TaxTMI 
TaxTMI 
2024 (4) TMI 556
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....al is challenged by the complainant. 2. Leave was granted and the Appeal was admitted on 2nd December 2019. Issues involved in this appeal are :-- a. whether the statutory notice was issued to proper person ? b. whether the trial court erred in acquitting the respondent No. 2 ? c. whether 'not giving findings by the trial court' will affect the outcome of the case ? Prima facie view of this Court. 3. There is a reason to believe that there is some misunderstanding in the mind of the learned Judge about the provisions of the Companies Act. Though learned Judge was aware that the Company is managed by the Directors, in the first paragraph of the judgment and the operative order, he has made certain references which indicates the learned Judge was dealing with only against Accused No. 2 (as a director)and has not dealt with Accused No. 1 - Company. It is a settled law that any company is an artificial entity in the eyes of law and its business is managed and run by natural persons. Even as per Explanation (a) to Section 141 of the Negotiable Instruments Act, 1881, the meaning of the word "Company" is given as "any body corporate and includes a firm or other association of ind....
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....rt on pages 31 and 32 mentioned about financing Rs. 45,000/- and Rs. 4,11,000/- to the complainant. Issuance of cheques 8. It is her further case that towards discharge of that liability accused issued the following 5 cheques. They were drawn on Bassein Catholic Co-operative Bank Ltd. Their details are as follows:- Sr. No. Cheque No. Date Amount 1. 386228 6th October 2014 1,00,000/- 2. 386229 8th October 2014 1,00,000/- 3. 386230 10th October 2014 1,00,000/- 4. 386231 13th October 2014 1,00,000/- 5. 386232 16th October 2014 1,00,000/- Dishonour 9. All these cheques were deposited by the complainant in the joint account standing in her name and in the name of her husband Shiva Perumal in Federal Bank Ltd., Goregaon Branch. Witness No. 2 - Mayur Satyanarayan Dusaj, Manager of the Federal Bank has also given evidence to that effect (page 84). It shows that there was a joint account in the name of complainant and her husband. As such, she was justified in depositing those cheques in that account because she was one of the joint account holder. 10. Those cheques were dishonoured by the drawee Bank. There are 5 cheques return memos issued by the Federal Bank ....
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.... not proved. Submission 13. According to learned Advocate Shri Khanchandani, these findings are perverse and against the provisions of Section 138 of the Negotiable Instruments Act. He also relied upon few judgments. I will deal with them subsequently. Receipt of Notice 14. The complainant also gave evidence about the receipt of notice, Postal receipt at page 47 and the tracking report is on page 48. The postal receipt was marked as Exhibit whereas tracking report was marked as article. It was pointed out to me by Mr. Khanchandani that there is no finding on the issue of receipt of notice. He is right. 15. It is true that the trial Court is bound to give findings on compliance of the mandatory procedure. The complainant was cross- examined on this aspect. The relevant answers find place in paragraph No. 2. The question was put to her:- "why you have not issued demand notice to Accused No. 1 - Kaushal Realtors Pvt. Ltd.". She gave answer:- "my Advocate Shri Vijay Shukla had told me that name of Kaushal Realtors Pvt. Ltd. will be added in the complaint". 16. She was also cross-examined on the point of address of her Advocate office. I do not think that if the complaina....
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....s are not for the period when the money is alleged to be advanced. Whereas on the point of existence of legally enforceable debt the trial Court observed in paragraph 10 that "cheques were not issued in discharge of legally enforceable debt against Accused No. 2". 22. It is true presumption can be drawn under Section 139 of the Negotiable Instruments Act. The presumption relates to receipt of cheques by the holder and it is for discharge of debt or other liability. This presumption can be rebutted by proving contrary. It is contended on behalf of the accused that the account was closed in the year 2007 whereas, cheques were of the year 2014. There is one more contention raised on the point of issuance of a blank cheque and there is difference in signature of the ink and contents of the cheque. The signature of the accused is in blue ink whereas rest of the matter on cheque is in black ink. It is admitted during the cross-examination by the complainant (para 7/page 82). 23. The complainant was also put certain questions about the business relationship in between her husband and of accused. Though her husband is an Electrical Contractor, she is not aware that her husband has taken ....
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....t given any favourable answers to the accused to support that plea. On this background, if the accused was desirous of persuading the Court to believe that the cheques were not issued towards discharge of liability he ought to have examined any witness. He has not done that. Merely because there is a difference in ink of the signature and contents, it will not help the accused. The signature is admitted, issuance is admitted, so presumption has to be drawn. The accused has failed to rebut that presumption also. Raising of Finance 28. For proving the liability whether it is really required for the complainant to show how the money is raised, I do not think that it is required. There were two materials relied upon by the complainant. One is the receipt issued by the Federal Bank for pledging of gold ornaments and another is Income-Tax returns. What is the relevance of Income-Tax returns? It can show how much is the total income and how much is the tax paid. One can plead that he is having a particular income from the sources shown in the return but whether income tax returns are really an answer to prove the liability, I do not think that they are required. There are reasons. Pers....
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....dishonest intention on the part of the accused to issue such cheques, the trial is conducted only for offence under Section 138 of the NI Act. These materials are sufficient to conclude that closure of account is a reason for dishonour. Issuance of notice and its receipt 32. As stated above, accused has not come with the defense that the address is wrong. No doubt, tracking report is not exhibited but there is a receipt showing that notice is posted. Presumption under General Clauses Act comes into picture. What is important is issuance of notice. The complainant has fulfilled that responsibility. Improvements in the case 33. The complainant was cross-examined at length in respect of the improvements to show the facts stated in the complaint were not mentioned in her demand notice. This cross-examination find place in paragraph No. 5. On various particulars, questions were put to the complainant. She has also admitted that those particulars are not mentioned in the demand notice. Even learned Advocate for the Respondent has produced one chart showing differences in the contents of the notice on one hand and contents of the complaint on the other hand. I have perused it. If the ....
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....truments Act. He is right but in the title clause of complaint (on the page 49), there is a reference of both sections. 38. It is not required to join all the Directors of Respondent No. 1 - Company because the complainant can only join those representatives of the Company which fall within the purview of Section 141(1) and 142(2) of the Negotiable Instruments Act. The learned Advocate Shri Khanchandani invited my attention to the following provisions of NI Act:- (a) Meaning of "drawer" given in Section 7 of the NI Act is "the maker of a bill of exchange or cheque is called drawer". (b) The initial wording of Section 138 of NI Act and one of the requirement is "drawing of a cheque by a person and on an account maintained by him with the banker". (c) Proviso (b) to Section 138 mentions the person to whom notice is to be issued. It is to be issued "to the drawer of the cheque". (d) If ingredients of Section 138 of the N.I. Act are fulfilled then such person shall be deemed to have committed an offence. 39. To buttress his submissions, he relied upon the following judgments:- (A) C.C. Alavi Haji Vs. Palapetty Muhammed and Anr. (2007) 6 SCC 555 It was held that issuance of ....
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....sues a cheque not in his individual capacity but on behalf of the Company. It may also happen that "such person may issue a cheque in his individual capacity on account maintained by him for discharging the liabilities of Company". In that eventuality, it is the "person who has issued a cheque will be responsible and not the Company which owns that amount". 42. When the question of issuing a cheque on behalf of the Company arises, such cheques can be issued only when there is Bank Account in the name of the Company. The person who is signing the cheque on behalf of the Company is not expected to have a Bank account even though as per Section 7 a person who draws a cheque is a drawer. These provisions have to be interpreted harmoniously along with the provisions of Section 138 of the NI Act. Why the legislators have used a phrase "cheque drawn by person on account maintained by". Because it may happen that cheque may be issued by an artificial entity. The wording "such person shall be deemed to have committed an offence" is also important. Because in the proviso (b) to Section 138, it contemplates to whom the notice is to be issued. It has to be issued to a person who has drawn the....