The central legal point established in the judgment is the liability of directors under Section 138 of the Negotiable Instruments Act and the principle of ratification under Section 196 of the Contract Act.

K.C.Gupta, J.

1. This is a petition under Section 482 of the Code of Criminal Procedure, 1973, inter alia, seeking quashing of the complaint dated August 17, 1998 (Annexure P1) under Section 138 of the Negotiable Instruments Act, 1881 (hereinafter referred to as the Act) and the summoning order dated November 6, 1998 (Annexure P2).

2. The brief facts of the case are that the respondent No. 1 (complainant) filed a complaint under Section 138 of the Act against respondents Nos. 2 and 3 and the petitioner on the allegations that respondent No. 1 had supplied iron material to respondent No. 2 vide Bill No. 166/67 dated October 8, 1995, for Rs. 4,81,032 and respondent No. 2 with a view to discharge the said financial liability through its director, respondent No. 3 Tarsem Kansal, under his signature had issued cheque No. 729707 dated July 1, 1998, of Rs. 2,21,126 equal to the amount of Bill No. 166 dated October 8, 1995, in favour of the complainant drawn on Oriental Bank of Commerce, Mandi Gobindgarh, assuring that the same would be honoured when it would be presented for encashment to the concerned bank.

3. Respondent No. 1 sent the said cheque for collection through his banker Bank of India, Mandi Gobindgarh to the concerned bank but it was dishonoured on July 9, 1998, with the remarks "insufficient funds". After receipt of the dishonoured cheque, respondent No. 1 issued legal notice dated July 14, 1998, through his authorised signatory by registered post to respondents Nos. 2 and 3 calling upon them to make the payment of the aforesaid cheque to the complainant within 15 days of the receipt of the notice but the same was not paid.

4. It was next averred that respondent No. 3 Tarsem Kansal being the director of respondent No. 2, Classic Ispat Pvt. Ltd., was controlling and managing the business and affairs of the company and the petitioner was also taking active part in the affairs of the company and thus all of them were liable under Section 138 of the Act for all the acts committed on behalf of the company.

5. After recording the preliminary evidence, respondent Nos. 2, 3 and the petitioner were summoned vide order dated November 6, 1998, by the Sub-Divisional Judicial Magistrate, Amloh. The said complaint was filed through Vishal Kumar Goel, special power of attorney of Rajiv Gupta, proprietor of Rohin Steel Industries.

6. Thus Sandeep Kumar filed petition under Section 482 of the Criminal Procedure Code seeking quashing of the complaint dated August 17, 1998 (Annexure P1) under Section 138 of the Act and the summoning order dated November 6, 1998 (Annexure P2) on the allegations, that no notice was given to him as required under Section 138, proviso (b) after dishonouring of the cheque requiring payment of the money within 15 days from the receipt of the notice by registered post. He also stated that the petitioner was a sleeping director and was not connected with the day-to-day affairs of the company and as such, was not liable under Section 138 of the Act. It is further alleged that Vishal Kumar Goel, special power of attorney was not authorised by the proprietor of the firm to institute the complaint against him and as such, the complaint against him was not maintainable; so it was liable to be quashed. Respondent No. 1 filed reply opposing the request of the petitioner for quashing the complaint as well as the summoning order.

7. I have heard counsel for the petitioner, Shri Anand Chhibbar, counsel for respondent No. 1 (complainant) Shri R.K. Battas and have gone through the file.

8. A perusal of the complaint (Annexure P1) shows that it has been filed through Vishal Kumar Goel, special power of attorney, against Classic Ispat Pvt. Ltd., Tarsem Kansal, director, and Sandeep Kumar, Annexure P4 is the special power of attorney which has been given by Rajiv Gupta, proprietor of Rohin Steel Industries in favour of Vishal Kumar Goel to file the complaint under Section 138 of the Act against Tarsem Kansal, director, C