Full Judgment Text
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CASE NO.:
Appeal (crl.) 1424 of 2007
PETITIONER:
M/s. Sarav Investment & Financial Consultants Pvt. Ltd. & Anr
RESPONDENT:
Llyods Register of Shipping Indian Office Staff Provident Fund & Anr
DATE OF JUDGMENT: 11/10/2007
BENCH:
S.B. Sinha & Harjit Singh Bedi
JUDGMENT:
J U D G M E N T
[Arising out of SLP(Crl.) No. 6791 of 2006]
S.B. SINHA, J
1. Leave granted.
2. Respondent filed a complaint petition in the 33rd Court of Learned
Metropolitan Magistrate at Ballard Pier, Mumbai against the appellant
herein alleging, inter alia, that as nine cheques delivered by him having
bounced, they have committed an offence under Section 138 of the
Negotiable Instruments Act (hereinafter referred to as \023the Act\024).
3. It was alleged that a notice was served asking the appellants to pay the
amount in question within a period of 15 days from the date of receipt
thereof.
4. Cheques were admittedly issued on 16.3.2000. The memo in regard
to non-payment of the said cheques was received by the respondent on
16.3.2000. Legal notices were allegedly issued on 30.3.2000 by the
respondent\022s Advocate intimating the appellants as regards the dishonour of
the said cheques and calling upon them to make payment of the amount of
cheque, stating;
4. Our clients presented all the aforesaid cheques for payment
on 16th March, 2000 through their bankers, Saraswant Co-op
Bank Ltd., Woli Branch, Mumbai 400 018. All the
aforesaid cheques were dishonoured and returned to our
clients by their bankers, vide advice dated 16th March, 2000,
with the remark \023Funds Insufficient\024, which was received by
our clients on 16/3/2000.
5. Under these circumstances, we hereby give you notice under
section 138 of the Negotiable Instruments Act, 1881, as
amended to date to make payment of the said sum of Rs.
5,31,47,792/- payable by you to our clients being the
aggregate amount of the aforesaid dishonoured cheques,
together with interest thereon at the rate of 18% p.a. from
16th March 2000, within fifteen days of receipt of this notice
by you, failing which our clients shall be constrained to
initiate criminal proceedings against you under section 138
of the Negotiable Instruments Act, 1881 at your entire risk
as to costs and consequences.
5. The said notice was not sent under registered cover with
acknowledgment due. Even the couriers\022 service was not availed.
Employees belonging to M/s. Mulla & Mulla & Craigie Blunt & Caroe,
Advocates for the respondents were asked to serve notices. Affidavit of
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service was filed on 8.5.2000. Ramchandra Damaji Khadpe, one of the
employees of the Lawyers Firm affirmed on affidavit in that behalf stating:-
\0232. I say that I went to 34, Adarsh Nagar Worli, Mumbai,
25 being the address of and furnished by Arvind Naik
the Director of M/s Sarav Investment and Financial
Consultancy Pvt. Ltd. However the said premises were
locked. On making enquiries with the neighbour it was
found that they had shifted to Bhatachi Chawl in Worli.
I say that I also went to this address, however even
there accused. Arvind Naik was not available and after
making enquiries from the occupants I understood that
Accused Arvind Naik had sold the premises and was no
longer available there.
4. In view of the above I say that the said notice has been
duly served upon Mr. Arvind Naik Director of M/s.
Sarav Investments & Consultancy Pvt. Ltd. the said
service upon them has been duly completed in
accordance with law.
6. Vilas Salvi, another employee of the firm, in his affidavit stated:-
\0232. I say that I went to 407, Jayesh Smruti, Near Bhagshala
Ground, Dombivili (W), Thane being the address of the
registered office of Sarav Investment & Financial
consultancy Pvt. Ltd. as furnished by accused No. 2
However, there was no office and the door was
answered by a lady who was not for with any
information and also refused to accept service of the
letter.
4. In view of the above I say that the said notice has been
duly served upon Mr. Arvind Naik Accused No. 2
Director of M/s. Sarav Investments & Consultancy Pvt.
Ltd. and upon the company Accused No. 1. The said
service upon them has been duly completed in
accordance with law.
7. The complaint petition was filed on 9.4.2000. In regard to the alleged
service of notice, it was stated:-
\0236. The said notice was sent to Accused Nos. 1 and 2 by
Hand Delivery, but to the shock of the representatives
of the advocates of the complainant who visited to the
premises of the Accused to deliver the said notice to the
accused, the premises of the Accused No. 1 were closed
and the Accused No. 2 was also not available at that
address. I say the accused No. 2 has, deliberately and
intentionally, shifted premises of Accused No. 1 to
avoid the service of the notice upon him and the
accused No. 1 company. The complainant relies upon
the affidavit of the representative of the Advocates of
the Complainant trust who visited the premises of the
Accused No. 1 to serve the statutory notice upon the
accused.\024
8. Relying on or on the basis of the purported statements made on the
complaint petition as also the affidavits of the aforementioned two clerks,
cognizance was taken by the learned Metropolitan Magistrate, 33rd Court
Ballard Pier, Mumbai on 24.4.2003.
9. Appellants having been summoned, filed an application for recalling
of the processes served on them inter alia on the premise that the
requirements to comply with proviso (c) appended to Section 138 of the Act
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having not been complied with, issuance of summons was illegal.
10. By an order dated 24.4.2003, the said plea was rejected by the learned
Magistrate stating:
\02310. The second point raised by the accused is that
the statutory notice under section 138 was not served
on the accused. In this regard it is to be noted that the
service was effected by hand delivery. It is also
contended in the complaint that it was at the hands of
one Ramchandra Khadpe and one Vilas Salvi.
Affidavit of those two process servers were filed
along with the complainant and statement on oath of
Vilas Salvi and Khadpe was recorded in the respective
cases. Thereafter on satisfaction the process was
issued upon relying the fact that on the given address
of the accused no. 1 in Dombivali the notices were
tendered and a lady who opened the door of that
tenement did not accept the notice and closed the
door. This much statement made by them was
sufficient to show prima facie attempt for service of
the statutory notice was done by the complainant. \023
11. A Criminal Revision Application was filed thereagainst before the
learned Sessions Judge, Bombay on 29.5.2003. By an Order dated 1.4.2004,
the learned Sessions Judge, Greater Bombay on consideration of the facts
and circumstances of the case, inter alia allowed the said revision application
opining:-
16. The legal position is therefore as above and what
follows from it is that the deemed service may only be
considered when it is by post and only then all the
observations in the above argument can become relevant.
The ratio of this judgment cannot be made applicable to a
case where a service is not by post. When the service is
alleged to be by hand delivery then it is a question of fact
and not a question of law. On facts the position is as
mentioned above. What is already discussed above
indicates that factually, there is no material on record
neither in the complaint nor in whatever evidence that
was produced by the complainant to satisfy the condition
of service of notice within 15 days of the receipt of
information of dishonour. This was not at all verified or
examined by the Ld. Magistrate. Had it been done the
abovementioned glaring defects were there for anyone to
see. Suffice is to say relying upon abovementioned
observations of the Hon\022ble Supreme Court that the
service of notice within the period is a sine quo non.
There is no alternative but to say that whatever material
was before the Ld. Magistrate it did not satisfy this
condition at all. Even before me now after considering
all these aspects the only conclusion can be that the said
condition satisfied. This position as discussed above
does not depend upon any contentions raised by the
accused but they follow from the material that was
produced or made available to the trial Court by the
complainant themselves. The question here is not of
believing or disbelieving the evidence that is produced by
the complainant though one may say that the so called
evidence of attempt of service is far from being free from
doubt. But I am not passing this order on that ground. I
have considered only the complainant before the trial
court. On examination of only that material and the
complainant\022s case it has to be held that since the most
important aspect was not even part of the complainant\022s
case in the trial court as discussed above the process
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could not have been issued in the first instance and at
least after the application for recall was made it had to be
recalled. In the result the revision applications must
succeed. I therefore pass the following order.\024
12. The High Court on the second revision filed by the respondent herein,
however, passed the impugned order stating;
\023\005To my mind, the averments made in the complaint
together with affidavit of the advocate and the evidence
and the document and the verification etc. clearly
mention that the service of the notice was by hand
delivery, would be sufficient for issuance of process
against the respondents\005\024
13. Mr. K. Radhakrishnan, learned senior counsel appearing on behalf of
the appellant, inter alia, would submit that keeping in view the provisions
contained in clauses (b) and (c) of the proviso appended to Section 138 of
the Negotiable Instruments Act, the impugned judgment of the High Court is
not sustainable.
14. Ms. Sunita Dutt, learned counsel appearing on behalf of the
respondent, on the other hand, would submit that the very fact that the
appellants have changed their office as a result whereof service of notice
could not be effected, the learned Magistrate has rightly taken cognizance of
the offence. The learned counsel would contended that affidavits have been
affirmed by the clerks working with the advocates of the respondents and
they were competent to serve notices upon the appellants herein which sub-
serve the requirements of law. Non-availability of the appellants at their
respective addresses, it was urged, would give rise to a presumption that
they had been evading service of notice. It was furthermore contended that
while determining the issue this Court should take into consideration the
quantum of the amount payable by the appellants to the respondents as also
their conduct that they were defaulters to third parties and on that premise
the impugned judgment may not be interfered with.
15. Section 138 of the Negotiable Instruments Act reads as under:-
\023138. Dishonour of cheque for insufficiency, etc., of funds
in the account \026 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 be extended to
two years, 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 \026
(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 in due course of the cheque, as
the case may be, makes a demand for the payment of
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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 cheque 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.
16. Section 138 of the Act contains a penal provision. It is a special
statute. It creates a vicarious liability. Even the burden of proof to some
extent is on the accused. Having regard to the purport of the said provision
as also in view of the fact that it provides for a severe penalty, the provision
warrants a strict construction. Proviso appended to Section 138 contains a
non-obstante clause. It provides that nothing contained in the main
provision shall apply unless the requirements prescribed therein are
complied with. Service of notice is one of the statutory requirements for
initiation of a criminal proceeding. Such notice is required to be given
within 30 days of the receipt of the information by the complainant from the
bank regarding the cheque as unpaid. Clause (c) provides that the holder of
the cheque must be given an opportunity to pay the amount in question
within 15 days of the receipt of the said notice. Complaint Petition, thus,
can be filed for commission of an offence by a drawee of a cheque only 15
days after service of the notice. What are the requirements of service of a
notice is no longer res-integra in view of the recent decision of this Court in
C.C. Alavi Haji Vs. Palapetty Muhammed & Anr. [JT 2007(7) SC 498].
17. Service of notice in this case was not sought to be effected under
registered cover with acknowledgment due. It was sought to be done by the
agent of the complainant itself. The agent of the complainant sought to
serve the said notice through their own employees.
18. The notice, was only required to be dispatched. Its contents were
required to be communicated. Communication to the appellant about the
fact of dishonouring of the cheques and calling upon him to pay the amount
within 15 days is imperative in character. It is not a case, where, actual
communication was not necessary. Service of notice is a part of cause of
action for lodging the complaint.
19. In K. Bhaskaran Vs. Sankaran Vaidhyan Balan and Anr. [(1999) 7
SCC 510], importance of service of notice has been pointed out stating:-
\02319. In Black\022s Law Dictionary \023giving of notice\024 is
distinguished from \023receiving of the notice\024 (vide p.
621): \023A 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.\024 A person
\023receives\024 a notice when it is duly delivered to him or at
the place of his business.
20. 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 on 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. It must be borne
in mind that the court should not adopt an interpretation
which helps a dishonest evader and clips an honest payee
as that would defeat the very legislative measure.
21. In Maxwell\022s Interpretation of Statutes, the learned
author has emphasized that \023provisions relating to giving
of notice often receive liberal interpretation\024 (vide p. 99
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of the 12th Ed.). The context envisaged in Section 138 of
the act invites a liberal interpretation for the person who
has the statutory obligation to give notice because he is
presumed to be the loser in the transaction and it is for
his interest the very provision is made by the legislature.
The words in clause (b) of the proviso to Section 138 of
the Act show that the payee has the statutory obligation
to \023make a demand\024 by giving notice. The thrust in the
clause is one the need to \023make a demand\024. It is only the
mode for making such demand which the legislature has
prescribed. A payee can send the notice for doing his
part for giving the notice. Once it is dispatched his part
is over and the next depends on what the sendee does.\024
20. See also C.C. Alavi Haji (supra). Reference may also be made to
Municipal Corporation of Delhi Vs. Qimate Rai Gupta & Ors. [JT 2007 (9)
SC 496].
21. Appellant No. 2 is a Director of Appellant No. 1 - Company. He is
merely vicariously liable for the acts of the company. He could be
prosecuted only if the ingredients laid down in Section 141 of the Act are
satisfied.. See K. Srikanth Singh Vs. M/s. North East Securities Ltd. & Anr.
[(2007) 9 SCALE 371]
22. We may consider the effect of the nature of service of notice effected
by the employees of the Law Firm. Paragraph 2 of the affidavit affirmed by
Ramchandra Damaji Khadpe does not disclose as to when he had gone to
serve notice upon the appellant at 34, Adarsh Nagar, Worli, Mumbai. It
was stated that he having been told by the neighbour of the appellant Arvind
Naik that he had shifted to Bhatachi Chawl in Worli, went there also. He
did not disclose as to what was the new address. He did not furthermore
state when did he visit that place.
23. Affidavit of Shri Vilas Salvi is almost on the same terms. He also did
not say when he had gone to serve the notice on the company. According to
him, and, as has been noticed by the learned Sessions Judge himself, some
affidavit was taken from him on 7th May. It was affirmed on 8th May.
Apart from the fact that their exists a doubt as to whether the said affidavit
was affirmed before the competent authority or not, it has in our opinion
rightly been observed by the learned Sessions Judge that the same even if
taken to be correct in its entirety, it has to be informed. The notice was
sought to be served only on 7th May, 2000. The complaint petition filed by
the respondent on 9th May, 2000 was therefore, totally pre-mature.
24. Submission of the learned counsel for the respondent in regard to the
conduct of the appellant is besides the point. The allegations made in the
complaint petition, if did not subserve the requirements of law was not
maintainable and, thus, the same could not have been entertained. Proper
application of mind was necessary in that behalf by the learned Magistrate.
The learned Magistrate proceeded on the basis that the service of notice
upon the company at its registered office would subserve the requirements of
law. But, in this case, point taken by the appellant is a different one.
25. Conduct of the appellant, in our opinion, is not material for
determining the issue. Even no presumption can be raised in regard to the
service of notice as the same has not been effected in terms of the statute.
26. We, therefore, are of the opinion that impugned judgment cannot be
sustained which is set aside accordingly. The appeal is allowed.