A.K. Goenka vs State And Anr.
2000 Latest Caselaw 826 Del

JUDGMENT

R.S. Sodhi J.

1. Admit.

2. This petition is directed against the order of the learned Metropolitan Magistrate, dated May 29, 2000, whereby the learned Metropolitan Magistrate, upon an application moved by the petitioner herein refused to drop proceedings initiated against him by his earlier order summoning' him to face trial upon a complaint made by the respondent.

3. Heard learned counsel for the parties.

4. It is the case of the petitioner that he was not given a notice, as required under Section 138(b) of the Negotiable Instruments Act, 1881 (for short "the Act"). Learned counsel for the petitioner further submits that the petitioner was not the person in charge of the affairs of the company at the time when the offence was committed. This, learned counsel states on the strength that the petitioner was in custody in Tihar Jail with effect from February 2, 1998, to May 4, 1998. He, therefore, contends that a notice under Section 138(b) of the Act is mandatory upon the director who is being prosecuted for the offence committed by the company under Section 138(a) of the Act. He also submits that only such directors who are in charge of the affairs of the company at the time the offence under Section 138 of the Act is committed can be prosecuted. It is further submitted that since the petitioner was in custody in February and May, 1998, when the offence was allegedly committed, the petitioner was not in charge of conduct of business of the company at that time, therefore, could not be prosecuted under the deeming provision in Section 141 of the Act.

5. On the other hand, learned counsel for the respondent has contended that after an offence is completed under Section 138 of the Act, only then does the deeming provision in Section 141 of the Act come into play, which makes the directors/officials, who are in charge of the affairs of the company, liable. Therefore, notice which has already been served on the company under Section 138 of the Act is deemed to have been served on the directors of the company. It is open to a person who would be prosecuted with the aid of the deeming provision under Section 141 of the Act to take up defense that he is not in charge of affairs of the company, this can be taken at an appropriate stage which is after answering summons and joining proceedings in accordance with law. Therefore, according to learned counsel, non-service of notice individually on directors is not essential and defense can only be taken at the appropriate stage of proceedings.

6. I am of the view that the necessary ingredients of the offence under Section 138 of the Act have been set out by the Suprem'e Court in Kusum Ingots and Alloys Ltd. v. Penner Peterson Securities Ltd. [2000] 100 Comp Cas 755 (SC) ; [20001 2 Scale 80, as follows (p. 762) :

"On a reading of the provision of Section 138 of the Negotiable Instruments 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 of 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 cheques as unpaid ;

(v) the drawer of such cheque fails to make payment of the said amount of money to the payee or the holder in due course of the cheque within 15 days of the receipt of the said notice."

7. The offence committed by a company is dealt with in Section 141 of the Act making persons who are in charge of the company as being deemed to be guilty of the offence committed by the company under Section 158 of the Act.

8. In my view it is not necessary to issue notice to directors of the company under Section 138 of the Act. Once the offence under Section 138 of the Act is complete, the law makes them responsible for the conduct of the business of the company and liable under a deeming provision. Therefore, notice also is deemed to have been served on the officials of the company when the company is served under Section 138 of the Act. Once an offence is complete under Section 138 of the Act, by the company, its official, as mentioned under Section 141 of the Act, become personally liable to be prosecuted. It is not for the complainant to research the working of the company before he exercises his right of moving the court under the Act. If the legislative intent was otherwise, the provision would state so. It is not for the courts to introduce their philosophy to change legislative intent.

9. As regards the defense provided to the directors/officials of the company, it would always be open to them during the proceedings of the trial to show that they were not in charge of conduct of business of the company or they can prove that the offence was committed without their knowledge or that due diligence was taken to prevent such offence and/or any other defense available at law. Challenge before the High Court in the first instance when merely summons has been issued in an abuse of proc ess, directors of the company are not above the law nor can it be urged that they would be humiliated by appearing before the magistrate. The majesty of law lies in the dignity of its magistracy and none can claim immunity.

10. In this backdrop, I dismiss Criminal Miscellaneous (Main) No- 2128 of 2000.