2022 (6) TMI 489 - HC - Indian Laws

Court overturns acquittal, orders conviction for accused. Valid service, director's intent key. Corporate liability clarified.

Radhamani India Limited Versus Basukinath Food Processors Limited & Anr.

Radhamani India Limited Versus Basukinath Food Processors Limited & Anr. - TMI Issues Involved:1. Service of notice under Section 138(b) of the Negotiable Instrument Act.2. Validity of demand notice and its service upon the accused persons.3. Prematurity of the complaint under Section 138 of the Negotiable Instrument Act.4. The principle of alter ego and attribution of intent in corporate criminal liability.5. Interpretation of penal statutes and the applicability of the presumption under Section 27 of the General Clauses Act.6. The necessity of arraigning the company as an accused in proceedings under Section 138 of the Negotiable Instrument Act.Detailed Analysis:1. Service of Notice under Section 138(b) of the Negotiable Instrument Act:The primary issue in the appeal was whether the notice demanding payment of the dishonoured cheque was legally, validly, and sufficiently served upon the accused persons. The complainant argued that the notice was sent to the correct address of the respondent No.1/company and was also served upon respondent No.2, the director and authorized signatory. The learned Magistrate, however, dismissed the complaint on the grounds that the notice was not served correctly.2. Validity of Demand Notice and Its Service Upon the Accused Persons:The complainant demonstrated that the notice was sent to the correct address of the respondent No.1/company and was duly served, as evidenced by the postal track report. The appellant contended that any error in the postal receipt regarding the name and address should not invalidate the service of notice. The court held that the postal receipt is not the definitive document to ascertain the correct address; rather, the copy of the notice and postal track report are more relevant. The court concluded that the notice was duly served on the respondent No.1/company.3. Prematurity of the Complaint under Section 138 of the Negotiable Instrument Act:The respondents argued that the complaint was premature as no notice was served upon the respondents. However, the court found that the complaint was filed after the expiry of the 15-day period from the date of receipt of the notice, making it not premature. The court emphasized that the complaint was lodged on 11th May 2013, well after the required period.4. The Principle of Alter Ego and Attribution of Intent in Corporate Criminal Liability:The court discussed the principle of alter ego, where the criminal intent of the person or group of persons guiding the business of the company is imputed to the corporation. It was held that notice served upon respondent No.2, the director and authorized signatory, can be attributed to the respondent No.1/company. The court referenced previous judgments, including Iridium India Telecom Ltd. vs. Motorola Incorporated and Sunil Bharti Mittal vs. Central Bureau of Investigation, to support this principle.5. Interpretation of Penal Statutes and the Applicability of the Presumption under Section 27 of the General Clauses Act:The court highlighted that penal statutes should be interpreted to suppress mischief and advance the remedy intended by the legislature. The presumption under Section 27 of the General Clauses Act, which deems a notice served if correctly addressed and posted, was applied. The court found that the notice was correctly addressed and presumed to be served, supporting the complainant's case.6. The Necessity of Arraigning the Company as an Accused in Proceedings under Section 138 of the Negotiable Instrument Act:The respondents argued that the company must be arraigned as an accused for the prosecution of the directors to be maintainable. The court referred to the decision in Himanshu vs. B. Shivamurthy, where the Supreme Court held that prosecution of a director is not maintainable without arraigning the company as an accused. However, in this case, the complainant had issued notices to both the company and the director, fulfilling the requirement.Conclusion:The court set aside the judgment and order of acquittal passed by the learned Metropolitan Magistrate, holding that the demand notice was duly served on the respondent No.1/company. The appeal was allowed, and the case was remanded to the trial court to record conviction and sentence against the accused persons within three weeks from the date of communication of the judgment. The court emphasized the importance of the correct interpretation of penal statutes and the principles of corporate criminal liability.