M/S. H G RETAIL SOLUTIONS PVT. LTD vs RAJIV KUMAR SAXENA
CRL.M.C. 1965/2022, CRL.M.A. 8359/2022
Facts:
1.Rajiv Kumar Saxena is a Proprietor of Proprietorship concern namely M/s India Export Pvt. Ltd. The petitioner, H.G. Retail Solutions (P) Ltd., through its Director Mr. Karan Tomar approached the Respondent with the Board resolution dated 10.06.2014, authorizing the Directors to avail a friendly loan from the Respondent.
2.A loan agreement was entered into between petitioner company i.e. H.G. Retail Solutions (P) Ltd., represented by its Director Mr. Karan Tomar and the respondent on 17.06.2014. An amended loan agreement was also executed on 18.06.2014
3.In terms of the agreement dated 17.06.2014 and 18.06.2014, the Director of the petitioner company issued two post-dated cheques, one for Rs. 40,00,000/- towards re-payment of the loan amount and the other for Rs. 2,50,000/- towards interest payable to the respondent. However, both cheques were returned unpaid due to insufficient funds.
4.The respondent sent a demand notice dated 01.10.2014 to Karan Tomar and Kusum Tanwar (directors of the Company and petitioners herein) as well as two other witnesses to the loan agreement. However, no demand notice was served on the company H.G. Retail Solutions (P) Ltd
5.A complaint under 138 NI Act pertaining to dishonour of a cheque for an amount of Rs. 40,00,000/-.Vide order dated 23.02.2015 the Ld. MM after taking cognizance of offence u/s 138 NI Act, summoned the petitioners. The company H.G. Retail Solutions (P) Ltd was also arrayed as an accused in the complaint u/s 138 NIA along with its directors namely Karan Tomar and Kusum Tanwar.The petitioners namely Karan Tomar and Kusum Tanwar preferred a discharge application which was dismissed by the Ld. MM, South East, Saket Court vide order dated 24.05.2017
6.The petitioner sought revision petitions assailing the summoning order dated 23.02.2015 which also came to be dismissed by the Ld. Sessions Court vide order dated 01.04.2021, which order has been challenged by way of the present petitions.
Issue: Whether the order passed by Ld. MM issuing summon to the Respondent without duly considering the aspect that no demand notice was ever sent to the company can be considered to be in accordance with law?
Arguments:
For Petitioner:
1.Counsel submitted that the proviso to Section 138, NI Act, lays down the prerequisites for establishing an offense under the provision. It is mandatory to serve a notice upon the drawer of the cheque, which, in this case, is the Company – H.G. Retail Solutions. The statutory provisions clearly outline the procedural steps for initiating a complaint, without compliance of which, the complaint cannot be deemed maintainable.
2.Counsel relied on Himanshu v. B. Shivamurthy AIR 2019 SC 3052, whereby, the Hon‟ble Supreme Court, held that in the absence of a notice of demand being served on the company and without compliance with the proviso to section 138, the High Court was error in holding that the company could now be arraigned as an Accused.
3.Counsel argued that the demand notice should be deemed to be delivered on 04.10.2014 when the petitioner refused delivery of the notice and, not 07.10.2014 as claimed by the respondent. It was pointed out that notice was first delivered to Shri Karan Tomar at the company’s office address on 04.10.2014, whereupon a refusal report was recorded. Ld. Counsel contends that the refusal report recorded on 04.10.2014 should be considered as deemed service as per Section 27 of General Clauses Act.
For respondent:
1.Counsel submitted that the the legal notice was indeed served on both the Directors of the company, calling upon them, to make the payment in lieu of dishonour of the cheque. It has been further submitted that the demand notice addressed to the directors was also sent at the address of the company.
2.Counsel relied on Bilakchand Gyanchand Co. v. A. Chinnaswami (1999) 5 SCC 693 the Hon‟ble Supreme Court held that a complaint under Section 138 of the Act was not liable to be quashed on the ground that the notice as per by Section 138 NI Act was addressed to the Director of the company at its office address and not to the company itself.
Decision: Hon’ble Court allowed the petitions and quashed the entire proceedings.
Rationale:
1.Hon’ble Court noted that the realization of a penal offense under section 138 of the NI Act necessitates the confluence of certain indispensable prerequisites. Firstly, a cheque has to be drawn by the drawer on an account maintained by him in lieu of his discharge of liability towards payment either in whole or part. Secondly, such cheque has to be presented to the bank within a period of six months from the date it was drawn or within the period of its validity, whichever is earlier. Thirdly, such cheque when presented to the bank is returned by the bank unpaid. Fourthly, issuance of a written demand notice by the payee to the drawer of the cheque demanding payment within a period of 30 days from the date of the receipt of the information by the payee from the bank regarding the return of the cheque as unpaid. Fifthly, failure of the drawer to make such payment within a period of 15 days from the date of the receipt of the demand notice.
2.It noted that noncompliance with any of the aforementioned imperative steps shall vitiate the very substratum of a prosecutorial „cause of action‟, rendering it not maintainable and bad in law. Thus, compliance of the necessary ingredients is mandatory, in order to constitute an offence under section 138 NI Act.
3.In the present case the cheque was drawn by the director Karan Tomar for and on behalf of the company HG Retail. Thus the company ought to have been served the demand notice, as in the absence of serving any demand notice to the company, the essential and mandatory step of serving a demand notice to the drawer of the cheque fails.
4.It is only when the company is prosecuted and proceeded against in compliance of section 138 NI Act, that vicarious liability in terms of section 141 NI Act will extend to its directors or others responsible for the commission of the offence.
Order Copy:
