Dismissed

Imperial Techsol Priavate Limited and Ors. v. the State of Maharashtra and Anr.

Bombay HC1 Aug 2022WP/1447/2021

Case brief

AI extract

What is this about?

A criminal writ petition challenging the issuance of process under Section 138 of the Negotiable Instruments Act. The petitioners alleged the demand notice was incorrectly addressed to the Board of Directors instead of the company drawer. The High Court held that notice served to the Board of Directors constitutes valid service on the company, allowing the proceedings to continue.

What did the court decide?

None. The petition for quashing the order of issuance of process is rejected; proceedings against the petitioners continue.

Imperial Techsol Priavate Limited and Ors. Vs the State of… — Cheque Dishonour | Bombay HC (2022)

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IN THE HIGH COURT OF JUDICATURE AT BOMBAY CRIMINAL APPELLATE JURISDICTION

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CRIMINAL WRIT PETITION NO.1447 OF 2021

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1. Imperial Techsol Pvt.Ltd.
Office at H.No.603, Near Air Force Camp,
Rajokari, New Delhi-110 038.
2. Rakesh Kumr Singh, 37 years,
R/o.Plot No8, Flat No.18,
R.P.Block-A, Ali Vihar Sarita Vihar,
Delhi-110 076.
3. Rashmi Singh, Age 42 years,
B-503, Plot No.9, Door Darshan
Apartment, Sector-45, Kanahi (73),
Gurgaon-122 003.
4. Dinesh Kumar, Age 46 years,
R/o.D-1/903, Summer Palm, Sector-86,
Sector-16, Faridabad-121002.Petitioners

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versus

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1. The State of Maharashtra.
2. Xtreme Media Pvt.Ltd.
Office at 8/33, Meghchhaya Shrisai Baba Road,
Lalbaug, Mumbai-400 012.Respondents

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Mr.Yashpal M. Thakur, Advocate for Petitioners.
Mr.Siddharth Murarka with Mr.Devendra Tiwari i/by Law Chamber
of Siddharth Murarka, Advocate for Respondent no.2.
Mr.A.D.Kamkhedkar, APP, for State.
Mr.Shailendra Jagdale, API, BKC Police Station, present.

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CORAM :PRAKASH D. NAIK, J.

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DATE :1st August 2022

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PC :

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MANISH Digitally signed by MANISH SURESH SURESH THATTE Date: 2023.05.17 THATTE 09:37:55 +0530

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1.The Petitioners are challenging the order dated 10th April 2019
passed by learned Metropolitan Magistrate, 6th Court, Mazgaon,
Sewree, Mumbai, issuing process against accused/Petitioners under

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Section 138 r/w 141 of Negotiable Instruments Act (N.I.Act).

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2. The brief facts of complaint are as follows :-

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(i)Respondent no.2 is the Private Limited Company
engaged in the business of manufacture and sale of LED Displays and
Digital Signage solutions. The accused no.1 company is a company
engaged in the business of providing integrated solutions with
respect to LED video wall, LED display, LED display screen, LCD
video wall, large format displays, digital signage, Signage media
player, Signage software solution etc. Accused no.2 to 4 being
directors were and are the persons in-charge of and responsible for
the conduct of the business of accused no.1 when the offence was
committed. Both the cheques which are subject matter of the
complaint have been signed by one person as authorized signatory of
accused no.1. The accused no.2, 3 and 4 are also liable to be
prosecuted being the Directors of accused no.1 who have been under
the law, entrusted by the management of accused no.1. Hence they
are directly liable for dishonour of the said two cheques. All the
accused neglected and failed to comply with the requisitions made in
the demand notice issued under the provisions of Section 138(c) of
the Negotiable Instruments Act, within the stipulated period. The
accused are therefore liable to be proceeded against;

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(ii)The accused no.1 referred to as the purchasers in
purchase order No.PO/DEL/18-19/15 voucher No.PO/DEL/18-19/
15, dated 6th June 2018 and purchase order No.PO/DEL/18-19/15,
voucher No.PO/DEL/18-19/16, dated 6th June 2018 placed on the
complainant company as suppliers for providing P3 indoor LED on
the terms and conditions mentioned therein;

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(iii)The accused company was required to make payment of
Rs.22,24,980/- and Rs.26,48,115/- within 30 days of delivery Two
post dated cheques were handed over to the complainant company
by the accused no.1 vide cheque no.000531 dated 15th October 2018
for Rs.26,48,115/- and cheque no.000532 dated 15th October 2018
for Rs.22,24,980/- in favour of the complainant company;

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(iv)The complainant presented the above cheques with its
bankers. The cheques were returned vide memos dated 15th January
2019 with remarks `payment stopped by the drawer’;

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(v)On 22nd January 2019 the complainant company
through its advocate sent a demand notice under Section 138, 141 of
Negotiable Instruments Act to accused calling upon them to pay the
aggregate amount of Rs.48,73,095/-;

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(vi)Demand notice was sent to the accused at the registered
office of accused no.1. It was received by accused no.1 on 28th
January 2018. Demand notice was replied by the advocate of
accused no.1 vide their letter dated 13th February 2019. Complaint
was filed on 11th March 2019.

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3.Learned Magistrate vide order dated 10th April 2019 issued
process against accused for offence punishable u/s.138 u/s.141 of
N.I.Act.

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4.Learned advocate for Petitioners submitted that statutory
demand notice is not issued to the drawer of cheque i.e. Petitioner
no.1 and therefore the order of issuance of process passed by learned
Magistrate is without application of mind. The complaint u/s.138 of
N.I.Act can be initiated only if the statutory demand notice issued to
the drawer of the cheque and the drawer fails to make the payment

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of the amount demanded. The statutory demand notice has been
sent only to the Board of Directors of Petitioner no.1. In the absence
of such demand notice the learned Magistrate ought not to have
issued process against petitioner no.1. In order to make the
petitioner no.2 to 4 vicariously liable for the alleged offence, it is
necessary that the demand notice is issued to the petitioner no.1
which is the drawer of the cheques. Since no demand notice is
issued to the petitioner no.1, the petitioner no.2 to 4 cannot be made
vicariously liable and therefore the process ought not to have been
issued. Learned Magistrate failed to consider that the statutory
demand notice dated 22nd January 2019 was sent to `The Board of
Directors, Imperial Techsol Private Limited’. However, the same is
not issued to the drawer of the cheque who is `Imperial Techsol
Pvt.Ltd.’. Therefore, in absence of compliance of clause (b) of
Section 138 of N.I.Act, the present proceedings cannot be proceeded
against the petitioner. To attract the offence and penalty under
Section 138 clause (b) of N.I.Act, it is imperative on the part of payee
or holder in due course of the cheque to make a demand for payment
of said amount of the cheque by giving notice in writing and the said
demand has to be raised on the drawer of the cheque. The statutory
notice is not issued to the drawer of the cheque. Service of notice of
demand as per clause (b) of Section 138 of N.I.Act is a condition
precedent for filing a complaint. Though the matter has reached at
the stage of evidence, this Court in exercise of its inherent powers
can quash the proceedings as prima facie there is non-compliance of
the statutory provisions contemplated under Section 138 of N.I.Act.

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5. Learned advocate for Petitioners has relied upon decision in the case of Krishna Texport and Capital Markets Ltd. Vs. Ila A.

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Agrawal and others (AIR-2015-SC-2091), Shehzad V.Merchant Vs.
Saiyed Ghulam Abbas Zaidi and others 2019-ALL MR (Cri)-5001 and
Pradeep Khetshi Shah Vs. State of Maharashtra and others 2019-ALL
MR (Cri)-1281.

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6.Learned advocate for Respondent no.2 submitted that there is
no illegality in the order issuing process. Notice was issued to Board
of Directors. Notice was received by Petitioner no.1. Reply was
forwarded on behalf of Petitioner no.1. The object of issuing notice
contemplated u/s.138 of N.I.Act is to intimate the drawer of cheque
about dishonour of the cheque and to give him an opportunity to
repay the amount of cheque which has been dishonoured. The
object of said provision has been fulfilled as the complainant through
its reply has denied the liability. The affidavit of evidence of
complainant is filed. At this stage this Court may not entertain this
petition for quashing the proceedings. As per Section 138 of N.I.Act
the payee/holder of the cheque has to make a demand for the
payment of the said cheque of the money by giving notice in writing
to the drawer of the cheque. It nowhere states that the notice must
be strictly addressed to the drawer of the cheque. Thus, the
requirement is giving a notice under Section 138 of the N.I.Act to the
drawer. When the notice is addressed to the Board of Directors of
the company and the same is acknowledged and replied on behalf of
the company through the advocate, it is deemed that the notice is
served to the company. The notice was replied by company and thus
it is admitted to have been served upon the company. The company
has denied the liability.

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7. Reliance is placed on following decisions :

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(i) Maxworth Realty India Ltd. Vs. M.K.Veerendra Basu (2019)-SCC OnLine-Kar-1652;

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(ii) Bhupesh Rathod Vs. Daya Shankar Prasad Chaurasia Criminal Appeal No.1105 of 2021).

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8.It is necessary to consider that Petitioner no.1 (accused no.1) is
the company, Petitioner nos.2 to 4 are the Directors of Petitioner
no.1/accused no.1. Pursuant to dishonour of cheques, demand
notice was sent on 22nd January 2019. Notice was addressed to Board
of Directors of Imperial Techsol Pvt.Ltd. The title of notice indicated
that it was notice u/s.138 of N.I.Act, for payment of the amount of
dishonoured cheques. Notice referred to two cheques which are
subject matter of this complaint, issued by accused no.1 and
dishonoured vide return memos dated 15th January 2019. The
addressee was called upon as per Section 138 of N.I.Act to make full
payment of both the cheques aggregating to Rs.48,73,095/- to
complainant within a period of 15 days from the date of notice
failing which the complainant is determined to take appropriate legal
action civil s well as criminal, particularly under Section 138 of the
N.I.Act. Section 420 of IPC and Order XXXVII of CPC. Reply dated
13th February 2019 was sent by accused no.1 Imperial Techsol
Pvt.Ltd. (petitioner no.1) through their advocates. The reply
acknowledges receipt of notice dated 22nd January 2019 written by
complainant company. It is also evident from contents of reply that it
was sent on behalf of accused no.1. Thus, notice which was sent at
the address of accused no.1 company is admitted to have been
served upon the accused no.1 company. In reply the petitioner no.1
has denied each and every singular averments made in the notice. It
was stated that P3 indoor Led Video walls for Cinepolls project

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supplied by complainant were not as per the schedule and as per
terms of agreement which has caused loss to accused no.1. Cheques
were presented before the date of expiry of cheques without
completing proper service. The accused no.1 has never committed
penal offence of cheque dishonouring. It is denied that accused is
required to make the payment of Rs.48,73,095/- to complainant.
The complainant was called upon to withdraw the complaint.

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9. Section 138 of N.I.Act reads as follows :

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“138.Dishonour of cheque for insufficiency, etc., of
funds in the account.- Where any cheque drawn by a
person on an account maintained by him with a banker
for payment of any amount of money to another person
from out of that account for the discharge, in whole or
in part, of any debt or other liability, is return by the
bank unpaid, 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, such person shall be deemed to
have committed an offence and shall, without prejudice
to any other provision of this Act, be punished with
imprisonment for a term which may be extended to two
years, or with fine which may extend to twice the
amount of the cheque, or with both;

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Provided that nothing contained in this section shall
apply unless-

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(a)the cheque has been presented to the bank within
a period of three months from the date on which it is
drawn on within the period of its validity, whichever is
earlier;

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(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
thirty days of the receipt of information by him from the
bank regarding the return of the cheques as unpaid;
and

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(c) the drawer of such cheque fails to make the

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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.”

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10.The requirement is giving notice under Section 138 of N.I.Act
to the drawer. The accused no.1/petitioner no.1 is the drawer of the
cheque. When the notice is addressed to the Board of Directors of
accused company and the same is acknowledged and replied by
company, it is deemed that the notice is served to the company. It is
not the case of petitioners that the petitioner no.2 to 4 i.e. Directors
are not liable or the cheque is not issued by drawer i.e. petitioner
no.1.

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11.In Krishna Texport and Capital Markets Ltd Vs. Ila Agrawal and
Others (supra), the contention of appellant before the Apex Court
was that it was not necessary to serve individual notice upon the
directors and it was insufficient if the notice was served on the
company Thus, the question before the Court was whether notice u/
s.138 of the Act is mandatorily required to be sent to the directors of
a company before a complaint could be filed against such directors
along with the company. It is held that according to Section 138,
where any cheque drawn by a person on an account maintained by
him is returned by the bank unpaid for reasons mentioned in said
section, such person shall be deemed to have committed an offence.
The proviso to the section stipulates three conditions on the
satisfaction of which the offence is said to be completed. The proviso
inter alia obliges the payee to make a demand for the payment of
said amount of money by giving a notice in writing to the drawer of
the cheque and if the drawer fails to make the payment of the said
amount within 15 days of the receipt of said notice, the stages

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stipulated in the proviso stand fulfilled. The notice u/s.138 is
required to be given to the drawer of the cheque so as to give the
drawer an opportunity to make the payment and escape the penal
consequences. No other person is contemplated by Section 138 as
being entitled to be issued such notice. The plain language of
Section 138 is very clear and leaves no room for nay doubt or
ambiguity. There is nothing in Section 138 which may even remotely
suggest issuance of notice to anyone other than the drawer. No
notice is additionally contemplated to be given to directors. If the
requirement that such individual notices to the directors must
additionally be given is read in to the concerned provisions, it will
not only be against the plain meaning an construction of the
provision but will make the remedy under Section 138 wholly
cumbersome.

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12.The aforesaid decision dealt with question whether individual
notices are required to be given to directors of company and it is held
that notice has to be given to drawer of the cheque. It is pertinent to
note that in the aforesaid decision it is observed that notice u/s.138
is required to be given to the drawer of the cheque so as to give the
drawer an opportunity to make the payment and escape the penal
consequences. In the present case, notice was addressed as Board of
Directors of Imperial Techsol Pvt.Ltd and it was received by accused
no.1 company and by submitting reply the liability has been denied.

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13.In the case of Shehzad Valimohammad Merchant Vs. Saiyed
Gulam Abbas Zaidi and others (supra), one of the issue before this
Court was that notice was not addressed to the company which is the
drawer of the cheque. It was observed that the object of issuing
notice is to give a chance to the drawer of the cheque to rectify his

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omissions and also to protect a honest drawer. When a statute
requires a particular thing to be done in a particular manner, then
that must be performed in the same manner and not in any other
manner In absence of a notice being issued to the company, which is
the drawer of the cheque in question, the invocation of proceedings
u/s. 138 of the N.I.Act must necessarily fail in the absence of
statutory compliance of sub-clause (b) of the Section 138.

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14.There cannot be any debate about the ratio of the decision that
notice is required to be given to the drawer of the cheque. However,
for the observations made hereinabove about the complaint under
challenge before this Court, this decision is of no assistance to the
petitioners.

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15.In Pradeep Khetshi Shah Vs. State of Maharashtra and others
(supra), this Court has dealt with objection by complainant about
maintainability of the petition since plea of the accused was
recorded. Reliance was placed on decision of Apex Court in the case
of Subramanium Pethuraman Vs. State of Maharashtra and another
(2004)13-SCC-324. In the present case, it is urged by learned
advocate for complainant that plea has been recorded by Trial Court
and the petition should not be entertained. In the aforesaid decision
this Court has considered various decisions and it is held that even if
plea is recorded in the proceedings, it cannot be said that application
u/s.482 of Cr.P.C is not maintainable. The present petition is
adjudicated on merits.

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16.In the case of Maxworth Realty India Ltd. Vs. M.K.Veerandra
Babu (supra), the High Court of Karnataka has dealt with the
submission that no notice was served on accused no.1 company.

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Notice has been served on accused no.2 who was Managing Director
of accused no.1. Reliance was placed on decision of Supreme Court
in the case of Himanshu Vs. B.Shivamurthy (2019)3-SCC-797. It is
observed that the reason for creating vicarious liability is plainly that
a juristic entity i.e. a company would be run by living persons who
are in charge of its affairs and who guide the actions of that company
and if such juristic entity is guilty, ultimately it is the persons who are
responsible for its affairs and they must be held responsible and
convicted. The Chairman or Managing Director of a company will be
having knowledge of a company. The accused no.2 is Managing
Director of accused no.1. When the statutory notice is issued to the
Chairman or Managing Director of the company and when the
company and Managing Director are the person who are at the helms
of affairs of the company, the company is vicariously liable. The
court rejected the submission that in the absence of notice to
company, there was no cause of action to initiate proceedings.

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17.In the case of Bilakchand Gyanchand Co. Vs. A.Chinnaswami
(1999)5-SCC-693, the notice was issued to the Managing Director of
the company who had signed the cheques. It was held that there
was no infirmity in the notice and High Court was not justified in
quashing the complaint on the ground that notice was sent to the
Managing Director at his office address could mean that notice was
sent to the company itself.

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18.In the case of Aneeta Hada Vs. Godfather Travels and Tours
Pvt.Ltd (AIR-2012-SC-2795), the issue was different. It was held
that if the offence was committed by a company, it can be punished
only if the company is prosecuted.

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19.As stated hereinabove, notice was received by accused no.1
company and within stipulated time it was replied by accused no.1
company with a counter that there was no existing liability. In the
circumstances the submission of learned counsel for Petitioners that
proceedings are required to be quashed on the ground of not issuing
notice to the drawer of cheque, cannot be accepted and deserves to
be rejected.

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ORDER

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(i) Criminal Writ Petition No.1447 of 2021 is rejected.

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(PRAKASH D. NAIK, J.)

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MST

Imperial Techsol Priavate Limited and Ors. v. the State of Maharashtra and Anr.

Case brief

What is this about?

What did the court decide?

Imperial Techsol Priavate Limited and Ors. v. the State of Maharashtra and Anr.

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

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