Delhi District Court
Sangeeta Batra vs . on 10 July, 2014
IN THE COURT OF METROPOLITAN MAGISTRATE (NI ACT)-01,CENTRAL:
ROOM NO.-275, TIS HAZARI COURT COMPLEX, DELHI
Sangeeta Batra, Geeta Batra, Bimla Batra, Kanchan Batra, Vajanti Batra (Complainants)
Vs.
VND Foods Ltd. (common accused)
CC No.74/1, 76/1, 77/1, 78/1, 84/1, 90/1, 91/1, 92/1, 93/1, 94/1, 95/1, 96/1, 97/1, 98/1, 103/1, 104/4,
105/1, 106/1, 107/1, 108/1, 109/1, 110/1, 111/1, 112/1, 113/1, 114/1, 115/1, 116/1, 117/1, 118/1, 119/1,
120/1, 137/1, 7803/1, 7810/1, 5440/1, 5449/1, 5450/1, 5452/1, 5463/1, 5474/1, 5481/1, 5487/1, 5490/1,
5491/1, 5496/1 & 5497/1 (47 files).
10.07.2014
JUDGMENT
Brief Reasons for Decision
1. Shorn of unnecessary details, the facts are that the complainants are five sisters and owners of premises - J-2/22, Rajouri Garden, New Delhi in the share of 1/5th each. The said property is a freehold property consisting of basement, ground floor, first floor and second floor with roof rights. All the sisters had appointed one Mr.Vipin Batra as their Attorney by way of a GPA dated 23.06.2008, and through him entered into a lease agreement with the accused, for a period of nine years, with respect to the entire building at a total monthly rent of Rs. 5,50,000 (before TDS deduction). Under the lease - Rs. 1,10,000/- i.e share of rental income of each sister was stipulated to be paid separately under five separate lease agreements entered into by the Attorney Mr.Vipin Batra, on behalf of each sister on 18.07.2008 with the accused partnership firm. It was stipulated within the lease that the property was to be used as a Restaurant under the name & style of 'Kabab Factory'. The period of first three months starting from the period of 1st July, 2008 to 30th of September, 2008, was to be a rent free period for the purposes of carrying out the necessary arrangements for the commencing of the restaurant. Hence the rent was to first accrue from 1st October, 2008. The period of nine years was divided for the purposes of monthly rent into three slabs :-
i) 1.10.2008 to 30.06.2011 - at the monthly rent of Rs.5,50,00/-
ii) 1.07.2011 to 30.06.2014 -Rent + 15 escalation %
iii) 1.07.2014 to 30.06.2017 - again an escalation of 15 %
Sangeeta Batra, Geeta Batra, Bimla Batra, Kanchan Batra, Vajanti Batra (complainants) Vs. VND Foods Ltd. 1 Now we need not concern ourselves with the second and third slabs, as the tenancy never sustained itself beyond the first slab. It was terminated in January, 2010 itself. Now As to, why and how, a tenancy which was meant to be for nine years - didn't sustain even for one year, we would be coming to that later in the judgment.
Now at the time of the execution of the lease agreement itself - three months rent in advance as security deposit was paid. In addition to this the lessee also issued to each complainant/lessors 12 Post Dated Cheques qua each agreement as advance rent totaling 60 cheques as advance rental for the period of 01.10.2008 to 30.09.2009. The present case has been filed qua the dishonour of 47 of these cheques. The complainants have chosen to file separate complaints qua each cheque, hence the details of the cheques and 47 complaints are important to be tabulated - since all these cases are being disposed off vide a common judgment :-
S.No. CC.No. Complainant/Payee Cheque Date Dishonoured Vide Cheque Memo dated Amount
1. 109/10 Geeta Batra 06.02.2009 17.08.2009 91,300
2. 113/10 Bimla Batra 06.02.2009 17.08.2009 91,300
3. 119/10 Kanchan Batra 06.02.2009 03.08.2009 91,300
4. 105/10 Vajanti Batra 06.02.2009 03.08.2009 91,300
5. 120/10 Sangeeta Batra 06.02.2009 03.08.2009 91,300
6. 5491/11 Kanchan Batra 06.03.2009 04.08.2009 91,300
7. 90/10 Vajanti Batra 06.03.2009 04.08.2009 91,300
8. 89/10 Geeta Batra 06.03.2009 17.08.2009 91,300
9. 104/10 Bimla Batra 06.03.2009 17.08.2009 91,300
10. 75/10 Sangeeta Batra 06.03.2009 04.08.2009 91,300
11. 92/10 Geeta Batra 06.04.2009 17.08.2009 91,300
12. 76/10 Sangeeta Batra 06.04.2009 04.08.2009 91,300
13. 96/10 Vajanti Batra 06.04.2009 04.08.2009 91,300
14. 111/10 Kanchan Batra 06.04.2009 04.08.2009 91,300
15. 95/10 Bimla Batra 06.04.2009 17.08.2009 91,300
16. 137/10 Vajanti Batra 30.04.2009 10.09.2009 91,305
17. 118/10 Vajanti Batra 30.04.2009 10.09.2009 91,305
18. 97/10 Sangeeta Batra 30.04.2009 10.09.2009 91,305
19. 112/10 Sangeeta Batra 30.04.2009 10.09.2009 91,305
20. 94/10 Geeta Batra 30.04.2009 11.09.2009 91,305
21. 106/10 Bimla Batra 30.04.2009 10.09.2009 91,305
22. 91/10 Kanchan Batra 30.04.2009 10.09.2009 91,305
23. 84/10 Bimla Batra 06.05.2009 17.08.2009 91,300 Sangeeta Batra, Geeta Batra, Bimla Batra, Kanchan Batra, Vajanti Batra (complainants) Vs. VND Foods Ltd. 2
24. 93/10 Vajanti Batra 06.05.2009 04.08.2009 91,300
25. 5474/11 Geeta Batra 06.05.2009 17.08.2009 91,300
26. 77/10 Sangeeta Batra 06.05.2009 04.08.2009 91,300
27. 5487/11 Kanchan Batra 06.05.2009 04.08.2009 91,300
28. 5452/11 Bimla Batra 06.06.2009 17.08.2009 91,300
29. 117/10 Vajanti Batra 06.06.2009 04.08.2009 91,300
30. 5449/11 Geeta Batra 06.06.2009 17.08.2009 91,300
31. 114/10 Kanchan Batra 06.06.2009 04.08.2009 91,300
32. 103/10 Sangeeta Batra 06.06.2009 04.08.2009 91,300
33. 5497/11 Vajanti Batra 06.07.2009 04.08.2009 91,300
34. 78/10 Sangeeta Batra 06.07.2009 04.08.2009 91,300
35. 74/10 Kanchan Batra 06.07.2009 04.08.2009 91,300
36. 5490/11 Bimla Batra 06.07.2009 17.08.2009 91,300
37. 5440/11 Geeta Batra 06.07.2009 17.08.2009 91,300
38. 5450/11 Geeta Batra 06.08.2009 17.08.2009 91,300
39. 115/10 Kanchan Batra 06.08.2009 13.08.2009 91,300
40. 5481/11 Vajanti Batra 06.08.2009 13.08.2009 91,300
41. 5496/11 Sangeeta Batra 06.08.2009 13.08.2009 91,300
42. 5463/11 Bimla Batra 06.08.2009 17.08.2009 91,300
43. 110/10 Kanchan Batra 06.09.2009 10.09.2009 91,300
44. 107/10 Bimla Batra 06.09.2009 10.09.2009 91,300
45. 116/10 Vajanti Batra 06.09.2009 10.09.2009 91,300
46. 108/10 Geeta Batra 06.09.2009 11.09.2009 91,300
47. 98/10 Sangeeta Batra 06.09.2009 10.09.2009 91,300
2. Now the aforementioned cheques were handed over to the complainant at the time of execution of the lease agreement i.e on 18.07.2008 in pursuance of Clause (4) of the lease agreement, which stipulated "the lessee has also submit 12 post dated cheques at the time of execution of this lease deed as advance for monthly rent...." The cheques bear the amount Rs.91,300/- which is the actual amount payable to the lessor after deduction of TDS at the lessee's end only, on the total rent of Rs.
1,10,000/- per month.
Now this is the broad structure of the lease agreement, under which the accused entered into possession and commenced work to make the premises fit for the purpose of running of the restaurant. However the restaurant failed to see the light of the day, because as it turns out, the necessary permissions for the installation of the lift and other alterations could not be procured within time, and the restaurant never commenced business, though remained under the occupation of the lessee/accused. To make matters worse, finally the premises in question was booked and sealed by the Sangeeta Batra, Geeta Batra, Bimla Batra, Kanchan Batra, Vajanti Batra (complainants) Vs. VND Foods Ltd. 3 MCD for unauthorized construction/excess coverage in violation of bye-laws. A portion of the basement and third floor were sealed on 13.04.2009, and the rest of the property on 12.09.2009. The sealing was on account of 'unauthorized construction/excess coverage'. It is an admitted position that the premises were sealed before work on restaurant could be completed and business began. Nevertheless - the cheques in question were presented, which returned dishonored on account of 'insufficiency of funds' - leading to legal demand notice being served on the accused - which has not been denied, and finally the filing of the present complaint on non payment within 15 days thereafter.
3. After sealing of the premises, the logical question that arose was - by whose fault? In this regard the complainant states that the premises in question is located on a notified commercial street, where business of restaurant can be carried out as per bye-laws/Master Plan, which is not disputed. Therefore as per the complainant the accused cannot be permitted to wriggle out of obligation to pay the rent on ground of sealing, which was done due to the act of the accused of raising unauthorized construction/extra addition, sans any permission or license. This, they claim, was in stark violation of the law and contractual obligations under the lease agreement, wherein the accused had to make changes/constructions in the premises in strict compliance to the bye laws, and accused bore sole responsibility for any statutory action taken qua construction within the lease period. The complainant claims that the accused raised unauthorized construction and additions on First Floor, Second Floor & constructed even a third floor on the roof, which was not meant to be constructed. The complainant in this regard relies on per para 6(f) of the Lease Agreement, wherein there is an embargo on the lessee not to make any structural addition on the roof except a lift room and a temporary shed for a generator set. This according to the complainant was observed in its breach by the accused, leading to the booking and sealing of the premises by the MCD.
The complainant therefore maintains that since the sealing was on account of act of accused and he remained in premises throughout till 12.09.2009, they were perfectly justified in presenting the cheques and filing the present complaint.
4. This is the broad case of the complainant. Now let us narrow down the controversy by sifting the admitted from the controverted. The issuance of duly filled - signed cheques and service of legal notice is admitted. Once these foundational facts are admitted - A presumption of consideration arises in favour of the complainant that the cheques were issued in discharge of a legal liability. The Sangeeta Batra, Geeta Batra, Bimla Batra, Kanchan Batra, Vajanti Batra (complainants) Vs. VND Foods Ltd. 4 onus to rebut the presumption was to be shouldered by the accused. With this guiding us, let us see the five fold defence of the accused :-
i) Complaint being still born, having not been filed by competent attorney;
ii) Lease Agreement is as agreement void ab-initio, being an agreement forbidden by law/against public policy;
iii) Lease Agreement is a voidable contract, on account of misrepresentation/concealment of material information by the lessor;
iv) Lease Agreement having got frustrated; the accused/lessee is absolved from payment of rent;
v) The final defence is that the cheques were issued not in discharge of a subsisting liability but as advance/security cheques.
Let us now begin at the beginnings; and deal with the merit of each objection :-
i) Whether the complaint is duly filed by a competent attorney ?
At the very outset the accused has challenged the authority of the GPA of the complainants, who had filed the present complaint on their behalf and also deposed in evidence. The accused to buttress his objection relies on the judgment of the Hon'ble Supreme Court in the case of A.C.Narayanan & Ors v. State of Maharashtra (Criminal Appeal No. 73 of 2007 arising out of S L P (Crl.) No. 2724 of 2008 decided on 13 09 2013). In my view the said judgment in no way advances his case. In the said judgment - the Hon'ble Supreme Court, while clarifying the legal position vis-à- vis criminal complaints filed by attorneys, has held :-
(i) Filing of complaint petition under Section 138 of NI Act through power of attorney is perfectly legal and competent.
(ii) The Power of Attorney holder can depose and verify on oath before the Court in order to prove the contents of the complaint. However, the power of attorney holder must have witnessed the transaction as an agent of the payee/holder in due course or possess due knowledge regarding the said transactions.
Sangeeta Batra, Geeta Batra, Bimla Batra, Kanchan Batra, Vajanti Batra (complainants) Vs. VND Foods Ltd. 5 Hence it is clear that a complaint u/s 138 of the NI Act, can be validly filed through an attorney and the said attorney can depose and prove the contents of the complaint if he has witnessed the transaction in question or possesses due knowledge as to the same. In this case, the attorney Mr.Vipan Batra was authorized by the five complainants vide GPA dated 23.06.2008(Ex.CW1/1(OSR in CC No.78/10) as their lawfully constituted attorney to let out the premises and execute lease deed/agreements to that effect, and also do all that is necessary for the said purposes. The attorney Mr.Vipan Batra acting on the basis of the GPA entered into the present lease agreement with the accused on 18.07.2008, without any demur from the accused. The GPA dated 23.06.2008 clearly on page 2 (para 5) allows the attorney to submit all kinds of suits, plaints, revision, appeal etc. for recovery of rent, ejectment and to represent the complainants in all courts civil and criminal and to do all other acts, deeds, and things in connection thereto. In my opinion the general/expansive tenor of the para especially towards the end, intends a wide ambit of power to the attorney, vesting all authority in him to file the necessary cases vis-à-vis the property and more particularly the lease agreement in question. Filing of the present complaint u/s 138 on dishonor of the cheques, given as rent, would fall within the authority of the attorney, especially when the matters have proceeded till its fag end, and considerable evidence led, without any demur from the complainants, which may be taken as ratification of his authority, or even the accused, who has taken this technical objection only at the penultimate stage. The accused has also challenged the competency of the attorney to lead evidence on the premise that the accused has no personal knowledge of the facts deposed to. Now in this regard it is an undisputed position that it was the attorney who had entered into the lease agreement with the accused, and hence he was clearly competent to depose with respect to facts relating to this transaction. The accused not only having entered into the lease with him as the representative of complainants, but also having corresponded with him at all occasions, cannot challenge his authority to depose as to aspects of this transaction. Hence this defence is not tenable.
Now moving on to the more substantial of the defences :-
ii) Whether the lease agreement in question can be said to be void ab initio on account of it being forbidden by law or against public policy, and therefore unenforceable by law ?
It has been argued on behalf of the defence, that the very agreement on the basis of which the rights and liabilities are being fixed is hit by the mischief of Section 23 of the Indian Contract Act, being against public policy and also forbidden by law, as the property did not have a completion Sangeeta Batra, Geeta Batra, Bimla Batra, Kanchan Batra, Vajanti Batra (complainants) Vs. VND Foods Ltd. 6 certificate before it was given out on lease to the lessee. The complainant has argued that this objection cannot be looked into at all in view of the bar of Section 91/92 of the Indian Evidence Act, 1872. This objection leaves me cold, and is devoid of merit, since it is trite law Sections 91 & 92 of the Indian Evidence Act, which talk about exclusivity and conclusivity of documents, do not rule out receipt of evidence to hit at the very validity of the document. The Bar is only as regards going beyond the contents of the document. Therefore the accused is within his rights to challenge the contract, to which he is a party as being void ab intio. Having said that, maintainability and sustainability are two different things. The objection may be maintainable, but let us appreciate whether it can actually succeed in this case ?
In this regard, reference to Section 23 of the Indian Contract Act, 1872 becomes pertinent. Section 23 reads as under :-
23. What considerations and objects are lawful, and what not.
--The consideration or object of an agreement is lawful, unless-- it is forbidden by law; or is of such a nature that, if permitted, it would defeat the provisions of any law; or is fraudulent; or involves or implies injury to the person or property of another; or the Court regards it as immoral, or opposed to public policy.
In each of these cases, the consideration or object of an agreement is said to be unlawful. Every agreement of which the object or consideration is unlawful, is void.
Let us also read Section 346 of the Delhi Municipal Corporation Act, 1957 :-
346. Completion certificates.--(1) Every person who employs a licensed architect or engineer or a person approved by the Commissioner to design or erect a building or execute any work shall, within one month after the completion of the erection of the building or execution of the work, deliver or send or cause to be delivered or sent to the Commissioner a notice in writing of such completion accompanied by a certificate in the form prescribed by bye-laws made in this behalf and shall give to the Commissioner all necessary facilities for the inspection of such building or work.
(2) No person shall occupy or permit to be occupied any such Sangeeta Batra, Geeta Batra, Bimla Batra, Kanchan Batra, Vajanti Batra (complainants) Vs. VND Foods Ltd. 7 building or use or permit to be used any building or a part thereof affected by any such work until permission has been granted by the Commissioner in this behalf in accordance with bye-laws made under this Act:
Provided that if the Commissioner fails within a period of thirty days after the receipt of the notice of completion to communicate his refusal to grant such permission, such permission shall be deemed to have been granted.
The fact that the building does not have a completion certificate issued by the MCD is not in dispute. It has been argued that since the building in question did not have a completion certificate, and Section 346 of the Delhi Municipal Corporation Act, places a specific embargo on the owner of the premises not to occupy or allow a building to be occupied which does not have a completion certificate and for this reason the contract is void ab initio and gives rise to no rights and liabilities.
The question that now arises for consideration is what would be the legal effect & consequences of a property being leased out which does not a have a completion certificate ?
In my opinion the agreement cannot be denuded of its effect totally, merely on account of the property not having a completion certificate. There is no denying that the Act stipulates that a building ought to be occupied only after completion certificate is obtained, and this serves a salutary object i.e to ensure that the buildings are constructed in accordance with sanction plans and bye-laws ensuring safety & aesthetics in building constructions, and in the present case when the property is leased out sans the completion certificate it is indeed a transgression of law. However, having said that, in my opinion still the violation of this rule would not invalidate the entire lease agreement, for the reason that it is a procedural violation, which may be visited with the consequences provided under the Act but should not be allowed to stifle the very agreement. Holding the rent agreement as void on account of this, would wreak havoc as judicial notice can be taken of the fact that only a fraction of properties in Delhi have completion certificates and any other view may deprive many of their rights under lease agreements, otherwise in accordance with law but without completion certificates. This cannot be said to be the intent of the legislators while framing this provision, had it been so - they would have not hesitating in adding that any contract qua any property entered into without the property holding a completion certificate, shall be void. Hence though literally read Section 346(2) places an embargo on occupation of premises sans completion certificates, however this to my opinion Sangeeta Batra, Geeta Batra, Bimla Batra, Kanchan Batra, Vajanti Batra (complainants) Vs. VND Foods Ltd. 8 needs to be read down as a provision, whose violation may be visited with penal consequences, but not denude the contract of its legal effect. The words of a statute are letters into which life is blown by breathe of judicial interpretation, which obviously has to be done keeping in mind - that the task of the judge is not just adjudication but social context adjudication.
Even as a purely legal reasoning, there is also a direct decision of the Hon'ble High Court of Delhi on this aspect, delivered in the case of Municipal Corporation of Delhi Vs. Piyush Traders (P) Ltd, ILR 1988 Delhi 577, wherein while dealing with a question of assessment of property tax, the Hon'ble Court was faced with a question as to "whether a lease agreement without completion certificate can be taken to be a valid lease ?", and the Court while answering in the affirmative held :-
"(6) It has been signed by the learned counsel for the petitioner that respondent No. 1 had admitted before the Assessing Authority that respondent No. 1 had not applied for a completion certificate till January, 1984. So he has argued that unless and until a completion certificate is obtained the building could not have been let out.
There is a fallacy in this argument. There is no requirement of law that unless and until a completion certificate is issued., the building cannot be considered fit for occupation and there is no legal bar placed by any statute prohibiting the letting of the building till a completion certificate is obtained. Section 346 of the Delhi Municipal Corporation Act requires the owner to obtain a completion certificate within one month of the completion of the building and Section 346(2) of the said Act prohibits occupation of the building till the permissions is obtained from the Commissioner in this regard. However, there is no provisions made in the Municipal Corporation Act making the occupation as invalid and not recognisable by law for other purposes. The violation of Section 346 of the Act could not be visited with penalties as contemplated by Section 351 read with Schedule I of the Act. Neither the letting made of such a building in respect of which occupation certificate is not obtained had been invalid by any provision of law nor there is any prohibition in the statute that no contract would be made for letting before obtaining the completion certificate and if made such a contract would be void.
Even such a building is not immune from the assessment of property tax when the notice had been issued under Section 126 for assessing the property tax for the year 1983-84. Even the petitioner took a plea that the building was complete and was liable to be taxed. So it cannot be argued that no letting could take Sangeeta Batra, Geeta Batra, Bimla Batra, Kanchan Batra, Vajanti Batra (complainants) Vs. VND Foods Ltd. 9 place till a proper completion certificate had been obtained as contemplated by Section 346 of the Act"
Hence it is clear that letting of the property without a completion certificate cannot be said to have the effect of invalidating the contract of lease itself.
To argue that this flaw would render the contract illegal, the accused has placed reliance on the decision of the Hon'ble High Court of Delhi in Virender Singh v. Laxmi Narain and Anr - MANU/DE/9709/2006. However the same does not advance the case of the accused in any manner, as it is distinguishable on the facts of the case. That case was as case of trafficking in public offices, where the contract in discharge of which cheque was given, related to securing of a post in police force on payment of illegal consideration. The contract was downright illegal and in violation of heinous penal provisions, and also public policy insofar as such contracts undermined merit and efficiency in a service as essential as the police service. The circumstances in the present case are totally different. What we have is a procedural violation, which cannot be sanctified as a fatal flaw to hold the contract as illegal.
Now as regards the contention that such an agreement is against public policy, therefore unenforceable. To my mind the present lease agreement cannot be said to be injurious to the public or the social well being of the people. Infact as observed above, where the requirement of obtaining a completion certificate, is observed more in breach, than in practice, invalidating all such leases on ground of public policy, cannot be said to be in public interest whichever way one looks at it, this would infact cause great hardships to people who may lose their tenancy rights on account of a procedural violation.
Public policy as it is, is a very treacherous ground for decision, an unruly horse and the judicial trend of narrowing down of the scope of public policy is pretty clear. In this regard, reliance may be placed on the locus classicus on the subject i.e Gherulal Parakh v. Mahadeodas Maiya, 1959 Supp (2) SCR 406:AIR 1959 SC 781, wherein it was held :-
"
..
23. Asquith, L.J. in Monkland v. Jack Barclay Ltd. [ (1951) 1 All ER 714] restated the law crisply at p. 723:
Sangeeta Batra, Geeta Batra, Bimla Batra, Kanchan Batra, Vajanti Batra (complainants) Vs. VND Foods Ltd. 10 "The Courts have again and again said, that where a contract does not fit into one or other of these pigeon-holes but lies outside this charmed circle, the courts should use extreme reserve in holding a contract to be void as against public policy, and should only do so when the contract is incontestably and on any view inimical to the public interest."
The Indian cases also adopt the same view. A division bench of the Bombay High Court in Shrinivas Das Lakshminarayan v. Ram Chandra Ramrattandas [ ILR (1920) 44 Bom. 6] observed at p. 20:
"It is no doubt open to the Court to hold that the consideration or object of an agreement is unlawful on the ground that it is opposed to what the Court regards as public policy. This is laid down in Section 23 of the Indian Contract Act and in India therefore it cannot be affirmed as a matter of law as was affirmed by Lord Halsbury inJanson v. Driefontein Consolidated Mines, Limited (1902 AC 484 at p. 491) that no Court can invent a new head of public policy, but the dictum of Lord Davey in the same case that "public policy is always an unsafe and treacherous ground for legal decision" may be accepted as a sound cautionary maxim in considering the reasons assigned by the learned Judge for his decision."
The same view is confirmed in Bhagwant Genuji Girme v. Gangabisan Ramgopal [ ILR 1941 Bom. 71] and Gopi Tihadi v. Gokhei Panda [ ILR 1953 Cuttack 558] . The doctrine of public policy may be summarized thus: Public policy or the policy of the law is an illusive concept; it has been described as "untrustworthy guide ", "variable quality", "uncertain one", "unruly horse", etc; the primary duty of a Court of Law is to enforce a promise which the parties have made and to uphold the sanctity of contracts which form the basis of society, but in certain cases, the Court may relieve them of their duty on a rule founded on what is called the public policy; for want of better words Lord Atkin describes that something done contrary to public policy is a harmful thing, but the doctrine is extended not only to harmful cases but also to harmful tendencies; this doctrine of public policy is only a branch of common law, and, just like any other branch of common law, it is governed by precedents;
the principles have been crystallized under different heads and though it is permissible for Courts to expound and apply them to different situations, it should only be invoked in clear and incontestable cases of harm to the public; though the heads are not closed and though theoretically it may be permissible to evolve a new head under exceptional circumstances of a changing world, it is advisable in the interest of stability of society not to make any attempt to discover new heads in these days...."
Sangeeta Batra, Geeta Batra, Bimla Batra, Kanchan Batra, Vajanti Batra (complainants) Vs. VND Foods Ltd. 11 In view of the above paras, it is clear that holding an agreement void in ground of public policy is fraught with risks, and in any case I hold that in present case there is no preponderating public danger that would be averted or public good served by holding the contract void, hence the argument of the accused that the contract is void being against public policy is turned down for the reasons aforestated.
iii) Whether the contract is voidable on account of mispresentation/fraud/concealment of material fact of non grant of completion certificate ?
Though not specifically articulated in the same form, the accused has argued that the lessor/complainant was under an obligation to disclose the non obtainment of completion certificate qua the premises, which as per him, was a material defect. The Accused to buttress this argument relies on Section 108 of the Transfer of Property Act, 1882, which reads as under :-
"..108. Rights and liabilities of lessor and lessee.-- In the absence of a contract or local usage to the contrary, the lessor and the lessee of immovable property, as against one another, respectively, possess the rights and are subject to the liabilities mentioned in the rules next following, of such of them as are applicable to the property leased:
(A) Rights and Liabilities of the Lessor
(a) The lessor is bound to disclose to the lessee any material defect in the property, with reference to its intended use, of which the former is and the latter is not aware, and which the latter could not with ordinary care discover;
In my opinion the contention of the accused has little merit. The accused had sufficient opportunity to carry out due diligence to find out whether the property had a completion certificate or not, hence the non communication of this information does not render the contract voidable, even otherwise under the Indian Contract Act, misrepresentation or fraud would not vitiate the contract as long as the party had means to find out the actual position. In any event - the lease agreement in para 15, clearly stipulates that the "lessee has verified and has fully satisfied itself regarding the soundness, Sangeeta Batra, Geeta Batra, Bimla Batra, Kanchan Batra, Vajanti Batra (complainants) Vs. VND Foods Ltd. 12 nature, extent, and quality of the construction, structure, fixtures and fittings of the building, purpose for which the demised premises can be used etc....." This to my mind meets his argument squarely. The accused in such circumstances can safely be presumed to have known the fact that the premises had no completion certificate. Hence the contract cannot be said to be voidable on this account. Fraud is not fraud if it does not defraud ! The accused cannot be said to have been defrauded as the lack of completion certificate could have been discovered by the accused even with bare amount of diligence, especially when he has been a government contractor, who can be presumed to be in the know of these things.
Even otherwise, as we would see in the following paras, the absence of a completion certificate, has limited role to play - as the premises were, as per the report of the MCD and testimony of DW1 - were not sealed on account of lack of completion certificate but due to 'unauthorised construction/excess coverage'. More on it later in the judgment.
Now, after the earlier discussion it is clear that the agreement when it was entered into, was valid, neither void nor voidable, but the question that arises is whether the 'contract subsequently becomes void' or is rendered void on account of sealing of the premises by the MCD ?, which brings us to the fourth issue the accused has raised, which is that - the agreement got frustrated on account of sealing and he could never use the property, so the question of payment of rent does not arise, and the cheques cannot be taken to be in discharge of a liability.
iv) Whether the contract can be said to have got frustrated on account of sealing of the premises ?
This to my mind again is a flawed contention, a perusal of an MCD reply to an RTI filed by the complainant dated 19.08.2009, reveals that the sealing can be attributed to the ongoing construction/excess coverage, while the property was in the possession of the accused. This is further corroborated by the cross examination of DW-1, AE(Building) SDMC, dated 20.02.2013 wherein it has come out that the premises were not sealed on account of absence of completion certificate but on account of unauthorized construction. He also deposed that the unauthorized construction of third floor was done between the first booking and second booking on 20.06.2009. It is clear that this is not a case where the lease contract got frustrated or incapable of performance due to a supervening act beyond the Sangeeta Batra, Geeta Batra, Bimla Batra, Kanchan Batra, Vajanti Batra (complainants) Vs. VND Foods Ltd. 13 act of parties or a vis-major. The fault lies with the parties, it has come in evidence that the accused had constructed the premises in contravention to the bye laws and that led to the building being sealed. The conduct of the complainant is also not above reproach. It may also be noted that the complainant, who had never obtained a completion certificate may also have contributed to the building being booked and sealed by the MCD. It may be quite possible that the deviations of the building from the bye-laws came to light only when accused approached the authorities seeking permission for installation of lifts etc, and then the MCD, who sprang into action - out of its deep slumber and took the action against the property, while lying low all these years inspite of the property having no completion certificate.
Be that as it may and without commenting finally as to whose fault led to the property being sealed and contract incapable of performance. (And the same need not be, because the case can be decided on a different point altogether, as one sees later in the judgment).
In these circumstances - the doctrine of frustration would be not absolve the parties from complying with the contract. The contract cannot be said to have been frustrated on account of a supervening, third party factor hence the parties were under an obligation to perform their parts of the contract. If the accused had raised an unauthorized construction in violation of the applicable bye laws, that constitutes breach of contract, and renders himself liable for an action for damages, which may be, inter-alia the expenses that the complainant was made to bear in the restoration and de-sealing of the premises, and also the compensation for the lost rental income. All this in my view, ought to have been subject matter of a civil litigation for damages for breach of contract and not in a complaint u/s 138 of the NI Act.
This brings us to the last and the most important issue raised by the accused.
v) Whether the cheques were issued not in discharge of a liability but as advance security cheques ?
Now with respect to this, Since the cheques are admitted to be signed and issued from an account maintained by the accused, it is a cheque that carries the presumption of having been issued in discharge of a legal liability/debt as per the mandate of Section 118(a) and Section 139 of the NI Act, Sangeeta Batra, Geeta Batra, Bimla Batra, Kanchan Batra, Vajanti Batra (complainants) Vs. VND Foods Ltd. 14 and it was for the accused to rebut that presumption, atleast on a scale of preponderance of probabilities by making his defence of cheque having been issued as advance security probable & plausible. This, he could do by cross examination of the complainants or adducing independent evidence. In my view - the accused has succeeded in rebutting the presumption. It is clear from the discussion till now that this was a contract for lease, whereby the complainant transferred the possession of their property for use by the accused on payment of an amount i.e rent. Now rent and utilization of the premises are inextricably connected. The rent becomes due or accrues on the utilization of the premises for the purpose for which it was taken. The premises having been sealed - the premises could not be utilized for the purposes of restaurant. Whether the same constitutes a breach of contract on part of the accused or the complainant, may be decided in an appropriate case. Be that as it may, what is clear is that the cheques in question are cheques that were issued at the time of execution of lease agreement itself as advance cheques. And these cheques it is clear were issued prior to a crystallized liability having arose. In this regard reliance is placed on the recent decision of the Hon'ble Apex Court in the case of M/s. Indus Airways Pvt. Ltd. & Ors versus M/s. Magnum Aviation Pvt. Ltd. & Anr. (Arising out of SLP (Crl.) No.9752 of 2010) decided on 07.04.2014, wherein while bringing out the difference between civil and criminal liability, categorically held that if a post dated cheque is issued as an advance payment for purchase of the goods and for any reason purchase order is not carried to its logical conclusion either because of its cancellation or otherwise and material or goods for which purchase order was placed is not supplied by the supplier, the cheque cannot be said to have been drawn for an existing debt or liability. This may lead to a civil liability for breach of contract but not clearly a penal liability u/s 138 NI Act. Reference, in this regard may be made to Para 13 of the judgment :-
"13. The explanation appended to Section 138 explains the meaning of the expression 'debt or other liability' for the purpose of Section 138. This expression means a legally enforceable debt or other liability. Section 138 treats dishonoured cheque as an offence, if the cheque has been issued in discharge of any debt or other liability. The explanation leaves no manner of doubt that to attract an offence under Section 138, there should be legally enforceable debt or other liability subsisting on the date of drawal of the cheque. In other words, drawal of the cheque in discharge of existing or past adjudicated liability is sine qua non for bringing an offence under Section 138. If a cheque is issued as an advance payment for purchase of Sangeeta Batra, Geeta Batra, Bimla Batra, Kanchan Batra, Vajanti Batra (complainants) Vs. VND Foods Ltd. 15 the goods and for any reason purchase order is not carried to its logical conclusion either because of its cancellation or otherwise, and material or goods for which purchase order was placed is not supplied, in our considered view, the cheque cannot be held to have been drawn for an existing debt or liability. The payment by cheque in the nature of advance payment indicates that at the time of drawal of cheque, there was no existing liability..."
It is an admitted case that the cheques in question had been received by the complainant in advance at the time of execution of the lease deed. It is also admitted that the property could not be used for the purpose it was intended for, on account of subsequent events. The fact that the cheques in question were given at the time of execution only is also reflected in para (4) of the lease agreement, which provides "the lessee has also submit 12 post dated cheques at the time of execution of this lease deed as advance for monthly rent...."
If the cheques in question were given as advance for future rent, the logical question that arises is what was the actual mode of payment then. The answer is provided by Clause 6(a) of the lease agreement, which reads as :-
"lessee to pay the reserve rent of Rs.1,10,000/- subject to deduction of TDS on or before 7 of each calendar month in advance against receipt through an account payee cheque in the name of lessor"
This spells out the mode of payment of rent, i.e that the rent was to be paid by way of an account payee cheque in the name of the lessor on or before 7th of each month in advance. The cheques in question were never meant to in discharge of the future rental liability. The fact that the cheques were issued as security is further sealed by the Complainant's frank admission in his cross examination dated 17.09.2011, wherein the GPA of the complainant conceded :
"....all the cheques (in all the cases) were handed over to me at the time of execution of lease deed dated 18.07.2008.
..
..
Sangeeta Batra, Geeta Batra, Bimla Batra, Kanchan Batra, Vajanti Batra (complainants) Vs. VND Foods Ltd. 16 It is correct that I had received all the said cheques at the time of execution of lease deed so that if there is any default in payment of monthly rent, I could encash those cheques".
Now this candid admission straight from the horse mouth's itself, clearly proves that that the cheques in question were not issued in payment of any rent that had accrued but as advance security cheques. Hence whichever way one looks at it - it is proved that the cheques were not issued in discharge of an existing legal liability, and in which case Section 138 is not attracted. It is reiterated that one need not go in to the question as to why or due to whose fault the premises were sealed. This may be the worst breach on the part of the accused, that he undertook illegal construction on the premises and the same was sealed, but that at best qualifies as a contractual breach at best, entitling the complainant to a civil action for damages on breach of contract but not to present the security cheques and maintain a prosecution u/s 138 of the NI Act, as the cheques it is clear were given as security/advance for a future rental liability, which on account of the sealing of the premises never arose. Parties have also led evidence on the point of as to whose responsibility was to get the premises de-sealed. In my opinion the question is not required to be decided, as it relates to the duty of mitigation on parties in case of breach of contract, which is not the subject matter of the present proceedings.
Hence in the ultimate analysis, for the foregoing reasons - the cheques cannot be said to have been issued in discharge of an existing legal liability and with this, I hold the accused persons as not guilty and acquit them of offence u/s 138 of the NI Act.
Let a copy of this judgment be uploaded on the Delhi District Courts website. Announced in open Court.
Judgment containing 17 signed pages.
(BHARAT CHUGH) MM-(NI Act)-Central-01/THC/Delhi 10.07.2014 Sangeeta Batra, Geeta Batra, Bimla Batra, Kanchan Batra, Vajanti Batra (complainants) Vs. VND Foods Ltd. 17