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2003 DIGILAW 130 (AP)

Sunrise Oleo Chemicals Ltd. v. K. M. Enterprises

2003-01-24

T.CH.SURYA RAO

body2003
T. SURYA RAO, J. ( 1 ) THE revision petitioners stand convicted by the learned XI Metropolitan Magistrate, Secunderabad by his judgment dated 19-7-1999 in C. C. No. 902 of 1998 for the offence punishable under Section 138 of the Negotiable Instruments Act and sentenced to pay a fine of Rs. 25,000/- by the 1st petitioner and to suffer simple imprisonment for one year and further to pay a fine of Rs. 25,000/- by the 2nd petitioner with the necessary default sentences. On appeal, the learned Additional Metropolitan Sessions Judge, Hyderabad by his judgment dated 26-6-2000 passed in Criminal Appeal No. 291 of 1999 while confirming the conviction, modified the sentences of fine by sentencing each to pay to Rs. 5,000/- instead of Rs. 25,000/ -. ( 2 ) THE 1st respondent herein laid a complaint against the revision petitioners under Section 138 of the Negotiable Instruments Act alleging inter alia that the 2nd accused being the Managing Director of the 1st accused company having purchased electrical and hardware material from the complainant company under various purchase orders, and received the material under various invoices dated 28-6-1997, 2-7-1997, 7-7-1997, 10-7-1997, 11-7-1997 and 12-7-1997, after having paid an amount of Rs. 37,000/- in two instalments did not pay the balance sum of Rs. 3,82,454-79 Ps. and that after repeated demands the 2nd accused issued a cheque for an amount of Rs. 2,02,000/- drawn on the account pertaining to M/s. Sunrise Oil Mills Private Limited and when the same was dishonoured he got a notice dated 9-12-1997, issued and when the same was returned unserved with the endorsement "no person was residing in the above address for the last seven days", he presented it again on 28-1-1998 and again it was dishonoured on the premise of "insufficient funds", and that when he got another legal notice dated 9-2-1998 issued the accused having received the notices on 11-2-1998, failed to pay the cheque amount and thereby committed the offence. The plea of the accused was one of denial. ( 3 ) AT the time of trial one witness was examined on the side of the complainant and the document Ex. P1 to Ex. P12 were got marked. None was examined on the side of the accused but Ex. D1 and D2 were got marked. The plea of the accused was one of denial. ( 3 ) AT the time of trial one witness was examined on the side of the complainant and the document Ex. P1 to Ex. P12 were got marked. None was examined on the side of the accused but Ex. D1 and D2 were got marked. ( 4 ) THE following facts are discernible from the evidence on record : the complainant is a proprietary concern. The 1st accused is a limited company incorporated under the name and style of M/s. Oleo Chemicals Limited and the 2nd accused is its Managing Director. The 1st accused company placed orders with the complainant for supply of electrical and hardware material on 25-6-1997, 26-6-1997, 27-6-1997, 2-7-1997 and 9-7-1997. Accordingly, the complainant supplied the material which was received by the 1st accused company under invoices Nos. 1 to 8 dated 28-6-1997, 28-6-1997, 28-6-1997, 2-7-1997, 7-7-1997, 10-7-1997, 11-7-1997 and 12-7-1997. The amount due under the various invoices towards the sale price of the goods supplied was in a sum of Rs. 4-19,454-79 Ps. An amount of Rs. 37,000/- was paid by the accused as advance at the time of purchase and the balance amount remained unpaid. In discharge of a part of that balance amount, the 2nd accused issued Ex. P1 cheque dated 30-9-1997 for a sum of Rs. 2,02,000/- drawn on the account maintained by Sunrise Oils Limited. Ex. P-1 cheque, had been presented thrice and it was returned unpaid on all the three occasions on the premise of insufficient funds. The accused was rquesting time on each occasion and that when on the third occasion Ex. P-1 was dishonoured the complainant got a notice dated 9-12-1997 issued to the accused, which was returned unserved with the endorsement "no person residing in the above address for the last seven days". The complainant presented the cheque again on 28-1-98 and it was dishonoured on the premise of insufficient funds . The fact that the cheque was not honoured was informed to the banker of the complainant by the banker of the accused on 31-1-1998 and in its turn it informed the complainant on 2-2-1998. The complainant got a notice dated 9-2-98 issued, which was received on 11-2-98 by the accused. The plea of the complainant was that the cheque was returned thrice, he presented the cheque again on 28-1-1998. The complainant got a notice dated 9-2-98 issued, which was received on 11-2-98 by the accused. The plea of the complainant was that the cheque was returned thrice, he presented the cheque again on 28-1-1998. ( 5 ) THE contention of the learned counsel for the revision petitioners is two fold; viz. that the drawer of the cheque being Sunrise Oil Mills Limited, the present complaint cannot be maintained as against Sunrise Oleo Chemicals Limited and secondly that having issued the notice as envisaged under Section 138 of the N. I. Act on 9-12-1997 demanding payment covered by the cheque, when it was dishonoured, it could not have been presented again in the month of January, 1998 and therefore, the complaint is barred by limitation. ( 6 ) ADVERTING to the first contention of the learned counsel for the revision petitioners, it is manifest that the 1st accused is M/s. Sunrise Oleo Chemicals Limited and the 2nd accused is its Managing Director representing the same. Ex. P1 cheque was drawn on the account being maintained by Sunrise Oil Mills Limited. But the signatory of the cheque is none else than the 2nd accused. There has been no gainsaying that the 2nd accused is also the authorised signatory of the concern by name "sunrise Oil Mills Limited. It is nobody s case that Sunrise Oil Mills Limited is indebted to the complainant in any manner for the goods supplied by the complainant. Admittedly pursuant to the various purchase orders placed by the 1st accused company represented by the 2nd accused the complainant supplied under various invoices the goods and in that connection Ex. P1 cheque was issued. When there has been no dispute about the purchase and supply of the goods in between the complainant and the 1st accused and when there is no privity of contract between the complainant and M/s. Sunrise Oil Mills, and when obviously Ex. P1 cheque was issued by the 2nd accused in discharge of a part of the debt outstanding between the complainant and the 1st accused, it is no matter even though the cheque was drawn on the account being maintained by a different company, when the 2nd accused who is the Managing Director of the 1st accused company and who has been representing the same is the signatory of the said cheque. It may be mentioned here that PW 1, in his re examination clarified that the accused No. 2 was the Managing Director of Sunrise Oil Mills Ltd. as well as Sunrise Oleo Chemicals Ltd. and that since no funds were available in the account of Sunrise Oleo Chemicals Ltd. he issued Ex. P1 cheque in discharge of the liability of the 1st accused company. This clear cut statement of PW 1 has remained uncontroverted. It is obvious therefore that Sunrise Oleo Chemicals Ltd. the 1st accused company in this case and Sunrise Oil Mills Ltd. are the sister concerns and the Managing Director of both the companies is one and the same and is no other than the 2nd accused. That apart when the cheque Ex. P1 was dishonoured on the fourth occasion, the complainant got the original of Ex. P4 notice issued to the first accused demanding payment of the amount covered by the cheque. Confessedly the said notice was received and in fact Ex. P5 reply notice was issued for and on behalf of Sunrise Oleo Chemicals Ltd. signed by the 2nd accused. No objection whatsoever has been taken inter alia in Ex. P5 by the accused on the premise that the 1st accused is not the drawer of the cheque. Having regard to the said facts, which are peculiar to this case, it is quite unreasonable for the revision petitioners to have contended that the 1st accused company had not been validly prosecuted, since it was not the drawer of the cheque. In this regard the learned counsel for the revision petitioners seeks to place reliance upon the judgment of the Calcutta High Court in Dilip Kumar Jaiswal v. Debapriya Banerjee (1992) 1 Crimes 1233 and Madras High Court in Oswal Ispat Udyog v. Salem Steel Suppliers (1993) 78 Comp Cas 512. In this regard the learned counsel for the revision petitioners seeks to place reliance upon the judgment of the Calcutta High Court in Dilip Kumar Jaiswal v. Debapriya Banerjee (1992) 1 Crimes 1233 and Madras High Court in Oswal Ispat Udyog v. Salem Steel Suppliers (1993) 78 Comp Cas 512. In the former case according to the facts, the cheque was drawn by the petitioner therein in the capacity of the Director of Hisco Steel Private Ltd. and when a prosecution was launched against the company as well as the petitioner therein when the cheque was dishonoured, he filed the petition in the High Court for quashing the said proceedings against him on the premise that the goods supplied to the company in respect of which the cheque was said to have been issued was defective and therefore, he was not liable and that no notice was served upon him although notice was issued to the company and therefore, he could not be prosecuted. The first contention is not germane for consideration in this case. As regards the second contention, the Calcutta High Court was of the view that M/s. Hisco Steel Private Ltd. was the maker of the cheque and therefore, the company and the petitioner being its Director can be prosecuted under Section 141 of the Negotiable Instruments Act. ( 7 ) THE learned counsel for the revision petitioners in the instant case seeks to lay emphasis on the finding that the company is the maker of the cheque and therefore, it is liable and inasmuch as in this case, the maker of the cheque being M/s. Sunrise Oil Mills Ltd. , but not M/s. Sunrise Oleo Chemicals Ltd. the case against the 1st accused M/s, Sunrise Oleo Chemicals Ltd. must fail. ( 8 ) IN the later judgment according to the facts, the cheque was issued on behalf of the firm by a partner of the firm. The requisite legal notice was, issued when the cheque was dishonoured, to the firm. When the firm as well as the partners were sought to be prosecuted, the partners filed the petition to quash the proceedings on the ground among others that no notices were served upon the partners and therefore, the prosecution could not be maintained against them. The requisite legal notice was, issued when the cheque was dishonoured, to the firm. When the firm as well as the partners were sought to be prosecuted, the partners filed the petition to quash the proceedings on the ground among others that no notices were served upon the partners and therefore, the prosecution could not be maintained against them. Repelling the said contention, the Madras High Court was of the view that the drawer of the cheque being the firm, the question of issuance and receipt of notice to all the individual partners would not arise for consideration. Again the learned counsel for the revision petitioners in the instant case seeks to lay emphasis on the finding that the firm is the drawer of the cheque. The facts in the present case are entirely different. The 2nd accused signed the cheque, no doubt drawn on the account of Sunrise Oil Mills Ltd. but issued the cheque in discharge of a part of the debt owed by the 1st accused company viz. Sunrise Oleo Chemicals Ltd. inasmuch as both the companies are the sister concerns and for want of funds in the account of the 1st accused company, the cheque was drawn on the account being maintained by the other company viz. Sunrise Oil Mills Ltd. but obviously it was issued in discharge of the debt due by the 1st accused company and therefore, for and on behalf of the company. Having regard to these peculiar facts, I am of the considered view that the 1st accused company cannot escape the liability on the premise that it is not the maker or drawer of the cheque. Having regard to the same, the first contention of the learned counsel merits no consideration. ( 9 ) APROPOS the second contention of the learned counsel for the revision petitioners, it is manifest that Ex. P1 cheque was presented on four occasions as can be seen from the stamps affixed thereon. It is the case of the complainant that when the cheque was presented initially, the accused requested for time and when the cheque was dishonoured on the third occasion the notice dated 9-12-1997 was got issued by the complainant through its counsel to the 1st accused-company. It is the case of the complainant that when the cheque was presented initially, the accused requested for time and when the cheque was dishonoured on the third occasion the notice dated 9-12-1997 was got issued by the complainant through its counsel to the 1st accused-company. According to the complainant in his evidence as P. W. 1 deposed that the said notice was returned unserved with an endorsement "no such person was residing in the said address for seven days. " It is no doubt true that the said cover containing the postal endorsement has not been filed in this case. The fact remains that it was a legal notice as envisaged under S. 138 of the Negotiable Instruments Act that was got issued by the complainant to the accused when the cheque was dishonoured on the 3rd occasion. However, it has not been controverted when P. W. 1 deposed in the cross-examination that the cheque was returned with an endorsement as stated supra. From these facts available on record, it has now got to be seen as to whether the complaint filed in this case is within the time or not. It is needless to say at this stage that the complaint is well within time, if the period is reckoned from the date of presentation of the cheque on the fourth occasion in the month of January, 1998 and the date of legal notice got issued by the complainant again under the original of Ex. P4 and 9-2-1998. The only question to be considered is what is the effect of the legal notice got issued by the complainant dated 9-12-1997 when the cheque was dishonoured on its presentation for the third time. Equally, it is needless to consider about the 1st two presentations and the fact of its dishonour on both the occasions, inasmuch as on both the occasions it was not followed up by any legal notice in writing. Having regard to the fact that the legal notice dated 9-12-1997 was returned with the endorsement "no such person was residing in the said address for seven days," which remains uncontroverted in the cross-examination, is it permissible for the complainant to present the cheque once again on the fourth occasion is the moot question. ( 10 ) IT is appropriate here to consider S. 138 of the Negotiable Instruments Act, which reads as under :"138. ( 10 ) IT is appropriate here to consider S. 138 of the Negotiable Instruments Act, which reads as under :"138. Dishonour of cheque for insufficiency etc. of funds in the account :- 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 provision of this Act, be punished with imprisonment for a term which may extend to one 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 in due 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 fifteen 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. Explanation : For the purposes of this section, "debt or other liability" means a legally enforceable debt or other liability. " ( 11 ) A perusal of the said provision shows that a cheque drawn by a person on an account maintained by him to another person for the discharge in whole or any part of debt or other liability is dishonoured, such a person is deemed to have committed the offence. " ( 11 ) A perusal of the said provision shows that a cheque drawn by a person on an account maintained by him to another person for the discharge in whole or any part of debt or other liability is dishonoured, such a person is deemed to have committed the offence. The offence would be complete only when the three conditions enjoined under the proviso to S. 138 of the Act are satisfied, viz; (1) that the cheque shall be presented within the period of six months or within the period of its validity whichever is earlier from the date of its drawal; (2) the person in whose favour the cheque is drawn shall make a demand for payment of the said amount by giving a notice in writing to the drawer of the cheque within fifteen days of the receipt of the information as regards the dishonour of the cheque; and (3) the drawer of the cheque fails to make payment of the said amount within fifteen days of the receipt of the said notice. The third condition gains significance having regard to the period of limitation engrafted under S. 142 of the said Act. Section 142 of the Act creates a bar on the Court from taking cognizance of an offence punishable under S. 138 of the Negotiable Instruments Act, except on a complaint in writing is filed within one month of the date of cause of action that arose under Cl. (c) of the proviso to S. 138 and the Court shall be the Court of the Metropolitan Magistrate or the Judicial Magistrate of First Class. The cause of action arises only when the drawer of the cheque fails to make the payment of the said amount within fifteen days from the date of receipt of the notice issued in conformity with condition No. 2 under the said proviso. The receipt of notice by the drawer of the cheque is a significant factor, inasmuch aas from that date, the fifteen days period is to be reckoned. It is only when the drawer of the cheque fails to pay the amount within 15 days, thenceforth it is deemed under law that the cause of action for prosecuting him has arisen. From that date, the period of 30 days shall have to be reckoned as enjoined under Cl. It is only when the drawer of the cheque fails to pay the amount within 15 days, thenceforth it is deemed under law that the cause of action for prosecuting him has arisen. From that date, the period of 30 days shall have to be reckoned as enjoined under Cl. (b) of S. 141 of the Act, of course the reckoning of the period shall be in accordance with S. 12 of the Limitation Act and other allied provisions thereunder for reckoning of the period prescribed. In any event the notice is not received and when it is not a case where the Court draws the conclusion that it is a deemed service, it cannot squarely be said that there has been failure on the part of the drawer of the cheque in which event there can be no cause of action for the complainant in whose favour the cheque has been drawn and issued. To avoid the contingency of avoiding service of notice by the unscrupulous drawers by one means or the other, the law envisages a constructive notice upon that person. Such avoidance may be by various means and such means cannot be put in a strait-jacket formula. Such an inference of deemed service can be drawn in accordance with the facts of a particular case. Reviewing the case law on the point, this Court in Khaleel Mohamood v. M/s. Sri Padmavathi Handlooms (2002) 1 Andh LT (Crl) 151 has held that a presumption of fact would be drawn when the facts warrant in accordance with the provisions of S. 27 of the General Clauses Act and S. 114, illustration (f) of the Indian Evidence Act and it is open to the adversary to prove that in fact there has been no such service at all. Such an inference can be drawn only to secure the ends of justice. Here in this case the notice was returned unserved with the endorsement "no such person was residing in the said address for seven days. " It is not known from the facts that when another notice was sent in the month of January, 1998 under the original of Ex. P4 the said notice was sent to the same address and the same was received. As discussed supra, the returned notice has not been filed in this case. " It is not known from the facts that when another notice was sent in the month of January, 1998 under the original of Ex. P4 the said notice was sent to the same address and the same was received. As discussed supra, the returned notice has not been filed in this case. Therefore, in view of the facts peculiar to this case, I am of the considered view that they do not warrant necessary presumption to be drawn in favour of the deemed service. When that notice was not served, no cause of action would arise in accordance with Cl. (c) under the proviso to S. 138 of the Act. Even assuming for a moment that the necessary presumption of deemed service can be drawn in this case on the premise that the party is seeking to avoid the notice, the cheque cannot be presented again so as to give a fresh cause of action. Therefore in such an event, no occasion for the presentation of the cheque for the fourth time would have arisen at all. Fifteen days period is to be reckoned from the date of the deemed service and the complaint should be filed within 30 days therefrom. The present complaint having been filed in this case on 25-3-1998 would certainly be beyond the period of limitation, inasmuch as the deemed service must be somewhere in the month of December, 1997. I am reinforced in my conclusion that no fresh cause of action would arise after the service of notice and there can be no fresh presentation of the cheque by a judgment of the Apex Court in Sadanandan Bhadran v. Madhavan Sunil Kumar (1998) 2 Andh LD (Crl) 529 : AIR 1998 SC 3043 ) wherein the Apex Court held thus. ""having given our anxious consideration to this question, we are of the opinion that the above two provisions can be harmonised, with the interpretation that on each presentation of the cheque and its dishonour a fresh right and not cause of action accrues on his favour. He may, therefore, without taking pre-emptory action in exercise of his such right under Cl. (b) of S. 138, go on presenting the cheque so as to enable him to exercise such right at any point of time during the validity of the cheque. But, once he gives a notice under Cl. He may, therefore, without taking pre-emptory action in exercise of his such right under Cl. (b) of S. 138, go on presenting the cheque so as to enable him to exercise such right at any point of time during the validity of the cheque. But, once he gives a notice under Cl. (b) of S. 138, he forfeits such right for in case of failure of the drawer to pay the money within the stipulated time he would be liable for the offence and the cause of action for filing the complaint will arise. Needless to say, the period of one month for filing the complaint will be reckoned from the day immediately following the day on which the period of fifteen days from the date of the receipt of the notice by the drawer expires. " ( 12 ) HAVING regard to the authoritative pronouncement of the Apex Court, the presentation of the cheque for the fourth occasion after issuing admittedly a legal notice demanding payment on account of the dishonoured cheque, when that legal notice returned unserved with an endorsement for the reasons hereinabove mentioned would not arise, inasmuch as the complainant forfeited his right of such presentation again, the moment he has taken the decision to issue the requisite legal notice as envisaged under Cl. (b) of the proviso to S. 138 of the Act. Either on the premise of deemed service of such notice dated 9-12-1997 or on the premise that there has been no service of such notice either way, the complainant could not have maintained his complaint. In the former case, the complaint is clearly barred by limitation and in the later case no cause of action has arisen to lay the complaint as discussed hereinabove. Therefore, for the above reasons, the presentation of the cheque once again in the month of January, 1998 after issuing the requisite legal notice under S. 138 of the Act on 9-12-1997 is not warranted, inasmuch as the complainant forfeited his right to present the said cheque again. In view of the said facts when it is not a case, which warrants drawal of a presumption of deemed service, nothing prevents the complainant from issuing a fresh notice. It may be mentioned here that the requisite legal notice as envisaged under Cl. In view of the said facts when it is not a case, which warrants drawal of a presumption of deemed service, nothing prevents the complainant from issuing a fresh notice. It may be mentioned here that the requisite legal notice as envisaged under Cl. (b) of the proviso to S. 138 shall be issued within fifteen days from the date of receipt of the information from the bank about the dishonour of the cheque. For any reason if that notice got issued within the stipulated period is not served the proviso in my considered view will not bar another notice to be issued, albeit exceeding the period of fifteen days as envisaged under the said proviso, inasmuch as it is only the service of notice accompanied by the default on the part of the drawer of the cheque that ultimately gives the cause of action for the complainant to launch criminal prosecution. Therefore, in my considered view it is a clear case where after the non-service of notice dated 9-12-1997 got issued by the complainant, nothing prevented the complainant from issuing another notice instead of taking recourse to present the cheque again obviously so as to save the period of limitation. For the foregoing reasons the complaint in this case is clearly barred by limitation. Therefore, the conviction and sentences imposed against the revision-petitioners are legally unsustainable. ( 13 ) IN the result, the revision case is allowed and the conviction and sentences passed against the revision-petitioners are herby set aside. The fine amount if any paid shall be refunded to them. Petition allowed.