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HC Says Erring Company is More Culpable Than Its Staff

Published: 06th July 2015 06:42 AM  |   Last Updated: 06th July 2015 06:42 AM   |  A+A-

HYDERABAD: The Hyderabad High Court has held that an offence committed by a company under the Negotiable Instruments Act is not maintainable if the complainant arraigns only its managing director, director and others as accused, without impleading the company in question, which is the main accused.

Justice S Ravi Kumar delivered the verdict on petitions filed by one Anil and others - all directors, including the MD of a private limited company - urging the court to quash cases filed against them before the Vth Additional Judicial First Class Magistrate in Guntur. The complainant Raju had filed separate complaints against the petitioners/accused for three dishonoured cheques.

As for the case details, the complainant, a civil contractor, submitted that the petitioners/accused were contractors, undertaking the works of the Airports Authority of India, and that he had entered into an agreement with them for execution of the said works.

As per the agreement, the accused had to pay for the work done by the complainant on a monthly basis and the amount due stood at about Rs 25 lakh . The complainant stopped work as the accused did not pay the requisite amount. The accused issued three different cheques towards part-payment, but the first cheque bounced due to shortage of funds and the other two were also dishonoured.

The complainant first issued a legal notice to the accused and as there was no response, he filed separate complaints to prosecute the petitioners/accused, forcing the latter to move the High Court.

The counsel for the petitioners submitted that all the petitioners were directors of a private limited company, a consortium, which is a registered company. He pointed out that the complainant had left out the company and wondered how could his clients be prosecuted when the main accused was not even impleaded.

On the other hand, the counsel for the complainant termed the arguments untenable and said the case against the accused was in compliance of Section 141 of the Negotiable Instruments Act.

After hearing both the sides and perusing the material on record, Justice Ravi Kumar ruled that every person incharge of the affairs of the company shall be deemed guilty along with the company for the offence committed by the company. So, the liability of the petitioners either as managing director or directors is only vicarious liability. Only if the company is held guilty, can these petitioners, by virtue of their position in the company, would be held guilty under the deemed provision provided in Section 141 of the Act.

Relying on a decision by the SC in the case of Aneeta Hada vs. Godfather Travels and Tours Private Limited, the judge made it clear that impleading company as one of the accused is mandatory and prosecuting director or authorised signatory of the cheque without arraying the company is maintainable.


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