1. The instant Cri. O.P is to quash the proceedings in C.C No. 413 of 1997 on the file of the Judicial Magistrate No. 1, Tuticorin. This Cri. O.P has arisen in this way: A complaint has been preferred by the respondent herein against five accused. Accused No. 3, M/s. Karthick Fisheries, and Accused No. 5, M/s. Karthick Multi Packs Pvt. Ltd., are companies. Accused No. 1, N.K Kumar, is the Managing Director of Accused No. 3 and one of the Directors of Accused No. 5. Accused No. 2 is the Director of Accused No. 3 and Accused No. 5. Accused No. 4 is also a Director of Accused No. 5. Accused No. 3, M/s. Karthick Fisheries incurred debt to the tune of Rs. 42,31,737.00 with the complainant/respondent herein in purchasing prawns. The accused made certain payments. As on April, 1996, the outstanding due from Accused No. 3 was Rs. 22,12,000/-. As the Chairman-cum-Managing Director of Accused No. 5, i.e M/s. Karthick Multi Packs Pvt. Ltd., Accused No. 1 issued a cheque for the said amount on 14-6-1997 drawn on Bank of Madura Ltd., T. Nagar, Madras. The Complainant/respondent herein presented the cheque through the Indian Bank, Melur, Tuticorin On 2-7-1997, the cheque was returned with an endorsement as “Funds Insufficient”. The complainant/respondent herein sent a legal notice to all the accused on 14-7-1997. But for the second accused, the others received the notice on 19-7-1997. The respondent preferred a complaint under Section 200, Cr. P.C against Accused Nos. 1 to 5 alleging that all the accused have committed an offence under Section 138 of the Negotiable Instruments Act. The learned Judicial Magistrate No. I, Tuticorin took cognizance of the matter and issued summons for appearance of the accused.
2. At this stage, Accused No. 2 has come forward with this Criminal Original Petition to quash the proceedings on the following grounds:—
(i) The statutory notice was not served on him;
(ii) The proceeding was instituted against him after his resignation on 6-11-1996. He was not in charge of the affairs of the company.
and (iii) The dues were in respect of Accused No. 3 company and the cheque was issued by a different entity viz., Accused No. 5 company, and therefore, the cheque was not issued for any legally enforceable debt.
3. Heard both the sides. Mr. K. Sridhar, learned counsel for the petitioner submitted that the petitioner has not been served with any notice at all and as such, no demand was made to him to make payment and sans payment, cause of action for offence does not arise. In support of his contention, the learned counsel for the petitioner cited the decision reported in B. Adhikari v. Ponraj, 1996 Cri LJ 180 (Mad). In that case, the notice sent to the drawer was returned as not found. N. Arumugham, J. has held that no notice was served upon the drawer as contemplated under sub-clauses (b) and (c) of Section 138 of the Negotiable Instruments Act, which would mean that there was no demand for payment.
4. On the other hand, Mr. A.D Jagadish Chandira, learned counsel appearing for the respondent, vehemently contended that once when notice was given to the company, notice need not be given to the Director individually, In support of his contention, the learned counsel for the respondent cited a decision report in Suraj Theatre v. Kakarla Bhorathe, 1998 Cri LJ 43. wherein a learned single Judge of the Andhra Pradesh High Court was of the view that in case of a complaint against a firm, notice need not be issued to each of the partners by virtue of Explanation (a) to sub-Section (2) of Section 141 of the Act, which reads that “company” means any body corporate and includes a firm or other association of individuals. What has been stated with respect to the firm would equally apply to a company also.
5. Under similar circumstances, the Delhi High Court in Jain Associated v. Deepak Chaudhary and Co., (2000) 2 Crimes 374 has held that Section 141 of the Act is a deeming provision holding every person who was in charge of and was responsible to the Company for the conduct of the business of the Company or partnership-firm as well as the firm shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly, and that Section 141 does not require that each and every partner of the firm is required to be issued with notice. This view has been expressed in the light of the observation of the Supreme Court made in Electronic Trade and Technology Development Corpn. Ltd., Secunderabad v. Indian Technologists and Engineers (Electronics) P. Ltd., 1996 J.C.C 155 : (1996 Cri LJ 1692).
6. It would thus appear that once when notice is stated to have been served on accused Nos. 3 and 5 companies, notices to the Individual Directors are not necessary to fasten them with liability. In the instant case, it is averred in the complaint that the statutory notice was issued and all the other accused received the notice, whereas the petitioner herein evaded the notice.
7. In Bhaskaran, K. v. Sankaran Vaidhyan Balan, 1999 (3) CTC 358 : (1999 Cri LJ 4606) the Apex Court has held that a person notifies or gives notice to another by taking such steps as may be reasonably required to inform the other in the ordinary course, whether or not such other actually comes to know of it and that a person “receives” a notice when it is duly delivered to him or at the place of his business. There Lordships of the Apex Court has pointed out that if a strict interpretation is given that the drawer should have actually received the notice for the period of 15 days to start running no matter that the payee sent the notice in the correct address a trickster cheque drawer would get the premium to avoid receiving the notice by different strategies and he could escape from the legal consequences of Section 138 of the Act, and that it must be borne in mind that Court should not adopt an interpretation which helps a dishonest evader and clips an honest payee as that would defeat the very legislative measure. It was also pointed out by their Lordships of the Apex Court that when a notice is returned by the sendee as unclaimed such date would be the commencing date in reckoning the period of 15 days contemplated in clause (d) to the proviso of Section 138 of the Act.
8. Even as per the provision of Section 98 of the Negotiable Instruments Act, notice of dishonour is not necessary when the party entitled to notice cannot after due search be found.
9. In Senniappan v. Sree Mahasakthi Yarn Stores (M/S), 1999 (1) Mad WN (Cri) 211, M. Karpagavinayagam, J. has pointed out that the question whether or not notice was issued and served on the petitioner therein is a question of fact which cannot be decided in the proceedings under Section 482 of the Code of Criminal Procedure and the matter has to be gone into at the time of the trial.
10. In K. Pannir Selvam v. M.M.T.C Ltd., (2000) 2 Crimes 354 : (2000 Cri LJ 1002), the Andhra Pradesh High Court has also pointed out that the question whether or not there is service of notice has to be decided by the trial Court on the basis of the evidence.
11. In the instant Case, all the other accused have received the notice. But the notice sent to the petitioner herein alone had been returned. The questions whether or not the notice was returned with culpable mind adopting strategy of subterfuge to successfully evade notice or whether notice was returned in the usual course, are all matters to be gone into at the time of the trial.
12. Evasion of notice would amount to constructive notice and thus the question whether there had been constructive notice or not has to be considered by the trial Court. On that score, the proceeding cannot be quashed.
13. Regarding the next contention that the proceedings was instituted against the petitioner after his resignation on 6-11-1996 and therefore, he was not in-charge of the affairs of the companies, the learned counsel for the petitioner produced form No. 32 and other documents kept at the office of the Registrar of the Companies to show that he had seized to be so and cited a decision reported in Nucor Wires Limited v. HMT (International) Limited, (1998) 2 Kant LJ 337, where the Karnataka High Court has held that it must be shown that Directors are in-charge of and responsible for conduct of business of Company at relevant time, that allegations against them must be specific that commission of offence was with their knowledge and connivance and that Penal provisions are to be construed strictly and there is no provision for fixing vicarious liability.
14. Per contra, in Rajesh Bajaj v. State, NCT of Delhi, 1999 (1) Andh LT (Cri) 301 (SC) : (1999) 3 SCC 259 : AIR 1999 SC 1216 : (1999 Cri LJ 1833), the Apex Court has held that in a petition under Section 482 of Cr. P.C it is not permissible to adopt a strictly hyper-technical approach and “seive the complaint through a cullendar of finest gauzes for testing the ingredients” of the offence alleged against the accused, and that as to whether the person in question was really in-charge of the affairs of the company and was responsible to the affairs of the Company or not, and as to what functions, he was assigned in the affairs of the Company and whether those functions could be considered sufficient to hold that he was in charge of the affairs of the company are matters which have to be gone into during the trial.
15. The same view has been expressed by the Andhra Pradesh High Court in K. Pannir Selvam v. M.M.T.C Ltd., (2000) 2 Crimes 354 : (2000 Cri LJ 1002) wherein it was held that minute dissection of statement in complaint could not be undertaken in quashing proceedings. The Andhra Pradesh High Court was of the view that when a plea was raised that the accused ceased to be a Director, it is a matter to be decided during the trial.
16. In Nucor Wires, Limited v. HMT (International) Limited (1998 (2) Kant J 337) cited supra, though the Karnataka High Court reiterates that there should be specific allegations in the complaint to the effect that the Directors are in-charge of and responsible for thg conduct of the business at the relevant time, the further observation that allegation against them must be specific that commission of offence was with knowledge and connivance of the Directors is not convincing to me, because so far as that aspect is concerned, the burden lies upon the accused and he has to discharge the burden at the relevant time in the course of the trial. Of course, to inculpate the Directors, there should be an allegation that they were in-charge of and responsible for the conduct of the business of the company at the relevant time. I have carefully gone through the complaint. The necessary averments made in the complaint that A.1, A.2 and A.4 are the Directors of A.5 companies. The petitioner is the Director of A.3 and A.5 company and they were in-charge of the affairs of the company.
17. The third and last contention raised by the petitioner is that the dues were in respect of Accused No. 3 company, viz., M/s. Karthick Fisheries and the cheque was issued by a different entity, i.e Accused No. 5, M/s. Karthick Multi Packs Pvt. Ltd. It is contended by the learned counsel for the petitioner that such liability is not a legally enforceable liability and the cheque was not issued for legally enforceable debt. In the instant petition, the petitioner had conceded that he is a Director of both A.3 and A.5 companies. He admits that Accused No. 1, the person issued the cheque, was also a Director of both the companies.
18. Section 138 of the Negotiable Instruments Act and the explanation thereto recites as under:—
“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 one year, or with fine which may extend to twice the amount of the cheque, or with both:
PROVIDED……………
EXPLANATION: For the purpose of this section, debt or other liability “means a legally enforceable debt or other liability.” The requirement for offence to be made out under this Section is that the cheque must be drawn “for the discharge, in whole or in part, of any debt or other liability”. This section does not say that the cheques should have been drawn for the discharges of any debt or other liability of the drawer towards the payee. Even in Section 139 of the Negotiable Instruments Act, by which a legal presumption is created, the Parliament has only fixed the presumption that the cheque was issued “for the discharge, in whole or in part, or any debt or other liability”. This would mean that the debt or other liability includes the due from any other person. It is not necessary that the debt or liability should be due from the drawer himself. It can be issued for the discharge of any other man's debt or liability. Legally enforceable debt or liability would have a reference to the nature of the debt or liability and not the person against whom the debt or liability can be enforced.
19. In K. Krishna Bai v. Arti Press, 1991 Mad LW (Cri) 513, it was held that the impugned cheque issued by M/s. Mudra Graphics Private Limited account for a legally enforceable debt of M/s. Surya Advertising Private Limited would come within the purview of Section 138 of the Negotiable Instruments Act. Therefore, I do not find any force in the contention of the learned counsel for the petitioner that the cheque was issued from and out of the funds of the Accused No. 5 company, but the debt was due from the Accused No. 3 company and therefore, so far as Accused No. 5 Company and the petitioner are concerned, there was no legally enforceable debt. In my considered opinion, the petitioner has not made out a case to quash the proceedings. Accordingly this Criminal Original petition is dismissed. Consequently, Cri. M.P No. 5136 of 1999 is also dismissed.
20. Petition dismissed.