2022 (6) TMI 489 - HC - Indian Laws

Dishonor of Cheque - insufficiency of funds - legally enforceable debt or not - service of notice upon the respondents/accused persons - rebuttal of presumptions - Section 138 of NI Act - HELD THAT - The issue as to whether a notice issued upon the director/authorized signatory of the company can be deemed to be a valid notice under Section 138(b) of the Negotiable Instruments Act fell for consideration in BILAKCHAND GYANCHAND CO. VERSUS A. CHINNASWAMI 1999 (3) TMI 620 - SUPREME COURT and RAJNEESH AGGARWAL VERSUS AMIT J. BHALLA 2001 (1) TMI 855 - SUPREME COURT . In the instant appeal, however, it is not the question to be decided as to whether service of notice upon the director and authorized signatory of the company is sufficient to bind the company for liability under Section 138 of the Negotiable Instrument Act. Unlike Himanshu (supra) the appellant/complainant issued notices to both the respondent/company and accused No.2 being the authorized signatory on behalf of the respondent/company. The respondent during trial of the case failed to prove service of notice upon accused No.2. So far as accused No.1 is concerned, it is found from the copy of the notice that the name and address of accused No.1/company was correctly recorded in the demand notice. The postal track report shows that it was served upon the accused No.1/company. During trial of the case the defacto complainant has proved the copy of notice, postal receipt and the postal track report. The postal track shows that the demand notice was served upon the accused No.1/company on 12th April, 2013. The accused however did not examine any witness to rebut the presumption of due service of notice under Section 27 of the General Clauses Act. In the instant case it is found from the copy of the notice that it was addressed respondent No.1/company in its correct address. The postal track report shows that it was duly served upon the respondent No.1/company. Therefore, the court is free to presume that the notice was duly served upon the accused No.1/company under the provision of Section 27 of the General Clauses Act - The question as to whether it was sent to the accused/company or that it was served or not in correct address is a question of fact to be determined from the copy of the notice and the postal track report. The copy of the notice, it is recorded hereinabove contains correct address of the accused No.1/company. The postal track report shows that it was duly served upon the accused/company. There are no alternative but to hold that the demand notice was duly served on 12th April, 2013 to the accused No.1/company - appeal allowed.

Issues Involved:
1. Service of notice under Section 138(b) of the Negotiable Instrument Act.
2. Validity of demand notice and its service upon the accused persons.
3. Prematurity of the complaint under Section 138 of the Negotiable Instrument Act.
4. The principle of alter ego and attribution of intent in corporate criminal liability.
5. Interpretation of penal statutes and the applicability of the presumption under Section 27 of the General Clauses Act.
6. The necessity of arraigning the company as an accused in proceedings under Section 138 of the Negotiable Instrument Act.

Detailed Analysis:

1. Service of Notice under Section 138(b) of the Negotiable Instrument Act:
The primary issue in the appeal was whether the notice demanding payment of the dishonoured cheque was legally, validly, and sufficiently served upon the accused persons. The complainant argued that the notice was sent to the correct address of the respondent No.1/company and was also served upon respondent No.2, the director and authorized signatory. The learned Magistrate, however, dismissed the complaint on the grounds that the notice was not served correctly.

2. Validity of Demand Notice and Its Service Upon the Accused Persons:
The complainant demonstrated that the notice was sent to the correct address of the respondent No.1/company and was duly served, as evidenced by the postal track report. The appellant contended that any error in the postal receipt regarding the name and address should not invalidate the service of notice. The court held that the postal receipt is not the definitive document to ascertain the correct address; rather, the copy of the notice and postal track report are more relevant. The court concluded that the notice was duly served on the respondent No.1/company.

3. Prematurity of the Complaint under Section 138 of the Negotiable Instrument Act:
The respondents argued that the complaint was premature as no notice was served upon the respondents. However, the court found that the complaint was filed after the expiry of the 15-day period from the date of receipt of the notice, making it not premature. The court emphasized that the complaint was lodged on 11th May 2013, well after the required period.

4. The Principle of Alter Ego and Attribution of Intent in Corporate Criminal Liability:
The court discussed the principle of alter ego, where the criminal intent of the person or group of persons guiding the business of the company is imputed to the corporation. It was held that notice served upon respondent No.2, the director and authorized signatory, can be attributed to the respondent No.1/company. The court referenced previous judgments, including Iridium India Telecom Ltd. vs. Motorola Incorporated and Sunil Bharti Mittal vs. Central Bureau of Investigation, to support this principle.

5. Interpretation of Penal Statutes and the Applicability of the Presumption under Section 27 of the General Clauses Act:
The court highlighted that penal statutes should be interpreted to suppress mischief and advance the remedy intended by the legislature. The presumption under Section 27 of the General Clauses Act, which deems a notice served if correctly addressed and posted, was applied. The court found that the notice was correctly addressed and presumed to be served, supporting the complainant's case.

6. The Necessity of Arraigning the Company as an Accused in Proceedings under Section 138 of the Negotiable Instrument Act:
The respondents argued that the company must be arraigned as an accused for the prosecution of the directors to be maintainable. The court referred to the decision in Himanshu vs. B. Shivamurthy, where the Supreme Court held that prosecution of a director is not maintainable without arraigning the company as an accused. However, in this case, the complainant had issued notices to both the company and the director, fulfilling the requirement.

Conclusion:
The court set aside the judgment and order of acquittal passed by the learned Metropolitan Magistrate, holding that the demand notice was duly served on the respondent No.1/company. The appeal was allowed, and the case was remanded to the trial court to record conviction and sentence against the accused persons within three weeks from the date of communication of the judgment. The court emphasized the importance of the correct interpretation of penal statutes and the principles of corporate criminal liability.

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