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TMI Blog2022 (4) TMI 1627X X X X Extracts X X X X X X X X Extracts X X X X ..... ejith A.S, who is the Managing Director of Preesa Foods and Spices (India) Private Limited was shown as the 1st accused and one Mr.Nandakumar Konat, the Chairman of Preesa Foods and Spices (India) Private Limited, as the second accused. What can be gathered on a reading of the pleadings in the complaint was that the company has purchased stationary articles for a sum of Rs. 1,49,560/- from the complainant. The company is not made an accused in the case on hand. Since the articles are purchased for the benefit of the company and a cheque drawn from the account maintained by it was issued to discharge the cost of the articles bought, to the complainant, primarily the company must be arraigned as the accused. Company being a legal entity it must be represented by it s Managing Director or any other officers duly authorised to represent it. Notice must also be issued to the company through it s authorised representative as per the mandate of the statute, prior to lodging of a complaint to launch the prosecution. The manner in which the persons arraigned in their official capacity are responsible for the day to day affairs of the company as accused was also not stated in Annexure A1. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of presentation of the cheque. Accordingly the complainant presented the cheque at Axis Bank, Ottapalam Branch but it was dishonoured for the reason funds insufficient . The cheque as well as the dishonour memo dated 29.03.2017 were returned to the complainant. Thereupon he issued a notice dated 18.04.2017 to the 3rd respondent who had signed the cheque. A reply notice was issued by the 3rd respondent raising untenable contentions. The amount demanded was not paid. Thereupon Complaint was filed to launch the prosecution against the petitioner and the 3rd respondent alleging commission of offence punishable under Section 138 N.I.Act. 2. Sworn statement of the 2nd respondent was recorded by the court below on 30.05.2017. The accused denied all the averments in the complaint. According to him the 3rd respondent/1st accused was the Managing Director of the company namely Preesa Foods and Spices (India) Private Limited and petitioner, a Director in the said company. He is working in United States of America and since 2015, the 3rd respondent was indulged in defalcation and misappropriation of the bank accounts of the company and on account of that the company was running in huge loss. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for police protection. The said writ petition was disposed of by judgment dated 19.10.2017 observing that in the event of any law and order situation occurred and reported, the parties will be at liberty to bring that to the notice of the 1st respondent and shall take such action as deems necessary. 4. The 2nd respondent/complainant then filed O.S.No.258/2017 before Munsiff Court, Ottapalam seeking for recovery of money based on the cheque. It is submitted that the cheque involved in Annexure A1 complaint was issued by the 3 rd respondent deceptively misusing the authority while he was the Managing Director of the company that had ceased all its operations from 31.03.2016. The liabilities of the company to the tune of Rs.1,50,00,000/- was settled by the petitioner using his personal funds by purchasing the immovable properties, machineries, trademark, copyright etc. The 3rd respondent was allowed to use the current account of the company maintained at Ottapalm Branch of the State Bank of India only to settle the Provident Fund, ESI, Kerala Value Added Tax liabilities and other statutory liabilities till 30.06.2016. But the 3rd respondent cheated the petitioner and siphoned the enti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany nor having any authorisation to represent the company. He was not even looking after the affairs of the company. Therefore Annexure A1 complaint having been filed without satisfying the requirements under Section 138 N I Act is liable to fail. 6. Chairman of the Board of Directors of the company has authority only to preside over the meetings of the company and not to involve in the day to day affairs of the company. That authority to deal with the daily affairs of the company is vested only with the Managing Director of the company, who is none other than Mr.Abu Thahir Thottivalappil Alavi. The petitioner herein is only a Director of the company and being employed at United States of America has no involvement in the day to day affairs of the company or in managing it at any point of time. There is total lack of averments in Annexure A1 that the Director was managing the company or involved in looking after the day to day affairs of the company. In Annexure A3 suit filed by the complainant against the company and the 3rd respondent for recovery of the amount covered by the cheque, the company had resisted the suit by contending that it has no liability to pay the amount as th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llows: 10. On a reading of the provisions of Section 138 of the NI Act it is clear that the ingredients which are to be satisfied for making out a case under the provision are : (i) a person must have drawn a cheque on an account maintained by him in a bank for payment of a certain amount of money to another person from out of that account for the discharge of any debt or other liability; (ii) that cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier; (iii) that cheque is returned by the bank unpaid, either because the amount of money standing to the credit of the account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with the bank; (iv) the payee or the holder in due course of the cheque makes a demand for the payment of the said amount of money by giving a notice in writing, to the drawer of the cheque, within 15 days of the receipt of information by him from the bank regarding the return of the cheque as unpaid; (v) the drawer of such cheque fails to make payment of the said amount of money to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of its affairs and who guide the actions of that Company and that if such juristic entity is guilty, those who were so responsible for its affairs and who guided actions of such juristic entity must be held responsible and ought to be proceeded against. S.141 again does not lay down any requirement that in such eventuality the directors must individually be issued separate notices under S.138. The persons who are in charge of the affairs of the Company and running its affairs must naturally be aware of the notice of demand under S.138 of the Act issued to such Company. It is precisely for this reason that no notice is additionally contemplated to be given to such directors. The opportunity to the drawer Company is considered good enough for those who are in charge of the affairs of such Company. If it is their case that the offence was committed without their knowledge or that they had exercised due diligence to prevent such commission, it would be a matter of defence to be considered at the appropriate stage in the trial and certainly not at the stage of notice under S.138. S.138 of the Act does not admit of any necessity or scope for reading into it the requirement that the dire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under Section 142 that the provisions dealing with taking cognizance contained in the CrPC should give way to the procedure prescribed under Section 142. Hence the opening of non-obstante clause under Section 142. It must also be remembered that Section 142 does not either contemplate a report to the police or authorise the Court taking cognizance to direct the police to investigate into the complaint. 14. In Himanshu v. B.Shivamurthy and Another [2019 (1) KHC 540] relied on, it was held that in the absence of a company being arraigned as an accused, complaint against Director is not maintainable. The dictum reads: The provisions of S.141 postulate that if the person committing an offence under S.138 is a company, every person, who at the time when the offence was committed was in charge of or was responsible to the company for the conduct of the business of the company as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished. In the absence of the company being arraigned as an accused, a complaint against the appellant was therefore not maintainable. The appellant had signed the cheque as a Director of the company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndatory that statutory demand notice under Section 138 is issued to the Company/partnership firm; but additional notice to the Directors/officials of the corporate body is not mandatory. 17. In Dashrath Rupsingh Rathod v. State of Maharashtra [2014 (3) KLT 605 (SC)] relied, the court held: It is axiomatic that when a Court interprets any statutory provision, its opinion must apply to and be determinate in all factual and legal permutations and situations. We think that the dictum in Ishar Alloy is very relevant and conclusive to the discussion in hand. It also justifies emphasis that Ishar Alloy is the only case before us which was decided by a three-Judge Bench and, therefore, was binding on all smaller Benches. We ingeminate that it is the drawee Bank and not the Complainant s Bank which is postulated in the so called second constituent of S.138 of the N.I.Act and it is this postulate that spurs us towards the conclusion that we have arrived at in the present Appeals. There is also a discussion of Harman to reiterate that the offence under S.138 is complete only when the five factors are present. It is our considered view, which we shall expound upon, that the offence in the cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... S.141 of the NI Act is found not maintainable against the company, the Managing Director or other persons working in different categories of the company or the persons who are in charge and responsible to the conduct of the company mentioned under Sub-ss.(1) and (2) of S.141 of the NI Act cannot be prosecuted further and convicted thereunder on that complaint. 21. To summarise, as per the directions issued by the decisions placed by the learned counsel for the petitioner, 5 ingredients are essential and mandatory to be complied with by a person launching a prosecution under Section 142 NI Act alleging commission of an offence punishable under Section 138 NI Act for enabling a court of law to take cognizance on it. When the drawer of the cheque is a company, demand notice as demanded by clause (b) of proviso to Section 138 NI Act must be issued to the company, represented by it s Managing Director. If notice is not issued, the complainant can be taken to have failed to comply with the mandatory requirements under the NI Act, which is very crucial for the prosecution to be successful and fruitful. Company must be arraigned as first accused in the cause title, represented by it s Man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t stated in Annexure A1. That is also an essential mandate required by Section 141 N I Act, having crucial bearing on the sustainability of Annexure A1. As held in the decisions cited supra, a Managing Director who has not been continuing the status as such in the company at the relevant time of the transaction which created the monetary liability forming a legally enforceable debt or liability cannot be alleged as penally responsible for the monetary liability created by the bouncing of the cheque drawn and given towards discharge of the liability. 22. The discussion made hereinabove, constrains this Court to hold that Annexure A1 complaint is not maintainable. The court below ought not to have taken cognizance on Annexure A1 and registered S.T.No.986/2017 on it s file and to proceed with it when ingredients relevant and essential to sustain it were totally lacking. Taking cognizance on Annexure A1 complaint, registration of S.T.No.986/2017 on it s basis on the files of the court below suffers for non-compliance of the mandatory requirements under the N I Act. In the result, Crl.M.C. is allowed and Annexure A1 and registration of ST.No.986/2017 on it s basis, on the files of the c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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