Deciding Authority : Supreme Court of India
Bench: G.B.Pattanaikk, U.C.Banerjee
Date of Judgement : 04/01/2000
Facts : Three cheques had been given to the appellant, drawn on Bank of Baroda, Parliament Street, New Delhi, representing different amounts, amounting to Rs.2,32,600/- in all. These cheques were presented by the appellant for encashment, but the same were returned with the endorsement payment stopped by the drawer. The appellant, therefore, served notices on the respondent, calling upon him to pay the amount of cheques within 15 days of the receipt of the notice. But the respondent failed to pay the amount.
Judgement: Mr. D.A.Dave, the learned senior counsel, appearing for the appellant contended before us that on the self-same ground, the High Court having earlier dismissed the application, filed under Section 482, could not have re-examined the matter when fresh applications were filed under Section 482 and could not have allowed the same. He also further urged that the very construction of the notice and the conclusion of the High court on that score is erroneous and further, the High Court committed error in not following the judgment of this Court in Bilakchand Gyanchand 1999(5) SCC 693.
Mr. G.L. Sanghi, the learned counsel, appearing for the respondent, referred to the evidence of the complainant before issuance of summons and submitted that on the face of the said evidence, the High Court was fully justified in coming to the conclusion that there has been no service of notice to the drawer, which is sine qua non for completion of offence under Section 138 read with Section 141 of the Negotiable Instrument Act , and, therefore, the conclusion of the High Court is unassailable. Mr. Sanghi further urged that the conclusion of the High court to the effect that supply of watches made by the respondent to the company M/s Bhalla Techtran Industries Ltd. and cheques involved in the case were also issued by the said company through its Director that is the petitioner and in view of such admitted facts, the petitioner cannot be proceeded against for the offence under Section 138 of the Act in his individual capacity, is the only conclusion permissible under the facts and circumstances of the case and, therefore, the order quashing the criminal proceedings should not be interfered with. According to Mr. Sanghi, the complainant has been prosecuting the accused Amit Bhalla in his individual capacity, though categorically in the complaint petition, it has been stated that the cheques had been issued by M/s Bhalla Techtran Industries Ltd., through Mr. Amit J. Bhalla as a Director and consequently, so far as the company is concerned, who is the real drawer of the cheque, no notice can be said to have been issued, and, therefore, criminal proceeding has rightly been quashed. Mr. Sanghiurged that the respondent not being the drawer of the cheque, could not have been prosecuted in his individual capacity inasmuch as there is no vicarious liability of a Director in the criminal matters. Mr. Sanghi also contended that the ultimate decision of quashing of criminal proceeding can be supported on the further ground that the complaint is purely one of civil nature and the complainant has abused the process of law by initiating criminal prosecution as an arm- twisting device and in this view of the matter, the case does not warrant interference by this Court in exercise of jurisdiction under Article 136 of the Constitution. Mr. Sanghi also urged that in course of the proceedings, the entire amount involved in the three cheques having been deposited, the criminal proceedings should not be allowed to be continued and the order, quashing the criminal proceedings should not be interfered with.
Having regard to the contentions raised by the counsels for the parties, two questions arise for consideration:
(1) Was the High Court justified in coming to the conclusion that the drawer has not been duly served with notice for payment?
(2) Whether deposit of the entire amount covered by three cheques, while the matter is pending in this Court, would make any difference?
So far as the first question is concerned, it is no doubt true that all the three requirements under clauses (a), (b) and (c) must be complied with before the offence under Section 138 of the Negotiable Instruments Act, can be said to have been committed and Section 141 indicates as to who would be the persons, liable in the event the offence is committed by a company. The High Court itself on facts, has recorded the findings that conditions (a) and (b) under Section 138 having been duly complied with and, therefore, the only question is whether the conclusion of the High Court that condition (c) has not been complied with, can be said to be in accordance with law. Mere dishonour of a cheque would not raise to a cause of action unless the payee makes a demand in writing to the drawer of the cheque for the payment and the drawer fails to make the payment of the said amount of money to the payee.
“The cheques had been issued by M/s Bhalla Techtran Industries Limited, through its Director Shri Amit Bhalla. The appellant had issued notice to said Shri Amti J. Bhalla, Director of M/s Bhalla Techtran Industries Limited. Notwithstanding the service of the notice, the amount in question was not paid. The object of issuing notice indicating the factum of dishonour of the cheques is to give an opportunity to the drawer to make payment within 15 days, so that it will not be necessary for the payee to proceed against in any criminal action, even though the bank dishonoured the cheques. It is Amit Bhalla, who had signed the cheques as the Director of M/s Bhalla Techtran Industries Ltd. When the notice was issued to said Shri Amit Bhalla, Director of M/s Bhalla Techtran Industries Ltd., it was incumbent upon Shri Bhalla to see that the payments are made within the stipulated period of 15 days. It is not disputed that Shri Bhalla has not signed the cheques, nor is it disputed that Shri Bhalla was not the Director of the company. Bearing in mind the object of issuance of such notice, it must be held that the notices cannot be construed in a narrow technical way without examining the substance of the matter. We really fail to understand as to why the judgment of this court in Bilakchand Gyanchand Co.,1999(5) SCC 693, will have no application. In that case also criminal proceedings had been initiated against A. Chinnaswami, who was the Managing Director of the company and the cheques in question had been signed by him. In the aforesaid premises, we have no hesitation to come to the conclusion that the High Court committed error in recording a finding that there was no notice to the drawer of the cheque, as required under Section 138 of the Negotiable Instruments Act. In our opinion, after the cheques were dishonoured by the bank the payee had served due notice and yet there was failure on the part of the accused to pay the money, who had signed the cheques, as the Director of the company”.
Held: The appeals is thus allowed.
By Tejasv Anand , IV th Year , Amity Law School , Delhi .
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