Supreme Court Quashes Complaints Due to Lack of Necessary Averments and Unserved Statutory Notice Under NI Act.

The SC allowed the appeals, quashing the HC's orders and the pending complaints against the appellants in the JMFC, Nandyal. The Court determined the complaints lacked necessary averments under Section 141(1) of the NI Act, failing to establish the appellants' vicarious liability. Additionally, the statutory notice of demand was not served, rendering the complaints unsustainable.

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Issues Involved:
1. Whether the complaint under Section 138 of the NI Act against the appellants was maintainable.
2. Whether the statutory notice of demand was served on the accused.
3. Whether the necessary averments under Section 141(1) of the NI Act were made in the complaint.

Summary:

Issue 1: Maintainability of the Complaint under Section 138 of the NI Act

The appellants, who were Accused Nos. 5, 6, and 7 in the complaint, filed a petition under Section 482 of the Code of Criminal Procedure, 1973, for quashing the complaint. The High Court dismissed this petition. The appellants argued that the mandatory averments required under sub-section (1) of Section 141 of the NI Act were not made. The complaint stated that the appellants were directors of the first accused company, and the cheques were signed by Accused No. 2, the Managing Director. However, the complaint failed to aver that the appellants were in charge of and responsible for the conduct of the business of the company at the time of the offence. The Supreme Court found that the necessary averments under Section 141(1) of the NI Act were not made, and thus, the complaint was not maintainable against the appellants.

Issue 2: Service of Statutory Notice of Demand

The second respondent admitted in the complaint that the statutory notice of demand was not served on the accused, relying on returned postal covers. The Supreme Court noted that the service of notice of demand is a condition precedent for filing a complaint under clause (c) of Section 138 of the NI Act. The failure to serve the notice was a ground for the complaint to fail.

Issue 3: Necessary Averments under Section 141(1) of the NI Act

The Supreme Court examined the averments in the complaints and found that they did not comply with the requirements of Section 141(1) of the NI Act. The complaints merely stated that the appellants were managing the company and were in charge of the day-to-day affairs but did not specify that they were responsible for the conduct of the business of the company. The Court emphasized that the words "in charge of" and "responsible to the company for the conduct of the business of the company" must be read conjunctively. The complaints lacked the necessary averments to attract vicarious liability under Section 141(1) of the NI Act.

Conclusion:

The appeals were allowed, and the impugned orders of the High Court were quashed and set aside insofar as the appellants were concerned. The complaints pending in the Court of Judicial Magistrate, First Class, Nandyal, were quashed against the appellants. The Supreme Court reiterated the importance of making specific averments to establish vicarious liability under Section 141(1) of the NI Act.

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