2021 (11) TMI 276 - HC - Indian Laws

Court quashes proceedings against A-2 and A-3 for lack of liability under Section 138

The court allowed the petition to quash proceedings against A-2 and A-3 as they were not shown to be in charge of the company's day-to-day activities, ... Dishonor of Cheque - issuance of notice u/s 138 of NI Act or not - HELD THAT:- Admittedly notice as required under Section 138 of the Negotiable Instrument Act had not been issued to the petitioners. There is no averment that they are in-charge of the day-to-day activities of A-1. The cheque had not been issued by A-1. The cheque had been issued by A-4 in his personal capacity from and out of his bank account. It must be very specifically stated in the complaint that the petitioners were in-charge of the day-to-day activities of A-1. It has not been so stated in the instant complaint. The cheque was issued by A-5 from and out of his personal account. It had not been issued by the present petitioners/A-2 and A-3. The advocate notice was not issued to the present petitioners/A-2 and A-3. There has been no compliance of the stipulations under Section 138 Negotiable Instruments Act 1881. Petition allowed. Issues Involved:1. Whether the petitioners (A-2 and A-3) were in charge of the day-to-day activities of the company (A-1).2. Whether the petitioners were properly notified under Section 138 of the Negotiable Instruments Act, 1881.3. Whether the cheque issued by A-4 can hold the petitioners liable.Issue-wise Detailed Analysis:1. Involvement in Day-to-Day Activities:The complaint did not state that the petitioners (A-2 and A-3) were in control of the day-to-day activities of the company (A-1). It was specifically mentioned that A-4 and A-5 were running the company. The court cited several precedents, including *Saroj Kumar Poddar Vs. State (NCT of Delhi)*, *Central Bank of India Vs. Asian Global Ltd.*, and *Pepsico India Holdings Pvt. Ltd. Vs. Food Inspector*, which established that for vicarious liability under Section 141 of the Negotiable Instruments Act, there must be specific averments showing how and in what manner the accused were responsible for the conduct of the business. The absence of such specific allegations against the petitioners led to the conclusion that they could not be held liable.2. Proper Notification Under Section 138:The court noted that the mandatory notice under Section 138 of the Negotiable Instruments Act was not issued to the petitioners. The legal requirement is that the payee or holder in due course must make a demand for payment by giving a notice in writing to the drawer of the cheque within thirty days of receiving information about the dishonour. The complaint failed to meet this requirement as the notice was only sent to A-1, A-4, and A-5, but not to the petitioners (A-2 and A-3). This non-compliance with the statutory requirement under Section 138 was a significant factor in the court's decision.3. Liability for Cheque Issued by A-4:The cheque in question was issued by A-4 from his personal account. The court emphasized that the cheque was not issued by the company (A-1) or the petitioners (A-2 and A-3). The court referenced *MSR Leathers Vs. S. Palaniappan* and *Kamlesh Kumar Vs. State of Bihar* to underline that for an offence under Section 138 to be constituted, the cheque must be drawn by the person on an account maintained by him with a banker. Since the cheque was issued by A-4 in his personal capacity, the petitioners could not be held liable.Conclusion:The court concluded that there was no specific averment that the petitioners were in charge of the day-to-day activities of the company. The mandatory notice under Section 138 was not issued to the petitioners, and the cheque was issued by A-4 from his personal account. Therefore, the petition to quash the proceedings against A-2 and A-3 was allowed, and S.T.C. No. 1084 of 2015 was quashed as far as the petitioners were concerned. Consequently, the connected Miscellaneous Petition was also closed.