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2024 (7) TMI 296 - HC - Indian LawsDishonour of Cheque - complete service of notice - whether service of notice of demand under Section 138 of the NI Act will be deemed to be complete if the said notice of demand was served only on the director of the accused company and not on the accused company itself? - HELD THAT - A reading of proviso (b) to Section 138 of the NI Act shows that issuing a notice of demand to the drawer of the cheque is a pre-requisite for filing a complaint under Section 138 of the NI Act. However, the objective of issuing a notice of demand under proviso (b) is to give an opportunity to the drawer to pay the cheque amount within 15 days of service of notice and thereby free himself from the penal consequences of Section 138 of the NI Act. The discussion in C.C. Alavi Haji 2007 (5) TMI 335 - SUPREME COURT makes it abundantly clear that the objective of serving a demand notice to the person accused of an offence under Section 138 of the NI Act is to give an opportunity to the drawer to pay the cheque amount within 15 days of service of notice and thereby free himself from the penal consequences of Section 138 of the NI Act. In fact, the Supreme Court goes on to hold that a person who does not pay within 15 days of receipt of the summons from the court along with the copy of the complaint under Section 138 of the NI Act, cannot contend that there was no proper service of notice as required under Section 138 of the NI Act. The cheques in question are signed by the petitioner no. 2 for and on behalf of the petitioner no. 1. Petitioner no. 2 is stated to be the Chairman of not only the petitioner no. 1-Company, but also of the Group of Companies, including IBooks. The cheques in question are claimed to have been issued in discharge of one common liability, where not only the cheques of petitioner no. 1 but also IBooks were issued by the petitioner no. 2 - In spite of service of the notice, the petitioner no. 2, instead of making the payment of the cheque amount, raised a dispute on the liability to pay the same and also stated that the cheques were not issued by IBooks, the addressee no. 1 in the notice. The defence that the notice was wrongly addressed to IBooks instead of the petitioner no. 1, therefore, cannot come to the aid of the petitioners, especially where the complaints in question are rightly filed making the petitioner no. 1-company as an accused. In ANEETA HADA VERSUS GODFATHER TRAVELS TOURS (P.) LTD. 2012 (5) TMI 83 - SUPREME COURT ), the Supreme Court has held that an authorised signatory of a company becomes a drawer as he has been authorised to do so in respect of the account maintained by the Company. Therefore, even testing on this standard, the notice was duly addressed to the drawer of the cheques in question. There are no merit in the present petitions. The same are, accordingly, dismissed.
Issues Involved:
1. Validity of the demand notice under Section 138 of the Negotiable Instruments Act (NI Act) when addressed to the director and not the company. 2. Compliance with pre-requisites for filing a complaint under Section 138 of the NI Act. 3. Application of legal precedents and principles in the context of the NI Act. 4. Appropriate use of powers under Section 482 of the Code of Criminal Procedure (Cr.P.C.). Detailed Analysis: Issue 1: Validity of the demand notice under Section 138 of the NI Act when addressed to the director and not the company. The primary issue was whether the service of a demand notice under Section 138 of the NI Act is valid if served only on the director of the accused company and not on the company itself. The court emphasized that the objective of serving a demand notice is to give the drawer an opportunity to pay the cheque amount within 15 days and avoid penal consequences. The court referred to the Supreme Court's judgment in *C.C. Alavi Haji v. Palapetty Muhammed & Anr.*, which clarified that the purpose of the notice is to avert unnecessary prosecution of an honest drawer. The court also cited *Bilakchand Gyanchand Co. v. A. Chinnaswami*, where the Supreme Court held that a notice addressed to a director who signed the cheque is sufficient. Similarly, in *Rajneesh Aggarwal v. Amit J. Bhalla*, the Supreme Court held that notice to the director who signed the cheque on behalf of the company is adequate. Issue 2: Compliance with pre-requisites for filing a complaint under Section 138 of the NI Act. The court analyzed whether the pre-requisites for filing a complaint under Section 138 of the NI Act were met. It was noted that the cheques in question were signed by the petitioner no. 2 on behalf of petitioner no. 1 and were part of a settlement agreement. Despite the notice being addressed to IBooks instead of the petitioner no. 1, the court found that the petitioner no. 2, who was aware of the liability, could not claim the notice was invalid. The court held that the complaints were rightly filed against the petitioner no. 1 company, thereby fulfilling the pre-requisites under Section 138 of the NI Act. Issue 3: Application of legal precedents and principles in the context of the NI Act. The court referred to several legal precedents to support its findings. It highlighted the Supreme Court's decision in *Aneeta Hada v. M/s Godfather Travels & Tours Pvt. Ltd.*, which established that an authorized signatory of a company becomes a drawer as they are authorized to do so on behalf of the company. The court distinguished the present case from other judgments cited by the petitioners, noting that those cases dealt with situations where the company was not made an accused, unlike the present case where the company was included as an accused. Issue 4: Appropriate use of powers under Section 482 of the Cr.P.C. The court reiterated the Supreme Court's caution against using powers under Section 482 of the Cr.P.C. to quash complaints at an initial stage, especially when disputed questions of fact are involved. The court cited *Rathish Babu Unnikrishnan v. State (NCT of Delhi) & Anr.*, emphasizing that quashing proceedings at a nascent stage could result in finality without the parties having an opportunity to adduce evidence. The court concluded that the factual controversy should be addressed by the trial court and dismissed the petitions, allowing the trial to proceed. Conclusion: The court dismissed the petitions seeking quashing of the complaints under Section 138 of the NI Act, finding that the service of notice to the director was valid, the pre-requisites for filing the complaints were met, and the powers under Section 482 of the Cr.P.C. should not be used to interfere at an initial stage. The court emphasized that its observations should not prejudice the petitioners in their defense during the trial.
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