whether notice under Section 138 of the Act is mandatorily required to be sent to the directors of a Company before a complaint could be filed against such directors along with the Company. ? - In our view, Section 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 individual notices under Section 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 Section 138. - Therefore 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.- 2015 S.C.MSKLAWREPORTS

 whether notice under Section  138  of  the
Act is mandatorily required to be sent to the directors of a Company  before
a complaint could be filed against such directors along  with  the  Company.

“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  two
year”, 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-

(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 induce course of the cheque,  as  the  case  may
be, makes a demand for the payment of 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
cheques 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.

Explanation: For the purpose of this  section,  “debt  or  other  liability”
means a legally enforceable debt or other liability.

141. Offences by companies- (1) If the person committing  an  offence  under
section 138 is a Company, every person who, at  the  time  the  offence  was
committed, was in charge of, and was responsible  to  the  Company  for  the
conduct of the business of the Company, as well as  the  Company,  shall  be
deemed to be guilty of the offence and  shall  be  liable  to  be  proceeded
against and proceeded against and punished accordingly;

Provided that nothing contained in this sub-section shall render any  person
liable to punishment if he proves that the  offence  was  committed  without
his knowledge, or that he had exercised all due  diligence  to  prevent  the
commission of such offence.

“Provided further that where a person  is  nominated  as  a  Director  of  a
Company by virtue of his holding any office or  employment  in  the  Central
Government  or  State  Government  or  a  financial  corporation  owned   or
controlled by the Central Government or the State Government,  as  the  case
may be, he shall not be liable for prosecution under this Chapter.

(2)  Notwithstanding  anything  contained  in  sub-section  (1),  where  any
offence under this Act has been committed by a  Company  and  it  is  proved
that the offence has been committed with the consent or  connivance  of,  or
is attribute to,  any  neglect  on  the  part  of,  any  director,  Manager,
secretary,  or  other  office  of  the  Company,  such  director,   manager,
secretary or other officer shall  also  be  deemed  to  be  guilty  of  that
offence  and  shall  be  liable  to  be  proceeded  against   and   punished
accordingly. Explanation: For the purpose of this section. –

(a) “Company” means  any  body  corporate  and  includes  a  firm  or  other
association of individuals; and

(b) “Director”, in relating to a firm, means a partner in the firm.”

The expression “drawer” used in Section 138 has  to  be  understood  in  the
light of the definition in Section 7 of the Act which is  to  the  following
effect :-
“..The maker of a bill of exchange or cheque is  called  the  “drawer”;  the
person thereby directed to pay is called the ‘drawee.”

 According to Section 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  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 Section  138  is  required
to be given to “the drawer” of the cheque  so  as  to  give  the  drawer  an
opportunity to make the payment and escape the penal consequences. No  other
person is contemplated by Section 138 as being entitled to  be  issued  such
notice.  The plain language of Section 138 is very clear and leaves no  room
for any doubt or ambiguity.  There is nothing in Section 138 which may  even
remotely suggest issuance of notice to anyone other than the drawer.

Section 141 states that if the  person  committing  an  offence  under
Section 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.  Section  141
again does not lay  down  any  requirement  that  in  such  eventuality  the
directors must individually be issued separate notices  under  Section  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  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.   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 Section 138.

 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 Section 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  Section
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 Section 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  consequences.   Under  clause  (a)  of  Section  142,  the
complaint must be filed within one month of the date on which the  cause  of
action arises under the third proviso to Section 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. Furthermore, unlike proviso to clause  (b)  of
Section 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.

In our view, Section 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  individual  notices  under  Section
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 Section  138.  Therefore  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.
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 & Ors. Vs. M/s. Shasun Chemicals and Drugs Ltd. (supra) was  incorrect
and it stands overruled. The appeal is allowed in these terms.- 2015 S.C.MSKLAWREPORTS

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