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negotiable-instruments:note:section-141

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negotiable-instruments:note:section-141 [2021/04/10 08:41] (current)
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 +====== Offences by companies ======
 +**Section 141** of the Negotiable Instruments Act,1881.
  
 +<wrap lo>(1) If the person committing an offence under section 138 is a company, every person who, at the time the offence was committed, was in charge of, and was responsible to the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly: Provided that nothing contained in this sub-section shall render any person liable to punishment if he proves that the offence was committed without his knowledge, or that he had exercised all due diligence to prevent the commission of such offence: Provided further that where a person is nominated as a Director of a company by virtue of his holding any office or employment in the Central Government or State Government or a financial corporation owned or controlled by the Central Government or the State Government, as the case may be, he shall not be liable for prosecution under this Chapter. </wrap> 
 +
 +<wrap lo>
 +(2) Notwithstanding anything contained in sub-section (1), where any offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to, any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.</wrap> 
 +
 +<wrap lo>**Explanation**: For the purposes of this section, \\
 +(a) “company” means any body corporate and includes a firm or other association of individuals; and\\
 +(b) “director”, in relation to a firm, means a partner in the firm.</wrap>
 +
 +Three categories of persons can be discerned from the said provision who are brought within the purview of the penal liability through the legal fiction envisaged in the section. They are:
 +  - The company which committed the offence,
 +  - Everyone who was in charge of and was responsible for the business of the company,
 +  - any other person who is a director or a manager or a secretary or officer of the company, with whose connivance or due to whose neglect the company has committed the offence.
 +
 +Normally an offence can be committed by human beings who are natural persons. Such offence can be tried according to the procedure established by law. But there are offences which could be attributed to juristic person also. If the drawer of a cheque happens to be a juristic person like a body corporate it can be prosecuted for the offence under [[negotiable-instruments:note:section-138|section 138]] of the Act. Now there is no scope for doubt regarding that aspect in view of the clear language employed in section 141 of the Act. In the expanded ambit of the word "company" even firms or any other associations of persons are included and as a necessary adjunct thereof a partner of the firm is treated as director of that company. The phrase "as well as" used in sub-section (1) of section 141 of the Act has some importance. The said phrase would embroil the persons mentioned in the first category within the tentacles of the offence on a par with the offending company. Similarly the words "shall also" in sub- section (2) are capable 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 offender under section 138 of the Act and the remaining persons are made offenders by virtue of the legal fiction created by the legislature as per the section. Hence the actual offence should have been committed by the company, and men alone the other two categories of persons can also become liable for the offence.((AIR 2000 SC 145))
 +
 +From a perusal of Section 141 it is evident that in a case where a company committed offence under Section 138 then not only the company but also every person who at the time when the offence was committed, was incharge of and was responsible to the company for the conduct of the business of the company shall be deemed to be guilty of the offence and liable to be proceeded against and punished accordingly. It follows that a person other than the company can be proceeded against under those provisions only if that person was incharge of and was responsible to the company for the conduct of its business.((2000 (6) SCALE 578))
 +
 +What is required for holding a person vicariously liable for the offence committed by a company, is the actual role played by such person in the management and conduct of the business of the company. All such persons who are responsible in the management of the business of the company and incharge of its business at the material time when the offence was committed by the company shall be deemed to be guilty of the offence.((1998 (4) ALD 613))
 +
 +In **Shibu K. P. and Others v. State of Kerala and Another**((2019 (3) KHC 1)) the Hon'ble High Court of Kerala held that: //__"Trust" is not a "body corporate" or an "association of individuals" as provided in the explanation to S.141 of the N.I. Act__. Therefore, no prosecution against the trustees, invoking the provisions under S.141 of the N.I. Act, can be maintained. Consequently, no successful prosecution against the petitioners, invoking the provisions of S.141 of the N.I. Act, can be sustained//
 +
 +The wordings contained in Section 141(1) of the Act are slightly different from the wordings contained in Section 141(2) of the Act with reference to the presumption. It is mentioned under Section 141(1) of the Act that when a company has committed the offence, every person, who was in-charge and responsible to the company for the conduct of the business of the company as well as the company, shall be deemed to be guilty. But under Section 141(2) of the Act, the presumption would arise against the director, manager, etc., only when it is proved that the offence has been committed with the consent or connivance of or is attributable to, any neglect on the part of those persons. Therefore, mere words that the petitioners-directors are responsible for the failure to make the payment of the cheque amounts without any further material would not be sufficient to conclude that it would cover Section 141(2) of the Act.((2002 CriLJ 4155))
 +
 +Merely being a director of a company is not sufficient to make the person liable under Section 141 of the Act. A director in a company cannot be deemed to be in charge of and responsible to the company for the conduct of its business. The requirement of Section 141 is that the person sought to be made liable should be in charge of and responsible for the conduct of the business of the company at the relevant time. This has to be averred as a fact as there is no deemed liability of a director in such cases.((S.M.S. Pharmaceuticals Ltd vs Neeta Bhalla & Anr ))