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KIRSHNA TEXPORT & CAPITAL MARKETS LTD. Versus ILA A. AGRAWAL & ORS.

2015 (6) TMI 344 - SUPREME COURT

Dishonour of cheque - No Separate notices issued to the directors in addition to the company - Held that:- The notice under Section 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 any doubt or ambiguity. There is nothing in Section 1 .....

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PEAL NO.1220 of 2009 - Dated:- 6-5-2015 - Uday Umesh Lalit and Pinaki Chandra Ghose , JJ. Ajit Anekar, Satyajit A. Desai and Ms. Indu Sharma, Advs. for the Appellant Prakash Sinha, Ashok Bhatia, Shekhar Kumar, Aniruddha P. Mayee, Charudatta Mahindrakar, Selvin Raja, Mahaling Pandarge, Nishant Katneswarkar and Ms. Asha Gopalan Nair, Advs. for the Respondent JUDGMENT Uday Umesh Lalit, J. - 1. This appeal by Special Leave is directed against the order dated 6.5.2008 passed by the High Court of Judi .....

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favour of the appellant was returned on 10.9.1996 with endorsement "funds insufficient". The notice therefore called upon the addressee to make the payment of the cheque amount within 15 days of the receipt of such notice. No reply was sent to the aforesaid notice dated 14.9.1996. 3. The appellant thereafter filed Complaint Case No. 243/S/1996 before the Additional Chief Metropolitan Magistrate, 5th Court at Dadar, Mumbai against the Company, Mr. K.J. Bodiwala, the Chairman and Managi .....

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Ms. Ila A. Agrawal and Mr. Prafulla Ranadive, Accused Nos. 6 and 8 respectively in the array of accused. 4. It was submitted by the appellant that separate notices to the directors were additionally issued but at the stage of evidence it turned out that such individual notices to the directors were with respect to dishonour of a different cheque. The facts as found therefore were that no individual notices were given to the directors. The Metropolitan Magistrate by his judgment and order dated .....

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ggrieved filed Criminal Application No. 2174 of 2007 in the High Court seeking leave to prefer appeal against the judgment acquitting respondents 1 and 2. It was submitted that it was not necessary to serve individual notice upon the directors and it was sufficient if the notice was served on the Company. Reliance was placed on the decision of a Single Judge of the Calcutta High Court in the case of Girish Chandra Pandey v. Kanhaiyalal Chandak 1999 ALL MR (CRI) JOURNAL 3, wherein it was held tha .....

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by High Court of Andhra Pradesh in K. Pannir Selvan v. MMTC [2000] Cr. L.J. 1002 and by Delhi High Court in Ranjit Tiwari v. Narender Nayyar [2012] 191 DLT 318. 6. The High Court, relying on the judgment of the Division Bench of Madras High Court B. Raman (supra) observed that it was mandatory to have issued separate notices to the directors. The High Court concluded thus :- "If the legal fiction is created by Section 141 to make directors who are responsible for day to day affairs of the .....

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may also be referred to. Para 2 of said decision sets out that the matter was referred to the Division Bench as a result of divergent views taken by Single Judges of the Court. Paras 25 and 26 of the decision are as under :- "25. Under Section 141(1), the persons in charge of and responsible to the Company shall be deemed to have committed the offence. Under sub-section (2), even the persons, who are not stated to be in charge of and responsible to the Company, can be prosecuted, if it is a .....

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cess of getting back the cheque amount from those persons, who represent the Company, in order to avoid the filing of the Complaint against them. In the said process, he has to necessarily make a demand from those persons, who are part and parcel of the drawer. Only when the process fails, the cause of action, as envisaged in Section 138, would arise against them, to enable the complainant to approach the Court, within the stipulated time. So, the starting of the process is, the service of notic .....

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emand, asking them to pay the amount. Some may reply that they are not in charge of and responsible for the conduct of the business of the Company. Some may reply that they are not connected with the Company in any way and some may rectify the omission, by making efforts to pay the amount to the payee, in the name of the Company, in that event, the complainant may either drop the action of filing the Complainant or, in the event of non-payment of the cheque amount, he may choose the persons, who .....

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(supra). It was submitted that though the issue whether such separate notices are mandatorily required to be given to the Directors had not squarely arisen, paras 10 & 11 of the decision of this Court in N.K. Wahi v Shekhar Singh [2007] 9 SCC 481 did speak of such notices. We quote said paras 10 & 11 :- "10. In order to bring application of Section 138 the complaint must show : 1. That Cheque was issued; 2. The same was presented; 3. It was dishonored on presentation; 4. A notice in .....

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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. At the outset we must consider whether the decision of this Court in N.K. Wahi (supra) had considered and concluded that it is obligatory to issue separate notices to the Directors in addition to the Company, before initiating any proceedings against them. We have perused the decision and find that no such issue had arisen for consideration in tha .....

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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 provisions of this Act, be punished with imprisonment for "a term which may extend to two year", or with fine which may extend to twice the amount of the cheque, or with both : Provided that .....

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bank regarding the return of the cheques 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. Explanation : For the purpose of this section, "debt or other liability" means a legally enforceable debt or other liability. 141. Offences by companies - (1) If the person committing an offence under section 138 i .....

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at he had exercised all due diligence to prevent the commission of such offence. "Provided further that where a person is nominated as a Director of a Company by virtue of his holding any office or employment in the Central Government or State Government or a financial corporation owned or controlled by the Central Government or the State Government, as the case may be, he shall not be liable for prosecution under this Chapter. (2) Notwithstanding anything contained in sub-section (1), wher .....

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quot; means any body corporate and includes a firm or other association of individuals; and (b) "Director", in relating to a firm, means a partner in the firm.' The expression "drawer" used in Section 138 has to be understood in the light of the definition in Section 7 of the Act which is to the following effect :- 'The maker of a bill of exchange or cheque is called the "drawer"; the person thereby directed to pay is called the "drawee."' 10. .....

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rvations have been so frequently cited with approval by courts administering provisions of welfare enactments that they have now attained the status of a classic on the subject and their validity cannot be challenged. However, in applying these observations to the provisions of any statute, it must always be borne in mind that the first and primary rule of construction is that the intention of the Legislature must be found in the words used by the Legislature itself. If the words used are capabl .....

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en the material words are capable of two constructions, one of which is likely to defeat or impair the policy of the Act whilst the other construction is likely to assist the achievement of the said policy, then the courts would prefer to adopt the latter construction. It is only in such cases that it becomes relevant to consider the mischief and defect which the, Act purports to remedy and correct." 11. In Nasiruddin v. Sita Ram Agarwal [2003] 2 SCC 577 this Court stated the law in the fol .....

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necessary to determine that there exists a presumption that the legislature has not used any superfluous words. It is well settled that the real intention of the legislation must be gathered from the language used……..." 12. In Nathi Devi v. Radha Devi Gupta [2003] 2 SCC 577 a Constitution Bench of this Court was called upon to consider, inter alia, whether the expression, "where the landlord is a widow and the premises let out by her, or by her husband, are required by he .....

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its decision this Court observed : "The interpretative function of the court is to discover the true legislative intent. It is trite that in interpreting a statute the court must, if the words are clear, plain, unambiguous and reasonably susceptible to only one meaning, give to the words that meaning, irrespective of the consequences. Those words must be expounded in their natural and ordinary sense. When the language is plain and unambiguous and admits of only one meaning, no question of .....

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ity, the court must look at the statute as a whole and consider the appropriateness of the meaning in a particular context avoiding absurdity and inconsistencies or unreasonableness which may render the statute unconstitutional." 13. With these principles in mind, we now consider the provisions in question. 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 dee .....

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fulfilled. The notice under Section 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 any doubt or ambiguity. There is nothing in Section 138 which may even remotely suggest issuance of notice to anyone other than the drawer .....

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re so responsible for its affairs and who guided actions of such juristic entity must be held responsible and ought to be proceeded against. Section 141 again does not lay down any requirement that in such eventuality the directors must individually be issued separate notices under Section 138. The persons who are in charge of the affairs of the Company and running its affairs must naturally be aware of the notice of demand under Section 138 of the Act issued to such Company. It is precisely for .....

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Section 138. 15. If the requirement that such individual notices to the directors must additionally be given is read into the concerned provisions, it will not only be against the plain meaning and construction of the provision but will make the remedy under Section 138 wholly cumbersome. In a given case the ordinary lapse or negligence on part of the Company could easily be rectified and amends could be made upon receipt of a notice under Section 138 by the Company. It would be unnecessary at t .....

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