Case Note & Summary
The applicant, M/s Wairagade Engineering Corporation, filed a criminal complaint under Section 138 of the Negotiable Instruments Act, 1881 against M/s Hiren Aluminum Ltd. and the State of Maharashtra. The Judicial Magistrate First Class, Nagpur issued process against the respondent-company in Criminal Case No. 1433/2006. The respondent-company challenged this order in Criminal Revision No. 921/2006 before the Adhoc Additional Sessions Judge, Nagpur, who quashed the process on 23/10/2007, relying on the decision in Natural Sugar and Allied Industries Ltd. v. Razzak s/o Hazi Gaffar and ors. (2006(4) Mh.L.J. 771). Aggrieved, the applicant filed the present criminal application. The applicant's counsel argued that the revisional court failed to properly apply the Constitution Bench judgment in Standard Chartered Bank v. Directorate of Enforcement (2005(4) SCC 530) and the subsequent Supreme Court decision in Iridium India Telecom Ltd. v. Motorola Incorporated (2011) 1 SCC 74, which held that a company can be prosecuted for criminal offences. The High Court, per A.B. Chaudhari, J., allowed the application, set aside the revisional court's order, and restored the Magistrate's order issuing process against the respondent-company.
Headnote
A) Criminal Procedure Code - Issuance of Process - Section 204 CrPC - Company as accused - The revisional court quashed process against a company relying on Natural Sugar case, but the High Court held that a company can be prosecuted under Section 138 NI Act, following Standard Chartered Bank and Iridium India Telecom Ltd. - Held that the revisional court's order was erroneous and set aside (Paras 1-3).
Issue of Consideration
Whether a company incorporated under the Companies Act can be prosecuted under Section 138 of the Negotiable Instruments Act, 1881, and whether the revisional court erred in quashing the process relying on Natural Sugar and Allied Industries Ltd. v. Razzak s/o Hazi Gaffar and ors.
Final Decision
The High Court allowed the criminal application, set aside the impugned order dated 23/10/2007 passed by the Adhoc Additional Sessions Judge, Nagpur in Criminal Revision No. 921/2006, and restored the order dated 10/07/2006 passed by J.M.F.C., Nagpur in Criminal Case No. 1433/2006 issuing process against the respondent-company.
Law Points
- Corporate criminal liability
- Issuance of process against company
- Section 138 Negotiable Instruments Act
- 1881
- Companies Act incorporation not a bar to prosecution
Case Details
2015 LawText (BOM) (07) 197
Criminal Application No. 93 of 2008
Shri Pradeep Marpakwar for applicant; Shri N. A. Padhye for respondent no. 1; Shri V. A. Thakare, APP for State/respondent no. 2
M/s Wairagade Engineering Corporation, through its partner Shri Shrikant Atmaramji Wairagade
M/s Hiren Aluminum Ltd., through its Managing Director, through its authorized Signatory, Dinesh Shaha; The State of Maharashtra
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Nature of Litigation
Criminal application challenging the revisional court's order quashing process issued against a company in a complaint under Section 138 of the Negotiable Instruments Act, 1881.
Remedy Sought
The applicant sought quashing of the revisional court's order and restoration of the Magistrate's order issuing process against the respondent-company.
Filing Reason
The revisional court quashed the process issued by the Magistrate against the respondent-company, relying on a decision that the applicant argued was incorrectly applied.
Previous Decisions
The Judicial Magistrate First Class, Nagpur issued process against the respondent-company in Criminal Case No. 1433/2006 on 10/07/2006. The Adhoc Additional Sessions Judge, Nagpur in Criminal Revision No. 921/2006 quashed that order on 23/10/2007.
Issues
Whether a company incorporated under the Companies Act can be prosecuted under Section 138 of the Negotiable Instruments Act, 1881.
Whether the revisional court erred in quashing the process relying on Natural Sugar and Allied Industries Ltd. v. Razzak s/o Hazi Gaffar and ors.
Submissions/Arguments
The applicant argued that the revisional court relied on Natural Sugar case, which was not properly applied, and that the Constitution Bench judgment in Standard Chartered Bank and the Supreme Court decision in Iridium India Telecom Ltd. hold that a company can be prosecuted.
The respondent-company's submissions are not detailed in the text.
Ratio Decidendi
A company incorporated under the Companies Act can be prosecuted under Section 138 of the Negotiable Instruments Act, 1881, as held by the Constitution Bench in Standard Chartered Bank v. Directorate of Enforcement and followed in Iridium India Telecom Ltd. v. Motorola Incorporated. The revisional court's reliance on Natural Sugar case was erroneous.
Judgment Excerpts
Being aggrieved by the judgment and order dated 23102007 passed by the Adhoc Additional Sessions Judge, Nagpur in Criminal Revision No. 921/2006 by which the order dated 1072006 passed by J.M.F.C., Nagpur in Criminal Case No. 1433/2006 issuing process against the respondentcompany incorporated under the Companies Act was quashed and set aside, the instant application was filed.
He then submitted that there is a Constitution Bench judgment in the case of Standard Chartered Bank and ors. Vs. Directorate of Enforcement and ors. reported in 2005(4) SCC 530 which was noticed by the learned Single Judge but was not properly applied and therefore, according to him, the impugned order is liable to be quashed and set aside.
Procedural History
The applicant filed a complaint under Section 138 NI Act against the respondent-company. The J.M.F.C., Nagpur issued process on 10/07/2006. The respondent-company filed Criminal Revision No. 921/2006, which was allowed by the Adhoc Additional Sessions Judge on 23/10/2007, quashing the process. The applicant then filed the present Criminal Application No. 93/2008 before the High Court.
Acts & Sections
- Negotiable Instruments Act, 1881: 138
- Companies Act, 1956:
- Code of Criminal Procedure, 1973:
