2024 (11) TMI 918 - HC - Indian Laws

Section 138 NI Act complaint quashed for exceeding limitation period despite service on company directors

M/s Glazebrooke Trading Private Limited Versus M/s Orbis Trusteeship Services Private Limited & Anr.

The Delhi HC quashed a criminal complaint filed under Section 138 NI Act for being time-barred. The court held that service of demand notice on the ... Seeking quashing of the Criminal Complaint - time limitation - it is contended that the subject complaint is time barred and filed beyond the stipulated time period provided under Section 142(b) of the NI Act - when did the limitation commence for filing the complaint and whether the time spent in pursuing the first complaint filed before the court in Gurugram could be excluded? - HELD THAT:- The primary accused being the company on whose behalf the subject cheques were issued, concededly, was served with a demand notice through email on 11.03.2022 itself. There is no averment from either side that the said email bounced back. The other two accused are the Directors in the accused company. A plain reading of Section 141 NI Act reveals that there is no requirement of serving each Director separately. The notice envisaged under Section 138 NI Act is required to be given to the drawer of the cheque i.e. the accused company in the present case to make good the sum payable under the cheque. A company being a juristic entity is run by living persons who are in charge of its affairs and who guide the actions of that Company and that if such juristic entity is guilty, those who were so responsible for its affairs and who guided actions of such juristic entity must be held responsible and ought to be proceeded against. Curiously in the present case, while the accused persons are claiming that the service of demand notice on the accused company be considered as service on its Directors as well, the complainant is contending otherwise - this Court has no hesitation to hold that the service of demand notice to the accused company on 11.03.2022 is effective service on petitioner No.2 as well - there is no dispute that petitioner No.3 was also served on 11.03.2022 itself through email. Once it is held that service of demand notice on the company would be considered as a service on the other petitioners, the next issue as to what would be the starting period of limitation for filing complaint is simple calculation. Indisputably, the said complaint was not accompanied with any application for condonation of delay. In reply of the petitioners‟ application seeking discharge, the complainant for the first time mentioned the factum of filing of complaint in court at Gurugram and its withdrawal. The said reply was filed on 31.03.2023. However, on date of taking cognizance on 02.08.2022, no such material was available before the trial court. The complaint being filed on 28.04.2022 without offering any explanation of delay or seeking its condonation was filed beyond the period of limitation and not maintainable. The criminal complaint is quashed and the order taking cognizance is set aside - Petition allowed. Issues Involved:1. Commencement of limitation period for filing the complaint.2. Exclusion of time spent in pursuing the first complaint filed before the Gurugram court.3. Effective service of demand notice on the accused company and its directors.4. Filing of the complaint beyond the period of limitation without seeking condonation of delay.Issue-wise Detailed Analysis:1. Commencement of Limitation Period for Filing the Complaint:The key issue was determining when the limitation period for filing the complaint commenced. The court examined whether the service of the demand notice via email on 11.03.2022 to the accused company, which was the drawer of the cheque, constituted effective service on its directors. The court concluded that service of the demand notice on the company is considered effective service on its directors, as the company acts through its directors. The court referenced the Supreme Court decision in Krishna Texport and Capital Markets Ltd v. Ila. A. Agarwal, which stated that notice to the company suffices for those in charge of its affairs. Consequently, the limitation period began on 27.03.2022, after the 15-day period for making the payment expired on 26.03.2022. The complaint was required to be filed by 27.04.2022, but it was filed on 28.04.2022, making it one day late.2. Exclusion of Time Spent in Pursuing the First Complaint Filed Before the Gurugram Court:The complainant argued that the time spent pursuing the complaint in the Gurugram court should be excluded from the limitation period. However, the court rejected this argument, citing the Supreme Court decision in Subodh S. Salaskar v. Jayprakash M. Shah, which held that the Limitation Act does not apply to proceedings under the Negotiable Instruments Act (NI Act). Therefore, the time spent on the Gurugram complaint could not be excluded from the limitation period for filing the complaint in Delhi.3. Effective Service of Demand Notice on the Accused Company and Its Directors:The court addressed whether the service of the demand notice via email on the accused company and its directors was effective. It was undisputed that the notice was served on the company and one director on 11.03.2022, and the court determined that this service was sufficient for all directors, as per Section 141 of the NI Act. The court emphasized that there is no requirement to serve each director separately, aligning with the Supreme Court's interpretation that notice to the company suffices for its directors.4. Filing of the Complaint Beyond the Period of Limitation Without Seeking Condonation of Delay:The court noted that the complaint was filed beyond the limitation period without any application for condonation of delay. The complainant did not offer any explanation for the delay or seek its condonation, which is necessary under the proviso to Section 142(b) of the NI Act. The court emphasized that the strict timelines stipulated in the NI Act require that any delay in filing a complaint must be accompanied by an application for condonation, providing sufficient cause to the court's satisfaction. The absence of such an application rendered the complaint not maintainable.In conclusion, the court quashed the criminal complaint and set aside the order taking cognizance, as the complaint was filed beyond the limitation period without seeking condonation of delay. The petition was disposed of accordingly.