TaxTMI 
TaxTMI 
2018 (3) TMI 1993
X X X X Extracts X X X X
X X X X Extracts X X X X
....C. seeking to array the second revision petitioner herein/Chit Company concerned as additional respondent No. 2 in the complaint and the said application was allowed by the Trial Court on 08/01/2014. Summons was thus issued and served and thereupon cognizance was also taken as against the second additional accused Company. The said additional accused No. 2 is the Chit Company and the first revision petitioner is stated to be the Managing Director of the said chit Company. It is not in dispute that the statutory demand notice as contemplated under Section 138 proviso (b) was issued to the Managing Director of the said Chit Company and it is not in dispute that such statutory demand notice was not sent to the second accused Company. An objection was raised by the second revision petitioner/additional accused No. 2 Company that since statutory demand notice under Section 138 proviso (b) was never served on the said Company, complaint is not maintainable and even as per the case projected by the complainant in evidence, the drawer of the cheque is the Company inasmuch as the dishonoured cheque has been issued from the account maintained by the Company and not from the individual accoun....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... (4) KLJ NOC 3 : 2017 (4) KLT SN 41 : AIR 2017 SC 4125 : 2018 Cri LJ 72 as well as by the judgment of this Court in the case in Balachandran v. State of Kerala reported in 2017 (3) KLT 1081 : 2017 (3) KLJ 906 : 2017 (5) KHC SN 3 : 2017 KHC 671: 2017 (2) KLD 649. 4. In the said judgment of this Court in Balachandran v. State of Kerala reported in 2017 (3) KLT 1081 : 2017 KHC 671 : 2017 (5) KHC SN 3 : 2017 (2) KLD 649 : 2017 (3) KLJ 906, this Court after placing reliance on some of the judgments of the Apex Court on the subject has held that Section 141 of the Negotiable Instruments Act (on the basis of vicarious liability of directors of an accused drawer Company) does not lay down any requirement that in such eventuality that the individual directors of the drawer Company must individually be issued separate notices under Section 138 proviso (b) of the Negotiable Instruments Act and that the individuals, who are in charge of the affairs of the Company and running its affairs must naturally be aware the notice of demand under Section 138 of the Act issued to such Company and that a notice should be mandatorily issued to the Company who is the drawer of the cheque. As the principa....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... SN 3 : 2017 (2) KLD 649 : 2017 (3) KLJ 906 p.p. 1087 to 1089, paragraphs 8 and 9, which read as follows: "8. It is relevant to note that it has been held by the Apex Court in the case Kirshna Texport & Capital Markets Ltd. v. Ila A. Agrawal, reported in 2015 (2) KLT 543 (SC): (2015) 8 SCC 28, that Section 141 of the Nl Act states that if the person committing an offence under S. 138 is a company, every Director of such company, who was in charge of and responsible to that company for conduct of its business shall also be deemed to be guilty and that the reason for creating vicarious liability is plainly that a juristic entity i.e., a company would be run by living persons, who are in charge of its affairs and who guide the actions of the company and that if such juristic entity is guilty, those who were so responsible for its affairs and who guided the actions of such juristic entity must be held responsible and ought to be proceeded against. That Section 141 again does not lay down any requirement that in such eventuality, the individual directors must individually be issued separate notices under Section 138 and that the persons, who are in charge of the affairs of the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r fresh disposal of the case, with a further direction that if the petitioner files application for arraying the company also as an accused, the learned Magistrate shall consider and pass orders on the same in accordance with law and continue the prosecution. One of the arguments raised by the learned counsel for the complainant is that the said order of this Court has not been challenged by the company before the Apex Court and that the said directions have become final and conclusive and are binding all the parties thereto, as well as on the fora like the Trial Court, Appellate Court, revisional Court, etc. who are concerned with such prosecution, which was ordered to continue by this Court. It is also not in dispute that the company was not a party to the said proceedings. Irrespective as to whether the company was a party to that proceedings or not, nothing in that order would legally preclude the company from contending that the prosecution is not maintainable on account of the non-service of the prior statutory demand notice. The order dated 26/11/2012 of this Court in the earlier round of Criminal Revision Petitions cannot be construed as if this Court has given licence to t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mplainant. The notice is issued solely to the said individual (R-2 herein) and the sole accused in the complaint (prior to the subsequent arraying of the company as an additional accused in the original complaint) is that individual. So even after arraying the company as an additional accused, said averments have not been in any manner altered or amended. Therefore, without the basic averment in the complaint that the drawer of the dishonoured cheques in question is the company and not the individual director, it is not right and proper to convict the accused company for the above said offence. That apart, in the facts and circumstances of a case like this, even if an application for amendment of averments in the complaint had been filed, it could not have been allowed as it could have caused serious prejudice to the accused company. Going by the legal principles laid down by this Court in the decisions of this Court as in Linda John Abraham v. Business India Group Company & ors. reported in 2011 (4) KLT 787 : 2011 (4) KHC 587, Hafsa Rahman P. v. State of Kerala & Ors., reported in 2017 (3) KLT SN 48 (C. No. 64) : 2017 (3) KHC 49, as well as the rulings of the Apex Court as in U.P.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ch after the institution of the complaint and the cognizance of the case taken as against the original accused, is illegal and ultra vires. It was also contended that in the impugned order of the Trial Court as well as the revisional order, it was held that there is no necessity to condone the delay in the arraying of the additional accused drawer Company concerned inasmuch as the original complaint has been filed within the one month's time limit stipulated in Section 142 of the Negotiable Instruments Act with the original sole accused therein/individual Director concerned and therefore, no separate application is required for any further delay condonation after cognizance of the offence has taken in the original complaint. The Apex Court held in paragraph 20 of Harihara Krishnan's case (supra) that the offence under Section 138 of the Negotiable Instruments Act is capable of being committed only by the drawer of the cheque and that the logic in the impugned judgment of the High Court therein that since the offence has already been taken cognizance of, there is no need to take cognizance of the offence against the drawer Company is flawed. That Section 141 stipulates liabi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hodology of taking cognizance in cases other than one involving Section 138 of the Negotiable Instruments Act and in the case of special statutory offence like Section 138 of the Negotiable Instruments Act, the Apex Court has clearly held in paragraphs 22 and 23 thereof that the scheme of prosecution in punishing under Section 138 of the Negotiable Instruments Act is different from the scheme prosecuting other offences as per the Cr.P.C. That Section 138 creates an offence and prescribes punishment and no procedure for investigation of the offence is contemplated and the prosecution initiated on the basis of a written complaint made by the payee of a cheque. It was further held that one of the crucial ingredients to be proved for obtaining successful prosecution is that in spite of the statutory demand notice under Section 138 proviso (b), the drawer of the cheque had failed to make payment within 15 days from the date of receipt of the demand. That such a crucial fact regarding the service of demand notice and non-payment of the money by the drawer, could be asserted by the complainant and the burden would be essentially on the drawer of the cheque to prove that he had infact made....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the Apex Court has categorically and unambiguously held that the prosecution as against the drawer Company therein is not maintainable inasmuch as the procedure adopted by the Trial Court in allowing an application under Section 319 of the Cr.P.C. so as to subsequently arraying the drawer Company as additional accused and that too without condoning the delay in taking cognizance as against the additional accused Company, is ultra vires and illegal. It will be appropriate in this regard to refer to paragraphs 22 to 27 of the aforecited judgment in Harihara Krishnan's case (supra) read as follows: " 22. The CrPC is an enactment which is designed to regulate the procedures governing the investigation of crimes in order to get the perpetrators of the crime punished. A crime is an act or omission prohibited by law attracting certain legal consequences like imprisonment, fine etc. Obviously, acts or omissions constituting offences/crimes are capable of being committed only by persons either natural or juridical. The CrPC imposes a duty on the investigating agencies to gather evidence necessary to establish the occurrence of a crime and to trace out the perpetrators ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ty whichever is earlier; (4) that the payee demanded in writing from the drawer of the cheque the payment of the amount of money due under the cheque to payee; and (5) such a notice of payment is made within a period of 30 days from the date of the receipt of the information by the payee from the bank regarding the return of the cheque as unpaid. It is obvious from the scheme of Section 138 that each one of the ingredients flows from a document which evidences the existence of such an ingredient. The only other ingredient which is required to be proved to establish the commission of an offence under S. 138 is that inspite of the demand notice referred to above, the drawer of the cheque failed to make the payment within a period of 15 days from the date of the receipt of the demand. A fact which the complainant can only assert but not prove, the burden would essentially be on the drawer of the cheque to prove that he had in fact made the payment pursuant to the demand. 24. By the nature of the offence under Section 138 of THE ACT, the first ingredient constituting the offence is the fact that a person drew a cheque. The identity of the drawer of the cheque is necessarily re....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... no reason to condone the delay. The justification advanced by the respondent that it is during the course of the trial, the respondent realized that the cheque in question was drawn on the account of DAKSHIN is a manifestly false statement. On the face of the cheque, it is clear that it was drawn on account of DAKSHIN. Admittedly the respondent issued a notice contemplated under Clause (b) of the proviso to Section 138 to DAKSHIN. The fact is recorded by the High Court. The relevant portion is already extracted in para 16. 27. The judgment under appeal is contrary to the language of THE ACT as expounded by this Court in Aneeta Hada (supra) and, therefore, cannot be sustained. The judgment is, accordingly set aside. The appeal is allowed. In the circumstances, the costs is quantified at Rs. 1,00,000/- (Rupees One Lakh Only)." 6. The facts of this case are broadly similar as the one considered by the Apex Court in Harihara Krishnan's case (supra). In the facts of this case, originally the sole accused was the individual director of the drawer Company (first revision petitioner herein). The complaint dated 06/10/2008 was filed on 13/10/2008. It is long thereafter the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....accused) cannot be told in view of the law declared in Aneeta Hada's case (supra) that such individual director cannot make any grievance on the ground that the drawer Company did not challenge the order of summoning ordered by the Trial Court in Section 319 application. As noted herein above, it was categorically held by the Apex Court that it is always open to the drawer Company to raise the defence that the initiation of prosecution against the drawer Company is barred by limitation and that the drawer Company need not necessarily challenge the summoning order at that stage and that the defence is open at the time of trial. Since the said defence is open at the time of trial, it goes without saying that the said defence is also open in the appeal and revision which is arising out of the Trial Court judgment. Therefore, the mere fact that both the revision petitioners, more particularly the second revision petitioner, has not challenged the order of summoning issued by the Trial Court on 08/04/2014 on the application dated 26/02/2014 filed by the complainant under Section 319 of the Cr.P.C., is not a ground to non-suit their contentions. Accordingly, it is only to be held tha....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... made only vicariously liable, provided the complaint is otherwise validly instituted. Here the cognizance against the drawer Company is illegal and ultra vires due to lack of averments in the complaint. It was equally impossible to take cognizance or continue prosecution as against the individual director (sole original accused/accused No. 1). Therefore, the foundation of the prosecution launched against both the accused has to come on to the ground. For this reason also, the conviction and sentence are liable to be interfered with in this revision petition as the same are illegal and ultra vires. 8. It is also not in dispute that the statutory demand notice under Section 138 of proviso (b) was served by the complainant only to the individual director (accused No. 1) and not to the drawer Company (additional accused No. 2). It has been categorically held by the Apex Court in Kirshna Texport & Capital Markets Ltd. v. Ila A. Agrawal, reported in (2015) 8 SCC 28 : 2015 (2) KHC 793 : 2015 (2) KLT 543 : 2015 (2) KLJ 534 : AIR 2015 SC 2091 : 2015 Cri LJ 2847 that in a case where the drawer of the dishonoured cheque is a Company/partnership firm, then the statutory demand notice under....
X X X X Extracts X X X X
X X X X Extracts X X X X
....in view of the law declared subsequently by a three Judge Bench in Aneeta Hada's case (supra), the view earlier taken by a two Judge Bench in Anil Hada's case (supra) stood overruled. Thereafter, the Apex Court in Kirshna Texport & Capital Markets Ltd.'s case (supra) has held that statutory demand notice on the drawer Company is mandatory where the drawer of the dishonoured cheque is a Company and that in such cases, it is not necessary to additionally issue notices to the directors/officers of the Company so long as the statutory demand notice is served on the drawer Company, etc. After considering the rival submissions on either side, this Court is of the prima facie view that the position held in the judgment in Bilakchand Gyanchand Company's case (supra) reported in (1999) 5 SCC 693 : 1999 KHC 1676 : AIR 1999 SC 2182 : 1999 SCC (Cri) 1034 : 1999 Cri LJ 3498 : 1999 (98) Comp Cas 573 and Rajneesh Aggarwal's case (supra) reported in (2001) 1 SCC 631 : 2001 KHC 130 : 2001 (1) KLT 484 : 2001 (1) KLJ NOC 49 :AIR 2001 SC 518 : 2001 SCC (Cri) 229 : 2001 Cri LJ 708 : 2001 (104) Comp Cas 332 have been on the basis of the previous perspective that the complaint could b....