2020 (11) TMI 502 - HC - Indian Laws

Dishonor of Cheque - petitioner challenges the composite order taking cognizance and issuing summons on the grounds that there is no proof as to when the notice under Section 138 of the Negotiable Instruments Act read with Section 141 of the Negotiable Instruments Act was served upon these petitioners - main contention raised by the petitioner is that the complainant in his complaint petition has not stated as to when notices under Section 138 of the Negotiable Instruments Act was served upon the petitioners. HELD THAT - The deeming fiction in respect of service of notice is applicable in respect of notice under Section 138 of the Negotiable Instruments Act also if the notice is properly and correctly addressed. In this context it is to be noted that it is not the case of the petitioners that the notice so issued is not properly or correctly addressed - the grounds taken by the petitioner has got no legs to stand. The notice is deemed to have been served upon the petitioner. Another ground taken by the petitioners is that the petitioner No.3 is a sleeping partner and has got nothing to do with the day to day affairs of the business and merely putting the words in the complaint that she was incharge of the day to day activity is not sufficient to take cognizance. Section 141 of the Negotiable Instruments Act does not make all the persons and directors liable for the offence. Criminal liability has been fastened on those who at the time of commission of offence were in charge of and were responsible to the firm for the conduct of the business of the firm. There may be cases where the partners are sleeping partners or directors who are not required to take part in the business they may be ladies and those who know nothing about the business. The accused No.2 and 3 are directors of the company who are responsible for and looking after day to day affairs of the business - the complainant has discharged their onus in terms of Section 141 of the Negotiable Instruments Act. Now it is the accused who have to rebut the same by cogent evidence. Before this Court at this stage save and except only the oral submission no impeachable material has been brought on record by the petitioners to suggest that the petitioner No.3 is not responsible and also is not looking after the day to day affairs of the company. In absence of any materials at this stage to give a finding in favour of the accused is not proper. It is well settled principle that when prima facie an offence is made out a criminal proceeding cannot be quashed at the very threshold. In these cases the cheques were issued in favour of the complainant whose payments were stopped. Admittedly notices were sent which were deemed to have been served. Admittedly the amount involved in each cheque was not paid - Since the cheques were issued by accused No.2 he has been summoned / noticed. Since accused No.3 is a director and it has been mentioned in the complaint petitions that she is also looking after the day to day affairs of the company by application of Section 141 of the Negotiable Instruments Act notice has also been issued to her. There are no illegality in the impugned orders in all these cases by which cognizance has been taken and the petitioners have been summoned in all these cases - petition dismissed.

Issues Involved:
1. Validity of cognizance and issuance of summons under Section 138 of the Negotiable Instruments Act.
2. Proof of service of notice under Section 138 of the Negotiable Instruments Act.
3. Existence of a legally enforceable debt.
4. Responsibility and role of directors under Section 141 of the Negotiable Instruments Act.

Issue-wise Detailed Analysis:

1. Validity of Cognizance and Issuance of Summons:
The petitioners challenged the orders taking cognizance and issuing summons in multiple cases where cheques issued by the petitioner company were dishonored. The petitioners argued that the complaint lacked specific averments regarding the service of notice, and there was no legal debt. The court determined that the grounds raised by the petitioners did not hold merit, as the notices were deemed served under Section 27 of the General Clauses Act, and the complaint sufficiently stated the directors' responsibility for the company’s affairs.

2. Proof of Service of Notice:
The petitioners contended that there was no proof of service of notice under Section 138 of the Negotiable Instruments Act. The court referred to Section 27 of the General Clauses Act, which provides that service by post is deemed effective unless proven otherwise. The court noted that the petitioners did not deny receiving the notices and applied the deeming provision, concluding that the notices were deemed served. The court cited the Supreme Court’s judgment in K. Bhaskaran v. Shankaran Vaidhyan Balan, which supports the application of deeming provisions for notices under Section 138.

3. Existence of a Legally Enforceable Debt:
The petitioners argued that there was no legal debt, as they had a monetary claim against the complainant due to a penalty imposed by the GST authorities. The court held that this contention could not be adjudicated at the stage of cognizance. The cheques issued by the accused company, whose payments were stopped, prima facie attracted the provisions of Section 138 of the Negotiable Instruments Act, making out an offence for taking cognizance.

4. Responsibility and Role of Directors:
The petitioners argued that petitioner No.3 was a sleeping partner and not involved in the company’s day-to-day affairs. The court referred to Section 141 of the Negotiable Instruments Act, which holds persons responsible for the conduct of the company's business liable. The court cited Supreme Court judgments, including Monaben Ketanbhai Shah v. State of Gujarat, emphasizing that the complaint must contain specific averments about the directors' responsibility. The court found that the complaint sufficiently stated that petitioners No.2 and 3 were responsible for the company’s affairs. The court concluded that the accused could rebut this at an appropriate stage with cogent evidence, but at the stage of cognizance, the complaint’s assertions were sufficient.

Conclusion:
The court dismissed all the criminal miscellaneous petitions, finding no illegality in the impugned orders taking cognizance and issuing summons. The court held that the notices were deemed served, the complaint sufficiently averred the directors' responsibility, and the issue of legally enforceable debt could not be adjudicated at the cognizance stage.

← Previous Next →