The essential requirements for a valid complaint under Section 138 NI Act, including the demand notice to the drawer of the cheque and the arraignment of the company as the accused when the cheque is drawn from the company's account.

ORDER :

1. This petition is filed by the 2nd accused under Section 482 of the Code of Criminal Procedure, 1973 (for short ‘Cr.P.C’) seeking to quash S.T.No.986/2017 pending on the files of Judicial First Class Magistrate Court, Ottapalam (for short ‘the court below’) and all proceedings initiated pursuant thereto. S.T.No.986/2017 is a prosecution launched under Section 142 of the Negotiable Instruments Act, 1881 (for short ‘NI Act’) alleging commission of an offence punishable under Section 138 NI Act by respondent No.2 against petitioner and respondent No.3. Petitioner is the 2nd accused in the prosecution. 1st respondent is the State, 2nd respondent is the complainant and the 3rd respondent is the 1st accused in the case. According to the 2nd respondent/complainant, stationary goods were purchased by the accused from his stationary shop for a sum of Rs.1,49,560/-and towards payment of it’s cost, 3rd respondent (1st accused) issued a cheque bearing No.418935 dated 28.03.2017, drawn on account No.30781221971 maintained by him at State Bank of India, Ottapalam Branch for a sum of Rs.1,49,560/-. At the time of issuance of cheque, the 3rd respondent made the complainant believe that funds would be available in the account at the time of presentation of the cheque. Accordingly the complainant presented the cheque at Axis Bank, Ottapalam Branch but it was dishonoured for the reason “funds insufficient”. The cheque as well as the dishonour memo dated 29.03.2017 were returned to the complainant. Thereupon he issued a notice dated 18.04.2017 to the 3rd respondent who had signed the cheque. A reply notice was issued by the 3rd respondent raising untenable contentions. The amount demanded was not paid. Thereupon Complaint was filed to launch the prosecution against the petitioner and the 3rd respondent alleging commission of offence punishable under Section 138 N.I.Act.

2. Sworn statement of the 2nd respondent was recorded by the court below on 30.05.2017. The accused denied all the averments in the complaint. According to him the 3d respondent/1st accused was the Managing Director of the company namely Preesa Foods and Spices (India) Private Limited and petitioner, a Director in the said company. He is working in United States of America and since 2015, the 3rd respondent was indulged in defalcation and misappropriation of the bank accounts of the company and on account of that the company was running in huge loss. Thereupon entire funds required for functioning of the company was given by the petitioner. The company went in huge loss due to the continuous defalcation of the Company’s accounts and properties by the 3rd respondent who is the earstwhile Managing Director.

3. The Board of Directors of the company in its meeting held on 03.03.2016, decided to sell the movable as well as immovable properties of the company. All the employees of the company were terminated and the company ceased to function from 01.04.2016. In the meeting held on 02.04.2016 with the 3rd respondent, the petitioner has declared that he will invest his personal funds to close all the loans of the company. The 3rd respondent was permitted to use the existing facilities in the factory till 30.06.2016 to clear off the stocks and collect debts. Immediately after the meeting the petitioner returned to United States of America to join his job. Thereafter the petitioner came to know that the 3rd respondent/1st accused who is none other than the Managing Director of the company who had the authority to sign the cheque and operate the Bank Accounts of the company had siphoned an amount of Rs.13,12,541/-from the company’s bank account. The said defalcation was noticed by the petitioner when he arrived at Ottapalam on 19.03.2017. Thereupon O.S.No.25/2017 was filed before Sub Court Ottapalam against the 3rd respondent and others. As per the General Body meeting of the company held on 05.04.2017, the rd respondent was removed from the affairs of the company and Sri.Abu Thahir