- 1 - NC: 2025:KHC:5487 CRL.A No. 151 of 2017 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 6TH DAY OF FEBRUARY, 2025 BEFORE THE HON'BLE MR JUSTICE RAJESH RAI K CRIMINAL APPEAL NO. 151 OF 2017 (A) BETWEEN: SMT JYOTSNA W/O RAJESH RAJPAL AGED ABOUT 44 YEARS OCC: BUSINESS R/AT NO. 241/242 NANDI MANSION, ARELUGUDI COMPOUND COTTONPET MAIN ROAD, BANGALORE - 560 005. …APPELLANT (BY SRI. MADHUSUDHAN M.N, ADVOCATE) AND: SRI. V. SUBRAMANI THE PROPRIETOR AND AUTHORISED PERSON OF M/S SANJANA GROUP HAVING ITS REGISTERED OFFICE AT NO 1616, 8TH MAIN, JAYANAGAR 3RD BLOCK BANGALORE - 560 011. …RESPONDENT (BY SRI. S.N. MAHESH, ADVOCATE) THIS CRL.A. IS FILED U/S.378(4) OF CR.P.C PRAYING TO SET ASIDE THE JUDGMENT AND ORDER DATED 05.12.2016 PASSED BY THE XXII ADDL.C.M.M., BANGALORE IN Digitally signed by MAYAGAIAH VINUTHA Location: HIGH COURT OF KARNATAKA - 2 - NC: 2025:KHC:5487 CRL.A No. 151 of 2017 C.C.NO.26638/2015 ACQUITTING THE RESPONDENT/ACCUSED FOR THE OFFENCE P/U/S 138 OF N.I. ACT. THIS APPEAL, COMING ON FOR HEARING, THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER: CORAM: HON'BLE MR JUSTICE RAJESH RAI K ORAL JUDGMENT This appeal is directed against the judgment dated 05.12.2016 passed in C.C.No.26638/2015 by the XII Additional Chief Metropolitan Magistrate, Bangalore City, wherein the learned Judge acquitted the respondent/accused for the offence punishable under Section 138 of Negotiable Instruments Act, 1881 (for short ‘NI Act’). 2. The parties are referred to as per their ranking before the Trial Court. 3. The facts apposite for consideration of this appeal as borne out from the pleadings are as under: The complainant's husband and accused were acquainted to each other since 2012. The complainant had - 3 - NC: 2025:KHC:5487 CRL.A No. 151 of 2017 purchased an immovable property bearing Flat No.401 on the 4th floor of Sanjana Castle Krishna Mahal situated at 2nd Main road, Sriramapuram, Bangalore from the accused through a registered sale-deed. Owing to such acquaintance, the accused approached the complainant and her husband for a hand loan of Rs.15,00,000/-. Accordingly, the complainant paid a sum of Rs.10,00,000/- by way of cash and her husband Rajesh Rajpal further paid a sum of Rs.5,00,000/- reckoning to total a sum of Rs.15,00,000/- on 13.01.2015. At the time of receiving a sum of Rs.10,00,000 from the complainant the accused had agreed to repay the said amount within a period of six months. Following the lapse of the stipulated period, the complainant approached the accused for repayment of the said amount and the accused issued post dated cheques for a sum of Rs.5,00,000/- dated 14.08.2015 vide cheque No. 783861 and another cheque for a sum of Rs.5,00,000/-dated 03.09.2015 cheque No.783859 in favour of the complainant drawing on ICICI Bank, Jayanagara branch, Bangalore. Upon presentation of - 4 - NC: 2025:KHC:5487 CRL.A No. 151 of 2017 the said cheuqes it returned dishonored with the bank endorsement enumerating as "Funds insufficient" dated 03.09.2015 and 05.09.2015. Thereafter, the complainant got issued legal notice on 05.09.2015 to the accused, calling upon, the accused to pay the cheque amount. Despite the issuance of legal notice, the accused failed to reply to the notice. Hence, the complainant filed a private complaint before the learned Magistrate under Section 200 of Cr.P.C for the offence punishable under Section 138 of N.I. Act. 4. In order to prove the case of complainant, she adduced her oral evidence as PW-1 by way of affidavit and got marked Ex.P1 to Ex.P7. However the accused neither examined any witness nor produced any documents. 5. On assessment of oral and documentary evidence, the Trial Court acquitted the accused for the offence punishable under Section 138 of NI Act. - 5 - NC: 2025:KHC:5487 CRL.A No. 151 of 2017 6. I have heard the learned counsel for the appellant and the learned counsel for respondent; also, I have carefully perused the entire evidence on record. 7. Before delving into the merits of the case, it could be seen from the records while dismissing the complaint, that the Trial Court had considered the cheques in question were issued by the accused on behalf of the Company i.e., Sanjana Group. Further, in the cross- examination of the complaint, she has categorically admitted that the accused-Company is proprietorship company and the accused and his wife are the Directors of the company. The complainant has filed the complaint against the accused on the capacity of his being the proprietor of the said company. However, the complainant failed to array the company as party to the proceedings before the Trial Court. The complainant also failed to issue legal notice to the company of the accused. It is neither stated in the legal notice nor in the complaint regarding the specific role and designation held by the accused in the - 6 - NC: 2025:KHC:5487 CRL.A No. 151 of 2017 said company. In such circumstances, the complainant is duty bound to array the company of the accused as a necessary party to the proceedings. 8. The Apex Court in the case of Aneeta Hada v. God fathers Travels Tours and Pvt. Limited reported in (2012) 5 SCC 661 has held as follows: 48. In Anil Hada [(2000) 1 SCC 1: 2001 SCC (Cri) 174] the two-Judge Bench posed the question: when a company, which committed the offence under Section 138 of the Act eludes from being prosecuted thereof, can the Directors of that company be prosecuted for that offence. The Bench referred to Section 141 of the Act and expressed the view as follows: (SCC pp. 7- 8, paras 12-13) “12. Thus when the drawer of the cheque who falls within the ambit of Section 138 of the Act is a human being or a body corporate or even firm, prosecution proceedings can be initiated against such drawer. In this context 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 - 7 - NC: 2025:KHC:5487 CRL.A No. 151 of 2017 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 then alone the other two categories of persons can also become liable for the offence. 13. If the offence was committed by a company it can be punished only if the company is prosecuted. But instead of prosecuting the company if a payee opts to prosecute only the persons falling within the second or third category the payee can succeed in the case only if he succeeds in showing that the offence was actually committed by the company. In such a prosecution the accused can show that the company has not committed the offence, though such company is not made an accused, and hence the prosecuted accused is not liable to be punished. The provisions do not contain a condition that prosecution of the company is sine qua non for prosecution of the other persons who fall within the second and the third categories mentioned above. No doubt a finding that the offence was committed by the company is sine qua non for convicting those other persons. But if a company is not prosecuted due to any legal snag or otherwise, the - 8 - NC: 2025:KHC:5487 CRL.A No. 151 of 2017 other prosecuted persons cannot, on that score alone, escape from the penal liability created through the legal fiction envisaged in Section 141 of the Act.” 53. It is to be borne in mind that Section 141 of the Act is concerned with the offences by the company. It makes the other persons vicariously liable for commission of an offence on the part of the company. As has been stated by us earlier, the vicarious liability gets attracted when the condition precedent laid down in Section 141 of the Act stands satisfied. There can be no dispute that as the liability is penal in nature, a strict construction of the provision would be necessitous and, in a way, the warrant.” (Emphasis supplied) 9. In a later judgment, the Apex Court in the case of Sunil Bharti Mittal vs.Central Bureau of Investigation reported in (2015)1 SCR 377 has held as follows: "60. It may be appropriate at this stage to notice the observations made by MacNaghten, J. in Director of Public Prosecutions v. Kent and Sussex Contractors Ltd. [1944 KB 146 : (1944) 1 All ER 119 (DC)] : (KB p. 156) A body corporate is a “person” to whom, amongst the various attributes it may have, there should be imputed the attribute of a mind capable of knowing and forming an intention—indeed it is much too late in the day to suggest the contrary. It can only know or form an intention through its human agents, but circumstances may - 9 - NC: 2025:KHC:5487 CRL.A No. 151 of 2017 be such that the knowledge of the agent must be imputed to the body corporate. Counsel for the respondents says that, although a body corporate may be capable of having an intention, it is not capable of having a criminal intention. In this particular case the intention was the intention to deceive. If, as in this case, the responsible agent of a body corporate puts forward a document knowing it to be false and intending that it should deceive, I apprehend, according to the authorities that Viscount Caldecote, L.C.J., has cited, his knowledge and intention must be imputed to the body corporate. 61. The principle has been reiterated by Lord Denning in Bolton (H.L.)(Engg.) Co. Ltd. v. T.J. Graham & Sons Ltd. [(1957) 1 QB 159 : (1956) 3 WLR 804 : (1956) 3 All ER 624 (CA)] in the following words : (QB p. 172) A company may in many ways be likened to a human body. They have a brain and a nerve centre which controls what they do. They also have hands which hold the tools and act in accordance with directions from the centre. Some of the people in the company are mere servants and agents who are nothing more than hands to do the work and cannot be said to represent the mind or will. Others are Directors and managers who represent the directing mind and will of the company, and control what they do. The state of mind of these managers is the state of mind of the company and is treated by the law as such. So you will find that in cases where the law requires personal fault as a condition of liability in tort, the fault of the manager will be the personal fault of the company. That is made clear in Lord - 10 - NC: 2025:KHC:5487 CRL.A No. 151 of 2017 Haldane's speech in Lennard's Carrying Co. Ltd. v. Asiatic Petroleum Co. Ltd. [1915 AC 705 : (1914-15) All ER Rep 280 (HL)] (AC at pp. 713 & 714). So also in the criminal law, in cases where the law requires a guilty mind as a condition of a criminal offence, the guilty mind of the Directors or the managers will render the company themselves guilty. ] 62. The aforesaid principle has been firmly established in England since the decision of the House of Lords in Tesco Supermarkets Ltd. v. Nattrass [1972 AC 153 : (1971) 2 WLR 1166 : (1971) 2 All ER 127 (HL)] . In stating the principle of corporate liability for criminal offences, Lord Reid made the following statement of law : (AC p. 170 EG) ‘I must start by considering the nature of the personality which by a fiction the law attributes to a corporation. A living person has a mind which can have knowledge or intention or be negligent and he has hands to carry out his intentions. A corporation has none of these : it must act through living persons, though not always one or the same person. Then the person who acts is not speaking or acting for the company. He is acting as the company and his mind which directs his acts is the mind of the company. There is no question of the company being vicariously liable. He is not acting as a servant, representative, agent or delegate. He is an embodiment of the company or, one could say, he hears and speaks through the persona of the company, within his appropriate sphere, and his mind is the mind of the company. If it is a guilty mind then that guilt is the guilt of the company. It must be a question of - 11 - NC: 2025:KHC:5487 CRL.A No. 151 of 2017 law whether, once the facts have been ascertained, a person in doing particular things is to be regarded as the company or merely as the company's servant or agent. In that case any liability of the company can only be a statutory or vicarious liability.’ 63. From the above it becomes evident that a corporation is virtually in the same position as any individual and may be convicted of common law as well as statutory offences including those requiring mens rea. The criminal liability of a corporation would arise when an offence is committed in relation to the business of the corporation by a person or body of persons in control of its affairs. In such circumstances, it would be necessary to ascertain that the degree and control of the person or body of persons is so intense that a corporation may be said to think and act through the person or the body of persons. The position of law on this issue in Canada is almost the same. Mens rea is attributed to corporations on the principle of ‘alter ego’ of the company. 64. So far as India is concerned, the legal position has been clearly stated by the Constitution Bench judgment of this Court in Standard Chartered Bank v. Directorate of Enforcement [(2005) 4 SCC 530 : 2005 SCC (Cri) 961] . On a detailed consideration of the entire body of case laws in this country as well as other jurisdictions, it has been observed as follows : (SCC p. 541, para 6) - 12 - NC: 2025:KHC:5487 CRL.A No. 151 of 2017 ‘6. There is no dispute that a company is liable to be prosecuted and punished for criminal offences. Although there are earlier authorities to the effect that corporations cannot commit a crime, the generally accepted modern rule is that except for such crimes as a corporation is held incapable of committing by reason of the fact that they involve personal malicious intent, a corporation may be subject to indictment or other criminal process, although the criminal act is committed through its agents.’” 40. It is abundantly clear from the above that the principle which is laid down is to the effect that the criminal intent of the “alter ego” of the company, that is the personal group of persons that guide the business of the company, would be imputed to the company/corporation. The legal proposition that is laid down in the aforesaid judgment in Iridium India case [Iridium India Telecom Ltd. v. Motorola Inc., (2011) 1 SCC 74: (2010) 3 SCC (Cri) 1201] is that if the person or group of persons who control the affairs of the company commit an offence with a criminal intent, their criminality can be imputed to the company as well as they are “alter ego” of the company.” (Emphasis supplied) 9. On careful perusal of the findings of the Hon’ble Apex Court in the above judgment, the complaint filed by the complainant against the accused is not maintainable. - 13 - NC: 2025:KHC:5487 CRL.A No. 151 of 2017 10. Against this backdrop, the appeal filed by the complainant is liable to be dismissed on the sole ground that the complainant failed to array the company as party in the proceedings. 11. Accordingly, the appeal filed by the complainant is dismissed. SD/- (RAJESH RAI K) JUDGE HKV List No.: 1 Sl No.: 25