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M/S Primetex Brands Pvt Ltd vs Kabir Kumar Mustafi & Ors. on 10 December, 2019

 IN THE COURT OF MS ALKA SINGH : METROPOLITAN MAGISTRATE -
             02 : SOUTH : SAKET COURT : NEW DELHI

 M/S PRIMETEX BRANDS PVT LTD VS KABIR KUMAR MUSTAFI & ORS.
                       CC NO. 4069/2017
            U/S 138 NEGOTIABLE INSTRUMENTS ACT

JUDGMENT

(1) Serial number of the case                         :     4069/2017
(2) Name of the complainant                           :     M/s Primetex Brands Pvt. Ltd.
                                                            Office at Shop No. 13, Between 259-
                                                            260, Community Center, New
                                                            Friends Colony, New Delhi

(3) Name of the accused,                              :     Kabir Kumar Mustafi
    parentage & address                                     S/o Late Sh Tridib Mustafi
                                                            Director & Principal of Gilleo
                                                            International School, Sec-127,
                                                            Mohali, Punjab-140308

(4) Offence complained of or proved                   :     138 Negotiable Instruments
                                                            Act, 1881

(5) Plea of the accused                               :     Pleaded not guilty
(6) Final Order                                       :     CONVICTION
(7) Date of Institution                               :     21.12.2013
(8) Date on which reserved for
   judgment                                           :     29.11.2019

(9) Date of Judgment                                  :     10.12.2019


               BRIEF STATEMENT OF THE REASONS FOR THE DECISION

1. The brief facts of this case as carved out from the complaint are that in the month of December 2007, accused no. 3 on behalf of accused nos. 1, 2 & 4 approached the complainant for sponsoring & participating in a musical event which M/s Primetex Brands Pvt Ltd vs Kabir Kumar Mustafi & Ors.

was to be organized by the accused from 22-24.02.2008. The complainant completed its part of the obligation and raised funds for organizing the event and became Chief Sponsor of the said musical event Easwind NUN Usual Musical Festival for promoting its products namely "NUN". Thereafter, the complainant and the accused entered into a sponsorship agreement dated 02.01.2008 and later on the complainant & accused no. 3 on behalf of accused nos. 1, 2 & 4 executed a MOU dated 19.02.2008. As per the terms and conditions of the MOU, the complainant paid Rs100 lacs for sponsoring the said musical event for two years out of which Rs50 lacs was paid for the first year event and another Rs50 lacs for the second year event. The first year event was organized on 22-24.02.2008 for which the complainant paid Rs50 lacs to the accused and thereafter, the complainant paid another Rs50 lacs by way of cheques bearing nos. 831146 dated 25.02.2008 and 732609 dated 27.02.2008 for Rs25 lacs each drawn on Syndicate Bank, branch Vasant Vihar, New Delhi which was acknowledged by the accused for the event of second year and receipt was issued by accused no. 3 on behalf of accused no. 1 to that effect. Thereafter, the complainant was not satisfied with the prospects shown by accused and complainant rather made losses in organizing the event, was compelled to drop the idea of organizing the event for the next year ie 2009 and asked the accused to refund the money. Accordingly, accused nos. 1, 3 to 5 issued a cheque bearing no. 272986 dated 15.08.2009 for a sum of Rs50 lacs drawn on Axis Bank, branch Saket, New Delhi in favour of the complainant company to discharge the liabilities of accused no. 1. Complainant company sent an e-mail date 03.08.2009 informing the accused regarding presentation M/s Primetex Brands Pvt Ltd vs Kabir Kumar Mustafi & Ors.

of the cheque in reply of which accused no. 4 sent an apology e-mail on 04.08.2009 to deposit the cheque by 15.08.2009. Later on the said cheque was presented for encashment which was dishonoured with reason "Funds Insufficient" vide memo dated 18.08.2009. Thereafter, on failure of accused to pay the cheque amount, a legal demand notice dated 08.09.2009 was sent to the accused through registered AD which was deemed to be duly served upon accused. Despite that payment of the cheque in question was not made by the accused within the stipulated time of 15 days. Thereafter, the complainant filed a complaint case bearing no. 3998/1/10 at Patiala House Court against the accused with regard to dishonour of the above mentioned cheque during pendency of which the accused requested the complainant to make payments against the cheque in question and settled the matter. The accused entered into MOU dated 20.04.2013 with the complainant and handed over demand draft in the sum of Rs10,000/- and fresh cheque of Rs86,64,583/- against the cheque in question in terms of settlement of the said complaint. On the basis of the same, complainant withdrew the said complaint at Patiala House Court on 22.04.2013. The DD of Rs10,000/- bearing no. 000094 dated 20.04.2013 was encashed by the complainant. Cheque bearing no. 004811 dated 22.10.2013 for Rs86,64,583/- drawn on Axis Bank, branch Chandigarh in favour of the complainant to discharge liabilities of accused was dishonoured on presentation for the reason "Funds Insufficient" vide return memo dated 23.10.2013. Complainant again got a legal demand notice dated 19.11.2013 sent to the accused through registered AD which was deemed to be duly M/s Primetex Brands Pvt Ltd vs Kabir Kumar Mustafi & Ors.

served upon accused. Despite that payment of the cheque in question was not made by the accused within the stipulated time of 15 days. Hence, the complaint.

2. In the pre-summoning evidence, affidavit by way of evidence Ex.CA was filed by the AR of complainant. In his affidavit of evidence Ex.CA, the AR of complainant reiterated all the averments made in his complaint and relied on documents ExCW1/A to ExCW1/R.

3. Accused appeared pursuant to issuance of summons and notice U/s 251 CrPC was served upon the accused vide order dated 04.09.2017 to which the accused pleaded not guilty and claimed trial. The accused was permitted to cross examine the complainant on the basis of the order of Hon'ble Mr Justice A K Pathak dated 06.09.2018.

4. At the stage of the cross examination, the complainant was asked certain general & formal questions regarding his address etc. After the attention of the witness was drawn to para 5 of affidavit ExCW1/1 and was asked "is it correct that the complainant company & Prospect Advisory and Management Pvt Ltd (PAM) entered into a sponsorship agreement but later on they mutually change the terms & conditions and executed another MOU dated 19.02.2008 ExCW1/C", the witness replied affirmatively and that after the execution of said MOU ExCW1/C, the sponsorship agreement came to an end. The witness admitted the signatures on the said MOU and further stated that he does not remember the date etc. on which the stamp paper for the MOU was prepared/procured. It was further deposed by the witness that as per the bank statement ExCW1/X1, the cheques for the total amount of M/s Primetex Brands Pvt Ltd vs Kabir Kumar Mustafi & Ors.

Rs50 lacs were paid on 27.02.2008 & 01.03.2008. The witness further acknowledged the genuineness of document ExDW1/E and refused to acknowledge the documents ExDW1/F to ExDW1/K as the same are unsigned papers. He acknowledged documents ExDW1/A to ExDW1/M, the same being communications between the parties. Witness also admitted his signatures on ExDW1/1. The witness also stated that the accused made them to believe that they were to receive money shortly and therefore, would be able to adhere to the settlement dated 20.04.2013, arrived at before the court. In response to the question as to how the sum of Rs1,02,64,706/- was given by complainant company to PAM. He replied that a sum of Rs17.64 lacs is booked as sponsorship, Rs39.32 lacs is booked as consultancy charges and Rs50 lacs was deposited with PAM. He also said that no specific document with regard to the cost of sponsorship for two years ie Rs50 lacs for each year totalling to Rs100 lacs, has been filed by him with the complaint and that he cannot recall as to specifically on what basis the amount of Rs50 lacs was agreed as cost of sponsorship for one year. He stated that PAM has acknowledged the deposit of Rs50 lacs by way of cheque dated 15.08.2009 in their books of accounts and the same has been reflected in the bank statement already on record. Thereafter, the witness acknowledged the documents ExDW3/B the same being receipt of Rs50 lacs issued by PAM to complainant company. The witness claimed that as per the agreement, both parties agreed to indemnify each other against all losses, claims, demands etc. It was also stated by the witness that as per agreement ExDW1/1, the matter was supposed to be referred to Arbitration as per clause 12 of the said agreement but the same was not referred M/s Primetex Brands Pvt Ltd vs Kabir Kumar Mustafi & Ors.

because the present case is for the dishonour of the cheque and in any case, the said agreement has already been superseded by MOU dated 19.02.2008. Thereafter, he denied all the suggestions having adverse inferences.

5. The accused was then called upon to explain the incriminating circumstances appearing in evidences against him as is mandated by Section 313 (1)

(b) Cr.P.C., whereby the accused no. 1 stated a slightly different story from that of his defence to notice U/s 251 CrPC that he did not receive any amount either personally or in his personal account. However, he admitted the issuance of cheque and other MOUs on the basis of which the previous complaint was disposed of as withdrawn. Thereafter, he stated that he issued the cheque in question in good faith and after informing the complainant that he does not have the required funds, the same was issued as compliance with the MOU. He also claimed that it was unequivocally agreed between the parties that the cheque in question would not be presented nor any prosecution would be initiated qua the cheque in question. He further denied to have received the legal demand notice. Additionally, he also stated that he did not receive any notice stating that the complainant company was unhappy from the earlier agreements between the parties and the initial cheque of Rs50 lacs was undated cheque that was obtained by the complainant company for the purpose of security to show the bonafide of accused company (PAM). He further claimed that complainant company misled the earlier courts and did not file the sponsorship agreement and it was clearly communicated by the AR of the complainant company who executed the MOU dated 20.04.2013 that no legal action against them shall be taken as there was M/s Primetex Brands Pvt Ltd vs Kabir Kumar Mustafi & Ors.

no personal liability of him. He went on to state that the whole matter is result of betrayal of trust and good faith by the complainant as he was not party to any of the initial agreements, payments etc. as the same was being handled by the company PAM and he used to reside outside Delhi. Though he claimed that he happened to know that there was an agreement of sponsorship of a music festival called Eswind and that the complainant company was the main sponsor for the agreed amount of Rs1.50 crores, that later on the terms & conditions were changed and the remaining amount Rs50 lacs from Rs1.50 crores was not paid by the complainant company. He said that the complainant company took an undated cheque of Rs50 lacs from PAM as security because the same was supposed to be not deposited but they deposited the same and after its dishonour, they filed this case. He further stated that by separate agreement in 2013, he agreed to furnish a separate cheque of Rs80 lacs for compromise but it was made clear several times that the same would be honoured subject to receiving of project funds from which he would make the payments but they have been betrayed as the complainant presented the cheque and dragged them to court. All this resulted in financial hardship for his company.

6. The accused no. 1 further desired to examine himself as the witness after moving the application u/s 315 of Cr.P.C. which was allowed in order to enable the accused to avail every opportunity to prove his case based on his defence so as to avoid any chances of injustice being meted out to him. In his examination in chief, he deposed that he was not involved in the day to day affairs of PAM and the purpose of the company was to organize the music events against the sponsorship by other M/s Primetex Brands Pvt Ltd vs Kabir Kumar Mustafi & Ors.

companies in exchange for publicity etc. Thereafter, he reiterated the facts of having entered into the sponsorship agreement as per which the complainant company would sponsor and pay Rs1.50 crores for the organization of the festival named Eswind and accordingly, it paid a sum of Rs52 lacs & a sum of Rs64,000/- as first installment towards the sponsorship of the event, the two installments remained due. He said that the copy of the communication between the two companies and the initial sponsorship agreement is ExDW1/A to ExDW1/K. He further claimed that the second installment due from the sponsors ie the complainant company were never paid but PAM had to deal with all the vendors, suppliers etc. However, the amount was paid in March 2009 though in the meanwhile, PAM was forced to pay because of delayed payments. He further stated that the MOU dated 02.01.2018 ExDW1/1 was entered into by PAM under pressure since it was facing serious difficulties because of non payment of second & third installments but finally the second installment was paid by way of two cheques in October 2009 with the condition as imposed by the complainant that the said amount be treated as loan which was to be returned. He also said that PAM informed the complainant company that it did not have the funds and that undated cheque was issued at the instance of the complainant company on the assurance that the same will not be presented. He further stated that in the year 2013, under inducement, he settled the matter with the complainant company personally and issued the cheque in question but the same could not be honoured due to Insufficient Funds. He claimed that he did not receive the amount which was agreed under the sponsorship agreement ie Rs1.50 crores.

M/s Primetex Brands Pvt Ltd vs Kabir Kumar Mustafi & Ors.

7. In his cross examination conducted by the counsel for the complainant, he stated that the sponsorship agreement dated 02.01.2008 was signed by Adhiraj on behalf of PAM & Ankur Prakash on behalf of complainant company and the first payment of Rs52 lacs was made but the second payment of another Rs50 lacs was made much later in time. He clarified that after a change into the terms of the agreement which was in writing, the second payment of Rs50 lacs was turned into a loan and was made refundable. He further stated that he was not sure as to whether any notice regarding non payment of the sponsorship agreement was sent to the complainant company nor any such document has been placed on record. He also replied affirmatively to the question that no proceedings were initiated under the sponsorship agreement. He further clarified that the cheque in question and the board resolution dated 20.04.2013 bears his signatures and the statement dated 22.04.2013 in the Court of Sh V K Meena also bears his signatures.

8. The accused examined Sh Adhiraj Kabir Mustafi as DW-2 and the substance of his examination in chief bereft of unnecessary details is that he & Anando Dutta were managing the affairs of the accused company and his father ie the accused was only a sleeping director. Thereafter, he also reiterated the same facts of having a MOU & subsequent agreements executed between the parties and the details thereof. He also stated that firstly he received a payment of Rs52 lacs out of Rs1.50 crores on 13.02.2008 and around 13.03.2008, he received another payment of Rs50 lacs via two cheques and this subsequent payment was received as the second phase of payment of total sponsorship of Rs1.50 crores and it was under the false assurances of M/s Primetex Brands Pvt Ltd vs Kabir Kumar Mustafi & Ors.

the complainant that they were induced into issuing an undated cheque to the complainant in October 2008 and since the company was facing financial difficulties, he could not comply with the demand for return of Rs50 lacs qua which he also wrote a letter of apology to Mr Anchal Jain, Director of complainant. He also stated that the company had already incurred expenses of Rs1.35 crores approx. and more money was due to their creditors as they were facing sever financial difficulties. Further, he stated that they have been short changed by receiving the partial payments against the full value of title sponsorship and instead of paying them a complete amount of Rs1.50 crores plus taxes, the complainant filed a case against them seeking refund of Rs50 lacs. He also produced certain documents which were the evidence filed by way of affidavit by the predecessor AR of complainant in Patiala House Courts ExDW2/1A to ExDW2/1N, copies of communications exchanged between two companies ExDW2/2A to ExDW2/2N, certified copies of the undated letter & receipt, ExDW2/3A to ExDW2/3C & copies of unaudited account statements of the expenses incurred in organizing first year festival from 22 to 24 February 2008 ExDW2/4A to ExDW2/4B.

9. In his cross examination conducted by counsel for complainant, he said that ExDW1/F to ExDW1/K are the original sponsorship agreement draft and the same is unsigned as it was mailed to them prior to receipt of payment on 13.02.2008. He also stated that when this agreement was replaced by fresh agreements, his signed copy were torn before the execution of JV agreement & the new sponsorship agreement and were handed over to Ankur Prakash. With respect to ExDW1/2, he said M/s Primetex Brands Pvt Ltd vs Kabir Kumar Mustafi & Ors.

that this was the new agreement presented by complainant company and same was signed under inducement & false assurance and the same was a back dated agreement ie of the same date when the original agreement was executed ie 02.01.2008 but the stamp paper shows that this agreement was neither drafted or executed before 20.02.2008. It was also testified by him that two main changes were brought by the second agreement, first was that the price of sponsorship for 05 year terms was Rs9.60 crores plus taxes out of which Rs1.50 crores plus taxes was payable in first year, the same was brought down to Rs3.50 crores plus taxes in the subsequent agreements. Secondly, the terms of payments and schedule which were described in detail in original agreement were absent from the second agreement. In response to the specific question asked to the witness ie were any steps taken by you to recover the amounts, you have stated you were short changed for by the complainant, he replied that after they were short changed, the affairs of the company were directed by the directors of the Primetex and they assured them that they would be raising funds for the company & for the future editions of the festival because of which they were convinced that complainant's intentions were bonafide. He further stated that they did not realize that they were being short changed until the complainant got the said cheque bounced intentionally which was given to them as security. He also stated that they did not receive any communication from the complainant company that they were either unwilling to continue with the sponsorship or with the joint venture, therefore, they did not give any notice etc. to the complainant company. He specifically denied the suggestion that after execution of ExCw1/C, all the earlier agreements were nullified. M/s Primetex Brands Pvt Ltd vs Kabir Kumar Mustafi & Ors.

Further, he admitted the signatures on MOU dt 20.04.2013 ExCW1/F, board resolution & statement dated 22.04.2013 ie the signature of the authorized signatory being accused himself and by him from his left hand. He also admitted the fact that they have officially closed their bank accounts, since 2009 there were hardly any transactions being conducted through those accounts and that he verbally raised protest regarding the cheque in question with directors of Primetex.

10. At the stage of final arguments, it was argued by the counsel for complainant Sh Rajiv K Nanda that the present case is an admitted case as is indicated by the complaint and various exhibits. That in the settlement arrived at before earlier court, there was no condition for settlement nor did the accused stated that he was under coercion. The accused has also not disputed the execution of MOU but has admitted the fact of loan. The accused has never challenged the Patiala House Court order rather has went on to admit his liability in his testimony recorded before the court. He also argued that in the entire examination of complainant conducted by counsel for accused, not one question was asked regarding the cheque and that in his cross examination, DW2 has admitted to have endorsed that he has signed the documents.

11. It was argued by the counsel for the accused Sh Amit Bagai that agreement ExCW1/C is not a sponsorship agreement and is rather a false piece of agreement and complainant has misrepresented the facts. He argued that the agreement bears the sign of the accused and original sponsorship agreement is ExDW1/1 which was applicable along with agreement ExCW1/C. He further argued M/s Primetex Brands Pvt Ltd vs Kabir Kumar Mustafi & Ors.

that complainant has misrepresented the fact regarding his address and the same has not been corrected till date. He also argued that if the accused was required to pay Rs01 crores and Rs.58.20 lacs have to be deducted therefrom, the accused did owe the liability to pay Rs50 lacs to the complainant. He also argued that earlier court order was obtained by fraud and it amounts to travesty of justice.

12. Arguments advanced by both parties heard. Case file perused meticulously.

13. Now, this Court shall deal with the defences of the accused one by one while also appraising the evidences simultaneously.

14. The defences taken by the accused are that he did not receive the legal notice of demand dated 19.11.2013 ExCW1/K and secondly that he issued the cheque in question in good faith and after duly informing the complainant that he did not have the funds.

15. The first defence of the accused is not tenable by virtue of judgment of CC Alavi Haji Vs. Palapetty Muhammed & Anr. (Crl. Appeal No. 767 of 2007), in which the Hon'ble Apex Court has held :-

"Any drawer who claims that he did not receive the notice sent by post, can, within 15 days of receipt of summons from the court in respect of the complaint u/s. 138 of the Act, make payment of the cheque amount and submit to the court that he had made payment within 15 days of receipt of summons (by receiving a copy of complaint with the summons) and, therefore, the complaint is liable to be rejected. A person who does not pay within 15 days of receipt of the summons from the court along-with the copy of the M/s Primetex Brands Pvt Ltd vs Kabir Kumar Mustafi & Ors.

complaint u/s. 138 of the Act, cannot obviously contend that there was no proper service of notice as required u/s. 138, by ignoring statutory presumption to the contrary u/s. 27 of the General Clauses Act and Section 114 of the Evidence Act".

16. Therefore, even if the accused that legal notice was not received by him, he did receive the summons informing him about the present case and the claim raised against him.

17. Secondly, the defence taken by the accused is only a bizarre statement that he issued the cheque in good faith and after informing the complainant that he does not have the funds, the same is devoid of any substance to be attaching of any importance whatsoever let alone it being considered as defence.

18. The whole theory propounded by the defence is that since they were facing financial difficulties due to which they had to sell their home, jeweleries, vehicles etc. and therefore, did not have the sufficient balance to honour the cheque, is liable to be outrightly rejected because no matter what was the interplay between the parties and what was their mutual considerations before the institution of the present case, as has been claimed by the accused repeatedly, right from his defence at the stage of notice framing till his examination as a witness, are no grounds to be considered in case U/s 138 N I Act.

19. The present case is primarily based on the MOU executed by the parties ExCW1/A pursuant to which the earlier matter between the same parties pending before the Patiala House Court was withdrawn as in lieu of the said MOU, the cheque in question was issued by the accused. It has to be further kept in mind that neither the M/s Primetex Brands Pvt Ltd vs Kabir Kumar Mustafi & Ors.

issuance of cheque has been disputed by accused nor his signatures. Apart from the stale defences that he has put forwarded the same being already discarded in the aforementioned paras.

20. The other claim put forth by the defence is that the MOU ExCW1/A and cheque in question were signed under duress, inducement and the false assurances of the complainant company that it will not present the cheque. This claim also could not come to the rescue of the accused in view of the fact that he had consistently admitted all the liabilities including the payment of the second installment by the complainant as per the subsequent agreement entered into between them which he agreed to be treated as loan or the fact that the demand for return of Rs50 lacs by the complainant was refused followed by a written apology to the director of Primetex as has come in the evidence of DW-2. These all facts only strengthen the claims of the complainant and has only weakened the defence story further.

21. The earlier proceedings before the Patiala House Courts is not the concern of this court rather the same was withdrawn after the mutual settlement of parties and this argument of the counsel for the accused that "the said order was obtained by fraud and amounts to travesty of justice" is liable to be condemned & discarded.

22. As far as the constant claim raised by the accused that signatures on the said MOU ExCW1/A were obtained through fraud and under duress has not been proved by the accused by placing on record any evidence and rather has only been repeated over & over again and therefore, a mere statement of a fact does not entail it M/s Primetex Brands Pvt Ltd vs Kabir Kumar Mustafi & Ors.

being proved. Further, the above said statement is also contrary to the other statement of accused himself given during recording of his statement U/s 313 CrPC, that under a separate agreement he agreed to furnish a personal cheque of Rs86 lacs ie the cheque in question, moreover, it has also come in the testimony of DW-2 that their main focus was to remove themselves from the criminal proceedings because of which they did not initiate any action against the complainant qua the earlier complaint case. Thus, all the liabilities have been admitted by the accused and in absence of any plausible defence being tendered, the court sees no reason as to why he should not be convicted.

23. In view of the above discussions & reasons and after considering all the materials and evidence before it, the court has come to the conclusion that the offence u/s 138 NI Act is made out against the accused, also in the opinion of this Court, the presumptions arising in favour of the complainant U/s 118 & 139 of the Act have not been rebutted by the accused while complainant has been successful in proving its case beyond reasonable doubts. Resultantly, this court finds the accused Kabir Kumar Mustafi S/o Late Sh Tridib Mustafi guilty for the offence punishable U/s Digitally 138 N I Act. Therefore, accused stands convicted. signed by ALKA ALKA SINGH Date:

Announced in the open court on 10.12.2019 SINGH 2019.12.10 16:25:42 (ALKA SINGH) +0530 Metropolitan Magistrate-02/N I Act/South Saket Court/New Delhi Certified that this judgment contains 16 pages and each page bears my signature.

(ALKA SINGH) Metropolitan Magistrate-02/N I Act/South Saket Court/New Delhi M/s Primetex Brands Pvt Ltd vs Kabir Kumar Mustafi & Ors.