2001 (1) TMI 855 - SC - Companies Law

Was the High Court justified in coming to the conclusion that the drawer has not been duly served with notice for payment? Whether deposit of the entire amount covered by three cheques, while the matter is pending in this court, would make any difference? Held that - Appeal allowed. After the cheques were dishonoured by the bank the payee had served due notice and yet there was failure on the part of the accused to pay the money, who had signed the cheques, as the director of the company. The impugned order of the High Court, therefore, is liable to be quashed. So far as the criminal complaint is concerned, once the offence is committed, any payment made subsequent thereto will not absolve the accused of the liability of criminal offence, though in the matter of awarding of sentence, it may have some effect on the court trying the offence. But by no stretch of imagination, a criminal proceeding could be quashed on account of deposit of money in the court or that an order of quashing of criminal proceeding, which is otherwise unsustainable in law, could be sustained because of the deposit of money in this court. In this view of the matter, the so-called deposit of money by the respondent in this court is of no consequence.

Issues:
1. Quashing of criminal complaints under section 138 of Negotiable Instruments Act by High Court.
2. Impleading the company as accused in the complaint.
3. Service of notice to the drawer as per section 138.
4. Interpretation of notice issued in individual capacity.
5. Legal implications of depositing money during the pendency of appeals.

Quashing of Criminal Complaints:
The Supreme Court analyzed the impugned orders quashing three criminal complaints filed under section 138 of the Negotiable Instruments Act. The High Court had dismissed the accused's application under section 482, challenging the magistrate's order issuing process. The accused raised contentions regarding the company not being impleaded as accused and the absence of proper notice as per section 138 proviso. The High Court rejected the first contention but accepted the second, holding that notice was not issued to the drawer, thus quashing the criminal proceedings.

Impleading the Company:
The High Court held that criminal prosecution could proceed under section 138 without impleading the company as an accused. However, it concluded that due to the notice being issued to the accused in his individual capacity and not to the company, the criminal proceedings could not be sustained under section 141. This decision was challenged in the appeals before the Supreme Court.

Service of Notice and Interpretation:
The Supreme Court highlighted the requirements under section 138, emphasizing the necessity of notice to the drawer for the offense to be established. The Court found that the notice served on the director of the company, who signed the cheques, was sufficient. It criticized the High Court's narrow interpretation and held that the notice was valid, as the director was obligated to ensure payment. The Court referenced a previous judgment to support its conclusion.

Deposit of Money During Pendency:
Regarding the deposit of the amount covered by the cheques during the appeals, the Court clarified that such deposits do not absolve the accused of criminal liability. The Court rejected the notion that criminal proceedings could be quashed based on subsequent deposits. It emphasized that the deposit made by the respondent during the proceedings had no impact on the continuation of the criminal case.

Conclusion:
The Supreme Court set aside the High Court's orders, allowing the appeals and directing the continuation of the criminal proceedings. It instructed the refund of the deposited money to the accused and urged the magistrate to expedite the proceedings.

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