Case: Kirshna Texport &amp; Capital Markets Ltd Vs. ILA A Agrawal &amp; Others

2. On 14.09.1996 a notice under Section 138 of the ‘Negotiable Instruments Act,referred to as) was issued on behalf of the appellant to M/S Indo French Bio Tech Enterprises Ltd (‘thefor short). The notice stated that a cheque bearing No. 364776 dated 8.9.1996 drawn by the Company on Dena Bank, New Marine Lines, Mumbai in favour of the appellant was returned on 10.9.1996 with endorsement. The notice therefore called upon the addressee to make the payment of the cheque amount within 15 days of the receipt of such notice. No reply was sent to the aforesaid notice dated 14.9.1996.3. The appellant thereafter filed Complaint Case No. 243/S/1996 before the Additional Chief Metropolitan Magistrate, 5th Court at Dadar, Mumbai against the Company, Mr. K.J. Bodiwala, the Chairman and Managing Director of the Company and 11 other directors including respondents 1 and 2. In so far as the directors are concerned, it was averred that they were in-charge of the business of the Company and its day to day affairs and were liable. During the pendency of said complaint case, the process issued against Accused Nos. 3 to 5, 7, 9 to 13 was recalled and due to the death of Mr. Bodiwala the proceedings as against him also abated, which left the Company and the present respondents 1 and 2 namely Ms. Ila A. Agrawal and Mr. Prafulla Ranadive, Accused Nos. 6 and 8 respectively in the array of accused.4. It was submitted by the appellant that separate notices to the directors were additionally issued but at the stage of evidence it turned out that such individual notices to the directors were with respect to dishonour of a different cheque. The facts as found therefore were that no individual notices were given to the directors. The Metropolitan Magistrate by his judgment and order dated 30.4.2007 convicted the Company but acquitted respondents 1 and 2 of the offence punishable under Section 138 of the Act. Relying on the judgment of the Division Bench of Madras High Court in B. Raman & Ors. Vs. M/s. Shasun Chemicals and Drugs Ltd. reported in 2006 Cril. L.J. Page 4552, it was observed that statutory notice under Section 138 of the Act was required to be issued to every Director and for non- compliance of such mandatory requirement respondents 1 and 2 could not be proceeded against.5. The appellant being aggrieved filed Criminal Application No. 2174 of 2007 in the High Court seeking leave to prefer appeal against the judgment acquitting respondents 1 and 2. It was submitted that it was not necessary to serve individual notice upon the directors and it was sufficient if the notice was served on the Company. Reliance was placed on the decision of a Single Judge of the Calcutta High Court in the case of Girish Chandra Pandey Vs. Kanhaiyalal Chandak and Ors. reported in 1999 ALL MR (CRI) JOURNAL 3, wherein it was held that if the partnership firm failed to give the amount within the stipulated time after receipt of notice, each partner need not be served with a separate notice individually. So also reliance was placed on the decision of a Single Judge of Delhi High Court in the case of Jain Associates and Ors. Vs. Deepak Chawdhary & Co. reported in 80 (1999) DLT 654 , wherein it was laid down that Section 141 of the Act does not require that each and every partner of the firm is required to be issued notice. Similar view was taken by High Court of Andhra Pradesh in K. Pannir Selvan vs. MMTC and another reported in (2000) Cr. L.J. 1002 and by Delhi High Court in Ranjit Tiwari vs. Narender Nayyar reported in 191 (2012) DLT 318. 6. The High Court, relying on the judgment of the Division Bench of Madras High Court B. Raman & Ors. (supra) observed that it was mandatory to have issued separate notices to the directors. The High Court concludedthe legal fiction is created by Section 141 to make directors who are responsible for day to day affairs of the Company, punishable under Section 138, then it is necessary that they get an opportunity to rectify, the mistake or clarify matters after service of notice. So before making the complaint against the directors, notice necessarily must be served on them. In my opinion without service of notice to accused Nos. 6 & 8, vicarious liability of the offence under Section 138 cannot be fixed upon them.At this stage the decision of the Division Bench of Madras High Court in B. Raman & others (Supra) may also be referred to. Para 2 of said decision sets out that the matter was referred to the Division Bench as a result of divergent views taken by Single Judges of the Court. Paras 25 and 26 of the decision are asUnder Section 141 (1), the persons in charge of and responsible to the Company shall be deemed to have committed the offence. Under sub section (2), even the persons, who are not stated to be in charge of and responsible to the Company, can be prosecuted, if it is alleged and proved that the offence has been committed with the consent or connivance of, or is attributable to, any neglect on the part of any of those persons prosecuted. So, these Sections would provide that when there are Directors, who are responsible for the conduct of the business of the Company, and when there are other officers, with whose consent the offence has been committed, the complainant shall make averments to the said effect. In that context, the complainant has to start the process of getting back the cheque amount from those persons, who represent the Company, in order to avoid the filing of the Complaint against them. In the said process, he has to necessarily make a demand from those persons, who are part and parcel of the drawer. Only when the process fails, the cause of action, as envisaged in Section 138, would arise against them, to enable the complainant to approach the Court, within the stipulated time. So, the starting of the process is, the service of notice on the persons, who represent the Company, the drawer of the cheque.26. The object of the notice is to give a chance to the drawer of the cheque to rectify his omission and also to protect an honest drawer. Service of notice of demand in Clause (b) of the proviso to Section 138 is a condition precedent for filing a complaint under Section 138. By sending a notice to the Company as well as the persons in charge of and responsible fore the conduct of the business of the company, he can make a demand, asking them to pay the amount. Some may reply that they are not in charge of and responsible for the conduct of the business of the Company. Some may reply that they are not connected with the Company in any way and some may rectify the omission, by making efforts to pay the amount to the payee, in the name of the Company, in that event, the complainant may either drop the action of filing the Complainant or, in the event of non-payment of the cheque amount, he may choose the persons, who are really responsible fore the commission of offence and, then, initiate prosecution against

Reasoning:
10. Since the High Court has read into Section 138 of the Act the requirement that separate notices ought to be given to the directors, without which they cannot be made vicariously liable, the principles concerning interpretative function of the Court may be advertedproviso inter alia obliges the payee to make a demand for the payment of said amount of money by giving a notice in writing todrawer of thethe drawerfails to make the payment of the said amount within 15 days of the receipt of said notice, the stages stipulated in the proviso stand fulfilled. The notice under Section 138 is required to be given toof the cheque so as to givean opportunity to make the payment and escape the penal consequences. No other person is contemplated by Section 138 as being entitled to be issued such notice. The plain language of Section 138 is very clear and leaves no room for any doubt or ambiguity. There is nothing in Section 138 which may even remotely suggest issuance of notice to anyone other thane persons who are in charge of the affairs of the Company and running its affairs must naturally be aware of the notice of demand under Section 138 of the Act issued to such Company. It is precisely for this reason that no notice is additionally contemplated to be given to such directors. The opportunity to theCompany is considered good enough for those who are in charge of the affairs of such Company. If it is their case that the offence was committed without their knowledge or that they had exercised due diligence to prevent such commission, it would be a matter of defence to be considered at the appropriate stage in the trial and certainly not at the stage of notice under Section 138.In our view, Section 138 of the Act does not admit of any necessity or scope for reading into it the requirement that the directors of the Company in question must also be issued individual notices under Section 138 of the Act. Such directors who are in charge of affairs of the Company and responsible for the affairs of the Company would be aware of the receipt of notice by the Company under Section 138. Therefore neither on literal construction nor on the touch stone of purposive construction such requirement could or ought to be read into Section 138 of the Act.