1999 JTR(SC) 304
2000 1 AICLR 782 ; 1999 AIR(SC) 2182 ; 1999 AIR(SCW) 2201 ; 2000 1 ALD(Cri)(SC) 19 ; 2001 1 AllCJ 845 ; 1999 98 CompCas 573 ; 1999 CriLR 222 ; 1999 CrLJ 3498 ; 1999 3 CTC 179 ; 1999 2 CurLJ 467 ; 1999 DCR 34 ; 1999 3 EastCrC(SC) 306 ; 2000 ISJ(Banking) 217 ; 1999 10 JT 236 ; 2000 1 MWN(Cri) 21 ; 1999 2 OLR 338 ; 1999 4 RCR(Cri) 114 ; 1999 RLR 310 ; 2000 3 RLW(Raj) 407 ; 1999 2 Scale 250 ; 1999 5 SCC 693 ; 1999 SCC(Cri) 1034 ; 1999 KHC 1676 ; 1999 1 KLT(Online) 977 ; 1999 9 Supreme 469
1999(9) Supreme 469
SUPREME COURT OF INDIA
B.N. Kirpal and S. Rajendra Babu, JJ.
Bilakchand Gyanchand Co. -Appellant
versus
A. Chinnaswami -Respondent
Criminal Appeal Nos. 297-298 of 1999
(@ SLPs (Crl.) Nos.1812-1813 of 1998)
Decided on 12-3-1999
IMPORTANT POINT
Where cheque was signed by M.D. of Company and notice of dishonour and demand was issued and complaint was lodged in name of M.D., it could not be said that notice u/s 138 of Negotiable Instrument was not proper so as to quash process against M.D.
Act
Referred
:CRIMINAL PROCEDURE CODE : S.482
NEGOTIABLE INSTRUMENTS ACT : S.138, S.142
(A) Under the Negotiable Instruments Act, 1881, Section 138 creates liability for dishonour of a cheque due to insufficient funds, requiring a formal notice to the responsible signatory or entity, while Section 142 empowers authorities to investigate and recover proceeds; read with relevant provisions of the Criminal Procedure Code, a complaint before a Judicial Magistrate is maintainable against the signatory whose actions caused the dishonour, and an application under Section 482 Cr.P.C. lies only on well-established grounds, not merely on procedural objections to the notice or complaint.
(B) A notice directed to the signatory of a dishonoured cheque is validly served; the complaint under Section 138 is maintainable against the signatory; the High Court cannot interfere under Section 482 Cr.P.C. on slender grounds; and the proceedings must proceed expeditiously before the competent Magistrate.
Facts of the case:
Six cheques signed by the Managing Director of a corporate entity were dishonoured for insufficiency of funds and excess of arrangement. A notice was sent to the signatory at his office address, which was refused acceptance. A complaint was filed before the Judicial Magistrate under Section 138 read with Section 142 of the Negotiable Instruments Act, 1881, and a process was issued. The respondent moved to recall the process, and subsequently filed a petition under Section 482 Cr.P.C., which was allowed by the High Court, quashing the complaint. The appellant challenged this order.
Findings of Court:
The High Court erred in holding that the notice was not validly served on the entity. The complaint was maintainable against the signatory, and there was no infirmity warranting interference under Section 482 Cr.P.C. The appeal is allowed, and the order of the High Court is set aside.
Issues:
Whether a notice addressed to the signatory of a dishonoured cheque is valid service on the entity; whether the complaint before the Judicial Magistrate is maintainable; whether the High Court was correct in exercising Section 482 Cr.P.C. to quash the complaint.
Ratio Decidendi:
The complaint under Section 138 of the Negotiable Instruments Act is properly directed at the signatory whose conduct caused the dishonour, and the High Court was not justified in interfering under Section 482 Cr.P.C. on the presented grounds, so the proceedings before the Magistrate must continue.
Result:
Appeals allowed; High Court order quashed; case remanded to the Judicial Magistrate for expeditious disposal in accordance with law.
(A) Under the Negotiable Instruments Act, 1881, Section 138 creates liability for dishonour of a cheque due to insufficient funds, requiring a formal notice to the responsible signatory or entity, while Section 142 empowers authorities to investigate and recover proceeds; read with relevant provisions of the Criminal Procedure Code, a complaint before a Judicial Magistrate is maintainable against the signatory whose actions caused the dishonour, and an application under Section 482 Cr.P.C. lies only on well-established grounds, not merely on procedural objections to the notice or complaint.
(B) A notice directed to the signatory of a dishonoured cheque is validly served; the complaint under Section 138 is maintainable against the signatory; the High Court cannot interfere under Section 482 Cr.P.C. on slender grounds; and the proceedings must proceed expeditiously before the competent Magistrate.
Facts of the case:
Six cheques signed by the Managing Director of a corporate entity were dishonoured for insufficiency of funds and excess of arrangement. A notice was sent to the signatory at his office address, which was refused acceptance. A complaint was filed before the Judicial Magistrate under Section 138 read with Section 142 of the Negotiable Instruments Act, 1881, and a process was issued. The respondent moved to recall the process, and subsequently filed a petition under Section 482 Cr.P.C., which was allowed by the High Court, quashing the complaint. The appellant challenged this order.
Findings of Court:
The High Court erred in holding that the notice was not validly served on the entity. The complaint was maintainable against the signatory, and there was no infirmity warranting interference under Section 482 Cr.P.C. The appeal is allowed, and the order of the High Court is set aside.
Issues:
Whether a notice addressed to the signatory of a dishonoured cheque is valid service on the entity; whether the complaint before the Judicial Magistrate is maintainable; whether the High Court was correct in exercising Section 482 Cr.P.C. to quash the complaint.
Ratio Decidendi:
The complaint under Section 138 of the Negotiable Instruments Act is properly directed at the signatory whose conduct caused the dishonour, and the High Court was not justified in interfering under Section 482 Cr.P.C. on the presented grounds, so the proceedings before the Magistrate must continue.
Result:
Appeals allowed; High Court order quashed; case remanded to the Judicial Magistrate for expeditious disposal in accordance with law.
ORDER
1. Leave granted.
2. Six cheques were issued in favour of the appellant herein. The cheques were signed by A. Chinnaswami, Managing Director of Shakti Spinners Ltd. When the cheques were presented for payment, they were dishonoured on the ground that "sufficient funds were not available and exceed arrangement". A notice was then sent by the appellant which the respondent refused to accept. This was followed by a complaint under Section 138 read with Section 142 of the Negotiable Instruments Act, 1881 in the Court of the Judicial Magistrate, 1st Class, Chopda, District Jalgaon, Maharashtra. On the complaint being filed, a process was issued against the accused.
3. The respondent moved an application before the Magistrate asking him to recall the process. Having failed in this attempt, a petition under Section 482 Cr.P.C. was filed in the High Court. The High Court by the impugned judgment came to the conclusion that notice under Section 138 was sent by the appellant herein to A. Chinnaswami at his office address but this could not mean that the notice was sent to the Company itself. On this ground alone, the High Court allowed the petition and quashed the complaint which was filed.
4. In our opinion, the High Court erred in quashing the complaint. It is evident that proceedings were initiated by the appellant against A. Chinnaswami who happened to be the Managing Director of Shakti Spinners Ltd. The cheques in question which were dishonoured were signed by him. The process was issued by the Judicial Magistrate in his name. We see no infirmity in the notice issued under Section 138 addressed to A. Chinnaswami, who was a signatory of the said cheques. The High Court, in our opinion, clearly fell in error in allowing the petition under Section 482 Cr.P.C. and in quashing the complaint and setting aside the proceedings pending before the Judicial Magistrate.
5. For the aforesaid reasons, these appeals are allowed and the order of the High Court is set aside. The Judicial Magistrate will now proceed to decide SCCs Nos. 155 and 156 of 1995 in accordance with law as expeditiously as possible.
(C.R.) Appeals allowed.
************