Dr.

RAM MANOHAR LOHIA NATIONAL LAW UNIVERSITY

Lucknow
Academic session 21-22

FINAL DRAFT- CORPORATE

LAW PROJECT

TOPIC- Critical Analysis of Aneeta Hada v Godfather Travels and Tours

Private Ltd., (2012) 5 SCC 661

SUBMITTED BY: UNDER THE GUIDANCE

OF:
SIMONE JAIN Dr. Visalakshi Vegesna
ROLL NO. 190101147 (SECTION B, 2024) ASSOCIATE PROFESSOR (LAW)
B.A. LLB (HONS.), SEMESTER VI Dr. RMLNLU, LUCKNOW

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 TABLE OF CONTENTS

TABLE OF CONTENTS.........................................................................................................2

ACKNOWLDGEMENT..........................................................................................................3

INTRODUCTION....................................................................................................................4

FACTS OF THE CASE...........................................................................................................4

Facts of the other two appeals (1483 and 1484 of 2009).....................................................4

Procedural History................................................................................................................5

LAWS AND STATUTORY PROVISIONS CONCERNED................................................5

ISSUES INVOLVED...............................................................................................................6

CONTENTIONS FROM BOTH SIDES................................................................................7

From the Appellants side:.....................................................................................................7

From the Respondents side...................................................................................................9

JUDGMENT...........................................................................................................................10

RATIO DECIDENDI.............................................................................................................10

CONCLUSION.......................................................................................................................12

BIBLIOGRAPHY..................................................................................................................13

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 ACKNOWLDGEMENT

“Words can never convey what deeds have done.”

Writing a project on any topic is never a single man’s job. I am overwhelmed in all
humbleness and gratefulness to acknowledge my depth to all those who have helped me to
put these ideas, well above the level of simplicity and into something concrete. I am very
thankful to my Ms. Visalakshi for her valuable help. She was always there to show me the
right track when I needed her help. With the help of her valuable suggestions, guidance and
encouragement, I was able to complete this project.
I would like to extend my heartiest thanks to Library staff who helped me in finding relevant
material.
I would also like to thank my friends, who often helped and gave me support at critical
junctures during the making to this project. I hope you will appreciate the hard work that I
have put in this project work.

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 INTRODUCTION
Because of the similarity between the controversy, the two appeals of 838 and 842 of 2008,
the facts of which will be referred to first; were linked with two appeals of 1483 and 1484 of
2009, the facts of which will be referred to thereafter. The core issue that has emerged in
these two appeals is whether the company could have been made liable for prosecution
without being impleaded as an accused and whether the directors could have been prosecuted
for offenses punishable under the aforesaid provisions without the company being arrayed as
an accused.

Because of the similarity between the controversy, the two appeals of 838 and 842 of 2008,
the facts of which will be referred to first; were linked with two appeals of 1483 and 1484 of
2009, the facts of which will be referred to thereafter. The core issue that has emerged in
these two appeals is whether the company could have been made liable for prosecution
without being impleaded as an accused and whether the directors could have been prosecuted
for offenses punishable under the aforesaid provisions without the company being arrayed as
an accused.
.

FACTS OF THE CASE

Aneeta Handa, the Appellant, was an authorized signatory of International Travels Limited, a
company registered under the Companies Act, 1956, issued a cheque dated 17th January
2011 in favour of the respondent, M/s. Godfather Travels & Tours Private Limited. The
cheque subsequently got dishonoured as the result of which the respondent initiated a
criminal proceeding by filing a complaint before the concerned Judicial Magistrate as per
section 138 of the Negotiable Instruments Act, 1881. The Company of the accused was not
displayed in the complaint. The Court’s decision was against the accused.

Facts of the other two appeals (1483 and 1484 of 2009)

The appellant is the director of the company who is prosecuted under section 292 of the IPC
and Section 67 of the 2000 Act without impleading the company as an accused. The initiation
of the prosecution was challenged under Section 482 of the Code of Criminal Procedure
before the High Court and the High Court held that offenses are made out against the

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appellant-Company along with the directors under Section 67 read with Section 85 of the
2000 Act and, on the said base, declined to quash the proceeding.

Procedural History

After dissatisfaction from the judgment, the appellant approached the High Court under
section 482 of CrPC for quashing the criminal proceeding. The High after taking into account
the scope of sections 138 and 139 of the Negotiable Instruments Act, 1881, and various other
factors, stated that the decision would be against the accused and the concerned contention
will not hold strong.

In criticism of the said order before the two-judge bench, the basis of the argument being that
the company was not included as an accused and the legal fiction created under section 141
of the said Act won’t be attracted. It was submitted that after the creation of legal fiction
against the Company as well as the person responsible for its acts, the conditions precedent to
it after the application of the provisions are to be totally satisfied and one such condition
would be the prosecution of the principal offender.

One of the judges of the two-Judge Bench, S.B. Sinha allowed the appeals while the other
judge, V.S. Sirpurkar, was of the opinion that the appeals should be dismissed. This
disagreement between the Judges led to the referral of the case to a three-Judge Bench which
is consequently being heard in this case.

LAWS AND STATUTORY PROVISIONS CONCERNED

- Section 183, 139,141 of the Negotiable Instruments Act, 1881.

- Section 482 of the CrPC (Code of Criminal Procedure), 1973
- Section 67 and 85 of the Information Technology Act, 2000
- Section 292 of the Indian Penal Code (IPC), 1860
- Section 10 of the Essential Commodities Act,1955

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 ISSUES INVOLVED

ISSUE- I

Whether a complaint under section 138 of the Negotiable Instruments Act, 1881 read with
section 141, against the director and authorized signatory of a cheque without the joining of
the company as an accused, maintainable?

ISSUE- II

What is the scope of section 141 of the Negotiable Instruments Act, 1881; the extent of
deeming legal fiction as per the section?

ISSUE- III

Can a person in charge of the company be prosecuted without the company being made
primarily liable under section 10 of the Essential Commodities Act, 1955?

ISSUE- IV

Whether the company, registered under the Companies Act applicable for criminal liability
under the concerned provisions?

ISSUE- V

Whether the criminal proceedings against the Director of the company under section 292 of
IPC maintainable without including the company as the accused, keeping in mind sections 67
and 85 of the Information Technology Act, 2000?

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 CONTENTIONS FROM BOTH SIDES

From the Appellants side:

It was submitted that there has to be some finding related to the commission of the offense by
the Company and such findings cannot be recorded until the company is before the court,
especially when it is a separate legal entity recognized by law. The individual being held
liable has a vicarious liability and as per the facts and the law until the company is charged as
a primary forbearer of crime, the vicarious liability of the individual does not arise. The
essence of vicarious liability is linked with the liability of the principal offender.

Strict Construction of the penal provision is a fundamental principle in criminal law and
deeming fiction under section 141 of the Act, has to be applied in all aptness so that language
of the provision doesn’t get away with concepts like ‘identification’ and ‘attribution’ thereby
lifting the corporate veil putting the directors and officers responsible in a deemed concept
within some guided parameters. The Company here, is the principal offender as per law and
it’s not being included in the case which damages the case of the prosecution and if there is
any unfavorable finding against it, that would hinder the company’s reputation, which is not
permitted in law.

The decisions previously referred to in the proceeding, Sheoratan Agarwal and Another v.

State of Madhya Pradesh,1 was submitted to be improperly distinguished with the State of
Madras v. C.V. Parekh and Anr.,2 which ultimately led to the misconstruction of the ratio
given by the two-judge bench.

The Decision in Anil Handa v. Indian Acrylic Paint,3 was also not considered in proper
because it primarily contradicts with the ratio cited in C.V. Parekh’s case.4 It was stated that
“the payee can succeed in the case only if he succeeds in showing that the offense was
1
Sheoratan Agarwal, and Another v. State of Madhya Pradesh, (1984) 4 SCC 352.

2
State of Madras v. C.V. Parekh and Anr., (1970) 3 SCC 491.

3
Anil Handa v. Indian Acrylic Paint, (2000) 1 SCC 1.

4
Supra note 2.

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actually committed by the company” but at another place, it was ruled that “the accused can
show that the company has not committed the offense, though such company is not made an
accused”.

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From the Respondents side

It was submitted that the interpretation of the concerned Section of Negotiable Instruments
Act, 1881, and its Amendment Act 1988, by the appellants, would defeat its purpose, aims,
and objectives of promoting efficiency in Banking. Its purpose is to discourage the dishonor
of Commitments and to punish unscrupulous people. If the legislative intendment is
appositely understood, the interpretation of the Act is to be made in favor of the paying-
complainant.

It was stated that the appellant had a totally misconceived reliance placed in C.V. Parekh. The
question before the trial court was acquittal or Conviction of the accused, while here it is the
summons that has been issued by the previous bench. Also, the Purpose and aim of the
Negotiable Instruments Act and 1955 Act is different where recent changes are taken account
of. Further, Section 141 creates liability for the punishment of offenses under Section 138 and
it is a deemed liability whereas the criminal liability created for an offense under Section 7 of
the 1955 Act is not a deemed offense.

The Legislature has wisely mentioned the word Drawer in Section 138 of the Act and not the
account holder and hence whosoever signs the cheques, will be liable for the offense and a
signatory of a cheque, here the company, is clearly responsible for the incriminating act and,
therefore, a complaint under Section 138 of the Act against the director or authorized
signatory of the cheque is maintainable.

It was submitted that there is no provision in section 141 of the Act which says that a director
cannot be separately prosecuted unless the company is primarily made liable and hence
cannot escape liability, seeking quashing of the proceedings under Section  482 CrPC. The
words “as well as the company” assumes significance as the deemed liability includes both
the company and the officers-in-charge and hence prosecution can exclusively be maintained
against the directors or officers-in-charge.

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 JUDGMENT
The Judgement was ruled in favour of the appellants and in consonance with the decree of
Judge S.B Sinha after which the appeals were allowed and the proceedings initiated under
section 138 were quashed. Criminal liability on account of dishonour of cheque primarily
falls on drawer company and extends to its officers only when the condition stated in Section
141 are fulfilled. Thus, arraigning of the company as the accused under Section 141 is
mandatory.

RATIO DECIDENDI
Section 141 uses the word person which refers to Company i.e a juristic person and can be
held liable for criminal offenses. The statutory intendment of Section 141 is absolutely plain
which states when a person, here company, commits offenses, certain people in charge of it
as well as the company would be deemed liable for the offense under section 138 of the Act.
The provision makes the company and people in charge liable by deeming fiction, which has
its own signification.

The word ‘deemed’ used in Section 141 of the Act, crystallizes the corporate criminal
liability and vicarious liability of a person who is in charge of the company. Referring
to SMS Pharmaceuticals Ltd v. Neeta Bhalla. 5 In the said case, it has been opined that the
criminal liability on account of dishonor of cheque primarily falls on the drawee company
and is extended to the officers of the company.

In the opinion of the court, the true application of section 141 would be by the application of
the principle of lex non cogit ad impossibilia i.e if, for some legal snag, the company cannot
be proceeded against without obtaining the sanction of the court of law or Authority. The trial
against the other accused may proceed only if the requirements under section 138 and 141 of
the Act are met. In such an event, a distinction must be made between the case where a
company had not been made accused and the one where despite making it the accused it
cannot be proceeded against because of the legal bar.

5
SMS Pharmaceuticals Ltd v. Neeta Bhalla, (2005) 8 SCC 89.

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Laying emphasis on C.V Parekh’s case,6 it clearly lays down that the company should be
held liable according to section 10 of the Essential Commodities Act,1955 and the liability of
the company arises only when the contravention is by the company itself. In pursuance of the
same principle the case of Sheoratan Agarwal, was overruled and Anil Handa 7 was partly
complied with. 

Responding to the ‘as well as the company’ contention of the respondent, it was stated it is
absolutely clear that once the company is liable, then only any of its members can be
vicariously held liable.

With respect to the Appeals 1483 and 1484 of 2009, it was stated that keeping in mind our
analysis pertaining to Section 141 of the Act would squarely apply to the 2000 enactment.
Thus adjudged, the director could not have been held liable for the offense under Section 85
of the 2000 Act. Resultantly, the Criminal Appeal No. 1483 of 2009 is allowed and the
proceeding against the appellant is quashed.

6
Supra note 2.
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 CONCLUSION
In view of the aforesaid analysis, an irresistible conclusion was arrived at, that for
maintaining the prosecution under Section 141 of the Act, arraigning a company as an
accused is imperative. The other categories of offenders can only be brought in the dragnet on
the touchstone of vicarious liability as the same has been stipulated in the provision itself.
This was said on the basis of the ratio laid down above. It would be the failure of the duty on
the part of the court if it had not been stated that all the decisions cited by the learned counsel
for the respondents relate to service of notice, instructions for stopping of payment and
certain other areas covered under Section 138 of the Act and the same really does not render
any aid or assistance to the case of the respondents and, therefore, it should be refrained from
dealing with the said authorities

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 BIBLIOGRAPHY
Criminal M.C No. 928 of 2006 decided on 12-1-2007.
Sheoratan Agarwal, and Another v. State of Madhya Pradesh, (1984) 4 SCC 352.
State of Madras v. C.V. Parekh and Anr., (1970) 3 SCC 491.
Anil Handa v. Indian Acrylic Paint, (2000) 1 SCC 1.
SMS Pharmaceuticals Ltd v. Neeta Bhalla, (2005) 8 SCC 89.

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