2025 (5) TMI 1521 - HC - Indian Laws

Dishonour of Cheque - no proper Legal Notice of Demand has been served on the Petitioners - Cheque in question being a Blank Security Cheque issued in 2009 - Validity of Legal Notice Dated 15.03.2016 - Legal Liability of Petitioner No. 3. No proper Legal Notice of Demand has been served on the Petitioners - HELD THAT - The law pertaining to the service of notice is clearly established. It is mandatory that the notice be served to the drawer of the cheque in order for the drawer to properly address the dishonour and if the dishonour is accidental or unintentional then the drawer may make the requisite payment within stipulated time and avoid prosecution for the offence under S.138 N.I. Act. Pertinently the Notice was not served upon the Partnership Firm but only on the two partners. It is pertinent to note that both Mr. Ravi Kumar and Ms. Arun Chitra had been issued Notice as partners of M/s Surya Polymers. The reference is also to the impugned cheque dated 27.02.2016 which was issued for and on behalf of M/s Surya Polymers and signed by the Petitioner Mr. Ravi Kumar as the authorised signatory. It is no doubt correct that the partner of the Firm would not be liable under Section 138 NI Act without the partnership Firm being arraigned an accused the partners cannot be made vicariously liable for the alleged commission of offence as held by the Apex Court in the case of Aneeta Hada vs. Godfather Travels and Tours Pvt. Ltd. 2012 (5) TMI 83 - SUPREME COURT and Himanshu vs B. Shivmurthy 2019 (3) TMI 294 - SUPREME COURT but in the present case though the Notice may not be happily worded but Mr. Ravi Kumar and Ms. Arun Chitra were issued Notice only as partners of M/s Surya Polymers. To say that there was no Notice given to the partnership Firm would be a hyper technical view and is not tenable. It cannot be said that the Notice technically was not served on the Firm but it is in fact the Firm which had been served through two partners. Also it cannot be overlooked that the Partnership Firm has been arrayed as Accused No.1. Cheque in question being a Blank Security Cheque issued in 2009 - HELD THAT - In the present case there is a clear statement that aside from the outstanding amount there was also VAT tax liability on account of non-submission of C Forms by the Petitioners payable by the Complainant - The case of the parties is that the business transactions between the parties came to an end in the year 2012 and therefore whatever was the outstanding liabilities got crystallised and became payable. The security cheques are intended for this very purpose to satisfy any outstanding amounts which are not paid by the Petitioners. Therefore though initially these Cheques may have been given towards security but were validly utilised towards the amounts that were outstanding from the Petitioners according to the Complainant. Section 18 N.I Act provides such blank signed cheques as being valid instruments for discharge of a debt - The Apex Court recently in Bir Singh v. Mukesh Kumar 2019 (2) TMI 547 - SUPREME COURT held that when a signed blank cheque is voluntarily given to a payee towards some payment the payee may fill up the amount and other particulars and that will not invalidate the cheque. - the plea of the Petitioners that it was a blank signed security cheque which was misused is clearly not tenable. Validity of Legal Notice Dated 15.03.2016 - HELD THAT - From the correspondence between the Parties it is prima facie established that there was an outstanding legally enforceable liability on account of dues and non-submission of C-Forms by the Petitioner resulting in tax liability on the Complainant. It is quite evident that the cheque amount prima facie pertains to outstanding legally enforceable liability - Now it is a matter of trial if there existed such liability and it cannot be considered at this stage of summoning. Legal Liability of Petitioner No. 3 - it is contended that Petitioner No. 3 wife of Petitioner No. 2 had no role in the day-to-day affairs of the Firm and thus cannot be held liable for the acts of the Firm - HELD THAT - It is not disputed that the Partner/Director of the concerned Firm/Company cannot be prosecuted unless they had specific role in the commission of the offence. However it is pertinent to note that the Legal Notices sent by the Complainant were addressed to both the Petitioners. The Replies to the same were given on behalf of both the Petitioners wherein it was not asserted that Petitioner No. 3/Ms. Arun Chitra was not involved in the day-to-day affairs of the Firm. Pertinently this Firm has two Partners and merely on the basis of bald assertions that she had no role in the affairs of the Firm cannot discharged at the stage of summoning. It is a defence that the Accused is entitled to prove during the Trial - Therefore the plea of Petitioner No. 3 that she had no role in the day-to-day affairs of the Firm is clearly not tenable. Conclusion - It is held that the Petitioners have been rightly summoned vide Order Dated 07.11.2016 and there is no ground for quashing the Complaint under Section 138 read with Section 142 of N.I. Act cannot be quashed. Petition dismissed.

Summary

The core legal questions considered in this judgment include: whether the criminal complaint under Section 138 read with Section 142 of the Negotiable Instruments Act, 1881 (NI Act) is maintainable; whether the legal notice demanding payment was validly served upon the drawer of the cheque; the nature and validity of the cheque in question as a blank security cheque issued in 2009; the validity of the legal notice dated 15.03.2016 in light of discrepancies in the claimed amounts; the liability of the third petitioner, a partner in the firm, who allegedly had no role in the day-to-day affairs; and whether the entire proceedings amount to an abuse of process warranting quashing of the complaint.

Regarding the maintainability of the complaint and service of the legal notice, the legal framework mandates that a written demand notice must be served on the drawer of the cheque within 15 days of receiving information of dishonour from the bank, as per Section 138(b) NI Act. The petitioners contended that no such notice was served on the partnership firm (the drawer), only on two partners individually, thus invalidating the complaint. The Court examined precedents including the Supreme Court's rulings in Kirshna Texport and Capital Market Ltd. and others, which emphasize the necessity of giving the drawer an opportunity to make payment and avoid penal consequences. However, the Court held that the notice served on the partners as representatives of the partnership firm effectively constituted notice to the firm itself. The Court rejected the hyper-technical argument that the firm was not served, noting the firm was also arraigned as accused and the partners were addressed as such in the notice. Thus, the Court found no merit in the contention that the complaint was void for lack of proper notice.

On the issue of the cheque being a blank security cheque issued in 2009, the petitioners argued that the cheque in question and another were given as security cheques at the inception of business relations and were blank and undated, with no amount mentioned, and that these were misused by the complainant. The Court analyzed the nature of security cheques under the NI Act and relevant case law, including the recent Supreme Court decision in Sripati Singh v. The State of Jharkhand, which clarified that a cheque issued as security is not a worthless instrument but can be presented for payment if the underlying obligation is not fulfilled. The Court noted that the business relations ended in 2012-2013, crystallizing any outstanding liabilities, which the security cheques were intended to satisfy. Further, the Court observed that once a signed blank cheque is voluntarily given, subsequent filling in of amount and date by the payee does not invalidate it, citing Section 18 of the NI Act and Supreme Court rulings such as Bir Singh v. Mukesh Kumar and P.K. Uthuppu v. N.J. Varghese. Therefore, the petitioners' plea that the cheque was a blank security cheque misused by the complainant was held not tenable at the summoning stage.

Concerning the validity of the legal notice dated 15.03.2016, the petitioners pointed to discrepancies between the amount claimed in the first notice dated 21.01.2016 (Rs. 71,061/-) and the cheque amount (Rs. 26,82,324/-) in the subsequent notice. The Court examined correspondence between the parties, including the petitioners' reply dated 22.02.2016, which admitted outstanding liabilities including VAT tax liabilities due to non-submission of 'C' Forms. The Court found that prima facie there existed a legally enforceable liability, and the cheque amount corresponded to this outstanding liability. The Court emphasized that the existence or quantum of liability is a matter for trial and cannot be adjudicated at the stage of summoning.

The liability of the third petitioner, a partner in the firm and spouse of another partner, was challenged on grounds that she had no role in the day-to-day affairs and was not a signatory to the cheque. The Court referred to settled legal principles that partners or directors can only be held liable under Section 138 NI Act if they have control over the business or if the offence is committed with their consent, connivance, or neglect, citing the Supreme Court's decision in Dilip Hariramani v. Bank of Baroda. However, the Court noted that the legal notices were addressed to both partners and replies were filed on behalf of both, without denying her involvement. Mere bald assertions of non-involvement cannot discharge liability at the summoning stage. Hence, the Court held that the plea of non-involvement was not tenable at this stage and the third petitioner could not be discharged without trial.

The petitioners also contended that the proceedings were an abuse of process aimed at harassment, particularly as they resided outside the territorial jurisdiction of the Delhi Court and that mandatory investigation under Section 202 Cr.P.C. was not conducted. The Court did not find sufficient basis to accept this contention, observing that the complaint and summons were in accordance with statutory provisions and jurisdictional requirements.

In conclusion, the Court upheld the summoning order dated 07.11.2016 and dismissed the petition seeking quashing of the complaint. It clarified that the observations made were tentative and not expressions on the merits of the case, leaving the parties free to agitate their rights during trial.

Significant holdings include the Court's rejection of the hyper-technical argument regarding service of legal notice on the partnership firm through its partners, affirming that notice to partners in their representative capacity suffices. The Court emphasized that a blank signed cheque, even if issued as security, is a valid negotiable instrument under the NI Act and can be presented for payment if the underlying liability crystallizes. The Court also reiterated that liability of partners must be established on evidence of their role or control and cannot be presumed merely by partnership status, but mere denial of involvement is insufficient at the summoning stage. The Court's reasoning clarifies the procedural and substantive thresholds for quashing complaints under Section 138 NI Act and reinforces the principle that disputes over existence or quantum of liability are to be decided at trial, not at the stage of summoning.