whether notice under Section 138 of the
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.
“138. Dishonour of cheque for insufficiency, etc., of funds in the accounts
Where any cheque drawn by a person on an account maintained by him with a
banker for payment of any amount of money to another person from out of
that account for the discharge, in whole or in part, of any debt or other
liability, is returned by the bank unpaid, either because of 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 nothing contained in this section shall apply unless-
(a) The 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.
(b) The payee or the holder induce course of the cheque, as the case may
be, 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 thirty days” of
the receipt of information by him from the 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 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 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 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), 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 attribute to, any neglect on the part of, any director, Manager,
secretary, or other office 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 purpose of this section. –
(a) “Company” 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.”
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 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 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 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.
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 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.
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 that point to issue notices
to all the directors, whose names the payee may not even be aware of at
that stage. Under Second proviso to Section 138, the notice of demand has
to be made within 30 days of the dishonour of cheque and the third proviso
gives 15 days time to the drawer to make the payment of the amount and
escape the penal consequences. Under clause (a) of Section 142, the
complaint must be filed within one month of the date on which 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.
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 construction nor on the touch stone of purposive construction such
requirement could or ought to be read into Section 138 of the Act.
Consequently this appeal must succeed. The order passed by the High Court
is set aside. Since the matter was at the stage of considering application
for leave to appeal and the merits of the matter were not considered by the
High Court, we remit the matter to the High Court for fresh consideration
which may be decided as early as possible. Concluding so, we must record
that the decision of the Division Bench of the Madras High Court in B.
Raman & Ors. Vs. M/s. Shasun Chemicals and Drugs Ltd. (supra) was incorrect
and it stands overruled. The appeal is allowed in these terms.- 2015 S.C.MSKLAWREPORTS
