Bangalore District Court
M/S.Sunvik Steels Pvt Ltd vs M/S.Ashok Magnetics Limited on 28 April, 2018
IN THE COURT OF XXVII ADDL. CHIEF
METROPOLITAN MAGISTRATE, BANGALORE.
Present: Sri. N.Muniraja B.A., LL.B.,
XXVII A.C.M.M Bangalore.
Dated: This the 28th day of April 2018.
C.C. NO.12405/2016
Complainant M/s.Sunvik Steels Pvt Ltd.,
No.23, 3rd Floor,
MES Road,
Bahubali Nagar,
Jalahalli Village,
Bangalore-560 013.
Rep by its Chief Finance Officer,
Sri.Pawan Kumar Batwal.
(Rep by Sri.A.S.R. Advocate)
Vs.
Accused M/s.Ashok Magnetics Limited,
(Formerly known as AML Steel Ltd.,)
Corporate Office:
AML Towers,
No.9, 6th Street,
Gopalapuram,
Chennai-600086.
2.Mr.Ajay Agarwal,
The Managing Director,
M/s.Ashok Magnetics Limited,
(Formerly known as AML Steel Ltd.,)
Corporate Office:
AML Towers,
No.9, 6th Street,
Gopalapuram,
Chennai-600086.
2 C.C.No.12405/2016
Also at his residence:
Flat No.1162, 16th Floor,
TVH lumbini Square,
127A, Bricklini Road,
Purasaiwalkam,
Vepery,
Chennai-6000007.
Tamilnadu,
India,
3. Ashok Agarwal
The Chairman,
M/s.Ashok Magnetic Limited,
(Formerly known as AML Steel Ltd.,)
Corporate Office:
AML Towers,
No.9 6th Street,
Gopalapuram,
Chennai-600086.
Also at his residence:
Agarwals, 2/3, Landons Road,
Kilpauk,
Chennai-600010.
(Reptd by Sri.R.M.D.R Adv)
*****
JUDGEMENT
The complainant company filed this complaint against the accused for the offence punishable U/s.138 of the Negotiable Instruments Act.
2. Brief facts of the complainant case are as follows:
The complainant is the private limited company established in the year 2003 and engaged in 3 C.C.No.12405/2016 manufacturing and supplying of Sponge Iron-Lumps, TMT Bar etc. The accused No.1 is the company engaged in the manufacturing of steel, accused No.2 is Managing Director and Accused No.3 is Chairman and they are incharge of the business of the accused No.1 company. The accused No.1 company has been purchasing the Sponge Iron-Lumps from the complainant since several years on credit basis. During the year 2015-16 the accused have purchased Sponge Iron-Lumps for their factory at R.S.No.33/5 PT 6, 34/12 & 13 Eripakkam Village, Nettapakkam, Commune Pondicherry-605106, under various invoices by placing the following orders and now there is a total outstanding amount of Rs.86,47,257/-.
Details of purchase orders are as follows:
Sl. Date Purchase Order No.
No.
1 14.9.2015 AMI/PO/023/15-16
2 22.9.2015 AMI/PO/024/15-16
3 11.10.2015 AMI/PO/029/15-16
4 19.10.2015 AMI/PO/031/15-16
4 C.C.No.12405/2016
5 28.10.2015 AMI/PO/033/15-16
6 19.11.2015 AMI/PO/035/15-16
7 19.11.2016 AMI/PO/036/15-16
8 18.12.2016 AMI/PO/037/15-16
9 14.01.2016 AMI/PO/040/15-16
10 14.01.2016 AMI/PO/041/15-16
11 01.02.2016 AMI/PO/07/15-16
3. The accused in respect of the supply of Sponge Iron-Lumps under the invoice Nos.7232, 7476 and 7477 dated 19.01.2016 and 28-01-2016 for Rs.3,56,012/-, Rs.3,92,227/- and Rs.4,12,983/-
total amount of Rs.11,61,222/- issued cheque bg.Nos.066799, 066815 and 066816 dated 5.3.2016 for Rs.3,56,012/-, Rs.3,92,227/- and Rs.4,12,983/- respectively drawn on Central Bank of India, Mount Road, Chennai for total sum of Rs.11,61,222/- in favour of the complainant company. The accused No.2 being the Managing Director of the accused No.1 company issued the said cheques towards purchase of sponge iron- lumps from the complainant. The Accused No.3 being a Chairman, 5 C.C.No.12405/2016 he is fully responsible for the business of the accused No.1 company. After several reminders requests and demands, the accused asked the complainant to present the said cheques. Accordingly, the complainant presented the said cheques for clearance on 5.3.2016 through their banker M/s. State Bank of India, Malleshwaram Branch, Bangalore and the said cheques returned as per endorsement 10.3.2016 as exceeds arrangement. Thereafter, the complainant got issued legal notice dated 1.4.2016 through RPAD calling upon the accused to pay the cheques amount within 15 days from the date of receipt of notice and the said notice served to the accused. Inspite of receipt of notice, the accused did not paid the cheques amount and have sent untenable reply notice dated 26.4.2016. Hence, this complaint.
4. The accused No.1 is the company and accused No.2 & 3 are the Managing Director and Chairman of 6 C.C.No.12405/2016 the accused No.1 company. The accused appeared through their advocate and they enlarged on bail. Substance of accusation read over to the accused and they pleaded not guilty.
5. On behalf of the complainant company to prove the guilt of the accused examined its Chief Finance Officer as PW1 and got marked 13 documents as per Ex.P.1 to P.13 and closed its side evidence. On closure of the complainant side evidence, statement of the accused recorded as required U/s.313 of Cr.P.C. The accused have denied the incriminating circumstances, which appears against them in the complainant side evidence. The accused have not led any defence evidence. However, during the course of cross-examination of PW1 got marked Ex.D.1 document.
6. Heard the learned counsels for the complainant and accused. The learned counsel for the 7 C.C.No.12405/2016 complainant has also filed written arguments and I perused the records.
7. The points that would arise for my consideration are as follows:
(i) Whether the complainant proves that the accused issued Ex.P.5 to 7 cheques towards discharge of legally enforceable debt or liability and the said cheques dishonoured?
(ii) Whether the complainant proves that after dishonour of cheques, served notice to the accused in compliance of Sec.138(b) of N.I Act?
(iii) What order?
8. My answer to the above points are as follows:-
Point No.1 : In the Affirmative Point No.2: In the Affirmative Point No.3: As per the final order, for the following.
REASONS
9. Point No.1 : It is the case of the complainant company that, the accused have issued Ex.P.5 to 7 cheques towards payment of sponge Iron-Lumps 8 C.C.No.12405/2016 supplied to the accused No.1 company and the said cheques dishonoured as exceeds arrangements. The complainant company is represented by its chief finance officer namely Sri.Pawan Kumar Batwal ie.,, PW1. On behalf of the complainant produced Ex.P.1 Board Resolution to show that PW1 has been authorised to represent the complainant company. In the course of cross-examination of PW1 on behalf of the accused not disputes the said Ex.P.1 Board Resolution and authority of PW1 to represent the complainant company. PW1 in the affidavit filed in lieu of chief examination has reiterated the contents of the complaint averments.
10. It is the case of the complainant that the accused No.1 is the company and accused No.2 is Managing Director and accused No.3 is chairman of the accused No.1 company and they are incharge and responsible for the business of the accused No.1 company. During the course of cross-examination of 9 C.C.No.12405/2016 PW1 on behalf of the accused contended that the accused No.3 is nothing to do with the accused No.1 company. No doubt, it is true that, PW1 in the cross-examination stated that he has not verified any documents to confirm about the accused No.2 is the Managing Director and accused No.3 is the chairman of the accused No.1 company and he has not produced any documents to show that the accused No.2 and 3 are looking after day to day affairs of the accused No.1 company. It is pertinent to note that in the entire cross-examination of PW1 on behalf of the accused not denied the fact that the accused No.2 is the Managing Director and his role and responsibility in the accused No.1 company.
11. The records reveals that the accused No.3 had filed Cri.Petition.Nos.1102/2017 to 1108/2017 before the Hon'ble High Court of Karnataka Bangalore to quash these proceedings against him on the ground that, he neither Director nor any 10 C.C.No.12405/2016 Officer of the accused No.1 company. The Hon'ble High Court as per the order dated 22.6.2017 dismissed the above said criminal petitions. However, the Hon'ble High Court during the course of order made an observation that it is open for the accused No.3 to establish before this court. As per Sec.141 of the N.I Act if a person committing an offence U/s.138 of N.I Act is a company, every such person who at the time of the offence was committed, was incharge of or responsible to the company for conduct of the business of the company, as well as the company shall be deemed to be guilty of offence. It has come in the cross-examination of PW1 that earlier the accused company was known as AML Steel company and subsequently named as M/s. Ashok Magnetic Ltd., There is no dispute with regard to the change of name of the accused company from AML Steel Company to M/s.Ashok Magnetic Ltd., During the course of cross-examination PW1 admits the Ex.D.1 Certificate of Incorportion. The said 11 C.C.No.12405/2016 document goes to show that the name of the accused company has been changed from AML Steel Ltd., to M/s.Ashok Magnetics Ltd with effect from 27th day of April 2015. As could be seen from Ex.D.1 document that the accused No.2 is the Director of the accused No.1 company and he authorised to operate the bank account of the accused No.1 company. As noticed above, on behalf of the accused not denied the role and responsibility of the accused No.2 in the accused No.1 company. Further, accused No.2 is the signatory of the cheques in question. The said fact is not denied on behalf of the accused. It is seen from Ex.D.1 document that the accused No.3 resigned to the position of Managing Director of the accused No.1 company with effect from 16.8.2014. It is pertinent to note that Ex.P.2 to 4 invoices of the transaction in question raised on 19.1.2016 & 28.01.2016 respectively and Ex.P.5 to 7 cheques are dated 5.3.2016. So it is clear that the accused No.3 resigned to the accused No.1 company much prior to 12 C.C.No.12405/2016 the complaint transaction and issuance of the cheques in question. As on the date of transaction itself, the accused No.3 was no more a Managing Director of the accused No.1 company. The complainant has not placed any material to show that the accused No.3 is the chairman of the complainant company. Therefore, the complainant failed to establish that the accused No.3 is the chairman of the accused No.1 company and he is incharge and responsible of the business of the accused No.1 company and he is incharge and responsible of the business of the accused No.1 company.
12. In the cross-examination of PW1 the accused have denied the placing of orders to the complainant for supply of materials, by the complainant and issuance of cheques in favour of the complainant and contended that, the complainant misused the cheques issued to the sister's concern of the complainant company for security purpose. Of 13 C.C.No.12405/2016 course, PW1 has specifically denied the suggestions made on behalf of the accused in this regard. The complainant produced the invoices as per Ex.P.2 to 4 to show the supply of Sponge Iron- Lumps to the accused No.1 company. During the course of cross- examination of PW1 on behalf of the accused contended that the complainant has not produced the purchase orders with respect to the invoices referred in this case and not produced the check post documents having transport the materials from the complainant factory situated at Tumkur District of Karnataka State to the accused company at Pondicherry and not produced LR copies to show the supply of goods to the accused and signature of the accused not obtained to the invoices having receipt of the materials by the accused and C-forms and the complainant created the invoices. It is true that, the complainant except the invoices not produced the other documents as contended above by the accused in the cross-examination of PW1. However, at the 14 C.C.No.12405/2016 time of arguments the learned counsel for the complainant has produced the xerox copy of the order dated 23.3.2017 along with certificate of payment passed by the Deputy Commissioner of Commercial Tax, Bangalore having paid the tax with respect to the materials supplied to the accused.
13. It is pertinent to note that the complainant produced Ex.P.12 reply notice issued by the accused to Ex.P.11 notice issued by the complainant after dishonour of the cheques in question demanding to make payment of the cheques amount. In Ex.P.12 reply notice the accused admits the fact that they are doing business with the complainant since 2009 and purchase of Sponge Iron-Lumps from the complainant and also admits about the placing of orders during the year 2015-2016 for supply of the materials for which issued 23 cheques to the tune of Rs.80,01,680/-. The complainant produced Ex.P.13 letter dated 5.3.2016 with Annexure- I written by the accused No.2, wherein also the accused admits the 15 C.C.No.12405/2016 issuance of 23 cheques for total sum of Rs.80,01,680/- drawn on Central Bank of India, towards Sponge Iron-Lumps supplied for the period of one year by the complainant company. In the Annexure-I appended to Ex.P.13 letter shown the details of all the 23 cheques issued by the accused. In Ex.P.12 reply notice the accused referred about the Ex.P.13 letter dated 5.3.2016. On behalf of the accused not denied the issuance of Ex.P.12 and 13. In the cross-examination of PW1 the accused tried to contend that in Ex.P.13 letter and Annexed thereto not mentioned the invoice numbers, but PW1 states that cheque numbers were mentioned. Since the accused in Ex.P.12 and 13 admits the factum of placing of orders to the complainant and issuance of 23 cheques in favour of the complainant to the tune of Rs.80,01,680/- towards supply of Sponge Iron- Lumps by the complainant. Non production of purchase order, check post documents, LR copies as contended by the accused in the cross-examination 16 C.C.No.12405/2016 of PW1 is of no consequences. The reference of Ex.P.5 to 7 cheques can be seen at Sl.No.13, 22 & 23 of Annexure-I appended to Ex.P.13 letter dated 5.3.2016. Further the amount mentioned in Ex.P.2 to 4 invoices very much tallies with the amount mentioned in Ex.P.5 to 7 cheques. The contention of the accused in the course of cross-examination of PW1 that, the cheques are issued for security purpose is contrary to the statement made in Ex.P.12 reply notice. Because in Ex.P.12 reply notice the accused asserted that, the cheques were issued for business transaction and not for security purpose.
14. The learned counsel for the accused referring to Ex.P.13 document has argued that, the accused informed to the complainant not to present the cheques as they have filed BIFR case No.156/2015 before the Hon'ble Board for Industrial and Financial Reconstruction (BIFR) New Delhi to declare the accused No.1 company as Sick Industry and inspite 17 C.C.No.12405/2016 of that, the complainant presented the cheques and got bounced and therefore, Sec.138 of N.I Act does not attracts. Per contra, the learned counsel for the complainant has argued that filing of the case before the Hon'ble Board for Industrial and Financial Reconstruction at New Delhi by the accused to declare that the accused No.1 company is sick industry has no bar to institute the proceedings U/s.138 of N.I Act. He further argued that, the accused have filed application U/s.258 of Cr.P.C. to stop the proceedings on the above said ground and this court after hearing both sides dismissed the said application as per order dated 4.11.2017 and he has relied upon the following decisions to contend that, institution of the proceedings under the Sick industrial Companies Act has no bar to proceed U/s.138 of N.I Act.
1. 2000 Cr.L.J 1464 (SC) (M/s.Kusum Ignotes and Alloys Vs.M/s.Pennar Peterson Securities Ltd.,) 18 C.C.No.12405/2016
2. II (2006) BC 152 (Rajasthan)( (Kirti Prem Raj Jain Vs. State of Rajasthan & Anr).
3. 2009 (1) DCR 337 (Bombay) (Aeflota Textiles India Limited & Anr Vs. Boghara Poly Fab Pvt ltd., & Anr) No doubt, it is true that as per Ex.P.13 notice dated 5.3.2016 the accused No.2 informed to the complainant not to present the cheques as they have registered BIFR case No.156/2015 before the Board for Industrial and Financial Reconstitution, New Delhi, to declare the accused No.1 company as sick industry. I have gone through the decision cited above by the leaned counsel for the complainant. In the cited decisions the Hon'ble Supreme Court of India and Hon'ble High courts of Rajasthan and Bombay held that, institution of proceedings under the sick Industries of Companies Act has no bar to prosecute U/s.138 of N.I Act. It is pertinent to note that the accused have filed application U/s.258 of Cr.P.C. to stop the 19 C.C.No.12405/2016 proceedings, as they have instituted proceedings before the National Tribunal to stop the proceeding, by urging the above ground. This court after hearing both sides as per order dated 9.11.2017 dismissed the application filed by the accused. The accused have not challenged the said order dated 4.11.2017 passed in that case. Therefore, the said order has attained finality. In view of the decisions cited above by the learned counsel for the complainant, even the proceedings initiated under the sick industries companies act has no bar to institute the proceedings U/s.138 of N.I Act. Therefore, the argument of the learned counsel for the accused holds no water.
15. The leaned counsel for the accused has argued that the accused No.1 is the company and the accused No.2 is the Managing Director but in the cheques in question mentioned as proprietor and there will not be a proprietors in the companies and therefore, these cheques pertaining to the proprietary 20 C.C.No.12405/2016 concern not to the company cheques. No doubt it is true that, in the cheques mentioned as proprietor. PW1 in the course of cross-examination admits that they will not receive the proprietary cheques with respect to the companies. But in the cross- examination he explained the reason for receive of those cheques. It is pertinent to note that it is not the case of the accused that, accused No.1 is the Proprietary concern, not a company. As could be seen from Ex.D.1 document that, when accused No.1 company was AML Steel Limited., the bank account Number of the said company was 1023837398 maintained with Central Bank of India, Mount Road, Chennai and the same account number continued even after the accused No.1 company changed name as M/s.Ashok Magnetic Limited. The account number mentioned in Ex.P.5 to 7 cheques very much tallies with the account number of the accused No.1 company mentioned in Ex.D.1 document. It is not the defence of the accused that, Ex.P.5 to 7 cheques 21 C.C.No.12405/2016 are not drawn from the account of the accused No.1 company. Merely, because in the cheques mentioned as proprietor, it cannot be said that the cheques not belongs to the account of the accused No.1 company. Moreover, PW1 has offered explanation in that regard. Therefore, the arguments of the accused cannot be accepted.
16. As discussed above, there is an admission on the part of the accused in Ex.P.12 reply notice and Ex.P.13 letter dated 5.3.2016 having supplied the Sponge Iron-Lumps by the complainant company to the accused and issuance of cheques by the accused in favour of the complainant towards supply of the said materials. It is under these circumstances, whatever the contentions raised by the accused in the course of cross-examination of PW1 will not survive for consideration. The accused have cross- examined the PW1 at length but nothing worth is elicited to rebut the presumption U/s.139 of N.I Act. 22 C.C.No.12405/2016 Moreover, the admissions made by the accused in Ex.P.12 & P.13 documents strengthened the case of the complainant as well as the presumption U/s.139 of N.I Act, raises in favour of the complainant.
17. As per Ex.P.8 to P.10 bank endorsements, the cheques in question dishonoured for the reason exceeds arrangement. In the cross-examination of PW1 it is not the defence of the accused that, at the time of presentation of the cheques in question to the bank for realization there were sufficient funds in the account of the accused No.1 company. Moreover, there is presumption U/s.146 of N.I Act regarding bank endorsement. The complainant by adducing oral as well as documentary evidence proved that the accused have issued cheques towards payment of the Sponge Iron-Lumps supplied by the complainant company and the said cheques dishonoured. Therefore, the complainant proved that the accused have issued the cheques towards discharge of legally 23 C.C.No.12405/2016 enforceable debt and the said cheques dishonoured. In view of the above discussion I answer Point No.1 in the Affirmative.
18. Point No.2:- It is the case of the complainant that, after dishonour of the cheques, issued notice on 1.4.2016 through RPAD calling upon the accused to pay the cheques amount within 15 days from the date of receipt of notice and the said notice served to all the accused and inspite of receipt of notice, the accused did not paid the cheques amount and they have sent untenable reply notice dated 26.4.2016. The complainant to prove the factum of issuance of notice to the accused through RPAD and service of the said notice to the accused produced Ex.P.11 office copy of the notice dated 1.4.2016, Ex.P.11(a) to (e) postal receipts, P.11(f) to (h) postal acknowledgements and Ex.P.12 reply notice issued by the accused. In the course of cross-examination of PW1 on behalf of the accused 24 C.C.No.12405/2016 not denied the service of notice issued by the complainant after dishonour of the cheques. Absolutely, there is no denial of the accused regarding service of notice. Moreover, the accused have issued Ex.P.12 reply notice to the notice issued by the complainant. Therefore, it can be said that the notice issued by the complainant company after dishonour of the cheques, served on the accused. Therefore, the complainant has complied mandatory requirement of Sec.138(b) of N.I Act. Hence, I answer Point No2. in the Affirmative.
19. Point No.3 :- In view of my findings on Point No.1 & 2 the complainant proved that the accused issued cheques towards payments of Sponge Iron- Lumps supplied by the complainant company and the said cheques dishonoured and even after service of notice, the accused failed to pay the cheques amount. Therefore, the accused are liable for punishment U/s.138 of N.I Act. In the course of my discussion on Point No.1, the complainant failed to 25 C.C.No.12405/2016 establish that the accused No.3 is the chairman of the accused No.1 company and he was responsible for the business at the time of committing of an offence. Therefore, the complaint against the accused No.3 will not survive. As discussed above, the accused No.2 is the Managing Director of the accused No.1 company and he is an authorised signatory to the cheques in question. Therefore, the accused No.1 & 2 are liable for punishment.
20. In the cheque bounce cases apart from the punishment to the accused compensation can also be awarded to the complainant with respect to the dishonoured cheques. Here is a case, the accused have issued the cheques towards payment of the materials supplied by the complainant. As per Ex.P.2 to 4 invoices, the complainant supplied Sponge Iron- Lumps to the accused No.1 company on 19.01.2016, and 28.01.2016 respectively. Ex.P.5 to 7 cheques are dated 5.3.2016 and the amount involved is of 26 C.C.No.12405/2016 Rs.3,56,012/- Rs.3,92,227/- & Rs.4,12,983/- respectively, so it is clear that they have issued the cheques to the complainant in respect of the transaction of the year 2015-2016. If the cheques honoured when they were presented for encashment, the complainant would utilized the said amount for their business purpose and would have got substantial profit. The act of the accused caused loss to the complainant and also dragged the complainant to the Court. Even as could be seen from Ex.P.2 to 4 invoices the accused are liable for payment of interest at the rate of 24% for delay in payment. It is under these circumstances, the complainant has to be suitably compensated in the matter and in the result, I pass the following.....
ORDER
The complaint filed by the
complainant company against Accused
No.1 & 2 is allowed and dismissed against the accused No.3 and consequently, acting U/s.255(1) of Cr.P.C, the accused No.3 is acquitted for the offence punishable 27 C.C.No.12405/2016 U/s.138 of the N.I.Act and his bail bond is cancelled and he set at liberty.
Acting U/s.255(2) of Cr.PC, the accused No.1 & 2 are convicted for the offence punishable U/s.138 of N.I. Act and sentenced them to pay fine of Rs.12,50,000/-. In default of payment of said fine amount, the accused No.2 shall undergo simple imprisonment for a period of Six months.
Out of the said fine amount order to pay Rs.12,40,000/- to the complainant as compensation and the remaining amount of Rs.10,000/- shall go to the state.
(Dictated to the stenographer, transcribed by him, corrected and then pronounced in open court by me on this the 28th day of April, 2018) (N.Muniraja) XXVII A.C.M.M., Bangalore.
ANNEXURE Witnesses examined on behalf of the complainant:
PW1 : Pawan Kumar Batwal Documents marked on behalf of the complainant:
Ex.P.1 : Board of Resolution
Ex.P.2 to 4 : Invoices
Ex.P.5 to 7 : Cheques
Ex.P.5(a) to 7(a): Signatures of the accused
Ex.P.8 to10 : Bank endorsements
Ex.P.11 : Office copy of Legal Notice
28 C.C.No.12405/2016
Ex.P.11(a) to (e) : Postal receipts
Ex.P.11(f) to (h) : Postal acknowledgements Ex.P.12 : Reply Notice Ex.P.13 : Letter dt:5.3.2016 Witnesses examined on behalf of the accused:
Nil Documents marked on behalf of the accused:
Ex.D.1 : Certificate of Incorporation XXVII A.C.M.M Bangalore.29 C.C.No.12405/2016
Dt:28.04.2018 Complnt:Sri.ASR Adv., Accused:SHS Adv., For Judgement (Order typed vide separate sheet) ORDER The complaint filed by the complainant company against Accused No.1 & 2 is allowed and dismissed against the accused No.3 and consequently, acting U/s.255(1) of Cr.P.C, the accused No.3 is acquitted for the offence punishable U/s.138 of the N.I.Act and his bail bond is cancelled and he set at liberty.
Acting U/s.255(2) of Cr.PC, the accused No.1 & 2 are convicted for the offence punishable U/s.138 of N.I. Act and sentenced them to pay fine of Rs.12,50,000/-. In default of payment of said fine amount, the accused No.2 shall undergo simple imprisonment for a period of Six months.
Out of the said fine amount order to pay Rs.12,40,000/- to the complainant as compensation and the remaining amount of Rs.10,000/- shall go to the state.
(N.Muniraja) XXVII A.C.M.M., Bangalore 30 C.C.No.12405/2016