Delhi District Court
J.M. Housing Limited vs Sh. Rajesh Kumar Gupta on 2 April, 2018
Criminal Revision Nos.39/2018
IN THE COURT OF SH. PULASTYA PRAMACHALA
SPECIAL JUDGE (PC ACT) CBI : EAST DISTRICT
KARKARDOOMA COURTS, DELHI
Criminal Revision No. : 39/2018
Under Section : 138 Negotiable Instruments Act, 1881
CC No. : 1911/2017
PS : Preet Vihar
CNR No. : DLET01-001081-2018
In the matter of :-
1. J.M. HOUSING LIMITED
D-334, Vivek Vihar, Delhi-110095.
2. SH. ANKUR AGGARWAL
D-41, Sector-59, Noida,
Uttar Pradesh.
3. SH. NEERAJ JINDAL
D-334, Vivek Vihar, Delhi-110095.
4. SH. ANIL JAIN
F-96, 1st Floor, Preet Vihar, Delhi-110092.
5. SH. RUPESH KUMAR GUPTA
R-4/115, Rajnagar, Ghaziabad, Uttar Pradesh.
............PETITIONERS
VERSUS
SH. RAJESH KUMAR GUPTA
S/o. Late Mr. Gopal Dass,
R/o. 25, Hargobind Enclave, Delhi-110095.
.........RESPONDENT
Date of Institution : 19.02.2018
Date of reserving order : 20.03.2018
Date of pronouncement : 02.04.2018
Decision : Petition is allowed.
Page 1 of 9 (Pulastya Pramachala)
Special Judge (PC Act) CBI, East District
Karkardooma Courts, Delhi
Criminal Revision Nos.39/2018
ORDER
1. Vide this order, I shall decide present revision petition directed against the order dated 18.08.2017, passed by trial court in the case titled as Rajesh Kumar Gupta v. M/s J.M. Housing Ltd. & Ors. bearing CC No. 1911/2017, under Section 138 Negotiable Instruments Act, 1881 (hereinafter referred to as NI Act). Vide impugned order dated 18.08.2017, trial court summoned several accused including petitioners herein as accused, in aforesaid complaint case.
BRIEF FACTS OF THIS CASE :-
2. Briefly stated, the relevant facts giving rise to this petition are that aforesaid complaint case was filed against six accused persons. Accused no. 1 was a company and accused no. 2 and 3 were alleged to be whole time directors of accused no. 1 company. Accused no. 4, 5 and 6 were also alleged to be directors of accused no. 1 company and at the helm of affairs of accused no. 1 company. Accused no.2 was alleged to be signatory to the agreement between the parties and accused no. 2 and 3, both were alleged to be signatories to the dishonored cheques.
3. It was alleged that accused persons and other officer enticed complainant to invest in a Group Housing Project namely "JM Orchid"
at Sector 76, Noida West, Uttar Pradesh being developed by accused no.1 company. Being allured by representation made by all accused on different occasions, repeated persuasion and negotiations, complainant invested Rs.46,39,050/- (rupees forty six lakhs thirty nine thousand and fifty only) in the said project against allotment of a flat bearing no. E-1404, ad-measuring 1762 sq. ft. in Page 2 of 9 (Pulastya Pramachala) Special Judge (PC Act) CBI, East District Karkardooma Courts, Delhi Criminal Revision Nos.39/2018 the said project. In this regard, an agreement dated 14.08.2013 was executed between the parties, settling down the terms in writing. Subsequently, a supplementary agreement dated 31.03.2015 was executed between the parties substituting the allotment of flat from E- 1404 in "JM Orchid" with allotment of two flats bearing no. E-2205 & E-2302 ad-measuring 1197 sq. ft. each in Group Housing Society known as "KM Florance" at Plot No. GH-DV-09C, Sector Tech Zone- IV, Greater Noida. Complainant further alleged that as per terms and conditions of agreement dated 14.08.2013 read with supplementary agreement dated 31.03.2015. There was an unconditional guarantee/offer to buy back both the aforementioned flats on or before 28.02.2017 at pre-settled and determined amount of Rs.50,96,712/-, which clause was enforced. Accordingly, accused no.1 company under aforesaid buy back clause, issued two cheques in favour of the complainant. One cheque was bearing no.987417 for Rs.45 lac and another cheque was bearing no.987317 for Rs.5,96,712/-, both dated 28.02.2017 and drawn on Vijaya Bank, Vigyan Vihar Branch, Delhi-110092, which were dishonored on account of funds insufficient.
4. Legal demand notice was sent, still cheque amounts were not paid by the accused persons, hence, case was filed.
5. Trial court after recording pre-summoning evidence, vide impugned order dated 18.08.2017, took the cognizance of the offence and summoned all the named accused persons for offence punishable under Section 138 N.I. Act.
GROUNDS : -
6. Being aggrieved of the impugned order dated 18.08.2017, petitioners Page 3 of 9 (Pulastya Pramachala) Special Judge (PC Act) CBI, East District Karkardooma Courts, Delhi Criminal Revision Nos.39/2018 have preferred this revision petition on the following relevant grounds:-
● That trial court erred in not appreciating that the covenant of an unconditional guarantee/offer to buy back both the flats at pre settled and determined amount, would separate the transaction of purchase of flats by respondent and further culminate the later part of said agreement as into the form of "agreement to sell"
between complainant and petitioner no.1 company qua two flats, which were admittedly purchased by complainant. ● That trial court did not appreciate that pursuant to buy back clause, cheques in question were issued and same were not issued in discharge of any "debt or other liability", which could be legally enforceable "debt or other liability" in the light of explanation provided under Section 138 NI Act. ● That trial court did not appreciate that cheques in question were allegedly issued to buy back the aforesaid two flats and subsequently the said cheques were dishonored. Even then no offence is made out against petitioners herein, because right in the aforesaid two flats still vest in the name of respondent and same admittedly has not been transferred to the petitioners. ● That trial court did not appreciate the legal procedure and miserably failed to ascertain from complaint case as well as official record placed before trial court that petitioner no.4 to 5 i.e. Anil Jain and Rupesh Kumar Gupta had neither signed the cheques in question nor the agreement. They were merely directors of petitioner no.1 company without any specific role assigned in the scheme of facts narrated in the complaint, when the offence under Page 4 of 9 (Pulastya Pramachala) Special Judge (PC Act) CBI, East District Karkardooma Courts, Delhi Criminal Revision Nos.39/2018 Section 138 of NI Act was committed. Vicarious liability has been fastened upon petitioners no.4 and 5 without any application of mind against the letter and spirit of Section 141 of NI Act. Therefore, trial court has simply brushed aside the legal logical corollary without any application of judicial mind and even did not appreciate its own record in its true letter and spirit and mechanically passed the impugned order.
● That impugned order suffers from illegality and impropriety and is unsustainable as the same was passed without considering the law laid down in Kattasujatavs Fertilizers & Chemicals Travancore Ltd. & Anr, 2003 SCC (CRI) 151, as there are no averments in the complaint as to how the petitioners no.4 and 5 were in any manner involved in the affairs and conduct of business of petitioner no.1 company. The court in the aforesaid judgment held inter alia :-
".......as there are no averments in the complaint as to how the petitioner was in any manner involved in the affairs and conduct of business of accused company, the order for summoning passed is unsustainable."
● That trial court failed to appreciate the law laid down by Supreme Court in Ashok Mal Bafna v. Upper India Steel Manufacturing & Engineering Company Ltd., that merely a person being director of the company did not make him liable under Section 138 NI Act.
ARGUMENTS :-
7. Ld. counsel for petitioners submitted that trial court did not look into the question whether cheques were issued in discharge of any legal obligation. He further submitted that the cheques were not issued Page 5 of 9 (Pulastya Pramachala) Special Judge (PC Act) CBI, East District Karkardooma Courts, Delhi Criminal Revision Nos.39/2018 towards any liability. They were issued as buy back guarantee and if same were not honored, it was not a criminal liability. Ld. counsel further argued that petitioners no.4 and 5 were not in-charge of petitioner no.1 company.
8. Ld. counsel for the petitioners relied upon following case laws :-
● Kattasujatavs Fertilizers & Chemicals Travancore Ltd. & Anr, 2003, SCC (CRI) 151.
● Ashok Mal Bafna v. Upper India Steel Manufacturing & Engineering Company Ltd., 2017 (8) SLT.
● Pooja Ravinder Devidasani v. State of Mahrashtra & Anr., 2014 (16) SCC 1;
● Sudeep Jain v. M/s ECE Industries Ltd. Crl. Misc. C. No. 1821 of 2013 DHC;
● National Small Industries Corporation Ltd. v. Harmeet Singh Paintal, 2010 (1) SCC 330;
● S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla & Anr. AIR 2005 SC 3512;
9. Per contra, ld. counsel for respondent submitted that para no.13 is related to advance payment and cheques were issued against legal liability as per buy back promise of petitioners. He further argued that it is matter of trial, if they offered to transfer the flats. Ld. counsel further argued that there was unconditional guarantee to buy back the flats, thereby giving rise to liability.
10.Ld. counsel for the respondent relied upon following case law :-
● M/s. Indus Airways Pvt. Ltd. & Ors. v. M/s. Magnum Aviation Pvt. Ltd. & Anr. Criminal Appeal No.830/2014, decided by Supreme Court on 07.04.2014.
APPRECIATION OF ARGUMENTS, FINDINGS AS WELL AS DECISION :-
11. The controversy in this case revolves around a legal question and Page 6 of 9 (Pulastya Pramachala) Special Judge (PC Act) CBI, East District Karkardooma Courts, Delhi Criminal Revision Nos.39/2018 the legal question is that whether a cheque given towards fulfillment of a promise made to buy back the flats at premium price, can be said to have been given towards discharge of existing legally enforceable debt?
12.Ld. counsel for the respondent referred to the case of M/s Indus Airways Pvt. Ltd. & Ors. (supra) to submit that even post dated cheques can be said to be given towards discharge of legally enforceable debt. The relevant finding of the court in this case are found in paragraphs 19 of the judgment, which are as follows:-
"19..........If at the time of entering into a contract, it is one of the conditions of the contract that the purchaser has to pay the amount in advance and there is breach of such condition then purchaser may have to make good the loss that might have occasioned to the seller but that does not create a criminal liability under Section 138. For a criminal liability to be made out under Section 138, there should be legally enforceable debt or other liability subsisting on the date of drawal of the cheque. We are unable to accept the view of the Delhi High Court that the issuance of cheque towards advance payment at the time of signing such contract has to be considered as subsisting liability and dishonour of such cheque amounts to an offence under Section 138 of the N.I. Act. The Delhi High Court has traveled beyond the scope of Section 138 of the N.I. Act by holding that the purpose of enacting Section 138 of the N.I. Act would stand defeated if after placing orders and giving advance payments, the instructions for stop payments are issued and orders are cancelled. In what we have discussed above, if a 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, in our considered view, the Page 7 of 9 (Pulastya Pramachala) Special Judge (PC Act) CBI, East District Karkardooma Courts, Delhi Criminal Revision Nos.39/2018 cheque cannot be said to have been drawn for an existing debt or liability.
13.The aforesaid finding of the Supreme Court do make a distinction between civil liability and criminal liability. It has been made clear that all civil liability cannot be covered under criminal liability. On the basis of this judgment, it can be said that mere breach of a contract may give rise to a civil liability, but it cannot ipso-facto become a case of criminal liability.
14.In the present case, admittedly, the cheques in question were given towards guarantee/offer to buy back two flats upto 28.02.2017 at a pre-settled amount of Rs. 5096712/-. Both the cheques were dishonoured, hence, at the most it can be said that the named accused persons did not honour their promise to buy back the flats at the fixed price. However, failure to keep this promise cannot be said to give rise to a criminal liability under section 138 N.I. Act. For the purpose of section 138 N.I. Act, there has to be existing liability against which the cheques should have been given. It was not liability of the named accused persons to pay Rs. 5096712/-. Rather, it was merely a promise to buy back at this price. In these circumstances, I am in agreement with the contentions raised by the petitioners that all ingredients of offence u/s 138 N.I. Act, were not fulfilled by the complaint of respondent herein in as much as, the cheques in question were not given towards discharge of legally enforceable debt/liability.
15.For aforesaid reasons, I do find the impugned order dated 18.08.2017 to be bad in the eyes of law, vide which petitioners were summoned as accused for offence u/s 138 N.I. Act. Hence, revision Page 8 of 9 (Pulastya Pramachala) Special Judge (PC Act) CBI, East District Karkardooma Courts, Delhi Criminal Revision Nos.39/2018 petition is allowed and impugned order dated 18.08.2017 is set aside.
16.Trial court record be sent back alongwith copy of this order. File be consigned to record room, as per rules.
Digitally signed by PULASTYA PRAMACHALA PULASTYA Location: Court
PRAMACHALA No.3, Karkardooma
Courts, Delhi
Date: 2018.04.02
17:56:03 +0530
Announced in the open court (PULASTYA PRAMACHALA)
today on 02.04.2018 Special Judge (PC Act) CBI, East
(This order contains 9 pages) Karkardooma Courts, Delhi
Page 9 of 9 (Pulastya Pramachala)
Special Judge (PC Act) CBI, East District
Karkardooma Courts, Delhi