Case Note & Summary
The petitioners, M/s Serve & Volley Outdoor Advertising Pvt Ltd and its directors, filed writ petitions under Articles 226 and 227 of the Constitution of India read with Section 482 of the Code of Criminal Procedure, 1973, seeking to quash a complaint filed by the respondent, M/s Times Innovative Media Ltd, under Section 138 of the Negotiable Instruments Act, 1881, and the order of summons issued by the XIV Additional Chief Metropolitan Magistrate, Bangalore. The complaint alleged that a cheque issued by the petitioner company was dishonoured due to insufficient funds. The petitioners contended that the demand notice was not served on them at their correct address, as it was sent to an old address, and that the directors were not liable as there were no specific averments regarding their role in the company. The court examined the facts and found that the notice was sent by courier to an address that was not the registered office of the company, and there was no evidence that the petitioners received the notice. The court also noted that the complaint did not contain any specific allegations against the directors regarding their responsibility for the issuance of the cheque. Relying on the principles laid down in various Supreme Court judgments, the court held that proper service of the demand notice is a mandatory requirement under Section 138 of the NI Act, and in the absence of such service, the complaint is not maintainable. Additionally, for directors to be vicariously liable, there must be specific averments in the complaint. Consequently, the court quashed the complaint and the order of summons.
Headnote
A) Negotiable Instruments Act - Dishonour of Cheque - Section 138 - Demand Notice - Proper Service - The complainant must prove that the demand notice was sent to the correct address of the drawer. Service by courier to a different address does not constitute valid service. The court held that the notice sent to the old address of the company without verifying the current address was not proper service, and thus the complaint was liable to be quashed (Paras 6-8). B) Negotiable Instruments Act - Dishonour of Cheque - Section 138 - Vicarious Liability of Directors - Specific Averments Required - For directors to be held liable under Section 138, the complaint must contain specific averments regarding their role in the company and their responsibility for the issuance of the cheque. In the absence of such averments, the proceedings against the directors are an abuse of process. The court held that the complaint did not make any specific allegations against the petitioners, and therefore the proceedings against them were quashed (Paras 9-10).
Issue of Consideration
Whether the complaint under Section 138 of the Negotiable Instruments Act, 1881 and the order of summons can be quashed on the ground that the demand notice was not served on the petitioners at their correct address and that the petitioners were not liable for the offence in the absence of specific averments regarding their role in the company.
Final Decision
The court allowed the writ petitions and quashed the complaint in PCR No.9479/2010 (CC No.35669/2010) and the order of summons dated 15.3.2011 passed by the XIV Additional Chief Metropolitan Magistrate, Mayohall, Bangalore.
Law Points
- Proper service of demand notice is mandatory under Section 138 NI Act
- Notice must be sent to the correct address of the drawer
- Service by courier to a different address is insufficient
- Vicarious liability of directors requires specific averments of role in company affairs
