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Criminal Appeal No. 16-P of 1973, decided on 15th December 1980.

(On appeal from the judgment and order of the Peshawar High Court, dated 16-2-1971 in Criminal Miscellaneous No. 37 of 1969).

---Ss. 409, 420 & 109-Criminal breach of trust-Cheating-Company, criminal liability of-Dishonour of cheques-Company (first, six respondents being its directors) obtaining appellant's (Pakistan International Airlines Corporation's) agency binding itself to hand over to appellants amounts collected by it for freight and sale of appellant's tickets after deducting its commission but after some time issuing cheques aggregating near about four lacs of rupees to appellant, such cheques dishonoured by Bank, and appellants after being, put off for some time: filing criminal complaint-Contention that mere fact of cheques being dishonoured twice by Bank not by itself sufficient to make out ingre dients of offence-Held, company not alleged to have been doing any business other than that of running appellant's agency, all money received by it from customers, subject to commission earned by it held on trust for payment to appellant and cheques being for very large amounts, dishonour of cheques itself made out ingredients of Ss, 409 & 420, Penal Code, 1860, as argued with reference to 1972 P Cr. L J 1182.

Ghulam Muhammad v. Muzammal Khan P L D 1967 S C 317 and Abdul Karim Butt v. Abdul Qavyum and another 1972 P Cr. L J 1182 ref:

--- Ss. 409, 420 & 109-Criminal breach of trust-Cheating --Company, criminal liability of-Company although distinct legal entity and quite, different from its members, including directors, yet com pany could act only through its directors and officers--Allegation of criminal offence against company-Can only mean alleged offence having been committed by its detectors or officers-Court in order to decide as to who committed such offence always required to pierce veil of incorporation-Commission of a criminal offence by a company, held, not inconsistent with mens rea on part of its directors.

Saloman v. Saloman 1897 A C 22 and President v. Shaukat Ali P L D 1971 SC585ref.)

Ss. 409, 420 & 109-Criminal breach of trust-Cheating-Company, criminal liability of company bound to pay to appellant sums col lected by it on behalf of appellant but failing to pay-"Someone" managing company's affairs clearly misappropriated appellant's funds--Mater, held, for trial Court to decide as to who such "some one" is and fact of "individual respondent" entrusted with relevant documents being not specified in complaint totally immaterial.

M. Bilal, Advocate and F. Safdar Hussain, Advocate-on-Record for Appel lant.

Nemo for Respondents Nos. 1 to 5

S. Ibne Ali, Additional Advocate-General (N: -W. F. P.) for the State.

Samiullah Jan, Advocate and M. Qasim Imam, Advocate-on-Record for Respondents. No. 6.

Date of hearing : 15th December 1980.

The first six respondents in this appeal, to whom. we will refer as the respondents, are directors of a company known as Messrs Khyber Express Limited (hereinafter called the company). The company was carrying on the business of travel agents, and in or about 1965 it obtained the appellant's agency for Nowshera. As the appellant's agent, it had to hand over to the appellant the amounts collected by it for freight and for the sale of the appellant's tickets after deducting its commission, The company appear, to have discharged its duties properly until 5th April, 1968. However, between 30th April and 15th May, 1968 it issued three cheques to the appellant aggregating Rs. 3,64,707.40, and the appellant presented these cheques for payment at a Lahore branch of the United Bank Limited. All the three cheques were dishonoured, therefore, the appellant informed the company and the respondents that these cheques had been dishonored and correspondence between the parties went on for a very long time, as some of the respondents requested the appellant to wait in order to enable them to arrive at a settlement. But, as no settlement was reached, the appellant served a notice of its demand, after which it was informed that the company had decided to apply to the Peshawar High Court for winding up. The appellant therefore, saw no purpose in waiting on the assurance, s of some of the respondents, therefore, it filed a complaint under sections 409, 420 and 109 of the P. P. C. against the respondents in the Court of the District Magistrate, Peshawar. This was on the 6th of January, 1969 and we may point out, although Mr. Bilal did not explain this discrepancy, the amount finally claimed by the appellant is Rs. 4,70,392.16. The District Magistrate transferred the case to an Additional District Magistrate, who after recording the statement of the petitioner's representative ordered the issue of notices to the respondents for appearance before him.

The first two respondents in this appeal therefore, filed application under section 561-A of the Criminal Procedure Code in the Peshawar High Court for the quashment of the appellant's complaint against them. This application was allowed by a learned Judge of the Peshawar High Court on the 16th February, 1971, therefore, the appellant filed a petition for leave against this judgment on the short and obvious ground that the learned Additional District Magistrate "did riot in any way act in excess of his jurisdiction," in merely issuing notice to the respondents. Leave had to be granted to examine this question as the view taken by the High Court was contrary to the law declared by this Court in Ghadarn Muhammad v. Muzammal Khan (PLD1967SC31'7). This appeal came up for he tiring before us on l0th December, 1980 and we found that the appellant had not imp leaded the State as a party in the appeal, therefore, we gave notice to the Additional Advocate General to assist us on the question whether, in these circumstances, the appeal was competent.

The learned Additional Advocate-General appeared before us today in pursuance of our notice and advanced an elaborate argument to show that the appeal was not competent, and he further prayed that we should implead the State in the appeal, otherwise it would put a premium on dishonesty and fraud. The argument had great force, and Mr. Bilal on behalf of the appellant also submitted that the appellant should be permitted to implead the State and its delay in making its request should be conceded. We deplore the appellant's failure to implead the State and we deprecate its very belated request for permission to implead the State. But, after hearing all the learned counsel, we allowed ibis request, because any other course would defeat the ends of justice and set a bad precedent.

We now turn to the arguments of the learned counsel on the merits of the case, and Mr. Samiullah Jan submitted that the only material against the respondents was that cheques issued by the company (of which they were directors) had been dishonoured twice, but this by itself was not, according to learned counsel, sufficient to make out the ingredients of any offence much less the ingredients of the offences alleged. We are not impressed by this submission.

It is true that if a cheque is dishonourd, it does not necessarily mean that the dralver of the cheque had issued it with the knowledge that he had no funds in his account. But -the position here is much more complicated. It is not Mr. Samiullah Jan's case that the, company was doing any business other than that of running the appellants agency. Therefore, subject to the; commission earned by it on its sales, all the moneys received by it from its customers were held by it on trust for payment to the appellant. Secondly, the three cheques which were dishonourd were for very large amounts. There fore, Mr. Bilal submitted that the dishonour of these cheques itself made out the ingredients of sections 409 and 420, P. P. C. and relied on Abdul Karim Butt v. Abdul Qayyum and another (1972 P Cr. L J 1182). The judgment cited lends some support to Mr. Bilal's submission but we do not wish to make any observation which would pre-judge the case of the parties, therefore, we have to emphasize that the only question before us is whether the learned Additional District Magistrate had exceeded his jurisdiction in issuing the notice to the respondents.

The learned Judge held that the learned Additional District Magistrate had exceeded his jurisdiction, but the learned Judge does not appear to have been given proper assistance on the question of the responsibilities and liabilities of the directors of a company, therefore, he held that the respondents could not be liable for the alleged breach of trust, because the company was "an artificial and juridical person". But, probably because the learned Judge had doubts about the sweeping proposition of law thus laid down by him, he also held in the alternative, that the respondents were not liable, on the facts of the case, for the alleged breach of trust.

Now, the question of the liability of the directors of a company for a criminal breach of trust or indeed for any offence by the company is a question of law, therefore, we venture to think that it would have been better if the learned Judge had given reasons for the sweeping conclusion reached by him. Be that as it may, although a company is a distinct legal entity which is quite different from its members, including its directors, a held in Salornan v. Saloman (1897 A C 22), this does not alter the fact that a company can only act through its directors and officers, therefore, an allegation of a criminal offence against a company can only mean that the company's directors and/or officers have committed the alleged offence and in order B to decide, who has committed that offence, the Court has always to pierce the veil of incorporation, as held by Hamoodur Rehman, C. J., in President v. Shaukat Ali (P L D 1971 S C 585). We are aware that this decision is an order by the Supreme Judicial Council and not by this Court therefore, we would clarify that we respectfully approve of the observations of the learned Chief Justice in this case on the necessity of piercing the veil of incorporation. Therefore, merely because a company is a distinct legal entity from its directors, it does not mean, as held by the learned Judge, that the commission of a criminal offence by a company is incons1stent with mens rea on the part of its directors.

Turning now to the alternative ground given by the learned Judge, he observed :-

"It is not specifically stated in the complaint as to which of the individual respondent was entrusted with the traffic documents and who sold them as agents and recovered the sale money so as to be rendered responsible for the commission of the alleged offences."

With respect, the fact that the complaint did not specify "the individual respondent" who had been entrusted with the traffic documents was totally immaterial, because the respondents knew that traffic document would be entrusted by the appellant to the company's officers and directors. Similarly, all the company's directors, including the respondents, knew or should have known that the moneys collected by the appellant were held on trust by the company for commission. Therefore, it was the duty of the company's directors, including the respondents, to ensure that, subject to its claim for commission, the company paid to the appellant the moneys collected by it from its customers for freight and for the sale of the appellant's tickets. But, as the company failed to pay the appellant its dues, it is clear that some one managing the company' affairs misappropriated the funds of the appellant. And, it would be for the Magistrate to decide, in the investigations before him, who that someone was. But, it cannot possibly be said that merely because the respondents were directors, they could not be guilty of breach of trust, as alleged by the appellant.

Mr. Samiullah Jan then referred us to the first respondent's quashment application and stated that according to this application, the responsibility for the breach of trust was of the third, fourth and the fifth respondents. But, the question whether it was these respondents who were responsible for the breach of trust or some other directors of the company or some officers of the company cannot be decided without an enquiry, and it is for the Magistrate and Magistrate alone to conduct this enquiry, therefore the respondents were very ill-advised in rushing to the High Court for the appellant's complaint.

The High Court's order is without jurisdiction and is set aside. The learned District Magistrate will, therefore, issue a fresh notice under section 202 of the Criminal Procedure Code to the respondents, who would be free to raise before him the points advanced by then in the High Court or any other plea that may be available to them under the law. With these observations, we set aside the judgment of the High Court and allow the appeal.

Appeal allowed.

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