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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.