Effect of lost / stolen cheque on Cheque Bouncing 138 NI Act case

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Section 138 of the Negotiable Instruments Act, 1881 provides for a punishment if a person who has issued a cheque is unable to clear the cheque and the said cheque gets dishonored. A criminal case is made against the person who had issued the cheque (drawer) for issuing a cheque and fraudulently not having sufficient funds in his account or for a stop payment direction to the bank. The maximum punishment in such cases is upto 2 years imprisonment, or fine amounting to double the cheque amount, or both. The intent of the legislature behind such an offence was that if a person has issued a cheque for payment to somebody, in that case he should respect such action and if he fails to make the payment due to insufficiency of funds then he would be criminally tried.

In various cases, the cheque has been lost / stolen by someone and then because the cheque was not credited and the payment was not made by the bank in favor of the person who had presented the cheque to the bank, in such a case will the offence still be made under the provisions of Section 138 of the Negotiable Instruments Act, 1881?

According to Section 138 of the Negotiable Instruments Act,

“138. Dishonour of cheque for insufficiency, etc. of funds in the account.—Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provision of this Act, be punished with imprisonment for a term which may extend to two years, or with fine which may extend to twice the amount of the cheque, or with both:

Provided that nothing contained in this section shall apply unless—

(a) the cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier;

(b) the payee or the holder in due course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving a notice in writing, to the drawer of the cheque, within thirty days of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and

(c) the drawer of such cheque fails to make the payment of the said amount of money to the payee or as the case may be, to the holder in due course of the cheque within fifteen days of the receipt of the said notice.

Explanation.—For the purposes of this section, ‘debt or other liability’ means a legally enforceable debt or other liability.”

On a simple reading of the above section, we can understand from the said provision that a legal fiction has been created that the person who had drawn the cheque is presumed to have committed an offence under the act in the said circumstances. However, “A legal fiction, as is well known, although is required to be given full effect, has its own limitations. It cannot be taken recourse to for any purpose other than the one mentioned in the statute itself”[1]. On this aspect, the Supreme Court has observed in the case of State of A.P. v. A.P. Pensioners’ Assn. [2] that,

“30. … In other words, all the consequences ordinarily flowing from a rule would be given effect to if the rule otherwise does not limit the operation thereof. If the rule itself provides a limitation on its operation, the consequences flowing from the legal fiction have to be understood in the light of the limitations prescribed. Thus, it is not possible to construe the legal fiction as simply as suggested by Mr Lalit.”

The Supreme Court in the case of Raj Kumar Khurana v. State of (NCT OF DELHI) and Another,[1] had decided whether if a cheque is lost or reported stolen, can a case of cheque bouncing under 138 NI Act be still made, and observed that,

“Section 138 of the Act moreover provides for a penal provision. A penal provision created by reason of a legal fiction must receive strict construction. (See R. Kalyani v. Janak C. Mehta[3] and DCM Financial Services Ltd. v. J.N. Sareen[4]) Such a penal provision, enacted in terms of the legal fiction drawn would be attracted when a cheque is returned by the bank unpaid. Such non-payment may either be:

(i) because of the amount of money standing to the credit of that account is insufficient to honour the cheque, or

(ii) it exceeds the amount arranged to be paid from that account by an agreement made with that bank.

Before a proceeding thereunder is initiated, all the legal requirements therefor must be complied with. The court must be satisfied that all the ingredients of commission of an offence under the said provision have been complied with.”

The Supreme Court further observed that since the parameters for invoking the provisions of Section 138 NI Act are limited, the Bank’s refusal to honor the cheque is not mischief as per the provisions of Section 138 NI Act.

Thus, as per the Supreme Court, if it can be proved that the cheque was reported stolen or lost and the same was intimated to the bank and / or to the police, a complaint under Section 138 NI Act cannot be made out as there has to be a strict interpretation that has to be given to the provisions of Section 138 because of the legal fiction that has been made in it.

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[1] (2009) 6 SCC 72

[2] (2005) 13 SCC 161

[3] (2009) 1 SCC 516

[4] (2008) 8 SCC 1

What are the remedies against an ex parte decree?

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Where the plaintiff appears but the defendant does not appear in the court when the suit is called out for hearing, and if the defendant has been duly served, the court is empowered to hear the suit ex parte, i.e., in the absence of the defendant, and pass a decree against the defendant. Thus, an ex parte decree is a decree passed by the court in the absence of the defendant. See, Order 9 Rule 11 of the Civil Procedure Code (CPC).

Following remedies are available to the defendant against whom an ex parte decree has been passed:

(1) Under the provisions of Order 9 Rule 13 of the CPC, where a decree is passed ex parteagainst a defendant, he may apply to the Court by which the decree was passed for an order to set it aside. In such a situation, if the defendant satisfies the Court that the summons was not duly served, or that he was prevented by any sufficient cause from appearing when the suit was called on for hearing, the Court shall make an order setting aside the decree as against him upon such terms as to costs, payment into Court or otherwise as it thinks fit, and shall appoint a day for proceeding with the suit.

(2) The defendant may file an appeal against such ex parte decree under Section 96(2) of the CPC.

(3) Alternatively, if no such appeal is available against such decree, the defendant may file a revision against such ex parte decree under the provisions of Section 115 of the CPC.

(4) Under Order 47 Rule 1 of the CPC, the defendant may apply for review, subject to the conditions mentioned therein.

(5) If the ex parte decree has been obtained by the plaintiff by fraud, the defendant may also have the option / remedy of filing a regular suit to set aside such ex parte decree. It should be noted that, ordinarily, a suit to set aside an ex parte decree cannot be filed. However, if such decree was obtained by the plaintiff by fraud, a suit may be maintainable to set aside such decree.

Selection and Appointment of Arbitrators in India

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In arbitration, the parties have the freedom to appoint any person as an arbitrator to adjudicate any dispute arising between them. This freedom of choice is stipulated by section 10(1) of Arbitration and Conciliations Act, 1996 which provides that, ‘parties are free to choose the number of arbitrators.’ It provides discretion with respect to number of arbitrators forming the adjudicating panel of a dispute. Further it is pertinent to note that, the provisions of Arbitration Act are silent upon any specific qualification of the arbitrator, thereby giving power to parties to decide upon it. This can be discerned from section 12 of the act which provides that ‘an arbitrator maybe challenged if he does not possess the qualifications agreed by the parties.’

The parties have the discretion to mutually agree upon qualification criteria for appointment of an arbitrator. As per the general practice in India, the General Condition of Contract provides for the provision of appointment of party who is a member of the awarding company in the tender agreements and concessionaire agreements in India. In such agreements, the contractor is awarded the work through letter of award; therefore there can be an implied inference that it lacks the power to negotiate on this particular aspect.

246TH LAW COMMISSION REPORT AND THE AMENDMENT ACT 2015

In the 246th Law Commission Report, an amendment was proposed to section 12 of the Act which stipulates the grounds for challenging the arbitrator. The report suggested that, being an ‘interested party’ i.e. party having relationship as an employee, consultant, advisor etc. with any of the party qualifies as a ground of challenging the appointment. The report further noted that this should be the rule for all types of arbitrations including family matters. However, this is a waivable clause for which parties would have to put in an express declaration in the agreement or after the dispute has arisen.

The Report imbibes this amendment from the provisions of the ‘Waivable and Non-waivable Red List‘ of the IBA Guidelines on Conflict of Interest.

This suggestion culminated into amendment of section 12 and addition of Schedule V and VII in the Arbitration and Conciliations (Amendment) Act 2015. Section 12(1)(b) read with Fifth Schedule mandates that the appointment made by any party which would give rise to justifiable doubts as to the independence or impartiality or arbitrator if he has a relationship with the parties or counsel or the arbitrator is an employee, consultant, advisor or has any other past or present business relationship with a party, the same would give rise to justifiable doubts.

That further Section 12(5) read with Seventh Schedule provides that there shall not be any arbitrator’s relationship with the parties or counsel who should also not be an employee, consultant, advisor or has any other past or present business relationship with a party. Such party should not be appointed as an arbitrator.

That applicability of the amended provisions is stipulated by section 1(2) read with 26 of the Amended Act by which provides that firstly, the amended provisions shall be deemed to have come into force on the 23rd October, 2015. And secondly, such amended provisions shall not apply to the arbitral proceedings commenced, before the amendment unless the parties otherwise agree.

Thus, The Arbitration and Conciliation (Amendment) Act, 2015 grants the liberty to the parties to appoint an arbitrator mutually. The Act provides that the parties are free to determine the number of arbitrators, provided that such number shall not be an even number. However, if the parties fail to do so, the arbitral tribunal shall consist of a sole arbitrator.

The procedure in relation to appointment of arbitrator(s) is provided under Section 11 of the Act. A person of any nationality may be an arbitrator, unless otherwise agreed by the parties. The aforesaid section also deals with the contingency wherein the parties fail to appoint an arbitrator mutually. In such a situation, the appointment shall be made, upon request of a party, by the Supreme Court or any person or institution designated by such Court, in the case of an International Commercial arbitration or by High Court or any person or institution designated by such Court, in case of a domestic arbitration.

Before the appointment of arbitrator is made, the concerned Court or the person or institution designated by such Court is required to seek a disclosure in writing from the prospective arbitrator in terms of Section 12(1) of the Act and also give due regard to any qualifications required for the arbitrator by the agreement of the parties and the contents of the disclosure and other considerations as are likely to secure the appointment of an independent and impartial arbitrator.

It may be noted that under Section 12(1) of the Act, an obligation has been cast upon the prospective arbitrator to make an express disclosure on (a) circumstances which are likely to give rise to justifiable doubts regarding his independence or impartiality; or (b) grounds which may affect his ability to complete the arbitration within 12 (twelve) months.

The purpose of this provision is to secure the appointment of an unbiased and impartial arbitrator.

Fifth Schedule to the Act (Annexure-A) contains a list of grounds giving rise to justifiable doubts as to the independence or impartiality of an arbitrator. The Seventh Schedule (Annexure-B) lays the grounds which make a person ineligible to be appointed as an arbitrator.

The Act provides that in an International Commercial Arbitration, an arbitrator of a nationality other than the nationalities of the parties may be appointed where the parties belong to different nationalities.

Expeditious disposal of application for appointment of an arbitrator(s) is emphasized by the Act and an endeavour shall be made to dispose of the matter within a period of sixty days from the date of service of notice on the opposite party.

RELEVANT CASE LAWS RELATING TO THE MATTER

The moot issue arises when agreement is pre-dated i.e. before 23rd October, 2015 and arbitration clause stipulates for appointment of an ‘interested party’ but the arbitration is invoked after amendment. Such case was first addressed by the Court in the case of Assignia- VIL JV v. Rail Vikas Nigam Limited,1 as decided on 29.04.2016, wherein the petitioner invoked arbitration clause on 26.10.2015 with respect to dissatisfaction with termination of the contract. The Respondent contested that these claims should be settled by the already constituted arbitral tribunal on 11.04.2014. The clause provided that the presiding arbitrator shall necessarily be serving at railways. The Court held that, ‘the request of respondent cannot be accepted as the arbitration is invoked after amended Act has come into operation. If the Respondent’s request is allowed, the very purpose of amending the Act would be defeated.’

The Assignia case became the relying stone forOrissa Concrete and Allied Industries Ltd. v. Union of India & Ors.,2 decided on 23.05.2016. As per the facts the petitioner sent invocation notice to respondent on 5th February, 2016, pursuant to which no arbitrator was appointed within 30 days. It was again communicated to respondent on 18th March 2016, when they finally appointed GM of South Central Railway as per the agreement. The Court held that, ‘as per the amended Act, the petitioner is entitled to the appointment of an independent and impartial Arbitral Tribunal in as much as the respondent has forfeited its right to appoint an Arbitral Tribunal of its choice in view of Amendment of the Act. The party is entitled to the appointment of an independent and impartial arbitral tribunal as per Section 11(8) of the Act, if the party would be able to cross the hurdle of Section 26 of the Amended Act.”

Further in the case of Vijay Anand & Associates Pvt. Ltd. v. Aman Hospitality Pvt. Ltd.,3 which was decided on 03.06.2016, the petitioner invoked the notice of arbitration on 27th January, 2016. The respondent appointed M/s Achal Kataria & Associates as the arbitrator to which petitioner did not agree on the basis of amendment of the Arbitration Act. The petitioner put forth that appointment of interested party after the amendment act would lead to failure of appointment process. Hence, party can approach court under Section 11. The Court held that, ‘in case M/s Achal Kataria & Associates. The Court held that under no circumstances to exercise of power cannot be taken away the jurisdiction of this Court to appoint an arbitrator under Section 11(5) of the Arbitration and Conciliation Act, 1996 as sought by the Petitioner.’

Thus, as per the amended position of law, an interested party cannot be appointed by the parties unless parties expressly agree for doing so. But this question also arose with respect to the arbitration invoked before this amendment. This was addressed in the case of Era Infra Engineering Ltd. v. Aravali Power Company Pvt. Ltd.,4 which was decided on 29.07.2016. The arbitration was invoked prior to October 23, 2016. And as per the arbitration clause of GCC, CMD of NTPC was to be appointed as the arbitrator. But the petitioner in its invocation letter itself had requested for and independent arbitrator, other than CMD since he is involved in executive matter of the company. The Court held that, ‘in the present case, no doubt, the invocation was on the basis of the un-amended Act but still under Section 12 of the Act would give the similar indication. The sole Arbitrator appointed by the respondent admittedly is CEO and Executive of the respondent – neutrality, to avoid any doubt in the mind of the petitioner and the reasons give in the petition, it would be appropriate that independent sole Arbitrator should be appointed as ultimately neutral person has merely to decide the dispute between the parties. Even, the object and scope of the Act says so, that an arbitration procedure should be fair and unbiased.”

Therefore, it can be concluded that developments in law of arbitration are converging to make the process fairer, efficient and progressive. As per the amended Act, the Parties cannot choose an ‘interested party’ as an arbitrator. Such choice would lead to failure of appointment procedure which would give right to other party to approach the Court under section 11 for appointment of unbiased and qualified arbitrator.

Footnotes

1 Assignia – VIL JV v. Rail Vikas Nigam Limited, Arb. P. No. 677/2015.

2 Orissa Concrete and Allied Industries Ltd. v. Union of India & Ors., Arb. P. No. 174/2016.

3 Vijay Anand & Associates Pvt. Ltd. v. Aman Hospitality Pvt. Ltd., Arb. P. 138/2016.

4 Era Infra Engineering Ltd. v. Aravali Power Company Pvt. Ltd., Arb. P. 136/2016.

 

 

Criminal Liability of Corporate Officials in India

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For a long time, corporations in India were not held liable for criminal offences due to the requirement of mens rea or the intention to commit the offence and inability to award imprisonment or arrest, etc. However, corporations are no longer immune.

Laying the Theoretical Framework: Corporate Criminal Liability

The recognition of the company as a separate legal entity is the basic cornerstone of laws relating to corporate liability around the world. However, courts struggled in attempting to fasten liability over companies for acts which were considered criminal offences. The courts had historically struggled on two main fronts in this regard

(1) to assign mens rea, i.e. a criminal intent factor to fictional entities such as companies, and

(2) to punish corporates where statutory punishments were mostly corporal in nature, i.e. requiring punishment via imprisonment.

On the face of this need, emerged the doctrine of corporate criminal liability, which basically enables the courts to single out individuals responsible for criminal acts committed in the name of companies. For offences which did not require the proof of mens rea, the simple answer that courts came up with was to introduce a modified version of the Doctrine of Vicarious Liability through which the controlling persons of the company would be made liable[i]. But soon company directors were also brought to answer for the criminal acts for which criminal intent was also necessary to be proven[ii]. This was called the theory of ‘Identification’ or ‘Attribution’, a modified form of vicarious liability, where for the purpose of the criminal act, the person in control of the affairs of the company (that is to say its directors and managersand the company were considered one and the same.

Jurisprudence of Corporate Criminal Liability of Directors

Gone are the times when the world viewed Indian Companies as ‘family businesses’. With time, the structures adopted in Indian companies have grown increasingly specialized and complex, with specific directors being nominated to take charge of specified activities of the Company. As we will see, the provisions for making the direction and management of a company liable are mostly deeming provisions. However, there can be an opinion amongst stakeholders while dividing duties amongst the board members that in case criminal liability arises against the company then the director nominated for overlooking that aspect of its business shall also be held criminally liable. The legal approach, though, is a little more complex than that.

Earlier, the courts in India only recognized that companies can act through their managers and directors, but the law as it stands now however, consolidates the position that companies are as culpable as any living person and can be prosecuted and punished for the same, this is governed by two major decisions in this regard. First is the case of Standard Chartered Bank v. Directorate of Enforcement[iii] wherein the constitution bench of the Supreme Court held that a company can be prosecuted and convicted for an offence requiring minimum imprisonment. And secondly, in Iridium India Telecom Ltd. v. Motorola Inc[iv], wherein the issue was whether a company could be held liable under Section 420 of the Indian Penal Code, 1860, the Apex Court answered in the affirmative and clarified further, that even if the offence would require the proof of mens rea, a company can be made liable to the act as the guilty mind of the person in control of the company’s affairs is ‘attributed’ to the company as well.

Director’s Liability under India’s Legislative Framework

Certain legislations have a provision titled as ‘Offences by Companies’, which makes the person in charge of and responsible at the time of commission of the offence liable for that offence along with the company unless the person proves that the offence was committed without his knowledge or that he exercised all due diligence to prevent the commissioning of such offence. Under the said provision, the director, manager, secretary or any other official of the company may also be held liable if it is shown that the offence was committed with his consent or connivance.

The Companies Act, 1956 employed the concept of “officer who is in default”, to impose the liability for defaults by a company over officers responsible for its management. However, penalties under the Companies Act, 1956 were seen as largely ineffective against cases of serious internal frauds committed by the promoters and senior management of companies. But, with the enactment of the Companies Act, 2013 ( the “Act”), came also the statutory recognition of the duties of a director, such as exercise of due and reasonable care, skill, diligence, and independent judgement.  Earlier, by virtue of their positions, only the MD, whole-time directors, and company secretaries used to fall within the scope of “officer who is in default”, but the Act has significantly expanded this scope to include any person who would, in the given scenario, have had superintendence/ control/ direction/ management over the affairs of the company. Under the Act, independent directors can also be made answerable for lapses in performing their duties. The Act also includes the elements of knowledge and intent in determining who is an officer who is in default. Moreover, section 447 of the Act, which deals with fraud, makes persons liable who act or abuse their position with intent to deceive, to gain undue advantage, or to injure the legitimate interests of others (company/ shareholders/ creditor/ persons) whether or not there is wrongful gain or loss. Nevertheless, it is necessary to prove intent and knowledge in most cases.

Apart from the Companies Act, 2013, offences by companies are also stipulated under various other legislations. These provisions extend the liability for contravening the provisions under the relevant statute to companies, and the persons in charge of and responsible for the conduct of the business of the company. Further, these provisions typically provide for a non-obstante clause which stipulates that if it is proved that the director, manager, secretary or other officer of the company connived, consented to the offence or can be attributed to the negligence, then such director, manager, secretary or other officer shall also be deemed guilty and proceeded and punished accordingly.

Some of the legislations that contain the above-mentioned provision would be as follows:-

  • the Air (Prevention and Control of Pollution) Act, 1981;
  • the Water (Prevention & Control of Pollution) Act, 1974;
  • the Prevention of Money Laundering Act, 2002;
  • the Securities Contracts (Regulation) Act, 1956;
  • the Securities Exchange Board of India Act, 1992;
  • the Competition Act, 2002; and
  • the Income Tax Act, 1961.

Supreme Court on Liability of Corporations and its Officials

The law on this aspect has evolved over time. Now, a corporation can be convicted of offences involving mens rea by applying the doctrine of attribution[1]. Thus, the corporation can be held responsible for offences committed in relation to the business of the corporation by the persons in control of its affairs. The legal position in the US and UK has also crystallised to ensure a corporation can be held liable for crimes of intent. In the UK, the courts have adopted the doctrine of attribution to the corporation liable for acts committed by the directing mind, i.e., the directors and managers.

It is now clear that the criminal intention of the company’s directors or officials can be attributed to the company to make the company liable. However, the question then arises whether the reverse is possible – i.e. whether the officials of the company can be held responsible for acts of the company? This question was recently answered by the Supreme Court of India in Sunil Bharti Mittal v. Central Bureau of Investigation ((2015) 4 SCC 609). The Apex Court in this case in no uncertain terms held that an individual who has perpetrated the commission of an offence on behalf of a company can be made accused, along with the company. However, to make an individual liable, there must be sufficient evidence of his active role coupled with criminal intent and/or a provision must be specifically incorporated into the statutory regime that attracts the doctrine of vicarious liability[2]. It may thus be noted that when the company is the offender, vicarious liability of the directors cannot be imputed automatically, in the absence of any statutory provision to this effect.

The question that arises basis the above discussion, then, is whether any person simply designated as an officer in default by the Company, can be held criminally liable.

In Sunil Bharti Mittal v. Central Bureau of Intelligence[v] the Supreme Court gave recognition to the theory of attribution/ identification in determining whether a director or person in charge of the company can be prosecuted for an offence by the company. The court stated that the person upon whom the acts of the company must be attributed must be the ‘alter-ego’ of the company, that is the degree of identity between the acts of the company and the ‘directing mind and will’ of the responsible persons must be high enough for the courts to infer them as one and the same. Moreover, just because a person is at the helm of the affairs, that would not make him/her liable for crimes requiring intent. In this case, the Supreme Court held that the special court was right to not accept charge sheet against the managing director just because he was the head of the company.

The discerning criteria thus is whether the proof of intent is required to prove an offence. An officer who is in default for contraventions which do not require proof of intent, may, thus, be prosecuted by virtue of his/her position, but the same is simply not tenable in offences where proof of intent is required.

An example of a statute which allows the nomination of person-in-charge for the obligations under a legislation is under section 66 of the Food Safety and Standards Act, 2006,. The provision in this enactment state that a director or manager can be nominated to be responsible for any contraventions of the provisions of the respective enactments.

It is to be noted, that only when the legislation permits the nomination of the responsible director, and such nomination is made before the commission of the offence, only then a director specifically nominated for offences under an act can be prosecuted, even if there is no direct intent[vi].

Hence,

The thumb rule is thus that unless it is specifically provided in a statute, a director may be made criminally liable only if there is existing proof of intent against the director. The directors must ensure that they diligently avoid the commission of such offences in the name of the Company, the onus shall nevertheless remain upon them to prove that the offence was committed without their knowledge or consent[vii].

Who can be held liable?

It is worth clarifying that a person cannot be held liable merely on the basis of the designation. No presumption can be drawn against the person occupying the position of a chairman or managing director only on the basis of their position. There is no universal rule that a director of a company is in charge of its everyday affairs. A person should fulfil the ‘legal requirement’ of being a person in law (under the statute governing companies) responsible to the company for the conduct of the business of the company and also fulfil the ‘factual requirement’ of being a person in charge of the business of the company.

The concept of vicarious liability of corporate officials has evolved substantially over the past decade. It is worth noting that it has become a tendency to implead the senior management officials of the company along with the company to exert pressure on the company to settle. In a lot of instances, such senior officials may also be summoned by the investigating authorities. There is almost unanimous judicial opinion that a clear case needs to be spelt out against the person in the complaint before fastening criminal liability.

Furthermore, in case the court is required to issue summons, there has to be strict compliance with statutory requirements. Summoning is a serious issue and criminal law cannot be set in motion as a matter of routine, and summons should only be issued after recording reasons in writing. The Indian Courts have so far been very cautious in their approach and have generally protected the corporate officials from harassment by the investigating agencies unless there is enough material against the official concerned.

It may be interesting to note that the above provision attaching liability to the directors, etc., is similar to the law in the UK to some extent wherein the corporate officials can be held liable if they consented, connived or neglected in their duties. Consent and connivance both presuppose knowledge.

Similarly, in the US, the corporate officials are held liable under the ‘Responsible Corporate Officer Doctrine’, which holds a corporate officer criminally liable for the criminal violations committed by a subordinate where the said officer occupies a position of responsibility and authority in the company and has the power to prevent such a violation, but fails to do so.

However, it must be noted that as opposed to the US and UK, there is no provision for Deferred Prosecution Agreements (DPA) in India, wherein the company can reach any settlement with the prosecution to avoid criminal sanctions.

To the comfort of corporates, so far we have seen that courts have taken a balanced view. They have not shied away from acting against the senior official if it is established that the official was responsible for the crime. At the same time, however, they have protected senior officials where their personal involvement could not be proved. Having said that, the need of the hour is to take certain deterrent measures to impose costs or punish complainants for initiating frivolous proceedings.

 

[1] Doctrine of Attribution– The doctrine of attribution implies that the criminal intent of the “alter ego” of the company / body corporate, i.e., the person or group of person that guide the business of the company, would be imputed to the corporation. Mens rea is attributed to the company on the basis of the alter ego of the company.

 [2] Doctrine of Vicarious Liability- This doctrine implies that the officials of the company shall be held responsible for the acts of the company by virtue of their position in the company.

[i] Queen v. Great North of England Railways Co., [1846] 9 QB 315; State v. Morris & Essex Rail Co.,23 N.J.L. 360 (1852); Commonwealth v. Proprietors of New Bedford Bridge, 68 Mass (2 Gray) 339 (1854)

[ii] New York Central and Hudson River Rail Road Co. v. United States, 212 US 431 (1909); Moussell Brothers Ltd. v. London & North West Railway Co Ltd, [1917] 2 KB 836; Lennard’s Carrying Co Ltd v. Asiatic Petroleum Co Ltd, [1915] AC 705

[iii] AIR 2005 SC 2622

[iv] (2011) 1 SCC 74

[v] AIR 2015 SC 923

[vi] R. Banerjee v. H.D. Dubey, MANU/SC/0731/1992

[vii] Ministry of Agriculture v. Mayhco Monsanto Biotech (India) Limited, (2016) 137 SCL 373 [CCI]

 

How to Register a Cooperative Society

Registration of Societies

RCPS Act Notification

List of Documents required to be submitted for Societies:

 

Checklist

List of common documents to be submitted by all types of societies

S. No. Name of Document
1 Signed copy of Form – A (Rule – 3) for Registration
2 Signature of Main Promotor in application & Signatures of minimum 10 persons from different families (or representatives of minimum 10 societies in case of federal society) who are eligible for becoming member of the Society
3 Certified copy of resolution authorizing the Main Promoter to sign the application for registration (Section – 8 (3))
4 Certificate by Police Station stating that the Main Promoter and members signing the application are not involved in criminal activity.
5 Certificate by District Central Cooperative Bank regarding Bank Balance (Rule – 3 B)
6 list of members/promotors with contribution towards share capital & admission fee
7 Project Report (The scheme showing the details explaining how the working of the society will be economically sound and, where the scheme envisages the holding of immovable property proposed to be purchased, acquired or transferred to the society)
8 No Objection Certificate from other Societies working in the area of operation

  • Not required iff same type of society is not existing in the area of registering society.
9 Opinion of the Federal Society relating to Financial viability (It may apply to the cooperative credit structures)
10 Certificate stating that 10 promotors are from different families and are residing in the area of operation of the Society (Certified copy of the Certificate by Talati / Chohra)
11 Four copies of proposed by-laws of the Society (with signature of all promoters)
12 Every proposed society has to pass the following resolutions (before filing the application for registration of society) And issue affidavit on Rs. 20 Stamp Paper (1 TO 6 resolution)

  • Appointment of Chairman of the meeting
  • Appointment of Main Promotor
  • Resolution regarding delegation of power for collecting Share Capital
  • Resolution regarding delegation of power for signing Certificates and Undertakings
  • Regarding selection of promotors and delegate the power to for signing By-laws
  • Regarding finalizing name of the Proposed Society and its area of operation.
  • Certificate by main promoter stating that no members of the society has any bad overdue debt of any other society
  • After registration only those persons include except have been the qualifiers as mentioned in By-laws.
  • Undertaking by main promoter stating that If Registrar suggests some modification in By-laws, then it shall be sanctioned in first general meeting of Society.
  • Affidavit by the Main Promoter declaring that members of proposed society are not member of other Societies having similar objectives.

List of Documents required to be submitted for specific Societies:

Industrial Cooperative Societies

S. No. Name of Document
1 Experience certificates of members about work related to objectives of the Society
2 Undertaking by main promoter assuring that the Society will get building for its activities
3 Undertaking by main promoter that tools available with the Society for carrying out work activities as per the objective of the Society.
4 Technical Opinion in cases whether required.

Labour Society

S. No. Name of Document
1 There should be atleast 50 members and Promotors should not be contractors.
2 Copies of Ration card and / or Aadhar card for residential proof
3 Certificate regarding population of the area of operation from Talati cum Mantri
4 Certificate by the Executive Engineer regarding society will get sufficient civil work after registration.
5 Certificate by the Competent Authority – Members are beneficiaries of Integrated Rural Development Program (BPL)
6 Certificate by the Roads and Building Department that members / Promotors are not associated with other Society and are not contractors

Agriculture Credit Cooperative Society Service / Multipurpose Agriculture Cooperative Credit Society

S. No. Name of Document
1 Farmers, Khatedars, rural artisans, farm labourers, members of Scheduled Caste are to be member of Society. There should be 15 Farmer Khatedar members and Society can be enabled to loan Rs 2 lakhs.

  • Latest 7/12 of Farmers (Khatedars) to be submitted.
2 Was there any Service Society in the area of operation? If Yes, Names:
3 If any of the above society had gone under liquidation then

  • Yes
  • No

If Yes, Names

4 Proof of amount deposited in bank
5 Bank Balance Certificate
6 Account statement of Income and Expenditure
7 Undertaking by the main promoter stating that “We will align with District Central Cooperative Bank (DCCB) and seek loans for the members”
8 Notes of proceedings of the General Meeting held for forming of the Society
9 Proof of residence of all members of society showing that members shall be permanent residents of that village or Group of Village
10 Undertaking by the main promoter that society is capable of hiring a building and provide proper training to the secretary.
11 Register containing details of land occupied by the members and Form 8- A signed by the Talati of land owned by the members
12 Certificate by the Talati regarding population of the village
13 Register of comparative details of crops taken in the village.

Gopalak Multi-Purpose Cooperative Society

S. No. Name of Document
1 Certificate by the Talati about population of cowherds/ Gopalak
2 Signed copy of List of 51 members (with name & full detail)
3 Certification from the Talati about being engaged in Animal husbandry
4 Member of the society should not be the member of Agriculture credit society of the village or area of operation

  • Undertaking by the main promoter
  • NOC from Agriculture credit society operational in the area stating the above(if any)
5 No family member of the member should be an overdue debtor of any other society

  • A common affidavit to be signed by each member
6 No Objection Certificate of other agriculture cooperative credit society within area of operation
7 Register of land and animals owned by the members

Milk Society

S. No. Name of Document
1 Letter of District Milk Union regarding details of quantity of milk collected / purchased
2 Proposed Centre is to be stared first. Registration is to be obtained within 6 to 12 months. Register and balance sheet of milk business of the Society during the said period
3 If any another Society registered in the area of operation of the proposed Society, then certificate by the Talati cum Mantri regarding distance between two societies and No Objection Certificate from the existing society

Cooperation Credit/Saving and Credit Cooperative Society

S. No. Name of Document
1 Names of villages and population certified by Talati
2 In case of cooperative credit society there should be share capital of Rs 1,00,000/- and in case of saving & Credit Cooperative Society share capital Rs 10,000/-
3 Register with photographs and signatures of the members
4 Certificate by Talati / Chohra of population of the area of operation
5 Affidavit of Promoters on Rs. 50/- Stamp Paper

Salaried Employees’ Credit Society

S. No. Name of Document
1 Certificate in the issued by the Competent Officer regarding the members / promoters in the Proposed Society being salaried employees of Government or Non-Government Institutions
2 There should be Rs. 10,000/- balance in the proposed bank account – Bank balance certificate
3 Undertaking by the Main Promoter stating that Loan shall be granted after proper evaluation of loan application and recovery shall be done regularly without partiality
4 Undertaking by the Competent Officer regarding making deduction of loan instalment from the salary (every month)
5 Undertaking by the Main Promoter regarding maintaining financial liquidity in the Society

Seed Producers Sales /Processing Cooperative Society

S. No. Name of Document
1 100 members, Caste wise register
2 Records in Form 8-A about promoters occupying land / halting land
3 Undertaking by the Main promoter declaring that members occupying land and have knowledge about agriculture produce and research.
4 Details on from where loan / assistance/ subsidy for completion of work of the scheme will be obtained
5 How the Society complete its project with loan/ assistance/ subsidy. Show the details.

Fruit and Vegetables Producer / Processing Cooperative Society

S. No. Name of Document
1 Details of number of Farmer (Khatedar) and number of farmers planting vegetables in the village
2 Undertaking by the Main Promoter declaring that all the members of the proposed society are carrying out agriculture and are farming vegetables

Cotton Producers’ Cooperative Society

S. No. Name of Document
1 Details of farmers taking cotton crop from amongst the Khatedar Farmers of the village
2 Undertaking by the Promoters declaring that all the members carry out agriculture and cotton farming
3 Register showing details of cotton farming by the members

Housing Society

S. No. Name of Document
1. Details of scheme under which the Society is to be registered
2. Member should be eligible for entering into contract, should be a common resident of village / city of the area of the society

  • Submit proof of residence of each member
4. Whether Contractor or land owners, Engineers or Architects or family members of the Promoters are member of the society? Yes/No, if yes than detail shall be given.
5. Details of printed receipts that have been given for funds collected
6. Whether advertisements have been published in local tabloids/pamphlets/leaflets by the Society?

  • Yes
  • No

If Yes, please give details & copy of advt.

7. In case the Society is for other than general classes, then society submits of all certificate issue by the Social Welfare Department.
8. Whether provision has been made for transfer Fee in the by-laws?

  • Yes
  • No
9. Whether any member of the proposed Society owns more than one house?

  • Yes
  • No

If Yes, please give details

10. Whether it is a Government Employees’ Housing Society?

  • Yes
  • No

If Yes, submit certificate issued by competent authority stating that the members are government employees.

11. Details of land.

  • Form No. 7 / 12, 8-A records of the latest date for land owners
  • Certificate by the Competent Officer exempting from the Land Ceiling Act
  • If land is NA than the certificate from competent officer
  • If land situated in residential zone, then the market value (as valued by govt. approved valuer) of society match with purchased value of the society. For the certificate of Governmental approved valuer or of Government Engineer
  • In case the land is private, copy of sale agreement
  • Lay-out plan / building plan should be signed by Engineer
  • New by-laws relating to land
  • If the land is fragmented, whether distance in excess of 250 meters has been maintained. Not less than 250-meter distance shall be maintained in fragmented land.
  • Provision for road maintain in map.
  • Whether common plot has been shown in the lay-out plan.
  • Verification Officer has visited the land where the Proposed Society is located
  • Member register shall be submitted.
  • Certificate by the Main Promoter declaring that registration of the Society shall be without Government aid.
  • Leaflet U. (four copies)

Consumer Stores/ Consumer Cooperative Society

S. No. Name of Document
1 If there are more than one villages in the area of operation, distance between them

  • Affidavit by main promoter
2 Society shall be register with at least 100 members. Promotors shall have to give undertaking after registration of the society, total number of the society shall be 500.
3 Certification by Talati regarding village having population of 10,000 or more
4 Undertaking of not selling Custom Goods

Community Farming Society

S. No. Name of Document
1 Latest copies of Form 7 / 12 and Form- 6 (Records of Rights of lands owned by Members / Promotors)
2 Agreement of Sale for the land to be acquired (with copies of 7 / 12 and Form-6 (Records of Rights)
3 Register of contribution with complete details of members

Irrigation Cooperative Societies

S. No. Name of Document
1 Minimum Share Capital Rs. 500/-
2 Copies of land area of members falling within the Command Area (Copy of 7/12 certificates)
3 Undertaking by the Main Promotors stating that the all members are staying in the area of operation of the society.
4 No Objection Certificate by the Competent Officer regarding any bore or canal passing through the Command Area.
5 No Objection Certificate from the Competent Officer of the Corporation or Panchayat if the Society is to be registered on the bore of Corporation or Panchayat
6 Undertaking by the Main Promotors regarding compliance to the terms set by Corporation – Panchayat with reference to the bore with the Corporation or Panchayat.
7 Undertaking by the Main promotor stating that society will not seek any loan / assistance from the Government or any financing institute for funds for bore scheme or any other scheme.

Narmada Irrigation Cooperative Societies

S. No. Name of Document
1 Map of the irrigation area
2 Undertaking from the Main Promotor that society will provide water to all members
3 Form 8 – A records or 7/12 of lands of Promotors
4 Undertaking of letter of acceptance from all the members
5 Technical opinion by SSNNLs
6 Certificate by concerned Executive Engineer, Canal Scheme, Canal Department regarding recognition of Irrigation Cooperative Society from Minor Branch.

Transportation Cooperative Societies

S. No. Name of Document
1 Driving license and address proof of promotors.
2 Undertaking and commitment of all the members are current or retired employees of S. T. Corporation and associated with Transport business

Tobacco Growers Cooperative Society

S. No. Name of Document
1 Details of the land owned by the member in the area of operation and details of tobacco produced by them.
2 Details of activities of purchase and sale of tobacco and other produces as per Cooperative Tobacco Federation and recommendation letter by the Federation.
3 Undertaking by each member that they are not associated with business of purchase or processing of tobacco.

/Fees Details

No fees

Timeline

60 Days from the date of application