M/S. Angel Admark Pvt. Limited v. M/S. Noida Software Technology Park Ltd (NSTPL) & ors, and State of Kerala

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT:** ## **THE HONOURABLE MR. JUSTICE ALEXANDER THOMAS** **TUESDAY, THE 14TH DAY OF FEBRUARY 2017/25TH MAGHA, 1938** ## **Crl.Rev.Pet.No. 1389 of 2016** **------------------------------------------AGAINST THE ORDER IN C.M.P.NO. 2077/2016 OF JUDICIAL FIRST CLASS MAGISTRATE COURT, KAKKANAD** **------------------** ## **REVISION PETITIONER(S)/COMPLAINANT :** **---------------------------------------------------------------** **M/S. ANGEL ADMARK PVT. LIMITED, 404, PRAGATI TOWER RAJENDRA PLACE, NEW DELHI-110 008, REPRESENTED BY ITS BOARD OF RESOLUTION HOLDER SUDHAKARAN.C.** **BY ADVS. SRI.S.JUSTUS SRI.T.SHIHABUDEEN SRI.L.SATHEESH** ## **RESPONDENT(S)/ACCUSED & STATE :** **---------------------------------------------------------** **1. M/S. NOIDA SOFTWARE TECHNOLOGY PARK LTD (NSTPL), SCINDIA VILLA, SAROJINI NAGAR, RING ROAD, NEW DELHI-110 023.** **2. THE MANAGING DIRECTOR, NOIDA SOFTWARE TECHNOLOGY PARK LTD.(NSTPL), SCINDIA VILLA, SAROJINI NAGAR, RING ROAD, NEW DELHI-110 023.** **3. SUNIL KUMAR MALHOTRA, DIRECTOR-FINANCE, NOIDA SOFTWARE TECHNOLOGY PARK LTD.(NSTPL), SCINDIA VILLA, SAROJINI NAGAR, RING ROAD, NEW DELHI-110 023.** **4. STATE OF KERALA, REPRESENTED BY PUBLIC PROSECUTOR, HIGH COURT OF KERALA, ERNAKULAM.** ## **R4 BY PUBLIC PROSECUTOR SRI. JESTIN MATHEW** **THIS CRIMINAL REVISION PETITION HAVING BEEN FINALLY HEARD ON 14-02-2017, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:** Msd. **“C.R”** ALEXANDER THOMAS, J. ----------------------------- Crl.R.P.No.1389 Of 2016 --------------------------------- Dated this the 14th day of February, 2017. ## O R D E R The revision petitioner is the complainant in Crl.M.P.No. 2077/2016 on the file of the Judicial First Class Magistrate Court, Kakkanad, Ernakulam. The 1st accused in the complaint is the 1st respondent company and accused 2 & 3 therein are respondents 2 & 3 who are the Managing Director and Director (Finance) of the said company respectively alleging offence under Sec.138 of the Negotiable Instruments Act. The allegations against the accused persons are that the 1st respondent company had issued a cheque for Rs.7.8 lakhs to the complainant company towards discharge of a legal debt and when the cheque was sent for collection, it has been returned as 'exceeds arrangement'. The petitioner had sent statutory notice as per Sec.138(b) of the N.I.Act to respondents 1 to 3. Learned Magistrate, after verifying the records, has dismissed the complaint under Sec.203 of the Code of Criminal Procedure stating that the demand notices have not been served to accused Nos. 2 & 3 and thereby accused Nos.2 & 3 have no knowledge about the demand notice and that it has been ::2:: Crl.R.P.No.1389 Of 2016 signed by someone else. Since the notices have not been duly served on respondents 2 & 3, the learned Magistrate had dismissed the complaint at the stage of Sec.203 of the Cr.P.C. The learned Magistrate has also stated in the impugned order that acknowledgement card is signed by some other person and there is no resemblance with signatures in the acknowledgement cards and the signatures in the cheque signed by accused 2 & 3. The impugned order passed by the learned magistrate reads as follows: “This is a complaint alleging commission of offence U/s. 138 of NI Act, wherein, the accused Nos.2, 3 have signed a cheque and delivered to the complainant, which was dishonoured on presentment. 2. On going through the records produced, it is seen that the demand notices have not been served on the accused Nos.2 and 3. The copies of Acknowledgement Cards produced reveal that the notices were in fact signed by some security personnel of one Jain Studio and the signature in those cards do not bear any resemblance with the signatures of A2 and A3 in the cheque. There are no averments in the complaint to the effect that the accused persons have any relation with the Jain Studio and there are no pleadings that the accused persons 2 and 3 have knowledge about the contends of the demand notice, even through the notices have been received by some person other than the accused. As there is no legally valid demand served on the accused persons 2 and 3, it cannot be held that all legal steps have been taken by the complainant in instituting this complaint. 3. The complaint is dismissed U/s.203 of Cr.P.C, in the above said circumstances.” The petitioner has preferred the instant revision petition for setting aside the said order dated 3.9.2016 passed in Crl.M.P.No.2077/2016. 2. Though notice has been served on respondents 1 to 3 they have not entered appearance. Heard Sri.S.Justus, learned counsel ::3:: Crl.R.P.No.1389 Of 2016 appearing for the revision petitioner (complainant) and Sri.Jestin Mathew, learned Prosecutor appearing for R-4 State. As already stated hereinabove, respondents 1 to 3 have not entered appearance despite due service of notice on them. 3. From a perusal of the pleadings on record as well as the impugned order it appears that the premise on which the complaint was instituted is for a legally enforceable debt owed by the 1st respondent company to the petitioner company, for which the 1st respondent company had issued a cheque for an amount of Rs.7.8 lakhs from an account maintained by the said company. The 1st accused is the company and 2nd accused is the Managing Director of the company. But it is to be noted that the accused has impleaded the Managing Director of the company and the personal incumbent, who is holding the said office of the Managing Director is not seen impleaded. But that is not a issue before this Court and this Court is not entering into those aspects. The 3rd accused is one Sunil Kumar Malhotra, who is shown as Director (Finance) of the 1st accused company. The main reasoning given by the learned magistrate is that the demand notices under Se.138 (b) of the Negotiable Instruments Act, have not been served on accused 2 & 3 and that it is seen that the acknowledgement cards were signed ::4:: Crl.R.P.No.1389 Of 2016 by some other person and there is no resemblance with the signatures in the acknowledgement cards and the signatures in the cheque signed by accused Nos. 2 & 3. Though the impugned order does not show with full clarity as to whether statutory notice has been duly served on the company, on a reading of the impugned order, one could infer that the demand notices have been duly served on the company and the dispute is only relating to service of notice to accused 2 & 3. 4. As the drawer of the cheque appears to be a company from whose account the cheque has been issued, Sec.141 of the N.I. Act will come into play and the said provision reads as follows: ' Sec.141.Offences by companies.-- (1) If the person committing an offence under section 138 is a company, every person who, at the time the offence was committed, was in charge of, and was responsible to the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly: Provided that nothing contained in this sub-section shall render any person liable to punishment if he proves that the offence was committed without his knowledge, or that he has 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 Governemnt 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), where any offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to, ::5:: Crl.R.P.No.1389 Of 2016 any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly. Explanation: For the purposes of this Section,- (a) “company” means any body corporate and includes a firm or other association of individuals; and (b) “director”, in relation to a firm, means a partner in the firm. _'_ It has been held by the Apex Court and various High Courts that Sec.141 states that if the person committing an offence under Sec.138 is a company, every Director of such company who was in charge of an responsible to that company for conduct of its business shall also to be deemed to be guilty. The reason for creating such 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 that if such juristic entity is guilty, juristic entity must be held responsible and ought to be proceeded against. In the light of these aspects the Apex Court in the judgment in Kirshna Texport and Capital Markets Limited v. Ila A. Agrawal & ors. reported in (2015) 8 SCC 28 has held that Sec.141 does not lay down any requirement that in such eventuality the Directors must individually be issued separate notices under Sec.138 of the Negotiable Instruments Act and the persons who are in charge of the affairs of the company and running its ::6:: Crl.R.P.No.1389 Of 2016 affairs must naturally be aware of the notice of demand under Sec.138 of the Act issued to such company. It is precisely for this reason that no notice is additionally contemplated to be given to such Directors and the opportunity to the “drawer” company is considered good enough for those who are in charge of the affairs of such company and if it is their case that the offence was committed without their knowledge or that they had exercised due diligence to prevent such commission, it would be a matter of defence to be considered at the appropriate stage in the trial and certainly not at the stage of notice under Sec.138. It would be profitable to extract the following observations in the case Kirshna Texport and Capital Markets Limited v. Ila A. Agrawal & ors. reported in (2015) 8 SCC 28 para 16. '16. Section 141 states that if the person committing an offence under Section 138 is a company, every Director of such company who was in charge of and responsible to that company for conduct of its business shall also be deemed to be guilty. 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 that if such juristic entity is guilty, those who were 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 this reason that no notice is additionally contemplated to be given to such Directors. The opportunity to the “drawer” company is considered good enough for those who are in charge of the affairs of such company. If it is their case that the offence was committed without their knowledge or that they had exercised due diligence to prevent such ::7:: Crl.R.P.No.1389 Of 2016 commission, it would be a matter of defence to be considered at the appropriate stage in the trial and certainly not at the stage of notice under Section 138.' Moreover, it is to be noted that proviso (b) to Sec.138 contemplates that statutory notice in question to be issued to the drawer of the cheque. Since the drawer of the cheque is stated to be company, then notice to such company would meet the minimal requirement of Sec.138. If a complainant thinks that it is more advisable to also issue separate notices to individual directors who are responsible for running of the affairs of the company, he is at liberty to do so. But once notice is duly served under Sec.138(b) to the company, who is the drawer of the cheque, then all the Directors and officers of the company who are in charge of the affairs of the business of the company should be deemed to have duly served notice inasmuch as notice has been duly served on the primary entity concerned, viz., company, who is the drawer of the cheque. In the instant case, it is not in dispute that notice has been duly served on the 1st respondent company. Therefore, merely because notice has not been duly served on accused 2 & 3 who are stated to be Managing Director and Director of the company respectively, will not by itself a vitiating ground to dismiss the complaint at the Sec.203 stage. However, it is to be noted that all these fine tuned aspects as to whether notice has been served on the 1st respondent, etc., are also matters of ::8:: Crl.R.P.No.1389 Of 2016 evidence. This Court has not reached a clinching conclusion that notice has been duly served on the 1st respondent company. At this stage, this Court has only proceeded on the basis that notice has been duly served on the 1st respondent company. It has also been held by this Court in Susan Zachariah & ors. v. M/s. Muthoot Capital Services Ltd. & anr. reported in 2012 3 KHC 870 that notice to the partners under Sec.138 of the N.I.Act is not necessary and that notice against the firm can be deemed to be notice against all its partners. It has also been held by this Court in Target Overseas Exports (P) Ltd. v. Iqbal reported in 2005 KHC 530 that the person who is entitled to notice is the drawer company and not the person who has signed the cheque on behalf of the drawer. In the judgment in Dilip Kumar Jaiswal v. Debapriya Banerji reported in 1992 KHC 289, a Division Bench of this Court has held that notice issued to the company is sufficient and separate notice to the directors of the company is not required to be served, prior to the filing of the complaint under Sec.138 of the N.I.Act, etc. For all these reasons, the view taken by the learned Magistrate for dismissing the complaint at the stage of Sec.203 Cr.P.C for non-service of notice to accused 2 & 3 who are Directors of the company is not tenable and sustainable. Accordingly, the impugned order is set aside and the case is remanded ::9:: Crl.R.P.No.1389 Of 2016 to the court below to proceed in accordance with law. The complainant and his counsel may personally appear before the learned Magistrate on 18.3.2017. The petitioner shall produce a certified copy of this judgment before the learned Magistrate for further necessary action. With these observations and directions, the Crl.R.P. stands finally disposed of. ALEXANDER THOMAS, Judge. bkn/-