1997 (6) TMI 361 - HC - Indian Laws

Court quashes cases for lack of merit under Section 138 of Negotiable Instruments Act

A. Chinnaswami Versus Bilakchand Gyanchand Company

The court quashed the proceedings in the cases filed by the respondent in the Court of J.M.F.C., Chopada. The complaints were found to lack merit as they ... - Issues Involved:1. Territorial jurisdiction of the court.2. Proper service of notice.3. Limitation period for filing the complaint.4. Proper party to be prosecuted under Section 138 of the Negotiable Instruments Act.Detailed Analysis:1. Territorial Jurisdiction of the Court:The petitioner argued that the J.M.F.C., Chopada, lacked territorial jurisdiction as all transactions occurred in Coimbatore, and the complainant had a branch there. The court noted that jurisdiction is determined based on the averments in the complaint. The complainant contended that the transactions took place within the territorial jurisdiction of Chopada, and the cheques were presented in the State Bank of India, Chopada. The court concluded that the question of jurisdiction is a mixed question of fact and law, requiring evidence to be recorded. Therefore, the order of issuance of process could not be quashed on this ground.2. Proper Service of Notice:The petitioner contended that separate notices should have been issued for each cheque and that the notice was not properly served. The court held that the postal endorsement 'not claimed' indicated that the notice was refused on 27-12-1994, starting the limitation period from that date. The court also noted that the cheques were issued by Shakti Spinners Ltd., and the notices were sent to A. Chinnaswami individually, not to the company. The court emphasized that the notice should have been addressed to Shakti Spinners Ltd., as the drawer of the cheque, and not to an individual. Therefore, the notice was deemed improper and non-compliant with Section 138(b) of the Negotiable Instruments Act.3. Limitation Period for Filing the Complaint:The court addressed the issue of limitation, noting that the notice was refused on 27-12-1994, and the complaint should have been filed within one month from 4-1-1995. Since the complaint was filed on 10-2-1995, it was argued to be barred by limitation. However, the court held that the question of limitation is a mixed question of fact and law, requiring evidence to determine the exact date of refusal. Therefore, the order of issuance of process could not be quashed on this ground.4. Proper Party to be Prosecuted:The petitioner argued that the complaint should have been filed against Shakti Spinners Ltd., the drawer of the cheques, and not against A. Chinnaswami individually. The court noted that the cheques were signed by A. Chinnaswami as the Managing Director of Shakti Spinners Ltd., making the company the drawer of the cheques. The court emphasized that criminal liability under Section 138 requires strict compliance with legal provisions, and the notice should have been sent to the company. Since the notice was not properly served on the drawer (Shakti Spinners Ltd.), the offence under Section 138 was not committed. The court also referenced Section 141 of the Negotiable Instruments Act, which requires the company to be prosecuted along with its officers. Since the company was not made an accused, the prosecution of the officer alone was deemed improper.Conclusion:The court allowed the applications, quashing the proceedings in S.C.C. Nos. 155/95 and 156/95 filed by the respondent in the Court of J.M.F.C., Chopada. The complaints did not disclose any offence under Section 138 of the Negotiable Instruments Act due to improper notice and the failure to prosecute the company along with its officer. The rule was made absolute, and the applications were allowed.