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The Rajasthan High Court has held that in the cases related to section 138 of the Negotiable Instrument Act, the director of a company cannot be prosecuted without prosecuting the company itself.
The bench of Justice Arun Monga has observed that the cheque was issued by the company named Kalika Hotel and Restaurant Private Limited, who is not made party to the complaint instituted by the respondent-complainant. It being a serious legal lacuna, cannot be countenanced and the complaint has to be therefore necessarily dismissed.
Background
The petitioner is a director of the company Kalika Hotel and Restaurant Pvt. Ltd. The director filed an application on 20/09/2022, stating that the cheque in question for an amount of Rs.1,25,400/- was issued in the name of the company, i.e., Kalika Hotel and Restaurant Pvt. Ltd. Despite this, the respondent (complainant) did not implead the company as a party to the complaint.
Therefore, proceedings under Section 138 of the N.I. Act cannot continue in the absence of the company. The director prayed for the dismissal of the complaint filed by the respondent.
However, the trial court dismissed the application filed by the petitioner stating that the complainant had prosecuted the accused Rohitesh Nagda in his personal capacity, not as the director of his company. Thus, there was no requirement of prosecuting the company in this case, even if it had issued the cheque.
The trial court did not agree with the argument that a director of a company cannot be prosecuted without prosecuting the company itself.
Conclusion
The court while allowing the petition relied on the decision of Supreme Court in the case of Aneeta Hada Vs. Godfathers Travels & Tours Pvt. Ltd. in which it was held that commission of offence by the company is an express condition precedent to attract the vicarious liability of others. Thus, the words “as well as the company” appearing in the section make it absolutely unmistakably clear that when the company can be prosecuted, then only the persons mentioned in the other categories could be vicariously liable for the offence subject to the averments in the petition and proof thereof.
The Apex court held that one cannot be oblivious of the fact that the company is a juristic person and it has its own respectability. If a finding is recorded against it, it would create a concavity in its reputation. There can be situations when the corporate reputation is affected when a Director is indicted.
FAQs
Can the Company’s Director Be Prosecuted Without Prosecuting the Company Itself ?
No. The Company’s Director Can’t Be Prosecuted Without Prosecuting Company Itself.
Case Title: Rohitesh Nagda Versus Lahar Singh Singhvi
Case No.: S.B. Criminal Misc(Pet.) No. 5126/2023
Date: 12/09/2024
Counsel For Petitioner: Avin Chhangani
Counsel For Respondent: None