2007 (10) TMI 555 - SC - Companies Law

Notice under section 138 of the Negotiable Instruments Act, 1881, not sent under registered cover with acknowledgment due. Held that - Considering the effect of the nature of service of notice effected by the employees of the Law Firm. Paragraph 2 of the affidavit affirmed by Ramchandra Damaji Khadpe does not disclose as to when he had gone to serve notice upon the appellant at 34, Adarsh Nagar, Worli, Mumbai. It was stated that he having been told by the neighbour of the appellant Arvind Naik that he had shifted to Bhatachi Chawl in Worli, went there also. He did not disclose as to what was the new address. He did not furthermore state when did he visit that place. The learned Magistrate proceeded on the basis that the service of notice upon the company at its registered office would subserve the requirements of law. But, in this case, point taken by the appellant is a different one. Appeal allowed.

Summary

Issues Involved:
1. Service of notice under Section 138 of the Negotiable Instruments Act.
2. Compliance with the statutory requirements of Section 138.
3. Validity of the complaint filed based on the service of notice.

Issue-wise Detailed Analysis:

1. Service of notice under Section 138 of the Negotiable Instruments Act:
The respondent filed a complaint alleging that nine cheques issued by the appellant had bounced, constituting an offence under Section 138 of the Negotiable Instruments Act. A notice demanding payment within 15 days was issued but was not sent via registered cover with acknowledgment due, nor through a courier service. Instead, employees of the respondent's law firm attempted personal service. Affidavits were filed by the employees detailing their attempts to serve the notice. The Metropolitan Magistrate took cognizance based on these affidavits, but the appellants argued that the service was not legally compliant.

2. Compliance with the statutory requirements of Section 138:
Section 138 stipulates that a notice must be served within 30 days of the bank's information about the cheque's dishonour, and the drawer must be given 15 days to make the payment. The Supreme Court emphasized that service of notice is a statutory requirement, and strict compliance is necessary due to the penal nature of the provision. The notice must be dispatched and its contents communicated to the drawer. The court noted that the service of notice by personal delivery was not adequately documented, and the affidavits lacked specific details about the attempts made, rendering the service questionable.

3. Validity of the complaint filed based on the service of notice:
The Sessions Judge found that the service of notice was not satisfactorily proven and that the complaint was premature as the notice was attempted to be served on 7th May 2000, and the complaint was filed on 9th May 2000. The High Court, however, upheld the issuance of process based on the affidavits and the complaint's averments. The Supreme Court disagreed, stating that the material before the trial court did not satisfy the statutory condition of service of notice within the required period. The court highlighted that the complaint was filed prematurely and without proper service of notice, rendering the process issuance invalid.

Conclusion:
The Supreme Court set aside the High Court's judgment, emphasizing the necessity of strict compliance with the statutory requirements of Section 138 regarding the service of notice. The appeal was allowed, and the complaint was deemed invalid due to the premature filing and improper service of notice.