Kerala High Court
Thomas Muttithadathil vs Malankara Plantations Limited on 23 March, 2012
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT:
THE HONOURABLE MR. JUSTICE ALEXANDER THOMAS
TUESDAY, THE 31ST DAY OF JANUARY 2017/11TH MAGHA, 1938
Crl.MC.No. 3955 of 2013
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S.T.NO. 1328/2012 OF THE JUDICIAL FIRST CLASS MAGISTRATE COURT-III,
KOTTAYAM
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PETITIONER(S)/ACCUSED NO. 4 & 5 :
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1. THOMAS MUTTITHADATHIL,
XIV/1473D, JOLLY BUNGALOW, WEST KARUVELIPADY,
KOCHI-682 005, WITHIN THE PALLURUTHI POLICE STATION LIMITS.
2. VALAYIL MATHAI MATHEW,
VALAYIL HOUSE, PERINGOLE, KOLENCHERRY-682311,
WITHIN THE AMBALAMUGAL POLICE STATION LIMITS.
BY ADVS. SRI.SAJI MATHEW
SRI.DENU JOSEPH
RESPONDENT(S)/COMPLAINANT & STATE :
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1. MALANKARA PLANTATIONS LIMITED,
MALANKARA BUILDINGS, KODIMATHA, KOTTAYAM-686 001,
REPREENTED BY ITS ATTORNEY SRI. NIKHIL GEORGE.
2. STATE OF KERALA,
REPRESENTED BY PUBLIC PROSECUTOR,
HIGH COURT OF KERALA, ERNAKULAM-682 031.
R1 BY ADVS. SRI.V.ABRAHAM MARKOS
SRI.BINU MATHEW
SRI.TOM THOMAS (KAKKUZHIYIL)
SRI.ABRAHAM JOSEPH MARKOS
SRI.ABRAHAM VARGHESE THARAKAN
R2 BY PUBLIC PROSECUTOR SRI. SAIGI JACOB PALATTY
THIS CRIMINAL MISC. CASE HAVING BEEN FINALLY HEARD
ON 31-01-2017, THE COURT ON THE SAME DAY PASSED THE
FOLLOWING:
Msd.
Crl.MC.No. 3955 of 2013
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APPENDIX
PETITIONER(S)' ANNEXURES :
ANNEXURE A: TRUE COPY OF THE COMPLAINT AS S.T NO. 1328/12 ON
THE FILE OF THE JUDICIAL FIRST CLASS MAGISTRATE
COURT III, KOTTAYAM, FILED BY THE 1ST RESPONDENT.
ANNEXURE B: TRUE COPY OF THE LEGAL NOTICE DATED 23/03/2012
ISSUED ON BEHALF OF THE 1ST RESPONDENT.
RESPONDENT(S)' ANNEXURES :
NIL
//TRUE COPY//
P.A.TO JUDGE
Msd.
CR
ALEXANDER THOMAS, J.
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Crl.M.C.No.3955 of 2013
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Dated this the 31st day of January, 2017
O R D E R
The petitioners herein are accused Nos.4 and 5 in S.T.No.1328 of 2012 on the file of the Judicial First Class Magistrate Court-III, Kottayam, instituted on the basis of a complaint filed by the first respondent herein alleging offence under Section 138 of the Negotiable Instruments Act.
2. According to the complainant, the cheque in question for an amount of Rs.1.5 Crores was issued on behalf of the first accused Company (M/s.Team Sustain Ltd.) and accused Nos. 2 to 5 were stated to be the directors of the first accused Company who were actively involved in the day to day affairs of the running of the Company.
3. It is now pointed out by Sri.Denu Joseph, learned counsel appearing for the petitioners, that the second petitioner herein (accused No.5) is no more and that his name may be struck out from the party array.
4. In view of the submission made on behalf of the second petitioner/5th accused, it is ordered that the Registry will ensure that the Crl.M.C.No.3955/2013 :2: name of the second petitioner is deleted from the party array.
5. The basic contention urged by the petitioner is that the impugned Annexure A complaint has been filed by the first respondent without fulfilling the mandatory requirement of statutory notice under clause (b) of the proviso to Section 138 as well as Section 93 of the Negotiable Instruments Act. It is alleged that the court below has proceeded to take cognizance and issued summons to the accused without considering the crucial aspect regarding lack of statutory notice to the accused. It is urged that Annexure B notice has been issued by the first respondent only to the first accused Company and not to the other four accused who are alleged to be the directors of the Company. Accordingly, it is urged that the action of the court below in taking cognizance and issuing summons to the petitioner is illegal and ultravires, etc.
6. Heard Sri.Denu Joseph, learned counsel appearing for the petitioner/accused, Sri.V.Abraham Markos, learned counsel appearing for the first respondent/complainant and Sri.Saigi Jacob Palatty, learned prosecutor appearing for the second respondent/State.
7. It is the case of the complainant that the complaint has been instituted on the basis of the cheque in question which has been issued to meet the liability of the first accused Company. Further it is Crl.M.C.No.3955/2013 :3: the case of the complainant that accused Nos.2 to 4 are the directors of the first accused Company who are actively running the day to day affairs of the said Company and that therefore, they are also vicariously liable in terms of the provisions contained in Section 141 of the Negotiable Instruments Act. The issue as to whether the individual directors of the Company are who arrayed as co-accused in cases where the offence under Section 138 of the Negotiable Instruments Act is alleged against the Company, should be given demand notice as per Section 138 proviso (b) has been considered and decided by the Apex Court in the case Kirshna Texport & Capital Markets Ltd. V. Ila A.Agrawal and others reported in 2015 (2) KLT 543 = 2015 (2) KLJ 534 = 2015 (2) KHC 793 = (2015) 8 SCC 28. A contention was urged that it has been held earlier by the Apex Court in the case N.K.Wahi v. Shekhar Singh and others reported in (2007) 9 SCC 481 = AIR 2007 SC 1454 = (2007) 3 SCC (Cri.) 203 that it was obligatory to issue separate notices to the directors in addition to the notice to the Company. Considering the issue, the Supreme Court held in Kirshna Texport & Capital Markets Ltd.'s case (Supra) that the reason for creating vicarious liability is plainly that a juristic entity, that is a Company would be run by living persons who are in charge of its affairs and who guided the actions of that Company and that if such juristic Crl.M.C.No.3955/2013 :4: 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 of the Negotiable Instruments Act again does not lay down any requirement that in such eventuality, the directors must individually be issued separate notices under Section 138 of the Negotiable Instruments Act and 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 and that 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 Section 138. Section 138 of the Negotiable Instruments 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 Negotiable Instruments Act and such directors who are in charge of affairs of the Company and responsible for the affairs of Crl.M.C.No.3955/2013 :5: the Company would be aware of the receipt of notice by the Company under Section 138. Therefore, it was held that 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. It was also held in paragraph 9 of Kirshna Texport & Capital Markets Ltd.'s case (Supra) that the Apex Court in N.K.Wahi's case (Supra) has not considered this issue at all, etc.
8. Going by the legal principles laid down by the Apex Court in Kirshna Texport & Capital Markets Ltd. v. Ila A.Agrawal and others (Supra), notice to the drawer Company should be treated as constructive notices on all the other directors or in charge of the affairs of the Company, as they are in charge of the day to day affairs of the said Company. It will be profitable to refer to paragraphs 13 to 16 of the said judgment of the Apex Court in Kirshna Texport & Capital Markets Ltd. v. Ila A.Agrawal and others (Supra), which read as follows :
"13. With these principles in mind, we now consider the provisions in question. According to S.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 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 said notice, the stages stipulated in the proviso stand fulfilled. The notice under S.138 is required to be given to "the drawer" of the cheque so as to give the drawer an opportunity to make the payment Crl.M.C.No.3955/2013 :6: and escape the penal consequences. No other person is contemplated by S.138 as being entitled to be issued such notice. The plain language of S.138 is very clear and leaves no room for any doubt or ambiguity. There is nothing in S.138 which may even remotely suggest issuance of notice to anyone other than the drawer.
14. S.141 states that if the person committing an offence under S.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. 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.
15. 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 S.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 S.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 S.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 consequence. Under Clause (a) of S.142, the complaint must be filed within one month of the date on which the cause of action arises under the third proviso to S.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. Futhermore, unlike proviso to Clause (b) Crl.M.C.No.3955/2013 :7: of S.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.
16. In our view, 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 indiviudual 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 contruction nor on the touch stone of purposive construction such requirement could or ought to be read into S.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 and Others v.M/s.Shasun Chemicals and Drugs Ltd. (supra) was incorrect and it stands overruled. The appeal is allowed in these terms."
9. A similar view has also been earlier taken by this Court in the judgments in Target Overseas Exports (P) Ltd. V. Iqbal reported in 2005 KHC 530 and Susan Zachariah and others v. M/s.Muthoot Capital Services Ltd. and another reported in 2012 (3) KHC 870, etc. that once under Section 138 proviso (b) statutory notice has been issued to the drawer Company, there is no necessity to issue separate notices to the individual directors who was sought to be vicariously liable for the action of the Company in question, etc. Madras High Court in the case Raman v. Shashun Chemicals reported in 2006 Crl.L.J. 4552 had taken a contra position and the said view of the judgment of the Madras High Court has also been referred to in paragraph 4 of the Crl.M.C.No.3955/2013 :8: judgment of the Apex Court in Kirshna Texport & Capital Markets Ltd. v. Ila A.Agrawal and others (Supra) and the said view of the Madras High Court has not been accepted by the Supreme Court, etc.
10. However, Sri.Denu Joseph, learned counsel appearing for the petitioner, would further contend that the Apex Court has not considered the impact of Section 93 of the Negotiable Instruments Act, 1881 and that therefore, the said judgment of the Apex Court is per incuriam, etc. Section 93 of the Negotiable Instruments Act, 1881 reads as follows :
"93. By and to whom notice should be given :- When a promissory note, bill of exchange or cheque is dishonoured by non- acceptance or non-payment, the holder thereof, or some party thereto who remains liable thereon, must give notice that the instrument has been so dishonoured to all other parties whom the holder seeks to make severally liable thereon, and to some one of several parties whom he seeks to make jointly liable thereon.
Nothing in this section renders it necessary to give notice to the maker of the dishonoured promissory note, or the drawee or acceptor of the dishonoured billl of exchange or cheque."
11. On a reading of the abovesaid Apex Court judgment in Kirshna Texport & Capital Markets Ltd. V. Ila A.Agrawal and others (Supra), this Court is not inclined to accept the plea made by the petitioner that the said judgment is per incuriam merely because it does not refer to the provision contained in Section 93 of the Negotiable Instruments Act. The law laid down by the Apex Court is binding on all authorities and fora including this Court by virtue of the mandate Crl.M.C.No.3955/2013 :9: contained in Article 141 of the Constitution of India. Therefore, this Court is of the view that the said plea taken up by the petitioner cannot be countenanced. That apart, this Court is of the view that for making out a criminal offence under Section 138 of Chapter XVII of the Negotiable Instruments Act, the provisions contained in that Section as well as in other related provisions in that Chapter will be the special law that governs the field. So far complying with the requirement of demand notice before institution of the criminal complaint for such offence, only the requirements in Section 138 proviso need alone be complied with. In such cases, the provisions in Section 93 contained in Chapter VII of the Negotiable Instruments Act cannot be viewed as mandatory and can only be seen as directory, as far as the requirements of demand notice for the cause of action in respect of the criminal offence in Section 138 of the Act.
12. Accordingly, it is only to be held that the contentions urged by the petitioner are devoid of any merit. However, it is made clear that if the petitioner has the case that the alleged offence was committed without his knowledge or that he had exercised all due diligence to prevent the commision of such offence or any other valid defence, that would be a matter of evidence to be considered at the appropriate stage of the trial and not at this stage and any such contentions of the Crl.M.C.No.3955/2013 :10: petitioner are reserved to be raised by him at the appropriate stage before the trial court.
With these observations and directions, the Crl.M.C. stands dismissed.
ALEXANDER THOMAS JUDGE csl