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SUPREME COURT OF INDIA
Pinaki Chandra Ghose, Uday Umesh Lalit, jj.
KIRSHNA TEXPORT & CAPITAL MARKETS LTD. – Appellant
Versus
ILA A. AGRAWAL & ORS. – Respondents
CRIMINAL APPEAL NO.1220 of 2009
Decided On : 06-05-2015
(b) Negotiable Instruments Act, 1881 – Section 141 – Vicarious liability – Persons responsible for running affairs of Company ought to be proceeded against – Section 141 does not require issuance of notices to individual Directors u/s 138 – Notice to Company is considered good enough. (Para 14)
(c) Negotiable Instruments Act, 1881 – Section 138 and 142 – Section 138 requires issue of notice within 30 days of dishonour of cheque – Drawer gets 15 days to pay – This period is not extendable – Complaint u/s 142 can be filed within 30 days of cause of action – This period is extendable – Thus a complaint can be filed within the aggregate period of seventy five days from the dishonour – If the drawer of the cheque is a Company, complainant can find out names of Directors during this period – However if contention of individual notice to Directors is accepted, this period gets reduced to 30 days only – That too may not be feasible in absence of names of Directors which the complainant may not be aware of – Directors would anyway be aware of any action against the Company – Individual notices to directors cannot be read into section 138. (Para 15, 16)
1999 ALL MR (CRI) JOURNAL 3; 80 (1999) DLT 654; (2000) Cr. L.J. 1002; 191 (2012) DLT 318; (2007) 9 SCC 481; (1958) SCR 360; (2003) 2 SCC 577; (2000) 9 SCC 249 – Referred
2006 Cril. L.J. 4552 – Overruled
Facts of the case:
On 14.09.1996 a notice under Section 138 of the ‘Negotiable Instruments Act, 1881’ was issued on behalf of the appellant to M/S Indo French Bio Tech Enterprises Ltd. The notice stated that a cheque bearing No. 364776 dated 8.9.1996 drawn by the Company on Dena Bank, New Marine Lines, Mumbai in favour of the appellant was returned on 10.9.1996 with endorsement “funds insufficient”. The notice therefore called upon the addressee to make the payment of the cheque amount within 15 days of the receipt of such notice. No reply was sent to the aforesaid notice.
The appellant thereafter filed Complaint Case against the Company, Mr. K.J. Bodiwala, the Chairman and Managing Director of the Company and 11 other directors including respondents 1 and 2. In so far as the directors are concerned, it was averred that they were in-charge of the business of the Company and its day to day affairs and were liable. During the pendency of said complaint case, the process issued against Accused Nos. 3 to 5, 7, 9 to 13 was recalled and due to the death of Mr. Bodiwala the proceedings as against him also abated, which left the Company and the present respondents 1 and 2 namely Ms. Ila A. Agrawal and Mr. Prafulla Ranadive, Accused Nos. 6 and 8 respectively in the array of accused.
No individual notices were given to the directors. The Metropolitan Magistrate convicted the Company but acquitted respondents 1 and 2 of the offence punishable under Section 138 of the Act.
The appellant filed Criminal Application in the High Court seeking leave to prefer appeal against the judgment acquitting respondents 1 and 2. It was submitted that it was not necessary to serve individual notice upon the directors and it was sufficient if the notice was served on the Company.
The High Court observed that it was mandatory to have issued separate notices to the directors.
Finding of the Court:
Individual notices to directors cannot be read into section 138.
Result: Appeal allowed.
JUDGMENT
Uday Umesh Lalit, J.
1. This appeal by Special Leave is directed against the order dated 6.5.2008 passed by the High Court of Judicature at Bombay rejecting Criminal Application No. 2174 of 2007 preferred by the appellant for leave to appeal.
2. On 14.09.1996 a notice under Section 138 of the ‘Negotiable Instruments Act, 1881’(hereinafter referred to as “the Act”) was issued on behalf of the appellant to M/S Indo French Bio Tech Enterprises Ltd (‘the Company’ for short). The notice stated that a cheque bearing No. 364776 dated 8.9.1996 drawn by the Company on Dena Bank, New Marine Lines, Mumbai in favour of the appellant was returned on 10.9.1996 with endorsement “funds insufficient”. The notice therefore called upon the addressee to make the payment of the cheque amount within 15 days of the receipt of such notice. No reply was sent to the aforesaid notice dated 14.9.1996.
3. The appellant thereafter filed Complaint Case No. 243/S/1996 before the Additional Chief Metropolitan Magistrate, 5th Court at Dadar, Mumbai against the Company, Mr. K.J. Bodiwala, the Chairman and Managing Director of the Company and 11 other directors including respondents 1 and 2. In so far as the directors are concerned, it was averred that they were in-charge of the business of the Company and its day to day affairs and were liable. During the pendency of said complaint case, the process issued against Accused Nos. 3 to 5, 7, 9 to 13 was recalled and due to the death of Mr. Bodiwala the proceedings as against him also abated, which left the Company and the present respondents 1 and 2 namely Ms. Ila A. Agrawal and Mr. Prafulla Ranadive, Accused Nos. 6 and 8 respectively in the array of accused.
4. It was submitted by the appellant that separate notices to the directors were additionally issued but at the stage of evidence it turned out that such individual notices to the directors were with respect to dishonour of a different cheque. The facts as found therefore were that no individual notices were given to the directors. The Metropolitan Magistrate by his judgment and order dated 30.4.2007 convicted the Company but acquitted respondents 1 and 2 of the offence punishable under Section 138 of the Act. Relying on the judgment of the Division Bench of Madras High Court in B. Raman & Ors. Vs. M/s. Shasun Chemicals and Drugs Ltd. reported in 2006 Cril. L.J. Page 4552, it was observed that statutory notice under Section 138 of the Act was required to be issued to every Director and for non-compliance of such mandatory requirement respondents 1 and 2 could not be proceeded against. .
5. The appellant being aggrieved filed Criminal Application No. 2174 of 2007 in the High Court seeking leave to prefer appeal against the judgment acquitting respondents 1 and 2. It was submitted that it was not necessary to serve individual notice upon the directors and it was sufficient if the notice was served on the Company. Reliance was placed on the decision of a Single Judge of the Calcutta High Court in the case of Girish Chandra Pandey Vs. Kanhaiyalal Chandak and Ors. reported in 1999 ALL MR (CRI) JOURNAL 3, wherein it was held that if the partnership firm failed to give the amount within the stipulated time after receipt of notice, each partner need not be served with a separate notice individually. So also reliance was placed on the decision of a Single Judge of Delhi High Court in the case of Jain Associates and Ors. Vs. Deepak Chawdhary & Co. reported in 80 (1999) DLT 654, wherein it was laid down that Section 141 of the Act does not require that each and every partner of the firm is required to be issued notice.
Similar view was taken by High Court of Andhra Pradesh in K. Pannir Selvan vs. MMTC and another reported in (2000) Cr. L.J. 1002 and by Delhi High Court in Ranjit Tiwari vs. Narender Nayyar reported in 191 (2012) DLT 318.
6. The High Court, relying on the judgment of the Division Bench of Madras High Court B. Raman & Ors. (supra) observed that it
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