M R Patel Former Managing Director vs M/S R K Synthetics & Fibres Pvt Ltd on 24 September, 2008

teistimoiiy of its officer PW1 and produced 9 documents,

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while’ on” behaif of the accused, accused tendered

evidence to negate the assertion of the complainant»._f~.._,’l’-..

The trial court considering the evidence o£i=.i’eco’l’–dl V’

concluded that it was sufficient to c-:harge_against.

the accused for the said offence and’»th’us found ,2,”

guilty, but while recording si’i’ch:”finding*,._
judge held :5′ accus.e:d.___wa_s”é,’VA’v,.:lfAonip._a.ny ‘ag’ai’n4st which
company proceedings were High Court
and as the of the matter,
proceedings’ by the provisions of
Section’?l46A..,.o.f_ and Dermission was
rzecessaV”ry,” Court passed the following
order_:__ V’ l A it i
‘ ‘ ‘°«c_y ….. ‘ORDER

»v4Fu,:i’:t”‘r_f?..er proceedings against A:
is hereby suspended until leave is
o’–b:ta’inVed by the complainant company from

‘the Hon’§3le High Court to continue

prosecution proceedings against A-3

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company.

t’ne,.’.=|eVavrnWeVd triaé it

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Acting under Section 255(2) of Cr.P.C.,
I hereby convict accused no.2 Mr. M.’R.Patel,
managing director of A1 company for
offence oenishable under Section S”

Section 141 of the N.I.Act E A
him to pay a fine of Rs.3,25:,:AOOQ,/:},’
aensa~_tion.’

4. iorderé,’ t:h’e”le_a.rned trial judge has
referred figafigg ‘to ‘i”:jitEation of winding up
pi’ocee_dingsSAAaS~ri_-d in -oaiirvagraohs 12, 13 and 14 of

the imou,_g4’ned’~.o’z*d,.er,V’~~.,,___*”?herefore, it is clear from the

reasoning rvecorded Sbylvlthe learned trial judge and the

o_e.erati’%”}:e jfjogrtion Vvotlthe order, the learned trial judge had

not so-hj:’ec’teci.accused no.1 trial. However, the evidence on

rec«ord,___v’tia,s’~~’Sheen apelied by the learned trial judge to

.,conséd’e.r° proof regarding guilt or otherwise of accused no.2

it ‘~,f”or..the offence under Section 138, l\l.1.Act. Accepting that

.–evidence as sufficient, accused no.2~managing clérector has

are

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been convicted to pay fine of Rs.3,25,000/» and in default
to undergo 8.1. for a period of 3 months, with avi~.f;u~rtiii.er

direction to pay Rs.3,20,0iZiO/» as cornpensation__.—iv’

5. The above order was_q.ue_stioried”*iia’efoi’~eV”§irst

appellate court in’C:’l.A.38/O3. C’orisri’dering»._lt’he’

urged by the accused, it held”i3o’t._sufti’cie’nzto’ir€te’i*fiere.3with

the fiiwdirig of the ‘triai court an_dx’th:..2’s_,_ the appeal? came to
be dismissed. Aggrieved”‘–h”y.Aboi;hi.pthe”s.e’-jtidgments, accused
is in revision. ”

6. _In the fgirouuinds urged are that

proceedin§s”t;:..nd_er C'<)fj*i;)ai1i_e's"Act were pending against

the 1" accused provision of Section 446 of

the Actproseciition'V–.coAL;_ldhot be initiated without prior leave

Company 'coi;rri;.° It was also urged that in view of

"'_sd'ch"restrii:tion"..oii prosecution of the is' accused, the

n"ianaginvg.–dt'ir_ector and other officers cannot be prosecuted

Hwhen prosecution against the 1"' accused itself is improper.

Learned counsel for the petitioner has reiterated

"these aspects which are seriously opposed by the learned

arr

"~m__'

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counsel for the respondent~complaihant. Learned counsel

for the respondent would contend that the [)fO\,1'..lV'.V§lQ:.'f'i._V of

Section 141, ¥\JK1.Act no doubt makes the

principal offender, but the liability of the mai'iia.:g:i~n:g'*~:director-«..

and other officers referred to therein .ind'e.oei,i'cle%it"'o_f am?"

action against the e””i;fhe4__priiicivpal”;

offerider. In other words, it___”isV u.rged.”tha’t there is no
impediment for the c-oi<"r'i_ol;,a_ihai*.3t"=t_o-r'choose whether to
prosecute the rcompa:*ay'~»n:r hot, i°Thel_"complainant can
proceed agai'instiil;j:tii'_1.»e~o:ffice_Vrs _of}-f_heV"company, leaving the
coiiipayn,y_VgVa'par't arid ii}'=si}–iiiiactioiri, ho plea can be taken
that in the ya'o~s'egice»g"off'vp__ros.ecution against the principal
offender,'=t_hlevactiohia-gainst officers cannot be prosecuted.

It..«ii)lasi'.ft.irth'e-rntirged that in the instant case as the

» :p«r.oVceeAdi.rigs'i–..against company was kept in abeyance, the

H~.or.ovisi'onj..oi'~i.,'S'ectioh 446 of the Companies Act was not

applic.£i:i).le'r"'V' Alternatively, it was urged that permission was

";<;o.t. required to prosecute the company even though
"sproceedings were pending because the stage at which the

H proceedings were at the relevant time is important.

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8. Learned counsel places reliance on the decision

of the apex court in the case of ANIL HADA .

ACRYLIC LTD. ([2960) 1 SCC 1). I t:esa:rd’–‘%trh’é

learned counsel in supp§emeiitatidnA”Vo’f’the ma_tVeri_aiV rnadne

available.

9. In this revision petvi_t”ion’,the’rn’o.Vot:V.giiefstion that
needs to be considered”–.is’,_wA–hel::_her’*wi_h-ii/ie_w of the order of
the trial court sus’pendi’i’i’g:..pvgrosectutiiionv;a*.ga’Vi’nst 1″” accused
(principai obtained from the
compariy__Vco’ii.rt:’,* against the managing
clirector be counsel had diiring the

course oi’__alrgVun*seritAs,.–iisuhnwitted that out of 5 cheques

iss;,I.ed” by the’Va__ccused in terms of the undertaking given

.Ab€§t)re_Vtl5.€.CC’i3f3pafly court, four chegues had bounced and in

“:_iri:_i_iparV”‘«c_ivr.cii~ijr”is’tances other prosecution was launched

agains1;..’:th’e”‘cornpaiiy and managing director. Proceedings

ci;hininVa’ted in conviction and was tested in appeal. This

“rco’u’rt in revision under Section 397, Cr.P,C. preferred

“against such conviction, rejected the revision petition,

agu

ill
confirming not only the finding of guilt, but also

consequential sentence. He submits this is the S”.??,Vch’e.qLJe

and therefore, in view of such finding recorded_..’%§’_}:’§,r”t’h’i’$.,:coi-:__rt _

in the other revision petition, confirming .c’o’i’ivvicti,o’n. of thuev

accused (petitioner herein), there,is:1’%:aarr’di«\;’.,at-mgr” sicof-pe”rifor

reconsideration of groundsurged as, the s»an’.i.ev.,hVas_,§beierruv

taken into consideration by cri.«.’i:2_e,i/isiion Petition
?Ȏo.393/{)4 and connected

10. urged regarding
tenability rr:-,an.aging director, it would
be api:>’r’o’p’r’ia.:te”to:::f%§je’fe:’r-rt?itheiorder passed by this court in
the rei/isi’–o.’n of 4 similar prosecutions.

The same is-. e’>

awarded in favour ofV.th.e cornp_la’ir-nantaln9..ea’ch

case shall be as under:

The default*~..gentencein yueaych cas’e°as
stipulated by the trVlal’court :i'”el”n”a»iV_r:sthe same in

each case; .

«*fh”e__aAccu.se’d_noi’2;. lsgrantecf tame to pay the

said ..fin’e. ernountsyVwiivfitén’the”g:>eriod as stipulated

bell CW. 1′ 25 . _

VV ” In Crl 81.2’/”Q4″ Six weeks

In_Cr{.R.P.. t31&3″_/704 Two months
in Crl,R.P.”v_39′:t/O4 Three months
tn”C,rVl.R.P. 392/O4 Four months

_A’TThe amount already deposited by accused

fl:=1.o.”2VV’qsixzall be immediately pasd to the

cohjpliaanazut towards fine. If the accused no.2

v–..Vfal’ls”‘to pay the balance of fine amount in any

x within the period as aforesasd, the trial

court as directed to secure has presence and to
send hem to undergo the default sentence and to
take steps to recover the fine and compensation

amounts in the concerned case.’

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11. It is thus clear that the grounds t1rg€C1V.VéZQt’c3.i’i1St

the reasoning of the trial judge and appellate _

revision petitions were not of the nature as”t»h.ej~on*e: in ..

case. In those cases, the impugned order ot,t’ri.a’l”-cou’i<tt_ read
as fotlows:

*.A.c<;i_i.<;,ea in c.c.32373/do-«:_ to pa—yy_VV:ltii':ne of
Rs.1,90,000/- in _ def'a–ugl't– to-._underg'o-.s:m'pEe
imprisonment for tw4o"'nlior.iths.:V ~ '

Accused in C.C.33269,/9'-ftzll to fine of
Rs.2,4O,OOOf*-V' in ,"'de'r'afuEt" undergo ssmpte
imDE'iS3Ol'lEfi'iEftt.,.f53i" two i;.*.«:mth*s

Accused pay a fine of
Rs.3,28.,VOG.O;fi- in «.ed'efa_uEt"t to: undergo simpée

1mprtsognmentiifotr three monthsv,"

Accused’ to Day a fine of
Rs.3’r,.28l,OC)G;’— “girl, “default to undergo simpée
impris’c.nment’for~.tw’o.months.

l3L;t_45i:.he___imVpugne’d-o..:f_der in this revision reads as follows:

A _ f-.’For_ther proceedings against A-1 company is
“rieifepy ,AVS%.l-Sfieflded till Eeave ES obtained by the
coinp’ljatn?-ant company from the Hon’b!e High Court to
_ co.:~itinu:e prosecution proceedings against A-1
‘co to pa n y.

Acting u/Sec.2S5(2) of Cr.P.C., I hereby

xa”;convi<:t accused no.2 Mr.ivl_R,PateE, managing

' dzrector of A-1 company for the offence punishable
u/s 138 r/w Sec.141 of N.I.Act and I sentence him to

pay a fine of Rs.3,2S,G0O/» in default, accused 2-
lVlr.M.R.PateE managing director of A-1 company shall

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undergo 3.1. for a period of three months. Out of
the recovered fine amount, an amount of—-.__
Rs.3,20,000/~ shall be paid to the Complainant as,
compensation. * '

The difference is very rnateriai. In C.C.33'9~2Q'{U.QV,:~A.Vj;llE3 tri'ail._i""

court had exercised power dndei:__

and the company was arraigri-ed as".accLiser§v'no.,i1 'and "thefl

managing director was arraigne-d'g:'asV acc'e.sg_edV':no'.:§2 "for the
offence under Section' gthevaccvesed were
sentenced to pay a fivne..,:'oVf.. in defaelt,
directed p.iQ\f/impi"isonment for 3
months: learned trial gudge has
siispeiide€_i against the company,
requiring,_the obtain prior permission of the

cornpaey color-tygtio' 'proceed against it. The words used in the

i«nftpughedTuxorder iiiii Hciearly indicate that prosecution

i"'pro;:eedi'i*.g_s.i'.i'-against the company were kept in

abeyan_'ce£si;1spei1ded tili permission was obtained and

h .therefore, in the strict legai sense, trial of accused no.1was

"'icsi;i-spfiended. The trial had not recorded any finding agaisnt

" V-the company. It aiso shows that the learned trial judge

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proceeded independentiy against accused no.2 and found

him guiity and passed the impugned sentence.

1:2. Referenee made to the order of the.__co.–jo.rd'i'nia»te'c

Bench of this court in Cri.R.P.391j-"O?-i and i:onnect.ed: casensig

wiil not be of any avail to thegVrespobg§e'n_t in

has to be next seen, when proseic-ution p.roceei_§in'gs'V'ag'ainst V'

the principai offender,'c~a_n V;V"r,si__3be'ya'gCe;': can the
managing director or othe.r_oifficieirs_:b'efgziriogceeeied against.

As seen from is liabie to
be tried for V;5;ee.t’ion 138, NJ. Act as
offender,Mthe’:V:(qnée:§Vt’i’oij’~.Vg;V’§;-It company which is a
juristicVVv’p.ers.on, of the cheque, who would be

the p_rivncipa’i~i o’1″fenVdeAr-?b The company being the drawer of

‘=..tiiei..c’ne,,quewv, is thiep-riincipai offender as engrafted in Section

y._’1′?~iV1′”of:”tbV.e».}’1\rjt;’–” However, the provision makes persons in

cing-figev_ofc::__that ji.iI’iSUC person iiable for consequent

\.,punisi’*.ment. In its terminoiogy, the provision expresses

“–“_twh_igsi_ntention very clearly, as under:

14-1. Offences by companies:

(1) if the person cominitnng an offence under Section

138 is a company, every person who, at the time

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the offence was commltted, was in charge of, and
was responsible to the company for the con”d*-act of

the business of the company, as weE”E’~w.a’sV”t.he

comparw, as weil as the coi’hpa%}y’;”‘shal_l’ -1:!_}e_

deemed to be guslty of the offence’~-..andl.”sha!ll’

iiable to be proceeded”aga:’nst_..aAnd<_ puniéshed

accordingty.

Therefore, the principal offenlcler’being”‘th_Ve’vcorn§pany, the
person in charge haa_._”‘:l)ee.;§ for consequential

QtiTllSh:’Tl€!”llZ on Ax/icarioos_,l’i_a.bilittyi» i’i’ivv’An’ijVl..Hacia case supra
the Apex co_ai{t oébselye-cl thtis (:_E3a_%a’x’12—-wand 13)
1 ._1Zffijhus.l”\riheVn~’:V’t’heV”dravirerllof the cheque who
w»étli,in of §e”c”t”:o’n 138 of the Act is a
humansbeangtozfb4’a,:bod”y’corporate or even firm,
proselctition ‘as¥¢c§é’a}’n’g’5 can be initiated agalnst
A . such éldtravwerpj. In–._l;hés”conte><t the phrase "as well as"
En lsuub.-s_e_ctv.on (1) of Sectlon 141 of the Act
_is'o.me importance. The said phrase would
' persons mentéoned in the férst category
wétnin the tentacles of the offence on a par wsth the
ovtteizdliswg company. Ssmléarly the words "shail aiso"
it v:n«:'sub~section (2) are capabie of bringing the third
category persons additionally within the dragnet of
the offence on an equal par. The effect of reading
Section 141 is that when the company is the drawer

of the cheque such company is the principal

Bl"

the penal iraprtrty created through the legai fictron

envisaged Efl Sectzon trail of the Act.

13. The observations of the

paragraph 33 of the judgment referred to

adurrabrates if the offence was corhrrii’tt’ed by ~;c”i.1¢.’C)b’23_’;,I,3xE3″l:1V”\/’ it.

can be Dunished oniY if the ,ComDfarJ\/has pr0l,3.”¢C’ri’teci,’=.4\”8ta’t’–..

instead of prosecuting the cor”*epe2.rey it’thVe=p.ayee’VVoVpts to if

prosecute only the persons°'”fa’i§sirigVj”r~vy%thinf”2″”V and 3″
category the payee can Case onty if he

succeeds in sh.ow.i_n’t; thigit offeri’c’e.,é_.sajactuatiy committed

by the cOirr.pa;rr;y. 3Iif”th”e.V,sa’rhe”pa–ragraph, though the apex
cotrrt h’e§d”t’he not coirtain a condition that a

prosecutionfof the cor”§?s;§an’y is sine–Qua–non for prosecution

‘”~,of of,t’het._,V.persons’who faii within 2″‘; and 3″” categories

Yet in the same paragraph the Hon’b$e

Ape;€”tCourt’i’,iijarsVheld “No doubt a finding that the offence

rhwas n;oVrr:_mV%tted by the company is sénacguaunon for

A C_’con\f/”ii-cyting those other persons”. It is further held, if a

company is not prosecuted due to any iegai snag or

otherwise, the other prosecuted persons cannot, on that

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score alone escape from the penal liability created through

the iegai fiction envisaged in Section 141 of the A4c.tii*~..4_:F’rorn

the discussions above it is clear that the burderfis’u~3p;o:nj’

complainant toestablish that duemto an’y”‘i~eg’al””s:n

Q}

otherwise company is not prosecu’»t4ed;.:”‘fo–§* examp’ie”‘p:e..ndrAs;;3g

adjudication of winding? V.-;ipv..___proceedingsjayga,i_VnVst:\§

companies etc.,.

14. In the instanvt-.c_as’ef”fact_s:.:’n.o;tV1’d_ii_spL;te{J are that
though the; winding up
company in company
petition” thewsaild”_petition came to be disposed
of, pe and the accused company to

reach _vamic’abl’e .sVe–ttle_mVe*ht in terms of which the accused

coissillpagy was peVr’n”i*i’t”L’ed to pay the amount due by it in five

egsL_.i’atet:§,_;9r;».oli1.i;Vh’i–y installments. Therefore affirmatively it has

to rvecotrdeld that no proceedings for winding up of the

first ‘a_ci::Lised company was pending as on the date

p.ros”ecution was initiated and has also on the date the

judgimient was rendered by the Trial Court. This makes lot

of difference. Because as the company proceedings for

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winding up of the conipany was not pending question of

invoking Section 446 of the companies act did not»._4a’:-.i_se.

Hence there was no legal snag to proceed _

accused company. On this basis itfihas to_-berv–h’:e!.cl ‘trhe.A’%’rig:ai*«..

Court on wrong presumption thatwirndingipp-..’p’roce:e_dings

were pending against the first«-.._accu’s~ed cor”.r.i’p’é::’r}y_Vlgeplt titled.

proceecléngs pending. As there vi:-ags no legalyil_nfipecf.’:iirnents or

snag it was necessary’f’orT’the._Tr2i_alg’Cou.rt’~ro record finding as

to whether the .:.harge.-aig.ai:nst*~ltgfor”voflfelnche under Section
1.38 of N€(_I}_Q..l’.l*3bl%fU:’f’lS’CF”LlPaiazeildt vivaVVs”‘p’roved to indict other
accusediprin–ci_gp*le”‘Vloi– iyicarifiotis liability, and Section

1 41 oi?VV_l\ie_gotiVa’§3.le.. fins»t’rc«:ii»_ri~i.e_r1t £:\Ctk

__1S. l°’~From_’V–_the above extraction, portion of the

«it isx”cl’ear’ that the company is the principal

offei1.d:e«r:ia.n’dg:Vother categories of persons are offenders by

iegaincu¢n;7

$6. Learned counsel for the respondent has placed

%Heax}y reliance on the observation of the apex court to

“contend that prosecution of the company is not at ail

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necessary and the complainant can proceed against two

categories of persons without prosecuting the comp.a’nv,”..,E3e

it on its own volition or be it due to any irTi,px_:’€..C§lI’Ti”Vei.n:t’

snag, E arn unable to accept this ,,contenti”o’n—obegcaeitise no

proceeding in’view of Section 445 of C:o’n3paAr’riies.’Actand

following paragraph 13 have niiobe read conjoiwijvitiyi vanti ngotiiinfv

isolation: Consecguently, it the
observation made in paragraph 13
does not have the haillifyin.g:’eff’e,ct_o’f.”th,e”.observation made
in i)aragra§_?i7.thei:.f:iVrst:.4V;”ifa,rt’Vioffparagraph 13. it,
therefor_e,,_,Veisp§:,:g1’§§s_’ or otherwise, the
prosecitrted from liability. The word
used ‘pr’ose:cutved”«:r’efers:”‘t:o4postwprosecution stage and not

preg:.;§§’rosAecutio’ii-A Therefore, I am satisfied that if the

cotztt fiiids that the prosecution against the principal

i”‘o_ffe.nder’:”a~:.qrj’drawer cannot be proceeded with by reason of

legal re-striction and even then, the trial court is required to

record a ‘finding on fact about guilt of that guristicperson to

°gir’os’ecute the category of persons recorded as observed by

“the apex court. In the instant case, the finding of guilt of

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the company becomes a precondition for proceeding to
punish the person falling in the category referred____to in

Section 14: of i\i.I. Act.

17. The learned trial judge has noticed

on prosecution of the 3″” acci.ise’d””‘wh.ich h_.asAl’-not”b’eeh

assailed. Since that finding is erro%ée_o’u-s,z the.’cooncii«is”io”n..vof._

the trial court that accused no’.~2]’i*s_liabletoubev.pVi;.nui’s’he’d, is’

improper.

18. For the reason-sfalfoflesaith”t_hez_’ijmgmgned order

cannot be stist~va’i’n.eci–. ¥The r3natte’r’..r’e.qui:}*es reconsideration

by the:’–.__ trial lgcourt.”<ACco'rd_in-glly, the revision petition is
allowed. The~ii"np'i;ig'r'ied.. is set aside so far as sentence

of a»ccu'se.ci no.'2~.Vcon'cerned. Ttte matter is remanded to

_tri.al_1"court-tvo proceed against the first accused company

land'l'.t_Vhle}w. .§'o.,v_pro'ceed against accused no.2, in the light of the

decis-ions-..'"of'vthe apex court referred to above, by passing

it pprop riate ord ers.

19. It is submitted that ttte matter is pending for

quite some time and time .be fixed. Accorclingl\,1, four

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mcmths time from the date of {eceipt of a copy of this hprder

is granted to dispose of the matter.

vgh*,fGH