he object and purpose of bringing in the act was to make the person dealing in commercial transactions work with a sense of responsibility and for that reason under the amended provisions of law lapse on their part to honour their commitment renders the persons liable for

criminal prosecutionm Lal Bhatia vs City Credit and Leasing Company iii (2002)BC210(P&H) he objects and reasons for inserting the Chapter was: "to enhance the acceptability of cheques in settlement of liabilities by making the drawer liable for penalties in case of bouncing of cheques due to insufficiency of funds in the accounts or for the reason that it exceeds the arrangements made by the drawer, with adequate safeguards to prevent harassment of honest drawers

his has been inserted by the parliament with the object and purpose of holding a person criminally responsible for his acts in commercial transactions trade and business dealings with

people carried out carelessly or without sense of responsibility

Ratanlal Gulabchand Gupta v Shara Sev Gruh Udyog Bhanda, 2001 CrLJ 373

Offence under 138 is an offence without any mens rea .It is not a criminal offence in real sense as it does not require mens rea, like few other criminal offences, but as public interest is hampered by such offence so it has been made a punishable offence. It includes strict liability. Creation of the strict liability is an effective measure by encouraging greater vigilance to prevent usual callous attitude of drawers of cheques in discharge of debts.

The essential ingredients of sec138 are as follows:- 1. Drawing of a cheque by a person on an account of any debt or other liability.2. Presentation of the cheque to the bank within a period of 6 months from date of its drawing or within the period of its validity.3. Returning of the cheque unpaid by the drawee bank.4. Notice in writing to the drawer of cheque within 30 days of receipt of information regarding return of cheque as unpaid in form of debit advance or return memo.5. Failure of the drawer to make payment within 15 days of receipt of notice K Bhaskaran v. Shanta Karan Vidya Balan AIR 1999 7 SC 570

The offence gets completed only after notice is served and payment as required by notice is not made Mahesh Mehta Huf v state of Goa,2006CrLJ 1142(Bom.)

Letters written by complainant can be construed as notice under Section 138 NIA.-Complaint can be filed on 16th day 11.Notice need not be sent through registered post –notice/letter sent under certificate of posting is presumed to have received by accused.12 Notice served on company but not MD and director who are parties in complaint , is valid notice U/S 13813. Notice to reasonably correct address is sufficient14.A notice refused to be accepted by the addressee can be presumed to have been served on him.15

2002 Crl.L.J. 3001. Bom.12 2002 Crl.L.J.2731 A. AP13 2001 (1) CTC 725. 14 Syed Hamid Bafaky Vs. Moideen1996 Crl.L.J. (Ker) 101315 V.Raja Kumar v P. Subbarama Naidu, 2005(1)PLJR(SC)235: Harcharan Singh v Shivrani 1981(2) SCC 647

In the case of dishonour of cheque 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

receipt of the notice by the drawer expires19 Prem Chand Vijay Kumar v Yashpal Singh, 2005(3) PLJR(SC)115

Where the cheque was drawn. 2. Where the cheque was presented for encashment. 3. Where the cheque was returned unpaid by drawee bank. 4. Where notice in writing was given to drawer of cheque demanding payment. 5. Where drawer of cheque failed to make payment within 15 days of receipt of notice.20 K. Bhaskaran v. Sankaran Vaidhyan Balan, 1999 (4) ALL MR 452 (S.C)

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 punished accordingly. A person shall not be liable 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 offence26. 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 prosecution27. 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 attributable to, any neglect on the part of, any director, manager, secretary or other officer 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.28 Notice served on company but not MD and director who are parties in complaint , is valid notice U/S 13829

Section 141(2), N.I. Act 1881. 2001 (1) CTC 725.

Every person at the time the offence was committed, was in charge of, and was responsible for the conduct of the business of the company is liable to be prosecuted. In other words, directors, secretary and officers of the company may be liable

The following paragraph from the judgment of Supreme Court in the matter of N. Rangachari vs. Bharat Sanchar Nigam Ltd. (MANU/SC/7316/2007 dated 19.04.2007) explains the law relating to persons who are deemed to be liable under section 138. Section 141 of the Act creates liability on every person who was in charge of and responsible responsible for the affairs of the company at the time of issue of cheque company. The Supreme Court has ruled (N. Rangachary, supra) that a holder of cheque cannot be expected to be aware of such matters which relate to “arrangements within the company in regard to its management, daily routine, etc.” As per the judgment of the Supreme Court, Directors of a company are prima facie in the position of being “in charge of affairs”. Hence, if you are holder of a bounced cheque issued by a company, it will be reasonable to name all directors of the company as accused in the complaint under sec 138.

A company being a juristic person, all its deeds and functions are result of acts of others. Therefore, officers of a Company who are responsible for acts done in the name of the Company are sought to be made personally liable for acts which result in criminal action being taken against the Company. It makes every person who at the time the offence was committed, was incharge of and was responsible to the

Company for the conduct of business of the Company, as well as the Company, liable for the offence.

 Company, though a legal entity, cannot act by itself but can only act through its

directors. Normally, the Board of Directors act for and on behalf of the company.

This is clear from Section 291 of the Companies Act which provides that subject to

the provisions of that Act, the Board of Directors of a Company shall be entitled to

exercise all such powers and to do all such acts and things as the Company is

authorized to exercise and do. Palmer described the position thus:

"A company can only act by agents, and usually the persons by whom it acts and by

whom the business of the company is carried on or superintended are termed

directors . "

It is further stated in Palmer that:

"Directors are, in the eye of the law, agents of the company for which they act, and

the general principles of the law of principal and agent regulate in most respects

the relationship of the company and its directors."

The above two passages were quoted with approval in R.K. Dalmia & ors. Vs. The

Delhi Administration [(1963) 1 S.C.R. 253 at page 300]. In Guide to the Companies

Act by A. Ramaiya (Sixteenth Edition) this position is summed up thus: "All the

powers of management of the affairs of the company are vested in the Board of

Directors. The Board thus becomes the working organ of the company. In their

domain of power, there can be no interference, not even by shareholders. The

directors as a board are exclusively empowered to manage and are exclusively

responsible for that management."

Therefore, a person in the commercial world having a transaction with a company

is entitled to presume that the directors of the company are incharge of the affairs

of the company. If any restrictions on their powers are placed by the memorandum

or articles of the company, it is for the directors to establish it at the trial. It is in

that context that Section 141 of the Negotiable Instruments Act provides that

when the offender is a company, every person, who at the time when the offence

was committed was incharge of and was responsible to the company for the

conduct of the business of the company, shall also be deemed to be guilty of the

offence along with the company. It appears to us that an allegation in the

complaint that the named accused are directors of the company itself would usher

in the element of their acting for and on behalf of the company and of their being

incharge of the company.

A person normally having business or commercial dealings with a company, would satisfy himself about its creditworthiness and reliability by looking at its promoters and Board of Directors and the nature and extent of its business and its Memorandum or Articles of Association. Other than that, he may not be aware of the arrangements within the company in regard to its management, daily routine, etc. Therefore, when a cheque issued to him by the company is dishonoured, he is expected only to be aware generally of who are incharge of the affairs of the company. It is not reasonable to expect him to know whether the person who signed the cheque was instructed to do so or whether he has been deprived of his authority to do so when he actually signed the cheque. Those are matters peculiarly within the knowledge of the company and those in charge of it. So, all that a payee of a cheque that is dishonoured can be expected to allege is that the persons named in the complaint are in charge of its affairs. The Directors are prima facie in that position.

It is necessary to specifically aver in a complaint under Section 141 that at the time the offence was committed, the person accused was in charge of, and responsible for the conduct of business of the company. This averment is an essential requirement of Section 141 and has to be made in a complaint. Without this averment being made in a complaint, the requirements of Section 141 cannot be said to be satisfied.

K.P.G. Nair v. Jindal Menthol India Ltd. [(2001) 10 SCC 218] and Monaben

Ketanbhai Shah and Another v. State of Gujarat and Others [(2004) 7 SCC 15], it

was stated:

"18. To sum up, there is almost unanimous judicial opinion that necessary

averments ought to be contained in a complaint before a person can be subjected

to criminal process. A liability under Section 141 of the Act is sought to be

fastened vicariously on a person connected with a company, the principal accused

being the company itself. It is a departure from the rule in criminal law against

vicarious liability. A clear case should be spelled out in the complaint against the

person sought to be made liable. Section 141 of the Act contains the requirements

for making a person liable under the said provision. That the respondent falls

within the parameters of Section 141 has to be spelled out. A complaint has to be

examined by the Magistrate in the first instance on the basis of averments

contained therein. If the Magistrate is satisfied that there are averments which

bring the case within Section 141, he would issue the process. We have seen that

merely being described as a director in a company is not sufficient to satisfy the

requirement of Section 141. Even a non-director can be liable under Section 141 of

the Act. The averments in the complaint would also serve the purpose that the

person sought to be made liable would know what is the case which is alleged

against him. This will enable him to meet the case at the trial."

In terms of Section 138 of the Act, a complaint petition alleging an offence thereto

must demonstrate that the following ingredients exist that:

(i) a cheque was issued;

(ii) the same was presented;

(iii) but, it was dishonoured;

(iv) a notice in terms of the said provision was served on the person sought to be

made liable; and

(v) despite service of notice, neither any payment was made nor other obligations,

if any, were complied with within fifteen days from the date of receipt of the

notice.

The liability of a Director must be determined on the date on which the offence is

committed

 Sabitha Ramamurthy & Anr. v. R.B.S. Channabasavaradhya [2006 (9) SCALE 212],

wherein it was held:

"A bare perusal of the complaint petitions demonstrates that the statutory

requirements contained in Section 141 of the Negotiable Instruments Act had not

been complied with. It may be true that it is not necessary for the complainant to

specifically reproduce the wordings of the section but what is required is a clear

statement of fact so as to enable the court to arrive at a prima facie opinion that

the accused are vicariously liable. Section 141 raises a legal fiction. By reason of

the said provision, a person although is not personally liable for commission of

such an offence would be vicariously liable therefor. Such vicarious liability can be

inferred so far as a company registered or incorporated under the Companies Act,

1956 is concerned only if the requisite statements, which are required to be

averred in the complaint petition, are made so as to make the accused therein

vicariously liable for the offence committed by the company. Before a person can

be made vicariously liable, strict compliance of the statutory requirements would

be insisted..."

Yet again in Saroj Kumar Poddar v. State (NCT of Delhi) and Anr. [2007 (2) SCALE

36], the said legal principle was reiterated stating:

"Apart from the Company and the appellant, as noticed hereinbefore, the

Managing Director and all other Directors were also made accused. The appellant

did not issue any cheque. He, as noticed hereinbefore, had resigned from the

Directorship of the Company. It may be true that as to exactly on what date the

said resignation was accepted by the Company is not known, but, even otherwise,

there is no averment in the complaint petitions as to how and in what manner the

appellant was responsible for the conduct of the business of the Company or

otherwise responsible to it in regard to its functioning. He had not issued any

cheque. How he is responsible for dishonour of the cheque has not been stated.

The allegations made in paragraph 3, thus, in our opinion do not satisfy the

requirements of Section 141 of the Act."

A faint suggestion was made that this Court in Saroj Kumar Poddar (supra) has laid

down the law that the complaint petition not only must contain averments

satisfying the requirements of Section 141 of the Act but must also show as to how

and in what manner the appellant was responsible for the conduct of the business

of the company or otherwise responsible to it in regard to its functioning. A plain

reading of the said judgment would show that no such general law was laid down

therein. The observations were made in the context of the said case as it was

dealing with a contention that although no direct averment was made as against

the appellant of the said case fulfilling the requirements of Section 141 of the Act

but there were other averments which would show that the appellant therein was

liable therefor

ection 141(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 punished accordingly.

8. From a perusal of Section 141 it is evident that in a case where a company

committed offence under Section 138 then not only the company but also every

person who at the time when the offence was committed, was incharge of and was

responsible to the company for the conduct of the business of the company shall be

deemed to be guilty of the offence and liable to be proceeded against and punished

accordingly. It follows that a person other than the company can be proceeded

against under those provisions only if that person was incharge of and was

responsible to the company for the conduct of its business.

The laudable object of preventing bouncing of cheques and sustaining the credibility of commercial transactions resulting in enactment of Sections 138 and

141 has to be borne in mind. Monaben Ketanbhai Shah & Anr vs State Of Gujarat & Ors on 10 August, 2004

In K.P.G. Nair v. Jindal Menthol India Ltd. [(2001) 10 SCC 218], this Court held that the substance of allegations read as a whole should answer and fulfill the requirements of the ingredients of Section 141. The criminal complaint was quashed in Katta Sujatha (Smt.) v. Fertilizers & Chemicals Travancore Ltd. & Anr. [(2002) 7 SCC 655], since in the complaint it was not stated that the accused was in charge of the business and was responsible for the conduct of the business of the firm nor was their any other allegation that she had connived with any other partner in the matter of issue of cheque.