Directors are liable to be prosecuted only if they are served individually with statutory notice under Section 138(b).

(Petition under Section 482 of the Code of Criminal Procedure)

M. Karpagavinayagam, J.

The question posed before this Division Bench is as follows:

In the absence of individual notice under Section 138 (b) of the Negotiable Instruments Act, to be served on the director of a company, can the said director be prosecuted for the offence, committed by the company, under Section 138 of the Act?

2. When this question was posed before a learned single Judge, Justice T.V.Masilamani, as he then was, it was brought to the notice of the learned single Judge, that, in Harish C.Chadda, Director, Nubal (India) Ltd. v. XS Financial Services Ltd., 2001 (2) L.W.(Cri.) 625, Justice D. Murugesan held that the prosecution against the director, who has not been served with a statutory notice, is not maintainable. In another decision, rendered by Justice Malai Subramanian, as he then was, in Sarvaraya Textiles Ltd. v. Integrated Finance Ltd., 2001 (1) CTC 725, it is held that prosecution is maintainable, even though notice has not been served on the director, who is sought to be prosecuted, since the notice issued to company amounts to service of notice on all the directors, arrayed as accused, along with the company, which was also brought to the notice of the learned single Judge.

3. On noticing that there are two divergent views taken by the learned single Judges with regard to the issue, Justice T.V.Masilamani, thought it fit to refer the matter to Hon'ble Chief Justice, for posting the same before a Larger Bench, for deciding the issue and setting at rest the controversy. Accordingly, this matter has been posted before this Division Bench, on the orders of Hon'ble Chief Justice.

4. We have heard Mr.B.Kumar, learned Senior Counsel for the petitioners, and Mr.K.Ravi Anantha Padmanabhan, learned counsel for the respondent. We appointed Mr.E.Raja, as Amicus Curiae, to assist this Court, and he is also heard, besides Mr.V.R.Balasubramaniam, Government Advocate, on the question posed before this Court.

5. All the counsel made their submissions at length, with thorough preparation. They also filed written submissions, as well as the typed sets, containing various decisions.

6. The following citations are referred to by Mr.B.Kumar, learned Senior Counsel, for the petitioner:

(i) AIR 1952 SUPREME COURT 156 (W.H.KING v. REPUBLIC OF INDIA);

(ii) AIR 1998 SUPREME COURT 366 (TOMY JACOB KATTIKKARAN v. THOMAS MANJALY);

(iii) 2000 (2) CRIMES 354 (K.PANNIR SELVAM v. M.M.T.C.LTD.);

(iv) 2000 (2) CRIMES 374 (JAIN ASSOCIATES v. DEEPAK CHAUDHARY AND CO.);

(v) 2001 (1) CTC 94 = 2000 (1) L.W.(CRL.) 422 (ANIL HADA v. INDIAN ACRYLIC LTD.);

(vi) 2001 (1) CTC 538 (DALMIA CEMENT (BHARAT) LTD. v. GALAXY TRADERS AND AGENCIES LTD.);

(vii) 2001 (1) CTC 725 (SARVARAYA TEXTILES LIMITED v. INTEGRATED FINANCE LTD.);

viii) 2001 (2) LW (CRI) 625 (HARISH C. CHADDA v. XS FINANCIAL SERVICES);

(ix) 2001 (4) SUPREME COURT CASES 382 (AMERY PHARMACEUTICALS v. STATE OF RAJASTHAN);

(x) 2005 (2) BANKMANN 42 (M/S.TARGET OVERSEAS EXPORTS PVT.LTD. v. A.M.IQBAL); and

(xi) 2005 (5) CTC 65 (S.M.S.PHARMACEUTICALS LTD. v. NEETA BHALLA).

7. The following decisions are cited by Mr.E.Raja, Amicus Curiae:

(i) AIR 1978 SUPREME COURT 597 (MANEKA GANDHI v. UNION OF INDIA);

(ii) 1998 SUPREME COURT CASES (CRI) 1471 (SADANANDAN BHADRAN v. MADHAVAN SUNIL KUMAR);

(iii) 1998-2-L.W.(CRL.) 611 (K.S.SUBBARAMAN v. IYYAMMAL);

(iv) 1999 (1) MWN (CRL.) 1 (SANTHANAPANDI v. STATE BY INSPECTOR OF POLICE);

(v) 1999 (1) MWN (CRI.) 126 (I.JAIRAJ v. C.ARAVANDA);

(vi) 1999 SUPREME COURT CASES (CRI) 1411 (CENTRAL BANK OF INDIA v. SAXONS FARMS);

(vii) 2000-1-L.W.(CRL.) 299 (K.BHASKARAN v. SANKARAN VAIDHYAN BALAN & ANOTHER);

(viii) 2000 (1) L.W.(CRL.) 422 (ANIL HADA v. INDIAN ACRYLIC LTD.);

(ix) 2001 (2) L.W. (CRL.) 611 (NATESHA SINGH ETC. & OTHERS v. M/S.KLEN AND MARSHALS OF MANUFACTURERS AND EXPORTERS PVT. LTD.);

(x) 2001 SUPREME COURT CASES (CRI) 955 (UNIPLAS INDIA LTD. v. STATE (GOVT. OF NCT OF DELHI);

(xi) 2003 SUPREME COURT CASES (CRI) 1