Aneeta Hada v. Godfather Travels and Tours Pvt. Ltd.
Supreme Court of India · 27 April 2012 · 3 judges
A company must be arraigned as an accused before its directors, signatories or officers can be prosecuted under Section 141 of the Negotiable Instruments Act; the same applies to Section 85 of the Information Technology Act.
Facts
The appellant, an authorised signatory of International Travels Limited, issued a cheque for Rs. 5,10,000 to the respondent, which was dishonoured. The respondent filed a complaint under Section 138 of the Negotiable Instruments Act without arraying the company as an accused, and the Magistrate took cognizance against her. The High Court refused to quash the proceeding under Section 482 CrPC. In appeal, S.B. Sinha, J. held that prosecution of the company was a sine qua non and would have allowed the appeals, while V.S. Sirpurkar, J. would have dismissed them, so the matter was placed before a three-Judge Bench. Linked appeals concerned Avnish Bajaj, the managing director of Ebay India Pvt. Ltd., prosecuted under Section 67 read with Section 85 of the Information Technology Act, 2000, without the company being made an accused; the High Court, following Sheoratan Agarwal, had let those charges continue.
Questions before the Court
- Can an authorised signatory or director of a company be prosecuted under Section 138 read with Section 141 of the Negotiable Instruments Act without the company being arraigned as an accused?
- Were Sheoratan Agarwal and Anil Hada correctly decided in view of the three-Judge Bench decision in State of Madras v. C.V. Parekh?
- Does the same position apply to Section 85 of the Information Technology Act, 2000?
What the Court held
- A company can bear criminal liability, and the intent of those guiding its business is imputed to it. Section 141 makes the company and the persons in charge liable by a deeming fiction. Being penal, it is strictly construed, and commission of the offence by the company is an express condition precedent to the vicarious liability of others.
- For maintaining a prosecution under Section 141, arraigning the company as an accused is imperative. The other categories of offenders can be brought in only on the basis of vicarious liability. This follows the three-Judge Bench ratio in C.V. Parekh.
- Sheoratan Agarwal does not correctly lay down the law and is overruled. Anil Hada is overruled in so far as it holds that a director or officer can be prosecuted without impleading the company, but the position differs where a legal impediment exists and lex non cogit ad impossibilia applies. Modi Distillery is restricted to its own facts.
- Section 85 of the Information Technology Act is in the same terms as Section 141, so the director could not be held liable without the company being arraigned, and the proceeding as framed was not maintainable against either the director or the company.
- All the appeals were allowed and the proceedings under Section 138 and under Section 67 read with Section 85 were quashed.
Why it matters
The judgment settles that the company is the principal offender under Section 141 of the Negotiable Instruments Act and must be made an accused before persons in charge of it can be prosecuted vicariously. It overrules Sheoratan Agarwal and, with a qualification for cases of legal impediment, Anil Hada, confines Modi Distillery to its facts, and extends the rule to Section 85 of the Information Technology Act.
In the Court's words
Copied from the official judgment; each passage links to its page.
“We have already opined that the decision in Sheoratan Agarwal (supra) runs counter to the ratio laid down in the case of C.V. Parekh (supra) which is by a larger Bench and hence, is a binding precedent. On the aforesaid ratiocination, the decision in Anil Hada (supra) has to be treated as not laying down the correct law as far as it states that the director or any other officer can be prosecuted without impleadment of the company.”
“Applying the doctrine of strict construction, we are of the considered opinion that commission of offence by the company is an express condition precedent to attract the vicarious liability of others.”
“We have referred to the aforesaid authorities to highlight that the company can have criminal liability and further, if a group of persons that guide the business of the companies have the criminal intent, that would be imputed to the body corporate. In this backdrop, Section 141 of the Act has to be understood. The said provision clearly stipulates that when a person which is a company commits an offence, then certain categories of persons in charge as well as the company would be deemed to be liable for the offences under Section 138.”
“Keeping in view the anatomy of the aforesaid provision, 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 offence under Section 85 of the 2000 Act.”
Provisions interpreted
- Section 141, Negotiable Instruments Act, 1881
- Section 138, Negotiable Instruments Act, 1881
- Section 85, Information Technology Act, 2000
- Section 10, Essential Commodities Act, 1955
Case and bench
- Parties
- Aneeta Hada v. M/s. Godfather Travels & Tours Pvt. Ltd.
- Case
- Criminal Appeal No. 838 of 2008, with Criminal Appeal No. 842 of 2008 and Criminal Appeal Nos. 1483 and 1484 of 2009
- Decided
- 27 April 2012
- Bench
- Dalveer Bhandari, Sudhansu Jyoti Mukhopadhaya, Dipak Misra
- Opinions
- Unanimous. Judgment of the Court delivered by Dipak Misra, J. The reference arose because S.B. Sinha and V.S. Sirpurkar, JJ., sitting as a two-Judge Bench, had differed on the interpretation of Sections 138 and 141.
Questions on this case
4 questions in live Law Maker papers mention this case. A few from free papers:
Question 1 · Legal Current Affairs: July 2026
In Manjula Kapoor v. State of Himachal Pradesh (29 July 2026), a complaint under Section 138 of the Negotiable Instruments Act, 1881 about a cheque drawn on a company's account had been filed without arraying the company as an accused. The Supreme Court held that:
- A. the complaint could go on against the signatory alone, since the company is only a proper party
- B. the defect was curable by the Magistrate summoning the company under Section 319 CrPC at any stage
- C. the High Court could order the company to be added as an accused, as limitation does not apply
- D. the defect was fatal, and it could not be cured by summoning the company under Section 319 CrPC
Show the answer
D. the defect was fatal, and it could not be cured by summoning the company under Section 319 CrPC
Manoj Misra and Vijay Bishnoi, JJ. (2026 INSC 789) applied Aneeta Hada: without the company, no cognizance could be taken, and Section 319 CrPC (now Section 358 BNSS) cannot cure such a fundamental defect or be used to bypass limitation. Only a fresh complaint, within time or with sufficient cause for delay, is possible. The complaint was quashed.