TaxTMI 
TaxTMI 
TaxTMI 
2022 (4) TMI 1627
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....he case. According to the 2nd respondent/ complainant, stationary goods were purchased by the accused from his stationary shop for a sum of Rs.1,49,560/- and towards payment of it's cost, 3rd respondent (1st accused) issued a cheque bearing No.418935 dated 28.03.2017, drawn on account No.30781221971 maintained by him at State Bank of India , Ottapalam Branch for a sum of Rs.1,49,560/-. At the time of issuance of cheque, the 3rd respondent made the complainant believe that funds would be available in the account at the time of presentation of the cheque. Accordingly the complainant presented the cheque at Axis Bank, Ottapalam Branch but it was dishonoured for the reason "funds insufficient". The cheque as well as the dishonour memo dated 29.03.2017 were returned to the complainant. Thereupon he issued a notice dated 18.04.2017 to the 3rd respondent who had signed the cheque. A reply notice was issued by the 3rd respondent raising untenable contentions. The amount demanded was not paid. Thereupon Complaint was filed to launch the prosecution against the petitioner and the 3rd respondent alleging commission of offence punishable under Section 138 N.I.Act. 2. Sworn statement of the 2n....
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....m seeking for a decree of permanent prohibitory injunction restraining the petitioner from evicting him from the property without recourse to law. The 3rd respondent has misused his authority and siphoned and defalcated the funds of the company and did not abide by the decisions taken in the meeting held on 02.04.2016. Another suit was also filed by the petitioner as O.S.No.75/2017 before Sub Court, Ottappalam seeking for a mandatory injunction. W.P.(C) No.11110/2017 was filed by the 3rd respondent before this Court seeking for police protection. The said writ petition was disposed of by judgment dated 19.10.2017 observing that "in the event of any law and order situation occurred and reported, the parties will be at liberty to bring that to the notice of the 1st respondent and shall take such action as deems necessary." 4. The 2nd respondent/complainant then filed O.S.No.258/2017 before Munsiff Court, Ottapalam seeking for recovery of money based on the cheque. It is submitted that the cheque involved in Annexure A1 complaint was issued by the 3 rd respondent deceptively misusing the authority while he was the Managing Director of the company that had ceased all its operations fr....
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....ctor of the drawer company, notice is required to be sent to the drawer company. Notice was not sent to the company and therefore the prosecution is vitiated for violation of a statutory mandate. In Annexure A1 complaint also, a statement that the 2nd respondent had issued notice to the petitioner or to the company is incorporated. Moreover Annexure A1 complaint is silent on the authority of the 3 rd respondent to represent the company. When the 3rd respondent has received Annexure A4 notice, he was neither a Director of the company nor having any authorisation to represent the company. He was not even looking after the affairs of the company. Therefore Annexure A1 complaint having been filed without satisfying the requirements under Section 138 N I Act is liable to fail. 6. Chairman of the Board of Directors of the company has authority only to preside over the meetings of the company and not to involve in the day to day affairs of the company. That authority to deal with the daily affairs of the company is vested only with the Managing Director of the company, who is none other than Mr.Abu Thahir Thottivalappil Alavi. The petitioner herein is only a Director of the company and b....
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.... by the drawee bank, (4) Giving notice in writing to the drawer of the cheque demanding payment of the cheque amount, (5) failure of the drawer to make payment within 15 days of the receipt of the notice. It is not necessary that all the above five acts should have been perpetrated at the same locality. It is possible that each of those five acts could be done at 5 different localities." 9. Kusum Ingots & Alloys Ltd. v. Pennar Peterson Securities Ltd. and Others [2000 (2) SCC 745] was also relied on and it was held by the Apex Court as follows: "10. On a reading of the provisions of Section 138 of the NI Act it is clear that the ingredients which are to be satisfied for making out a case under the provision are : (i) a person must have drawn a cheque on an account maintained by him in a bank for payment of a certain amount of money to another person from out of that account for the discharge of any debt or other liability; (ii) that cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier; (iii) that cheque is returned by the bank unpaid, either because the amount o....
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....e acquires the right to institute proceedings for prosecution under S.138 of the Act, which right remains legally enforceable for a period of 30 days counted from the date on which the cause of action accrued to him." 11. In Krishna Texport & Capital Markets Ltd. v. Ila A. Agrawal and Others [2015 (2) KHC 793] relied on by the learned counsel the requirement of issuance of separate notice to Directors is considered and the court held: "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 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. S.141 again does not lay down any requirement that in such eventuality the directors must individually be issued separate notices under S.138. The persons who are in charge of the affairs of the Company and running its affairs must naturally be aware of the notice of demand under S.138 of the Act issued to such Company. It is precisely for this reason that n....
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....nless the complaint contains all the necessary factual allegations constituting each of the ingredients of the offence under Section 138, the court cannot take congnizance of the offence. Disclosure of the name of the person drawing the cheque is one of the factual allegations which a complaint is required to contain. Otherwise in the absence of any authority of law to investigate the offence under Section 138, there would be no person against whom a Court can proceed. There cannot be a prosecution without an accused. The offence under Section 138 is person specific. Therefore, the Parliament declared under Section 142 that the provisions dealing with taking cognizance contained in the CrPC should give way to the procedure prescribed under Section 142. Hence the opening of non-obstante clause under Section 142. It must also be remembered that Section 142 does not either contemplate a report to the police or authorise the Court taking cognizance to direct the police to investigate into the complaint." 14. In Himanshu v. B.Shivamurthy and Another [2019 (1) KHC 540] relied on, it was held that in the absence of a company being arraigned as an accused, complaint against Director is n....
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.... the N.I. Act something which is not there at all. The legislature appears to have cautiously avoided such insistence. Thus, going by the language of S.138 and 141 of the N.I.Act and considering the purpose of notice under proviso (b) to S.138 it follows that accused 2 and 3 who face prosecution under S.141 of the N.I.Act are not entitled to any notice under proviso (b) to S.138 of the N.I.Act." 16. In Indira Gandhi Memorial General Marketing Society Ltd. V. Roys Abraham and Another [2017 KHC 730] relied on, the court held: "where the drawer of the dishonoured cheque in question is a Company/partnership firm, it is mandatory that statutory demand notice under Section 138 is issued to the Company/partnership firm; but additional notice to the Directors/officials of the corporate body is not mandatory." 17. In Dashrath Rupsingh Rathod v. State of Maharashtra [2014 (3) KLT 605 (SC)] relied, the court held: " It is axiomatic that when a Court interprets any statutory provision, its opinion must apply to and be determinate in all factual and legal permutations and situations. We think that the dictum in Ishar Alloy is very relevant and conclusive to the discussion in....
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....tutory period." 20. In Fakrudhin V.P. v. State of Kerala and Another (2014 (4) KHC 815) relied on, the court held: "For maintaining prosecution under S.141 of the NI Act, arraigning of a company as an accused is imperative and hence proceeding against the Managing Director cannot be continued in the absence of the company being not in the party array. In view of the above decision, it can also be held that there cannot be a split up among the accused between the company and its functionaries or officers, where the complaint is found not maintainable against the company. In the light of the above discussions, I hold that where the complaint under S.138 read with S.141 of the NI Act is found not maintainable against the company, the Managing Director or other persons working in different categories of the company or the persons who are in charge and responsible to the conduct of the company mentioned under Sub-ss.(1) and (2) of S.141 of the NI Act cannot be prosecuted further and convicted thereunder on that complaint." 21. To summarise, as per the directions issued by the decisions placed by the learned counsel for the petitioner, 5 ingredients are essential and mandatory to b....