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Notice to directors in cheque bounce cases not mandatory

Directors of companies and partners of firms have been fastened with stricter onus by the Supreme Court in cheque bouncing cases. It ruled last week that notice of dishonour of cheques to the company is sufficient, and there is no need to serve separate notices on the directors. The directors are supposed to know about the dishonour when the company gets the notice. There is sufficient time, nearly 75 days, to find which directors are responsible for the fault and therefore, there is no need to prolong the process by serving notices on each director or partner. The Supreme Court overruled the Bombay High Court which had maintained that separate notices were essential. Allowing the appeal case, Kirshna Texport & Capital Markets Ltd vs Ila Agrawal, the court asked the high court to reconsider its view regarding the trial of two directors. Analysing Sections 138 and 141 of the Negotiable Instruments Act, the court said: "There is nothing in Section 138 which may even remotely suggest issuance of notice to anyone other than the drawer (the company)… Section 141 again does not lay down any requirement that the directors must individually be issued separate notices. The persons running the affairs must naturally be aware of the notice issued to such company. It is precisely for this reason that no notice is additionally contemplated to be given to such directors."

Article referred: http://www.business-standard.com/article/opinion/no-notice-to-directors-in-cheque-bounce-cases-115051000672_1.html

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