Jain Associates And Ors. vs Deepak Chawdhary & Co.
1999 Latest Caselaw 306 Del

JUDGMENT

S.N. Kapoor, J.

1. This petition is directed against an order dated 17.1.1997 summoning the petitioner firm and its two partners for offence under Section 138 read with Section 141 of Negotiable Insument Act (hereinafter called the Act).

2. The contention of the petitioners herein is that there was no service of notice under Section 138 of the Act on the petitioners Jain Associates, Shri Prahlad Rai Jain and Shri Deepak Kumar Jain. The notice which purports to have been sent under registered envelop returned without any postal remark from Postal authorities. The petitioners rely on L. Mani Vs. Kandan Finance 1996 Company cases 205.

3. On the other hand the contention of the learned counsel for the complainant/respondent is that in addition to the registered envelop the notice was also sent under UPC and Postal receipt of the notice was already there on the record. Accordingly the presumption is that the notice sent under UPC and the registered letter was served on the petitioners. They cleverly avoided the service of notice sent under Registered post and the petitioners had knowledge of notice sent under U.P.C.

4. Having heard both the parties and after going through the record it appears that two points are required to be considered: (i) Whether notice was to be sent to the partnership firm as well as the partners thereof under Section 138 in case a cheque issued on behalf of the partnership is dishonored, and (ii) If the notice is not required to be served on individual partners whether the notice sent at the address of the partnership firm under UPC is sufficient to proceed with the matter for the purpose of summoning the petitioners?

5. Before further proceedings let us see what the complainant claims insofar as the service of the notice is concerned. The complainant discloses in para 7, 8 and 9 as under:-

(7) This notice was sent both under Registered AD cover and under certificate of posting.

(8) The notice which was sent under registered cover was received back in the office of the counsel without any postal remarks. The other which was sent under certificate of posting is not received back.

(9) Subsequently enquiries were conducted at BJ 70, West Shalimar Bagh, Delhi and the complainant came to know that the building, a double storey, is known as "Jain Niwas" and the Accused No. 2 is residing there. He also has a telephone No. 7120133.

(10) Thus the return of the notice sent under registered cover is deliberate and intentional. The accused deliberately evaded receipt of the registered notice. This amounts to his knowledge that such a notice was sent by the complainant and deliberate refusal of the same. That would clearly amount to constructive service of notice. The very purpose of the Act cannot be thwarted by simply refusing the notice.

6. There is no dispute in between the parties that on 28.1.1994 cheque No. 56124 was issued on behalf of the petitioner No. 1 and it was signed by Mr. Prahlad Rai Jain, authorised signatory of the partnership firm. The same was dishonored on 31.1.1994 with an enforsement indicating that the payment was stopped by the drawer. The complainant served the notice as mentioned above. When the payment was not received the complaint was filed and the learned Metropolitan Magistrate on 22.3.1999 passed the impugned order summoning the accused rejecting the contention of the learned counsel for the petitioners.

7. In this case there is no dispute that Petitioner No. 1 is a partnership firm as such a company within the meaning of Clause (a) of Explanation to Section 141 of the Act and petitioner No. 1 and 2 being the partners are directors within Clause (b) of explanation to Section 141 of the Act.

8. Section 138 of the Act refers to dishonour of cheque "either because of the amount of money standing to the credit of that 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 that bank".

9. The Supreme Court in M/s. Electronic Trade and Technology Development Corp. Ltd. Secundrabad. Vs. M/s Indian Technologists and Engineers (Electronics) P. Ltd. & Anr. 1996 JCC 155 has held that once the cheque had been drawn and issued to the payee and presented the cheque and thereafter, if any instructions are issued to the bank for non-payment and the cheque was returned to the payee it amounted to dishonour of the cheque and it came within the meaning of Section 138. The Supreme Court further observed that suppose after the cheque was issued to the payee or to the holder in due course and before it was presented for encashement notice was issued to him not to present the same for encashment and yet the payee or the holder in due course presented the cheque to the bank for payment and when it was returned on instructions, Section 138 did not get attracted. Here in the case in hand it is not the case of the petitioners that any such notice was issued to the complainant not to present the cheque. It is not the case of the petitioner that the cheque was not presented within six months from the date on which it was drawn as required by proviso (a) to Section 138.

Insofar as provisos (b) and (c) of Section 138 are concerned , they being material are being reproduced for ready reference:

Provided that nothing contained in this section shall apply.

(a) xxx xxx xxx

(b) the payee or the holder in due course of the cheque, as the case may be, 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 fifteen days of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and

(c) the drawer of such cheque fails to make the payment of the said amount of money to the payee or as the case may be, to the holder in due course of the cheque within fifteen days of the receipt of the said notice.

10. The notice is required to be given in writing to the drawer of the cheque and within 15 days of the receipt of notice by the payee or the holder in due course of the cheque, the payment is required to be made within fifteen days. The dispute is not about the fact that notice was not given within 15 days. The dispute as mentioned above relates to service of notice on one hand and secondly that no notice was sent to the individual partners. There is again no dispute that the notice was sent by registered post. It was received back without any postal remarks and the other notice sent under UPC has not been received back. The claim of the petitioner is that the notice sent under registered post and has been received back without any postal remark and if notice sent by registered post has been returned without postal remark service of notice sent under Certificate of posting could be manipulated. I think that this Court should not go into these questions and leave the question of actual service or otherwise on the decision of the learned Trial Court. In ordinary course whenever a notice is sent even under certificate of posting it is to be presumed under illustration (b) Section 114 of the Evidence Act that the common course of business has been followed and accordingly such a notice has been duly served in due course unless and until it is proved that the postal communication was disrupted in any manner. This is a question which is to be left for decision of the learned Trial Court after recording evidence in these proceedings.

11. However, the learned counsel relies upon L. Mani Vs. Kandan Finance 1996 Company cases 205. Madras High Court took the view that Section 138(c) did not contemplate constructive notice. The phrase "receipt of the said notice" unambiguously pointed to actual receipt of notice was also the view of the Madras High Court. Where the registered notice was returned with an endorcement "addressee not found", it could not be stated that there could have been any sort of wilful evasion of such notice. It is submitted that in this case even this remark is not there on the envelop received back and therefore there was no service of the alleged notice.

12. On the other hand the learned counsel for the respondent relies upon Pawan Kumar Vs. Shakuntala 1998 3 RCR (Criminal) 533. Rajasthan High Court on the authority of M/s. Madan & Co. Vs. V. Wazir Jaivir Chand AIR 1969 SC 631 took the view that notice as required under Section 138(b) sent to accused through registered cover at correct residential address if received back with postal endorsement was "Not found", it could only be attributed to addressee's own conduct. In such circumstances, if the Court took cognizance it was validly taken for in similar circumstances the learned Rajasthan High Court dismissed the similar petition, is the submission of learned counsel for the respondent.

13. It may be mentioned that in M/s. Madan & Co. Vs. Wazir Jaivir Chand AIR 1969 SC 632 relied upon by Rajasthan High Court analogous provision under the Rent Control Act came to be considered by the Supreme Court. The phrase considered was if, notwithstanding the receipt of notice under proviso to C1. (i) of the proviso to sub sec. (i) of S. 11 he makes a default in the payment of rent referred to in C1. (i) of the proviso to sub-sec. (i) of S. 11 on three occasions within a period of eighteen months."

14. There cannot be any dispute that provisions of a criminal enactment has to be strictly interpreted. The question would therefore be: whether the observation of the Supreme Court in M/s. Madan & Co. Vs. Wazir Jaivir Chand shall be helpful in this case or not. In this regard one has to take note of the following observations of the Supreme Court in M/s. Electronics Trade And Technology Development Corporation Ltd. Secundrabad Vs. M/s. Indian Technologists and Engineers (Electronics) P. Ltd. and Anr. 1996 JCC 155 (Supra):

"Shri Nageshwara Rao, learned counsel appearing for the respondents contended that stoppage of payment due to instructions does not amount to an offense under Section 138 and that, therefore, the ingredients in Section 138 have not been satisfied. We find no force in the contention, the object of bringing of Section 138 on statute appears to be to inculcate faith in the efficacy of banking operations and credibility in transacting business on negotiable instruments. Despite civil remedy, Section 138 intended to prevent dishonesty on the part of the drawer of negotiable insument to draw a cheque without sufficient funds in his account maintained by him in a bank; and induces the payee holder in due course to act upon it. Section 138 draws presumption that one commits the offence if he issues the cheque dishonestly. It is seen that once the cheque has been drawn and issued to the payee and the payee has presented the cheque and thereafter, if any instructions are issued to the Bank for non-payment and the cheque is returned to the payee with such an endorsement, it amounts to dishonour of cheque and it comes within the meaning of Section 138."

Thus it is apparent that Section 138 of the Act has to be interpreted from the point of view of the efficacy of banking operations and credibility in transacting business on negotiable instruments, in a business like manner and not in a pedantic manner, to defeat the very purpose and objects of the Act. Consequently one has to accept the view taken by the Rajasthan High Court in preference to Madras High Court.

15. As regards the requirement of service of notice on all the partners i.e. petitioners No. 2 and 3 is concerned the notice was to be served "on the drawer of the cheque". In the present case, the drawer is a partnership firm acting through one of its partner. Section 141 of the Act is a deeming provision holding every person who was incharge of and was reasonable to the company for the conduct of the business of the company or partnership firm as well as the firm shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly. Section 141 does not require that each and every partner of the firm is required to be issued notice. The above said deeming provision imposing vicarious liability is to be seen in the right of the observations of the Supreme Court in M/s. Electronics Trade and Technological Development Corp. Ltd.

Secundrabad Vs. M/s. Indian Technologist and Engineers 1996 JCC 155 supra. Accordingly on the basis of the language of clause (b) of proviso to Section 138, one finds it difficult to accept that each and every partner or Director is required to be served with a notice. It may also be mentioned that in Smt. Renu Vohra & Anr. Vs. Shreyans Paper Mills Ltd. & Ors. 1993 (2) Crimes 1145 this High Court has taken the view that on receipt of notice by one partner habitually acting for the business of the firm is operates as notice on the firm and the firm or any of its partners cannot set up ignorance of notice as a defense, meaning thereby that service of notice on firm sufficient. Similar view was taken by Andhra Pradesh High Court in Suraj Theater Vs. Kakarla Bhora the 1998 Crl. L. J. 43; and by Karnataka High Court in P. A. Verghese Vs. Competion Business Associates P. Ltd. IV (1997) CCR 181 by necessary implication. In Anita Vs. Anil K. Mehta & Ors. 1996 (1) Crime 412 Punjab and Haryana High Court has specifically observed that Section 138 of the Act does not require that said notice must be sent to each of the partners. Kerala High Court in S.S. Shree kumar Vs. M.M. Ibrahim 1998 Cr. L. J. 2492 has gone to the extent that a notice issued in the name of sole proprietary firm M.M. Ibrahim and Company, served on the drawer of the cheque M.M. Ibrahim was sufficient and acquittal of accused on the ground that there was no proper service of notice was held improper; the acquittal was set aside and the matter was remanded back to the Magistrate for fresh disposal.

16. Insofar as proceedings with the matter against the two partners Prahlad Kr. Jain and Deepak Chaudhry is concerned the assertions in complaint in para 2 and 3 are as under:

"(2) That the accused No. 1 is a partnership firm and accused No. 2 and 3 are its partners. Both are responsible for the conduct of the business of the accused No. 1 firm. The accused No. 2 Prahlad Rai Jain is also an authorised signatory who has issued the cheque in question.

(3) That the accused No.1 firm is carrying on business in the purchase and sale of shares, debentures, bonds and other securities. The accused No. 2 is also a member of the Delhi Stock Exchange Association Ltd."

These assertions indicate that prima facie both the accused have been partners of the partnership firm and are responsible for the conduct of the business of the accused firm. Prahlad Rai Jain, petitioner No. 2 is a authorised signatory as well. So far as the petitioner No. 3 is concerned it also appears that petitioner No.1 and 2 are members of Delhi Stock Exchange Association Ltd. and both are acting partners in the business run in the name of firm petitioner No. 1. Consequently the provisions of Section 141 of Act are attracted.

17. On the material before the learned Trial Court and the allegations made in the complaint, it cannot be said that the complaint did not disclose the essential ingredients of the offence and if the assertions made are prima facie accepted, it cannot be said that no case was made out.

18. For the aforesaid reasons, it does not appear that the learned Metropolitan Magistrate has committed any error, in so far as the summoning of the petitioners are concerned. Accordingly there is no force in this petition. the petition is dismissed accordingly.