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Kirshna Texport & Capital Markets Ltd. v. Ila A. Agrawal & Ors.

Criminal Appeal · Neutral citation not assigned (Criminal Appeal No. 1220 of 2009)Decided 6 May 2015
Criminal Appeal No. 1220 of 2009
Justice Pinaki Chandra Ghose · Justice Uday Umesh Lalit

Background

After a cheque issued by a company in favour of the appellant was dishonoured for insufficient funds, the appellant sent a statutory notice under Section 138 of the Negotiable Instruments Act only to the company, not individually to its directors, before filing a criminal complaint against the company and its directors. The trial court convicted the company but acquitted two of the directors (the respondents), holding, relying on a Madras High Court ruling, that individual notice to each director was legally required. The Bombay High Court refused the appellant leave to appeal against that acquittal, and the appellant approached the Supreme Court.

Decision Breakdown

The Supreme Court held that Section 138 does not require a separate, individual statutory notice to each director of a company: a notice to the company itself is sufficient, since directors in charge of its affairs are presumed to be aware of it. The Court reasoned that reading in a requirement of individual notice would make the summary remedy for cheque dishonour unworkable and could let the strict, non-extendable limitation period be exploited to defeat genuine claims. It expressly overruled the contrary view of the Madras High Court in B. Raman v. M/s. Shasun Chemicals and Drugs Ltd., set aside the Bombay High Court's order refusing leave to appeal, and sent the leave application back to the High Court to be decided afresh on its merits (since the High Court had rejected it solely on the now-overruled legal ground, without considering the application itself).

Lesson Learnt

A company's directors cannot escape liability for a dishonoured cheque merely because the statutory notice under Section 138 was sent to the company and not to them individually: notice to the company is legally sufficient to fix responsibility on those in charge of its affairs.

Official source (sci.gov.in)View Judgment (PDF)

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