Preesa Foods and Spices (India) Private Limited v. State of Kerala and Sreejith A.S., Kunnath Rafeeque

## `IN THE HIGH COURT OF KERALA AT ERNAKULAM` ## `PRESENT` ``` THE HONOURABLE MRS. JUSTICE MARY JOSEPH MONDAY, THE 4[TH] DAY OF APRIL 2022 / 14TH CHAITHRA, 1944 ``` ``` CRL.MC NO. 7909 OF 2018 ``` ``` AGAINST THE PROCEEDINGS IN S.T.NO. 986 OF 2017 OF JUDICIAL FIRST ``` ``` CLASS MAGISTRATE COURT, OTTAPALAM ``` ## `PETITIONER/ACCUSED NO.2:` ``` PREESA FOODS AND SPICES(INDIA) PRIVATE LIMITED MANISSERI, VANIYAMKULAM POST, OTTAPALAM TALUK, PALAKKAD DISTRICT- 679 522, ``` ``` REPRESENTED BY IS DIRECTOR, NANDAKUMAR KONAT, S/O.KUMARAN, NANDANAM, SUNDARA IYER ROAD, OTTAPALAM-679 101, PALAKKAD DISTRICT. ``` ``` BY ADVS.SRI.O.RAMACHANDRAN NAMBIAR SRI.GEEN T.MATHEW ``` ## `RESPONDENTS/COMPLAINANT AND ACCUSED NO.1:` - `1 STATE OF KERALA REPRESENTED BY PUBLIC PROSECUTOR, HIGH COURT OF KERALA, ERNAKULAM - 682031` ``` 2KUNNATH RAFEEQUE, PROPRIETOR,H.H.RETAIL SHOPEE, MADEENA TOWER,VANIYAMKULAM POST-679 522. OTTAPALAM TALUK,PALAKKAD DISTRICT. ``` ``` 3SREEJITH A.S, S/O SIDHARTHAN A.S,EX MANAGING DIRECTOR, PREESA FOODS AND SPICES INDIA PRIVATE LIMITED MANISSERI,VANIYAMKULAM POST, OTTAPALAM TALUK,PALAKKAD DISTRICT-679 522, RESIDING AT: SREEVILAS, KANNIAMPURAM POST-679 104, OTTAPALAM, PALAKKAD DISTRICT. ``` ## `R1 BY SENIOR PUBLIC PROSECUTOR SMT T V NEEMA` ``` R2 BY ADV SRI.R.SREEHARI ``` ``` THIS CRIMINAL MISC. CASE HAVING BEEN FINALLY HEARD ON 01.12.2021 THE COURT ON 04.04.2022 PASSED THE FOLLOWING: ``` ``` Crl.M.C.No.7909 of 2018 2 ``` ## **`ORDER`** ## **`Dated this the 4[th] day of April, 2022`** This petition is filed by the 2[nd] accused under Section 482 of the Code of Criminal Procedure, 1973 (for short ‘Cr.P.C’) seeking to quash S.T.No.986/2017 pending on the files of Judicial First Class Magistrate Court, Ottapalam (for short ‘the court below’) and all proceedings initiated pursuant thereto. S.T.No.986/2017 is a prosecution launched under Section 142 of the Negotiable Instruments Act, 1881 (for short ‘NI Act’) alleging commission of an offence punishable under Section 138 NI Act by respondent No.2 against petitioner and respondent No.3. Petitioner is the 2[nd] accused in the prosecution. 1[st] respondent is the State , 2[nd] respondent is the complainant and the 3[rd] respondent is the 1[st] accused in the case. According to the 2[nd] respondent/ complainant, stationary goods were purchased by the accused from his stationary shop for a sum of Rs.1,49,560/- and towards payment of it’s cost, 3[rd] respondent (1[st] accused) issued a cheque bearing No.418935 dated 28.03.2017, drawn on account No.30781221971 maintained ## **`Crl.M.C.No.7909 of 2018 3`** by him at State Bank of India , Ottapalam Branch for a sum of Rs.1,49,560/-. At the time of issuance of cheque, the 3[rd] respondent made the complainant believe that funds would be available in the account at the time of presentation of the cheque. Accordingly the complainant presented the cheque at Axis Bank, Ottapalam Branch but it was dishonoured for the reason “funds insufficient”. The cheque as well as the dishonour memo dated 29.03.2017 were returned to the complainant. Thereupon he issued a notice dated 18.04.2017 to the 3[rd] respondent who had signed the cheque. A reply notice was issued by the 3[rd] respondent raising untenable contentions. The amount demanded was not paid. Thereupon Complaint was filed to launch the prosecution against the petitioner and the 3[rd] respondent alleging commission of offence punishable under Section 138 N.I.Act. 2. Sworn statement of the 2[nd] respondent was recorded by the court below on 30.05.2017. The accused denied all the averments in the complaint. According to him the 3[rd] respondent/1[st] accused was the Managing Director of the company namely Preesa Foods and Spices (India) Private Limited and petitioner, a Director in the said company. He is ## **`Crl.M.C.No.7909 of 2018 4`** working in United States of America and since 2015, the 3[rd] respondent was indulged in defalcation and misappropriation of the bank accounts of the company and on account of that the company was running in huge loss. Thereupon entire funds required for functioning of the company was given by the petitioner. The company went in huge loss due to the continuous defalcation of the Company’s accounts and properties by the 3[rd] respondent who is the earstwhile Managing Director. 3. The Board of Directors of the company in its meeting held on 03.03.2016, decided to sell the movable as well as immovable properties of the company. All the employees of the company were terminated and the company ceased to function from 01.04.2016. In the meeting held on 02.04.2016 with the 3[rd] respondent, the petitioner has declared that he will invest his personal funds to close all the loans of the company. The 3[rd] respondent was permitted to use the existing facilities in the factory till 30.06.2016 to clear off the stocks and collect debts. Immediately after the meeting the petitioner returned to United States of America to join his job. Thereafter the petitioner came to know that the 3[rd] respondent/1[st ] accused who is none other than the Managing Director of the company who had the ## **`Crl.M.C.No.7909 of 2018 5`** authority to sign the cheque and operate the Bank Accounts of the company had siphoned an amount of Rs.13,12,541/- from the company’s bank account. The said defalcation was noticed by the petitioner when he arrived at Ottapalam on 19.03.2017. Thereupon O.S.No.25/2017 was filed before Sub Court Ottapalam against the 3[rd] respondent and others. As per the General Body meeting of the company held on 05.04.2017, the 3[rd] respondent was removed from the affairs of the company and Sri.Abu Thahir Thottivalappil Alavi was appointed in his place as the Managing Director of the company. The petitioner is only a Director in the above company and he neither involved in it’s day to day affairs nor represented or managed the above company. The 3[rd] respondent filed O.S.No.181/2017 before Munsiff Court, Ottapalam seeking for a decree of permanent prohibitory injunction restraining the petitioner from evicting him from the property without recourse to law. The 3[rd] respondent has misused his authority and siphoned and defalcated the funds of the company and did not abide by the decisions taken in the meeting held on 02.04.2016. Another suit was also filed by the petitioner as O.S.No.75/2017 before Sub Court, Ottappalam seeking for a mandatory injunction. W.P.(C) No.11110/2017 ## **`Crl.M.C.No.7909 of 2018 6`** was filed by the 3[rd] respondent before this Court seeking for police protection. The said writ petition was disposed of by judgment dated 19.10.2017 observing that “in the event of any law and order situation occurred and reported, the parties will be at liberty to bring that to the notice of the 1[st] respondent and shall take such action as deems necessary.” 4. The 2[nd] respondent/complainant then filed O.S.No.258/2017 before Munsiff Court, Ottapalam seeking for recovery of money based on the cheque. It is submitted that the cheque involved in Annexure A1 complaint was issued by the 3[rd] respondent deceptively misusing the authority while he was the Managing Director of the company that had ceased all its operations from 31.03.2016. The liabilities of the company to the tune of Rs.1,50,00,000/- was settled by the petitioner using his personal funds by purchasing the immovable properties, machineries, trademark, copyright etc. The 3[rd] respondent was allowed to use the current account of the company maintained at Ottapalm Branch of the State Bank of India only to settle the Provident Fund, ESI, Kerala Value Added Tax liabilities and other statutory liabilities till 30.06.2016. But the 3[rd] respondent cheated the petitioner and siphoned the entire amount in the ## **`Crl.M.C.No.7909 of 2018 7`** bank account by using the cheque leaves and misusing his authority as the former Managing Director of the company. According to the petitioner the cheque involved in Annexure A1 complaint was fraudulently issued by the 3[rd] respondent without the knowledge of either the petitioner or other Director Board Members of the company at a time when the company had ceased to function. After 30.06.2016, no authority was there for the 3[rd] respondent to issue the cheque of the company to the 2[nd] respondent. The 2[nd] respondent has issued a lawyer notice dated 18.04.2017 to the 3[rd] respondent. The 3[rd] respondent had issued a reply notice dated 04.05.2017 wherein it was stated that he was not the Director of the Company. Notice thus was sought to be issued to the company. According to the petitioner, the company came to know about the issuance of the cheque, sending of notice etc. only when summons issued in Ext.A1 was received. According to him to maintain a complaint under Section 138 N I Act, the important conditions to be fulfilled are that the payee should demand in writing from the drawer of a cheque. i.e. the company in the case on hand, payment of money due under the cheque to him, such a notice of payment has to be served within a period of 30 days from the date of ## **`Crl.M.C.No.7909 of 2018 8`** receipt of information by the payee from the bank about the return of the cheque as bounced and failure of the drawer of such cheque to make payment of the amount within 15 days from the date of receipt of such notice. In the case on hand such a demand notice was not sent either to the company or the Managing Director of the company. Therefore Annexure A1 complaint was not validly instituted and liable to be quashed. 5. In Annexure A5 reply notice issued in response to Annexure A4 notice, the 2[nd] respondent was informed that the 3[rd] respondent not being the Director of the drawer company, notice is required to be sent to the drawer company. Notice was not sent to the company and therefore the prosecution is vitiated for violation of a statutory mandate. In Annexure A1 complaint also, a statement that the 2[nd] respondent had issued notice to the petitioner or to the company is incorporated. Moreover Annexure A1 complaint is silent on the authority of the 3[rd] respondent to represent the company. When the 3[rd] respondent has received Annexure A4 notice, he was neither a Director of the company nor having any authorisation to represent the company. He was not even looking after the affairs of the company. Therefore Annexure A1 complaint ## **`Crl.M.C.No.7909 of 2018 9`** having been filed without satisfying the requirements under Section 138 N I Act is liable to fail. 6. Chairman of the Board of Directors of the company has authority only to preside over the meetings of the company and not to involve in the day to day affairs of the company. That authority to deal with the daily affairs of the company is vested only with the Managing Director of the company, who is none other than Mr.Abu Thahir Thottivalappil Alavi. The petitioner herein is only a Director of the company and being employed at United States of America has no involvement in the day to day affairs of the company or in managing it at any point of time. There is total lack of averments in Annexure A1 that the Director was managing the company or involved in looking after the day to day affairs of the company. In Annexure A3 suit filed by the complainant against the company and the 3[rd] respondent for recovery of the amount covered by the cheque, the company had resisted the suit by contending that it has no liability to pay the amount as the company itself ceased operation on 01.04.2016. Since the company had not done any business after 31.03.2016 necessity was not there for it to purchase any goods or raw materials for and on behalf of the company after ## **`Crl.M.C.No.7909 of 2018 10`** 31.03.2016. The 3[rd] respondent had misused the authority vested on him as the Managing Director of the company and cheated the company by issuing the cheque involved in Annexure A1, to cheat the company and to illegally gain money from the company. In the suit also the company has specifically pleaded about non receipt of notice by it. Therefore any notice sent to the 3[rd] respondent by the 2[nd] respondent at a time when the former was not a Director of the company is invalid and would not serve any purpose under Section 138 NI Act. 7. The learned counsel for the petitioner has relied on Harshendra Kumar D. V. Rebatilata Koley and Others [2011 (3) SCC 351] wherein it was held that an ex director cannot be made accountable and fastened with liability for anything done by company after acceptance of his resignation by the company. On facts, resignation of appellant as Director of Company was accepted and notified to the Registrar of Companies in the prescribed form (Form 32). As on date of alleged commission of offence, the Director has no role in the affairs of the Company. It was held that if criminal complaints are allowed to proceed against the appellant, it would result in gross injustice and tantamount to abuse of process of court. ``` Crl.M.C.No.7909 of 2018 11 ``` ## 8. Bhaskaran v. Balan [1999 (3) KLT 440 (SC)] relied on by the learned counsel and the court held as follows: “ The offence under Section 138 of the Act can be completed only with the concatenation of a number of acts. Following are the acts which are components of the said offence : (1) Drawing of the cheque, (2) Presentation of the cheque to the bank, (3) Returning the cheque unpaid by the drawee bank, (4) Giving notice in writing to the drawer of the cheque demanding payment of the cheque amount, (5) failure of the drawer to make payment within 15 days of the receipt of the notice. It is not necessary that all the above five acts should have been perpetrated at the same locality. It is possible that each of those five acts could be done at 5 different localities.” ## 9. Kusum Ingots & Alloys Ltd. v. Pennar Peterson Securities ## Ltd. and Others [2000 (2) SCC 745] was also relied on and it was held by the Apex Court as follows: “10. On a reading of the provisions of Section 138 of the NI Act it is clear that the ingredients which are to be satisfied for making out a case under the provision are : (i) a person must have drawn a cheque on an account maintained by him in a bank for payment of a certain ## **`Crl.M.C.No.7909 of 2018 12`** amount of money to another person from out of that account for the discharge of any debt or other liability; (ii) that cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier; (iii) that cheque is returned by the bank unpaid, either because the amount of money standing to the credit of the 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 the bank; (iv) the payee or the holder in due course of the cheque 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 15 days of the receipt of information by him from the bank regarding the return of the cheque as unpaid; (v) the drawer of such cheque fails to make payment of the said amount of money to the payee or the holder in due course of the cheque within 15 days of the receipt of the said notice. 11. If the aforementioned ingredients are satisfied then the person who has drawn the cheque shall be deemed to have committed the offence. In the explanation to the section clarification is made that the phrase "debt or other liability" means a legally enforceable debt or other liability.” ## 10. MSR Leathers V. Palaniappan [2012 (4) KLT 136 (SC)] relied on, after quoting Section 138 NI Act, the court held as ## **`Crl.M.C.No.7909 of 2018 13`** ## follows: “12. A careful reading of the above provisions makes it manifest that a complaint under S.138 can be filed only after cause of action to do so has accrued in terms of clause (c) of proviso to S.138 which, as noticed earlier, happens no sooner than when the drawer of the cheque fails to make the payment of the cheque amount to the payee or the holder of the cheque within 15 days of the receipt of the notice required to be sent in terms of clause (b) of proviso to S.138 of the Act. 14. Presentation of the cheque and dishonour thereof within the period of its validity or a period of six months is just one of the three requirements that constitutes 'cause of action' within the meaning of Ss.138 and 142(b) of the Act, an expression that is more commonly used in civil law than in penal statues. For a dishonour to culminate into the commission of an offence of which a court may take cognizance, there are two other requirements, namely, (a) service of a notice upon the drawer of the cheque to make payment of the amount covered by the cheque and (b) failure of the drawer to make any such payment within the stipulated period of 15 days of the receipt of such a notice. It is only when the said two conditions are superadded to the dishonour of the cheque that the holder/payee of the cheque acquires the right to institute proceedings for prosecution under S.138 of the Act, which right remains legally enforceable for a period of 30 days counted from the date on which the cause of action accrued to him.” ## **`Crl.M.C.No.7909 of 2018 14`** 11. In Krishna Texport & Capital Markets Ltd. v. Ila A. Agrawal and Others [2015 (2) KHC 793] relied on by the learned counsel the requirement of issuance of separate notice to Directors is considered and the court held: “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. S.141 again does not lay down any requirement that in such eventuality the directors must individually be issued separate notices under S.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 S.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 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 S.138. ## **`Crl.M.C.No.7909 of 2018 15`** S.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 S.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 S.138. Therefore neither on literal construction nor on the touch stone of purposive construction such requirement could or ought to be read into S.138 of the Act.” ## 12. In Balachandran V. State of Kerala [2017 (3) KLT 1081] relied on by the learned counsel, the court has held: “ That S.141 again does not lay down any requirement that in such eventuality, the individual directors must individually be issued separate notices under S.138 and that 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 S.138 of the Act issued to such company and that it is precisely for this reason that no notice is additionally contemplated to be given to such directors. That the opportunity to the “drawer” by issuing statutory demand notice is considered good enough for those who are in charge of the affairs of such company, etc., and if it is their case that the offence was committed without their ## **`Crl.M.C.No.7909 of 2018 16`** 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, etc. Therefore, it is crystal clear that in a case, where the drawer of the dishonoured cheque is a company, then statutory demand notice should mandatorily be served on the drawer company but that separate individual notices to the individual directors and officials of the company is not mandatory.” ## 13. Harihara Krishnan N. V. J .Thomas [2017 (4) KHC ## 699 (SC)] was also relied on and the court held: “ Unless the complaint contains all the necessary factual allegations constituting each of the ingredients of the offence under Section 138, the court cannot take congnizance of the offence. Disclosure of the name of the person drawing the cheque is one of the factual allegations which a complaint is required to contain. Otherwise in the absence of any authority of law to investigate the offence under Section 138, there would be no person against whom a Court can proceed. There cannot be a prosecution without an accused. The offence under Section 138 is person specific. Therefore, the Parliament declared under Section 142 that the provisions dealing with taking cognizance contained in the CrPC should give way to the procedure prescribed under Section 142. Hence the opening of non-obstante clause under Section 142. It must also ## **`Crl.M.C.No.7909 of 2018 17`** be remembered that Section 142 does not either contemplate a report to the police or authorise the Court taking cognizance to direct the police to investigate into the complaint.” 14. In Himanshu v. B.Shivamurthy and Another [2019 (1) KHC 540] relied on, it was held that in the absence of a company being arraigned as an accused, complaint against Director is not maintainable. The dictum reads: “ The provisions of S.141 postulate that if the person committing an offence under S.138 is a company, every person, who at the time when the offence was committed was in charge of or 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. In the absence of the company being arraigned as an accused, a complaint against the appellant was therefore not maintainable. The appellant had signed the cheque as a Director of the company and for and on its behalf. Moreover, in the absence of a notice of demand being served on the company and without compliance with the proviso to S.138, the High Court was in error in holding that the company could now be arraigned as an accused.” ## **`Crl.M.C.No.7909 of 2018 18`** ## 15. In Target Overseas Exports (P) Ltd. V. Iqbal [2005 (2) KLT 45] relied on, the court has held: “ Going by the language of proviso (b) to S.138 of the N.I.Act, the person entitled to notice is the drawer and not the persons who have signed the cheque on behalf of the drawer. The purpose of notice must also be borne in mind. Notice is not an empty ritualistic formality. The drawer of the cheque must be given an opportunity to reverse the effect of dishonour within the specified period. Such notice by its very purpose need be given only to the drawer and not those who do acts on behalf of such drawer. In these circumstances, it appears to be evident that only the 1[st] accused-- company and not accused 2 and 3, the signatories/Directors are entitled to notice under proviso (b) to S.138 of the N.I.Act. Accused 2 and 3 face indictment not primarily under S.138 of the N.I.Act. They face indictment because 1[st] accused has committed the offence under S.138 of the N.I.Act and they happen to be persons in charge and responsible to the company for the conduct of its affairs. Thus, primarily accused 2 and 3 are the persons in charge and they face indictment only under S.141 of the N.I.Act. The language of S.141 of the N.I.Act does not at all indicate, suggest or help the Court to conclude that such persons who face indictment under S.141 of the N.I.Act are entitled to notice under proviso (b) to S.138 of the N.I.Act. Such a stipulation is not there at all under S.141 of the N.I.Act. That would be reading into S.141 of the N.I. Act something which is not there ## **`Crl.M.C.No.7909 of 2018 19`** at all. The legislature appears to have cautiously avoided such insistence. Thus, going by the language of S.138 and 141 of the N.I.Act and considering the purpose of notice under proviso (b) to S.138 it follows that accused 2 and 3 who face prosecution under S.141 of the N.I.Act are not entitled to any notice under proviso (b) to S.138 of the N.I.Act.” ## 16. In Indira Gandhi Memorial General Marketing Society Ltd. ## V. Roys Abraham and Another [2017 KHC 730] relied on, the ## court held: “where the drawer of the dishonoured cheque in question is a Company/partnership firm, it is mandatory that statutory demand notice under Section 138 is issued to the Company/partnership firm; but additional notice to the Directors/officials of the corporate body is not mandatory.” ## 17. In Dashrath Rupsingh Rathod v. State of Maharashtra ## [2014 (3) KLT 605 (SC)] relied, the court held: “ It is axiomatic that when a Court interprets any statutory provision, its opinion must apply to and be determinate in all factual and legal permutations and situations. We think that the dictum in Ishar Alloy is very relevant and conclusive to the discussion in hand. It also justifies emphasis that Ishar Alloy is the only case before us which was decided by a three-Judge Bench and, ## **`Crl.M.C.No.7909 of 2018 20`** therefore, was binding on all smaller Benches. We ingeminate that it is the drawee Bank and not the Complainant’s Bank which is postulated in the so called second constituent of S.138 of the N.I.Act and it is this postulate that spurs us towards the conclusion that we have arrived at in the present Appeals. There is also a discussion of Harman to reiterate that the offence under S.138 is complete only when the five factors are present. It is our considered view, which we shall expound upon, that the offence in the contemplation of S.138 of the N.I.Act is the dishonour of the cheque alone, and it is the concatenation of the five concomitants of that Section that enable the prosecution of the offence in contradistinction to the completion/commission of the offence.” ## 18. In Harman Electronics Private Limited and Another ## V. National Panasonic India Private Limited [2009 (1) SCC 720] relied on by the learned counsel, the court held: “ for proving that the accused had committed an offence under S.138; the ingredients thereof are required to be proved- What would constitute an offence is stated in the main provision- Proviso appended thereto imposes certain further conditions required to be fulfilled before cognizance of the offence can be taken -Ingredients for constitution of the offence laid down in the provisos (a), (b) and (c) appended to S.138, NI Act are intended to be applied in favour of the accused- Receipt of a notice would give rise to the cause of action for filing a complaint - Cls.(b) and (c) of the proviso to S.138 must be read ## **`Crl.M.C.No.7909 of 2018 21`** together-Issuance of notice would not by itself give rise to a cause of action but communication of the notice would” ## 19. In Dalmia Cement (Bharat) Ltd. V. Galaxy Traders & Agencies Ltd. and Others [2001(6) SCC 463] relied on, the court held : **“** Section 138 of the Act makes a civil transaction to be an offence by fiction of law. To constitute an offence under Section 138 of the Act, the complainant is obliged to prove its ingredients which include the receipt of notice by the accused under clause (b). It is not the “giving” of the notice which makes the offence but it is the “receipt” of the notice by the drawer which gives the cause of action to the complainant to file the complaint within the statutory period.” ## 20. In Fakrudhin V.P. v. State of Kerala and Another ## (2014 (4) KHC 815) relied on, the court held: “For maintaining prosecution under S.141 of the NI Act, arraigning of a company as an accused is imperative and hence proceeding against the Managing Director cannot be continued in the absence of the company being not in the party array. In view of the above decision, it can also be held that there cannot be a split up among the accused between the company and its functionaries or officers, where the complaint is found not maintainable against the company. In the light of the above discussions, I hold that where the complaint under S.138 read with S.141 of the NI Act is found not maintainable ## **`Crl.M.C.No.7909 of 2018 22`** against the company, the Managing Director or other persons working in different categories of the company or the persons who are in charge and responsible to the conduct of the company mentioned under Sub-ss.(1) and (2) of S.141 of the NI Act cannot be prosecuted further and convicted thereunder on that complaint.” 21. To summarise, as per the directions issued by the decisions placed by the learned counsel for the petitioner, 5 ingredients are essential and mandatory to be complied with by a person launching a prosecution under Section 142 NI Act alleging commission of an offence punishable under Section 138 NI Act for enabling a court of law to take cognizance on it. When the drawer of the cheque is a company, demand notice as demanded by clause (b) of proviso to Section 138 NI Act must be issued to the company, represented by it’s Managing Director. If notice is not issued, the complainant can be taken to have failed to comply with the mandatory requirements under the NI Act, which is very crucial for the prosecution to be successful and fruitful. Company must be arraigned as first accused in the cause title, represented by it’s Managing Director. Apart from that in the complaint necessary pleas about the involvement of the accused in the affairs of the company must also be ## **`Crl.M.C.No.7909 of 2018 23`** incorporated. In the case on hand, in Annexure A1 complaint, in the cause title, Mr.Sreejith A.S, who is the Managing Director of Preesa Foods and Spices (India) Private Limited was shown as the 1[st] accused and one Mr.Nandakumar Konat, the Chairman of Preesa Foods and Spices (India) Private Limited, as the second accused. What can be gathered on a reading of the pleadings in the complaint was that the company has purchased stationary articles for a sum of Rs. 1,49,560/- from the complainant. Or in otherwords, the transaction that created the monetary liability for discharging which, the disputed cheque was caused to be issued was between the complainant company and the accused company. Cheque was issued by the 1[st] accused in his capacity as the Director of the company. The Chairman of the company was arraigned as the 2[nd] accused. But the company, the drawer of the cheque is not found arraigned as an accused. The authorities cited above strongly support the factum that when the disputed cheque has been drawn from the account maintained by the company or partnership firm or any other body corporate as envisaged under Section 141 NI Act, then the drawer of the cheque is none other than the company/partnership firm or the corporate body as the case ## **`Crl.M.C.No.7909 of 2018 24`** may be. Going by the averments in Annexure A1 it is found that cheque was issued from the account maintained by the company with State Bank of India, Ottapalam Branch and not from the personal account of either of the accused. The company is not made an accused in the case on hand. Since the articles are purchased for the benefit of the company and a cheque drawn from the account maintained by it was issued to discharge the cost of the articles bought, to the complainant, primarily the company must be arraigned as the accused. Company being a legal entity it must be represented by it’s Managing Director or any other officers duly authorised to represent it. Notice must also be issued to the company through it’s authorised representative as per the mandate of the statute, prior to lodging of a complaint to launch the prosecution. The manner in which the persons arraigned in their official capacity are responsible for the day to day affairs of the company as accused was also not stated in Annexure A1. That is also an essential mandate required by Section 141 N I Act, having crucial bearing on the sustainability of Annexure A1. As held in the decisions cited supra, a Managing Director who has not been continuing the status as such in the company at the relevant time of the ## **`Crl.M.C.No.7909 of 2018 25`** transaction which created the monetary liability forming a legally enforceable debt or liability cannot be alleged as penally responsible for the monetary liability created by the bouncing of the cheque drawn and given towards discharge of the liability. 22. The discussion made hereinabove, constrains this Court to hold that Annexure A1 complaint is not maintainable. The court below ought not to have taken cognizance on Annexure A1 and registered S.T.No.986/2017 on it’s file and to proceed with it when ingredients relevant and essential to sustain it were totally lacking. Taking cognizance on Annexure A1 complaint, registration of S.T.No.986/2017 on it’s basis on the files of the court below suffers for non-compliance of the mandatory requirements under the N I Act. In the result, Crl.M.C. is allowed and Annexure A1 and registration of ST.No.986/2017 on it’s basis, on the files of the court below and all further proceedings initiated pursuant thereto as against the petitioner who is the 2[nd] accused are quashed. Sd/MARY JOSEPH JUDGE MJL ## **`Crl.M.C.No.7909 of 2018 26`** ## `APPENDIX OF CRL.MC No.7909/2018` |`PETITIONER’`<br>`S`<br>|`ANNEXURES`<br>`:`| |---|---| |`ANNEXURE A1`|`CERTIFIED COPY OF THE COMPLAINT IN`| ||`S.T.NO.986 OF 2017 BEFORE THE JUDICIAL`| ||`FIRST CLASS MAGISTRATE COURT, OTTAPALAM.`| |`ANNEXURE A2`|`COPY OF THE RESOLUTION DATED 05.04.2017`| ||`PASSED AT THE GENERAL BODY MEETING OF THE`| ||`COMPANY PREESA FOODS AND SPICES (INDIA)`| ||`PRIVATE LIMITED.`| |`ANNEXURE A3`|`CERTIFIED COPY OF THE SUIT O.S.NO.258 OF`| ||`2017 BEFORE THE MUNSIFF COURT, OTTAPALAM`| ||`FILED BY THE 2ND RESPONDENT.`| |`ANNEXURE A4`|`TRUE COPY OF THE LAWYER NOTICE DATED`| ||`18.04.2017`| |`ANNEXURE A5`|`CERTIFIED COPY OF THE REPLY NOTICE DATED`| ||`04.05.2017`| |`ANNEXURE A6`|`CERTIFIED COPY OF THE DISHONOURED CHEQUE`| ||`DATED 28.03.2017 BEARING NUMBER 418935`| ||`DRAWN IN THE CURRENT ACCOUNT NUMBER`| ||`30781221971 OF STATE BANK OF INDIA,`| ||`OTTAPALAM BRANCH FOR RS.1,49,560/-.`| |`ANNEXURE A7`|`CERTIFIED COPY OF THE CHEQUE RETURN MEMO`| ||`ISSUED BY THE AXIS BANK, NILAMBUR`| ``` RESPONDENTS’ ANNEXURES: NIL ``` ``` TRUE COPY ``` ``` P A TO JUDGE ```