2019 (12) TMI 708 - HC - Indian Laws

Dishonor of Cheque - section 138 of Negotiable Instruments Act - Complaint against the petitioner who is neither a Director or Party to the agreement - Whether continuation of criminal proceedings against the petitioner is liable to be quashed on account of failure on the part of the complainant to establish any involvement of the petitioner in the dishonour of cheques mentioned above and non issuance of legal demand notice to the petitioner by the complainant? HELD THAT - It is not disputed that the complainant issued notice to the respondent company as well as two of its directors, being respondent nos. 3 to 5, however, admittedly no notice has been issued to the petitioner under Sections 138 (1) (b) NI Act. As per the aforesaid provision, the payee or the holder in due course of the cheque, as the case may be, shall make a demand for the payment of the said amount of money by giving a notice in writing, to the drawer of the cheque, within thirty days of the receipt of information by him from the bank regarding the return of the cheque as unpaid. As per sub clause (c) Section 138 (1) of the said Act, the drawer of such cheque fails to make the payment of the said amount of money to the payee or, as the case may be, to the holder in due course of the cheque, within fifteen days of the receipt of the said notice. Admittedly, in the present case, notice raising demand for payment has not been issued to petitioner by the complainant. Thus, as per the statute, to fasten a liability upon the accused/petitioner, it was mandatory to issue a notice to him under the aforesaid Act, that too within the stipulated period. In the absence of any notice, as stipulated under the Act within the prescribed time period, the summons and proceedings against the petitioner are vitiated and the same deserve to be quashed - petition allowed.

Summary

Issues:
Quashing of criminal proceedings under Sections 138/141 read with Section 142 of the Negotiable Instruments Act due to lack of involvement of the petitioner and absence of legal notice to the petitioner.

Analysis:

1. The petitioner sought directions to quash a complaint under Sections 138/141 read with Section 142 of the Negotiable Instruments Act and all related proceedings. The case involved a dispute where the petitioner, along with others, was accused of dishonoring cheques related to a property transaction.

2. The respondent No. 2 desired to purchase a flat, leading to agreements and payments made to the respondents. However, issues arose when the sale deed was not executed, and cheques issued by the respondents were dishonored. The complainant alleged non-payment despite assurances and legal notices sent to the respondents.

3. The central issue before the Court was whether criminal proceedings against the petitioner should be quashed due to lack of evidence of his involvement in the cheque dishonor and the absence of a legal demand notice sent to him, as required by Section 138(1)(b) of the Negotiable Instruments Act.

4. The Court noted that while the complainant had issued notices to other parties involved, no notice had been sent to the petitioner as per the statutory requirement. Failure to provide a notice to the drawer of the cheque within the specified period could not establish liability on the accused, as highlighted in a previous judgment.

5. Referring to a relevant case law, the Court emphasized the importance of fulfilling the pre-conditions for filing a complaint under Section 138 of the Negotiable Instruments Act, including sending a statutory notice. Since the required notice was not issued to the petitioner within the prescribed time, the summons and proceedings against the petitioner were deemed vitiated and thus, quashed.

6. Consequently, the Court allowed the petition, quashing the proceedings against the petitioner based on the lack of notice as mandated by the Act within the specified timeframe.