IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 09.02.2010 CORAM THE HONOURABLE MR. JUSTICE C.T.SELVAM Crl.O.P.No. 4072 of 2006 and Crl.M.P.Nos. 995 & 996 of 2006 and Crl.O.P.No. 5305 of 2006 and Crl.M.P.No.1356 of 2006 and Crl.O.P.No. 31587 of 2005 and Crl.M.P.No. 8907 of 2005 K.C.Palanisamy ... Petitioner in Crl.O.P.No.4072 of 2006 Versus The Principal Manager, Coimbatore Telecom represented by Sri V.Muthiah, Assistant Chief Accounts Officer, O/O.Principal General Manager, BSNL, Coimbatore. ... Respondent in Crl.O.P.No.4072 of 2006 R.Karunanithi ... Petitioner in Crl.O.P.No.5305 of 2006 Versus Principal General Manager, Bharat Sanchar Nigam Limited MTP Road by Sri.V.Muthiah Coimbatore – 641 043. ... Respondent in Crl.O.P.No.5305 of 2006 https://hcservices.ecourts.gov.in/hcservices/ Bharat Mathur ... Petitioner in Crl.O.P.No.31587 of 2005 Versus The Principal General Manager, BSNL, Coimbatore Telecom represented by V.Muthiah, Assistant Chief Accounts Officer, O/O.Principal General Manager, BSNL, Coimbatore – 641 043 ... Respondent in Crl.O.P.No.31587 of 2005 Prayer: Criminal Original Petitions filed under Section 482 of Criminal Procedure Code to call for the records connected with C.C.No.385 of 2005 on the file of the Judicial Magistrate No.V, Coimbatore and quash the same. For Petitioners : Mr.B.Kumar, Senior Counsel for Mr.R.Loganathan in Crl.O.P.No.4072 of 2006 Mr.V.Gopinath, Senior Counsel for Mr.R.John Sathayan in Crl.O.P.No.5305 of 2006 Mr.C.Manishankar in Crl.O.P.No.31587 of 2005 For Respondents: Mr.M.Govindaraj in all Crl.O.P.s. C O M M O N O R D E R These three Criminal Original Petitions seek to quash the proceedings in C.C.No.385 of 2005 on the file of the Judicial Magistrate No.V, Coimbatore. 2.The case is one for prosecution for offence under Section 138 of the Negotiable Instruments Act. The brief facts giving rise to the complainant case are as follows; The complainant is the B.S.N.L. i.e., Bharath Sanchar Nigam Limited. A company by name Data Access India Limited had a licence agreement with the complainant dated 27.03.2002. Under the agreement, the complainant issued an International Long Distance Service licence to the first accused Company to establish, https://hcservices.ecourts.gov.in/hcservices/ install, operate and maintain I.C.D. Services. The first accused company was permitted to set up an I.L.D POP at Coimbatore and I.L.D. traffic from Coimbatore to be transmitted through their H.D. Gateway Switch at Chennai. Several sums became due under such agreement from the first accused company to the complainant. Such company executed a Bank guarantee of Rs.3.14 crores in favour of the complainant and also issued cheques in favour thereof. The cheque for value of Rs.25,50,704/- towards part payment due to B.S.N.L. issued on 31.08.2004 was presented by the complainant for payment and when the same was returned for the reason "Account Blocked", the complainant has issued a telegram calling upon the company/Data Access India Limited to effect payment within 15 days and on non-compliance with the demand, the complainant has approached the Court alleging offences under Sections 138 and 142 of the Negotiable Instruments Act. 3.The petitioner in Crl.O.P.No.31587 of 2005 has been arrayed as the second accused, since he was the Vice President of the first accused company. The petitioner in Crl.O.P.No.4072 of 2006 has been arrayed as the third accused alleging that he was the Chairman-cum-Managing Director of the first accused company and the petitioner in Crl.O.P.No.5305 of 2006 has been arrayed as the fourth accused alleging that he was a Director (Finance) of the first accused company. 4.I have heard Mr.B.Kumar, learned Senior Counsel in Crl.O.P.No.4072 of 2006, Mr.V.Gopinath, learned Senior Counsel in Crl.O.P.No.5305 of 2006 and Mr.C.Manishankar, learned Counsel in Crl.O.P.No.31587 of 2005 appearing for the petitioners in support of the quash petitions. Heard Mr.M.Govindaraj, learned counsel for the respondents, on the submissions made on behalf of the petitioners and perused the materials available on record. 5.Mr.B.Kumar, learned Senior counsel appearing for the petitioner in Crl.O.P.No.4072 of 2006 submitted that the Cheque giving rise to the complaint had been presented for payment on 18.12.2004. Even prior thereto, the petitioner had ceased to be a Director. He had served as an Additional Director of the first accused Company for a period of four months and 18 days, having resigned the post on 18.11.2004. Such resignation have been duly registered with the Registrar of the Companies under Form-32. Thus, the learned Senior Counsel submits that as the petitioner in Crl.O.P.No.4072 of 2006 was not a Director of the first accused company at the time of the commission of the offence, he could not be proceeded against. 6.The petitioner in Crl.O.P.No.5305 of 2006 had served as an Additional Director of the first accused company between 24.07.2004 and 05.11.2004 on which date he had resigned. The fact https://hcservices.ecourts.gov.in/hcservices/ of his resignation from Directorship stands duly registered with the Registrar of Companies under Form-32. The petitioner in Crl.O.P.No.31587 of 2005, was not even on the Board of Director of the first accused company. He had held the post of Vice President thereof but had resigned on 07.10.2004. The contention of the respective Senior Counsel for both the petitioners is that at the time of the commission of the offence they had nothing to do the affairs of the first accused company and hence they could not be proceeded against. 7.Mr.B.Kumar, learned Senior Counsel submitted that in the instant case, no statutory notice as contemplated under the Negotiable Instruments Act had been issued to the accused 2 to 4 and in the absence thereof, they could not be proceeded against. Reliance was placed on the Judgment of this Court in Mr.B.Raman & 2 others v. M/s. Shasun Chemicals and Drugs Limited represented by its Company Secretary, No.3, Doraiswamy Road, T.Nagar, Chennai- 600 017, 2006-2-L.W.(Crl.) 775, wherein a Division Bench of this Court, after discussion of the law on the subject has held that unless an opportunity is given to the Directors before filing the Criminal complaint, by serving notice on them, it would not be possible for them to establish their innocence during the pre- trial stage that they were not in charge of the company or that the offence was committed without their knowledge or that they exercised all due diligence to prevent the commission of the offence. "Section 138 (b) refers to issuance of notice to the drawer. Of course, while interpreting the said section, a notice to the drawer shall mean notice to the drawer, who has drawn the cheque in individual cases. But, when the offence is committed by the company, by virtue of Section 141, every person, who, at the time of offence was committed, was in charge of and responsible for the conduct of the business of the company, is presumed to be guilty of the offence. The word "drawer", as contained in Section 138 (b), cannot be restricted in the sense to the drawer of the cheque alone, but to those, who are presumed to be guilty of the offence, by virtue of Section 141, more particularly when such individuals are liable to be imprisoned for such an offence and their personal liberty is infringed thereon. As such, it is a violation of Article 21 of the Constitution of India." 8.The learned Senior Counsel informing that in this case, the alleged notice had been sent by Telegram dated 28.12.2004, relied on decision of this Court in M.Murugan v. Queen Jhansi Vetrikodi, 2004 (2) CTC 530 to support his contention that a notice issued through telegram was not a valid notice. In such decision, a https://hcservices.ecourts.gov.in/hcservices/ learned Single Judge of this Court had distinguished the nature of communication under telegram and fax and had found that while a Fax message would be an authenticated message, a telegram would not be so. A telegraphic message was capable of being wrongly communicated and would not bear the signature of the sender. The learned Single Judge also referred to earlier decision of this Court reported in Pattabirama Reddy v.Nageshwara Reddy, 2001(2) L.W.(Crl) 781, wherein it was held that a telegram cannot be accepted as a statutory notice, as it is only an unsigned or anonymous communication. The learned Judge further referred to the decision of the Apex Court in District Magistrate and another v. G.Jothisankar, 1993 (2) Crimes 1189, wherein the Apex Court had held that a telegram by itself was not an authenticated document, unless it subsequently was confirmed by a signed communication. 9.The learned Senior Counsel also referred to the decision of the Apex Court in S.M.S. Pharmaceuticals Limited, v. Neeta Bhalla and another, AIR 2005 SUPREME COURT 3512 (1) to point out that an averment, that the accused was at the time of the commission of offence in charge of and responsible for conduct of the business of the company, was essential and when such averment was not made in the complaint, the prosecution for offence under Section 138 of the Negotiable Instruments Act could not be sustained. 10.The learned Senior Counsel also relied on the decision in G.Hubert Fenelon v.D.Sridharan and another, 2002 (4) CTC 676 wherein the learned Single Judge of this Court had found that the Directors could not be liable for prosecution, if they were not so at the time of commission of the offence. 11.Reiterating the submissions made by the learned Senior Counsel, Mr.C.Manishankar appearing for the petitioner in Crl.O.P.No.31587 of 2005 placed reliance on decision in MONABEN KETANBHAI SHAH AND ANOTHER v. STATE OF GUJARAT AND OTHERS, (2004) 7 Supreme Court Cases 15 and submitted that as held in such decision, the obligation of the petitioner/ accused to prove that at the time the offence committed he was not in charge of and was not responsible to the company for the conduct of the business of the company, would arise only when the complaint contained necessary averment towards establishing such fact. As found in the case cited, in the instant case also the requisite averments absolutely were lacking. Reliance also has been placed on the decision of the Apex Court in S.M.S.Pharmaceuticals Limited v.Neeta Bhalla and another, (2007) 4 Supreme Court Cases 70. 12.In response to the submissions of the learned counsel for the petitioners, the learned counsel appearing for the respondent https://hcservices.ecourts.gov.in/hcservices/ would submit that as per the resolution of the first accused company, dated 19.02.2001, the petitioner in Crl.O.P.No.31587 of 2005 was the Vice President thereof and would be responsible to the company and hence, such petitioner could not escape liability. Thus, while the second accused had been shown to be in charge of the business of the company under the resolution of the company itself and it clearly was informed in the complaint that the third accused was the Managing Director and the fourth accused was the Director(Finance), then such accused, would have to prove their innocence, if at all, at the trial. The learned counsel placed reliance on the decision in S.V.Muzumdar and others v. Gujarat State Fertilizer Company Limited and another, AIR 2005 Supreme Court 2436, wherein the Apex Court had held that the question of whether a person is in charge of and responsible for the company for the conduct of the business is to be adjudicated on the basis of materials to be placed by the parties. Whether the deeming proviso to Sub-section (1) of Section 141 applied or whether the allegations contained in the complaint are sufficient to attract culpability is a matter for adjudication at the trial and the accused would have to prove his innocence. The learned counsel also placed reliance on the decision in N.Rangachari v.Bharat Sanchar Nigam Limited, AIR 2007 Supreme Court 1682 to point out that in a petition moved to quash proceedings by one of the Directors of the first accused company and in a prosecution for commission of offence under Section 138 of the Negotiable Instruments Act which again was in respect of the dues owed to the BSNL, the Honourable Apex Court refused to quash the proceedings. 13.I have considered the rival submissions. 14.A perusal of the complaint reveals that there is no averment therein to the effect that the petitioners before this Court were in charge of and the responsible to the first accused company for the conduct of its business. As per the decision of this Court reported in M.Murugan v. Queen Jhansi Vetrikodi, 2004 (2) CTC 530, such averment is an essential one. In the absence thereof the complaint would fail. Again, no individual statutory notice under Section 138 of the Negotiable Instruments Act has been issued by the complainant to the petitioners. While so, the decision of the Hon'ble Division Bench of this Court reported in 2006-2-L.W.(Crl) 795 would be a bar to their prosecution for offence under section 138 of the Negotiable Instruments Act, It also is seen that even to the first accused company, notice has been sent only by telegram. A learned Single Judge of this Court has found the same to be unsatisfactory. I am in respectful agreement. Though the learned counsel for the respondent would rely upon the decision of the Apex Court in Central Bank of India and another v. M/s.Saxons Farms and others, JT 1999 (8) SC 58 to submit that no form of notice has been prescribed in Clause (b) of https://hcservices.ecourts.gov.in/hcservices/ the 138 of the Negotiable Instruments Act and that the requirement was that notice should be given in writing within 15 days of receipt of information from the Bank regarding return of the cheque as unpaid and in the notice a demand for payment of the amount of the cheque has to be made the reasons put forth by the learned Single Judge of this Court that a telegram could convey a wrong message and the same would be unauthenticated would hold good. N.Rangachari v.Bharat Sanchar Nigam Limited, AIR 2007 Supreme Court 1682, is a proceeding under Section 138 of the Negotiable Instruments Act between the complainant and the first accused company. The Apex Court observed that where a cheque was issued in favour of a person by a company and the same was dishonoured, the complainant was expected only to be aware generally of who was in charge of the affairs of the company .... it would be unreasonable to expect him to know whether any person who signed the cheque was instructed to do so or whether he has been deprived of his authority to do so when he actually signed the cheque as these would be the matters peculiarly within the knowledge of the company and those in charge of it. Hence, all that a payee of a cheque that is dishonoured can be expected to allege is that the persons named in the complaint are in charge of its affairs. On such reasoning, the Hon'ble Apex Court had held that proceedings could not be quashed under Section 482 of Cr.P.C. The learned Apex Court also found that the Directors are prima facie in that position. In such case, the Apex Court had found that reading the complaint as a whole, it was clear that the allegations in the complaint are that at the time at which the two dishonoured cheques were issued by the company, the appellant were the Directors of the company and were in charge of the affairs of the company. Such decision as also the the other decision relied on viz., in S.V.Muzumdar and others v. Gujarat state Fertilizer Company Limited and another, AIR 2005 Supreme Court 2436, wherein it had been held that matters relating to whether a person in charge of or responsible of the company for the conduct of the affairs would have to be adjudicated at the Trial, were those rendered by a bench of two Judges. The question that arises for consideration stand settled by the decision of a bench of three Judges in S.M.S.Pharmaceuticals Limited v.Neeta Bhalla and another, (2007) 4 Supreme Court Cases 70, which is to the effect that specific averments against persons arrayed as accused through the aid of Section 141 of the Negotiable Instruments Act and to the effect that they where in charge of, and responsible to the company for the conduct of the affairs at the time of the commission of the offence were absolutely essential. https://hcservices.ecourts.gov.in/hcservices/ 15.For the aforesaid reasons, these petitions shall stand allowed and the proceedings in C.C.No.385 of 2005 on the file of the Judicial Magistrate No.V, Coimbatore shall stand quashed in so far as the petitioners are concerned. The Criminal Original petitions are ordered accordingly. Consequently, the connected miscellaneous petitions are closed. Sd/ Asst.Registrar /true copy/ Sub Asst.Registrar mps To 1.The Judicial Magistrate No.V, Coimbatore. 2.The Principal Manager, Coimbatore Telecom, O/O.Principal General Manager, BSNL, Coimbatore. 3.The Principal General Manager, Bharat Sanchar Nigam Limited, MTP Road, Coimbatore – 641 043. +1cc to Mr.R.Loganathan, Advocate Sr 8815 +1cc to M/s.C.Mani Shankar, Advocate Sr 8722 +1cc to Mr.R.John Sathyan, Advocate Sr 8955 +1cc to Mr.M.Govindaraj,Advocate Sr 8242 AKR(CO) km/10.3. Crl.O.P.No.4072 of 2006 and Crl.M.P.Nos.995&996of2006 and Crl.O.P.No.5305 of 2006 and Crl.M.P.No.1356 of 2006 and Crl.O.P.No.31587 of 2005 and Crl.M.P.No.8907 of 2005 https://hcservices.ecourts.gov.in/hcservices/