2022 (1) TMI 497 - HC - Indian Laws

Court upholds complaint under Section 138, directs speedy trial

The court dismissed the Criminal Original Petition, upholding the validity of the complaint under Section 138 of the Negotiable Instruments Act. The trial ... Dishonor of Cheque - insufficiency of funds - requirement to issue separate notice to manager or not - main contention of petitioner is that the Manager, who is in charge of the petitioner company, was not issued individual statutory notice under Section 138 and hence, he is not responsible for the alleged dishonour of cheques - HELD THAT:- The contention raised by the learned counsel for the petitioner that the present Manager of the petitioner company was not issued individual statutory notice under Section 138, cannot be countenanced for the reason that, in the decision relied on by the learned counsel for the respondent, the Hon'ble Supreme Court in KIRSHNA TEXPORT & CAPITAL MARKETS LTD. VERSUS ILA A. AGRAWAL & ORS. [2015 (6) TMI 344 - SUPREME COURT] has specifically held that if the person committing an offence under Section 138 is a company, every Director of such company who was in charge of that company for conduct of its business shall be deemed to be guilty. Further, the Hon'ble Supreme Court has held that the persons who are in charge of the affairs of the company must naturally be aware of the demand notice issued to the company. Hence, no separate notice is required to be given to such persons - Moreover, it has been held by the Hon'ble Supreme Court that if the contention of the accused is that the offence was committed without their knowledge or that they had exercised due diligence to prevent such commission, the same would be considered only at the time of trial and not at the stage of notice under Section 138. Admittedly, in this case, the liability of the petitioner company has not been discharged and also it is not denied that Mr.Hitesh V. Shah is the Director of the company. The Manager, who is in charge of the petitioner company, has entered appearance before the Court below only on receipt of the summon issued to the Director Mr. Hitesh V. Shah and hence, no separate notice is required to be issued to him under Section 138 of the Act. Since the matter is of the year 2003, the Magistrate is hereby directed to complete the trial within a period of six months from the date of receipt of a copy of this order - Petition dismissed. Issues Involved:1. Validity of the complaint under Section 138 of the Negotiable Instruments Act.2. Requirement of individual statutory notice to the manager of the petitioner company.3. Limitation period for filing the complaint.4. Responsibility of the company and its officers for the dishonoured cheques.Issue-wise Detailed Analysis:1. Validity of the Complaint under Section 138 of the Negotiable Instruments Act:The respondent filed a complaint against the petitioner for the dishonour of cheques under Section 138 of the Negotiable Instruments Act. The petitioner issued cheques dated 02.09.2003 and 25.02.2004, which were dishonoured due to 'insufficient funds.' Despite legal notices, the petitioner failed to settle the dues, leading to the filing of the complaint. The court noted that the petitioner company had not discharged its liability, and the complaint was validly filed.2. Requirement of Individual Statutory Notice to the Manager of the Petitioner Company:The petitioner contended that the manager, who was in charge of the company, was not issued individual statutory notice under Section 138, and hence, he was not responsible for the dishonoured cheques. The court referred to the Supreme Court's judgment in Kirshna Texport and Capital Markets Limited Vs. ILA.A.Agrawal, which held that Section 138 does not require separate notices to be issued to the managers or directors of the company. The persons in charge of the company's affairs must naturally be aware of the notice issued to the company. Therefore, the court concluded that no separate notice was required for the manager.3. Limitation Period for Filing the Complaint:The petitioner argued that the complaint was filed beyond the period of limitation. However, the respondent clarified that the complaint was filed in June 2004 and numbered in 2005, which was within the limitation period. The court found that the petitioner was evading summons by shifting business locations, and the complaint was filed within the permissible time frame.4. Responsibility of the Company and Its Officers for the Dishonoured Cheques:The court emphasized that under Section 141 of the Negotiable Instruments Act, if the offence under Section 138 is committed by a company, every person in charge of and responsible for the conduct of the company's business shall be deemed guilty. The court noted that the petitioner company and its director were responsible for the dishonoured cheques. The manager, who appeared before the court, was aware of the proceedings, and no separate notice was required for him.Conclusion:The court dismissed the Criminal Original Petition, stating that the complaint under Section 138 of the Negotiable Instruments Act was valid and should proceed to trial. The Metropolitan Magistrate was directed to complete the trial within six months, and the petitioner was allowed to produce all relevant documents to prove their case. The court upheld the responsibility of the company and its officers for the dishonoured cheques, reinforcing the legal principles under Sections 138 and 141 of the Negotiable Instruments Act.