TMI Blog2018 (11) TMI 930X X X X Extracts X X X X X X X X Extracts X X X X ..... Directors. There is no requirement that the Directors of the Company in question must also be issued individual notices under Section 138 of the Act. Such Directors who are in charge of affairs of the Company and responsible for the affairs of the Company would be aware of the receipt of notice by the Company under Section 138 and would be liable without even being issued individual notices. In the present case subject cheque was issued by the company under the signatures of Mr. M.S. Narula, its Managing Director. The statutory notice is addressed and served on Mr M.S. Narula. Since the company is a legal entity and functioning only through its directors and Managing Director, service of notice on the Managing Director would be sufficient service of notice on the company - There could be no better way of serving a legal entity like a company than by serving a notice on the person who is in charge and in control of the company. The Managing Director is the key person who is in control of the affairs of the company. Statutory notice in the present case has been served on the Managing Director. There is sufficient compliance of the statutory requirements of section 138 Negoti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the cheque having been signed by Mr. M.S. Narula who is admittedly the Manager Director, as is evident from the affidavit filed in support of the petition, the notice was to the company and the complaint in the name of the company through its Director Mr. M.S. Narula is maintainable. 8. The factual position that emerges is that the alleged debt is that of the Petitioner Company. Subject cheque has been issued and signed by Mr. M.S. Narula its Managing Director. Statutory notice under section 138 Negotiable Instruments Act has been issued only to the Managing Director. It is an admitted position that statutory notice has not been addressed to the company and was addressed only to its Managing Director. Subject complaint has been filed only against the company and not against the Managing Director. The company has been arrayed through Mr. M.S. Narula, its Managing Director. 9. The question that arises for consideration is as to whether a complaint under section 138 Negotiable Instruments Act would be maintainable, against the company, if the statutory notice under section 138 Negotiable Instruments Act, is issued only to its Managing Director and is not issued to the company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 138, where any cheque drawn by a person on an account maintained by him is returned by the bank unpaid for reasons mentioned in the 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 the said amount of money by giving a notice in writing to the drawer of the cheque and if the drawer of the cheque fails to make the payment of the said amount within 15 days of the receipt of the said notice, the stages stipulated in the proviso stand 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. 16. Section 141 states that if the perso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich the cause of action arises under the third proviso to Section 138. Thus, a complaint can be filed within the aggregate period of seventy-five days from the dishonour, by which time a complainant can gather requisite information as regards names and other details as to who were in charge of and how they were responsible for the affairs of the Company. But if we accept the logic that has weighed with the High Court in the present case, such period gets reduced to 30 days only. Furthermore, unlike proviso to clause (b) of Section 142 of the Act, such period is non-extendable. The summary remedy created for the benefit of a drawee of a dishonoured cheque will thus be rendered completely cumbersome and capable of getting frustrated. 18. In our view, Section 138 of the Act does not admit of any necessity or scope for reading into it the requirement that the Directors of the Company in question must also be issued individual notices under Section 138 of the Act. Such Directors who are in charge of affairs of the Company and responsible for the affairs of the Company would be aware of the receipt of notice by the Company under Section 138. Therefore, neither on literal constructi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccused is a company which is run by its directors. Admittedly Mr M.S. Narula is the Managing Director of the company. He is also the signatory on the subject cheque which has been issued by the company. Though it is disputed by counsel for the petitioner that Mr M.S. Narula is the Managing Director of the company, the present petition has been filed by the company and signed by Mr M.S. Narula. In support of the petition Mr M.S. Narula has filed his affidavit. In the affidavit it is specifically stated that Mr M.S. Narula is the Managing Director of the company. The petitioner company is a juristic entity and it acts through its directors and Managing Directors. 16. In the present case subject cheque was issued by the company under the signatures of Mr. M.S. Narula, its Managing Director. The statutory notice is addressed and served on Mr M.S. Narula. Since the company is a legal entity and functioning only through its directors and Managing Director, service of notice on the Managing Director would be sufficient service of notice on the company. 17. There could be no better way of serving a legal entity like a company than by serving a notice on the person who is in charge an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d of Directors act for and on behalf of the company. This is clear from Section 291 of the Companies Act which provides that subject to the provisions of that Act, the Board of Directors of a company shall be entitled to exercise all such powers and to do all such acts and things as the company is authorised to exercise and do. Palmer described the position thus [Ed.: Palmer's Company Law, 20th Edn., p. 513.]: A company can only act by agents, and usually the persons by whom it acts and by whom the business of the company is carried on or superintended are termed directors . It is further stated in Palmer that [Ibid., p. 515.]: Directors are, in the eye of the law, agents of the company for which they act, and the general principles of the law of principal and agent regulate in most respects the relationship of the company and its directors. 18. The above two passages were quoted with approval in R.K. Dalmia v. Delhi Admn. [AIR 1962 SC 1821: (1963) 1 SCR 253] (SCR at p. 300). In Guide to the Companies Act by A. Ramaiya (16th Edn.) this position is summed up thus: All the powers of management of the affairs of the company are vested in the Board o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ***** ***** ***** 25. In Bilakchand Gyanchand Co. v. A. Chinnaswami [(1999) 5 SCC 693 : 1999 SCC (Cri) 1034 : AIR 1999 SC 2182] this Court held that a complaint under Section 138 of the Act was not liable to be quashed on the ground that the notice as contemplated by Section 138 of the Act was addressed to the Director of the company at its office address and not to the company itself. The view was reiterated in Rajneesh Aggarwal v. Amit J. Bhalla [(2001) 1 SCC 631 : 2001 SCC (Cri) 229 : AIR 2001 SC 518]. These decisions indicate that too technical an approach on the sufficiency of notice and the contents of the complaint is not warranted in the context of the purpose sought to be achieved by the introduction of Sections 138 and 141 of the Act. 21. Applying the analogy of the law laid down by the Supreme Court in N. Ragnachari (supra), it can be safely held that if knowledge of the company is deemed to be knowledge of the directors in control, sufficient to fasten liability on them under section 138 Negotiable Instruments Act, without service of a statutory notice, then knowledge of the Managing Director is to be deemed to be the knowledge of the Company. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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