Service of notice on the Managing Director of a company is sufficient compliance with the statutory requirements of section 138 Negotiable Instruments Act, and vicarious liability is created for the company and its directors.

SANJEEV SACHDEVA, J.

1. The petitioner seeks quashing of summoning order dated 06.03.2013 and seeks quashing of complaint filed under Section 138 of the Negotiable Instruments Act (hereinafter referred to as the N.I. Act).

2. The respondent had filed a complaint under Section 138 N.I. Act contending that two cheques in the sum of Rs. 75 lakhs issued by the petitioner were dishonoured for the reasons “insufficient funds”.

3. Apart from the raising defence on merits, the petitioner has raised a technical defence to the complaint and contends that the same goes to the very root of the matter and submits that the complaint is not maintainable.

4. Subject cheques were issued on a bank account maintained by DSC Ltd., the petitioner herein. Cheques were admittedly signed by Mr. M.S. Narula, who is stated to be the Managing Director of the petitioner company.

5. It is an admitted position that statutory notice under Section 138 of the N.I. Act dated 19.01.2013 was addressed only to “Mr. M.S. Narula, Director, DSC Ltd.” No notice was sent in the name of “DSC Ltd”. Subject complaint has been filed only against “DSC Ltd. Through its Director–M.S. Narula”.

6. Learned counsel for the petitioner contends that since statutory notice was only addressed to Mr. M.S. Narula and not to DSC Ltd., the complaint filed only against DSC Ltd. through Mr. M.S. Narula is not maintainable. He contends that the holder of the account on which the cheque was drawn was not put to notice and the noticee to whom the statutory notice was issued has not been arrayed as an accused, thus the proceedings are not maintainable and are liable to be quashed.

7. Per contra, the contention of learned counsel for the respondent is that DSC Ltd. being a legal entity and the cheque having been signed by Mr. M.S. Narula who is admittedly the Manager Director, as is evident from the affidavit filed in support of the petition, the notice was to the company and the complaint in the name of the company through its Director Mr. M.S. Narula is maintainable.

8. The factual position that emerges is that the alleged debt is that of the Petitioner Company. Subject cheque has been issued and signed by Mr. M.S. Narula its Managing Director. Statutory notice under section 138 Negotiable Instruments Act has been issued only to the Managing Director. It is an admitted position that statutory notice has not been addressed to the company and was addressed only to its Managing Director. Subject complaint has been filed only against the company and not against the Managing Director. The company has been arrayed through Mr. M.S. Narula, its Managing Director.

9. The question that arises for consideration is as to whether a complaint under section 138 Negotiable Instruments Act would be maintainable, against the company, if the statutory notice under section 138 Negotiable Instruments Act, is issued only to its Managing Director and is not issued to the company which is maintaining the account from which the subject cheque is issued.

10. To answer the question, we will have to examine the legal position.

11. The Supreme Court of India in Krishna Texport & Capital Markets Ltd. V. Ila A. Agrawal, (2015) 8 SCC 28 has held as under:

“14. In Nathi Devi v. Radha Devi Gupta [(2005) 2 SCC 271] a Constitution Bench of this Court was called upon to consider, inter alia, whether the expression, “where the landlord is a widow and the premises let out by her, or by her husband, are required by her for her own residence” appearing in Section 14-D of the Delhi Rent Control Act would include every widow so as to entitle her to obtain immediate possession of the premises owned by her. While holding that the benefit under Section 14-D is available only to a widow where premises are let out by her or by her husband, this Court repelled the contention that a widow who had acquired tenanted premises by sale or transfer could also invoke the provisions of Section 14-D. During the course of its decision this Court observed