Delhi District Court
Radlay Metal Products Pvt. Ltd vs M/S Nakshatra Steel Sales & Services Ltd on 15 May, 2023
IN THE COURT OF ADDITIONAL SESSIONS JUDGE-05,
SOUTH DISTRICT, SAKET COURTS : DELHI
1) CA No. 78/2018 CNR No. DLST01-001598-2018
2) CA No. 79/2018 CNR No. DLST01-001604-2018
3) CA No. 80/2018 CNR No. DLST01-001605-2018
4) CA No. 81/2018 CNR No. DLST01-001606-2018
5) CA No. 82/2018 CNR No. DLST01-001607-2018
6) CA No. 83/2018 CNR No. DLST01-001608-2018
7) CA No. 84/2018 CNR No. DLST01-001609-2018
1. Radlay Metal Products Pvt. Ltd.
2. Mr. Naresh Kumar (Director)
3. Mrs. Vimmi Kakkar (Director)
At K-44, Udyog Nagar, Near Peeragarhi,
New Delhi-110041 ......APPELLANTS
VERSUS
M/s Nakshatra Steel Sales & Services Ltd.
AND
M/s Leo Ispat Ltd.
Registered-cum-Corporate Office:
Y-126, First floor, Loha Mandi, Naraina,
New Delhi-110028 .....RESPONDENT
DATE OF INSTITUTION : 02.04.2018
ARGUMENTS HEARD ON : 29.04.2023
DATE OF JUDGMENT : 15.05.2023
JUDGMENT
1. Some companies entered into business transaction for supply of goods wherein one of the companies, namely, Radlay Metals became liable to pay some amount against supplied goods. The supplier company was represented by one DD Garg RAKESH and the company receiving the goods was represented by Naresh KUMAR SINGH Kumar. In the transaction, the central point was some cheques Digitally signed by RAKESH KUMAR signed by Naresh Kumar on behalf of Radlay Metals.
SINGH Date: 2023.05.15 18:32:50 +0530 CA Nos. 78/2018, 79/2018, 80/2018, 81/2018, 82/2018, 83/2018 & 84/2018, Page 1 of 14Controversy erupted between the companies. DD Garg claimed that against the supplied goods, there was some outstanding which was to be discharged by the Radlay Metals for which Naresh Kumar had given several cheques. On the other hand, Naresh Kumar claimed that those cheques were given as PDCs at the time of beginning of the business transaction. The cheques were presented for encashment but the same were returned unpaid by the bank due to stoppage of payment. This resulted in filing of seven complaint cases on the basis of dishonoured cheques. All the seven cases resulted into conviction of the company, namely, Radlay Metals U/s 138 NI Act. Vicarious liability was also imposed by virtue of Section-141 NI Act on Naresh Kumar and his wife Vimmi Kakkar. The order of conviction and sentence have been challenged by filing seven appeals. The complainant also chosen to file seven appeals for enhancement of sentence. This is how 14 appeals have come to this Court for disposal. Both the sides have been heard and record has been perused. Vide another judgment, seven appeals filed by the complainant are being disposed of separately. Through the present Judgment, I am proceeding to dispose the seven appeals filed by the convicts.
2. Factual position has been noted by the Ld. Trial Court in its judgment. The facts are common for all the cases except for amount/cheque numbers. For convenience, Paragraph-1 of one of the Judgments is reproduced as under :
RAKESH KUMAR "Briefly stated, case of the complainant is that SINGH Digitally signed complainant is a company incorporated under the by RAKESH KUMAR SINGH provisions of Indian Companies Act, 1956, engaged in the Date: 2023.05.15 18:33:04 +0530 CA Nos. 78/2018, 79/2018, 80/2018, 81/2018, 82/2018, 83/2018 & 84/2018, Page 2 of 14 business of iron and steel products. That accused no.1 is a company registered under the provisions of Indian Companies Act and that accused no.2 & 3 are Directors of accused no.1 company and responsible for its day-to- day affairs. That in the year 2009, accused approached the complainant for purchase of various iron and steel products on behalf of accused no.1. That accused no.2 &
3 promised to make timely payments. That goods were supplied to the accused in accordance with their orders. That as on 31.01.2012, accused were liable to pay an amount of Rs.1,03,18,917/- to the complainant. That accused were also liable to pay delay payment charges of Rs.1,66,19,726/-. That against invoices dated 30.08.2011, 01.09.2011, 03.09.2011 and 07.09.2011, accused issued cheques bearing numbers 477217, 477296, 477297, 477298, 477299 and 477300, all dated 05.02.2012 for amounts of Rs.2,67,704/-, Rs.5,50,966/-, Rs.5,85,839/-, Rs.2,48,360/-, Rs.9,13,811/- and Rs.2,78,860/-, respectively, drawn on bank account of accused no.1 company maintained with Punjab & Sind Bank, Paschim Enclave Branch, Delhi (hereinafter referred to as the 'cheques in question') in favour of the complainant. That cheques in question were returned unpaid upon presentation on account of "payment stopped by drawer"
vide return memo dated 07.02.2012. That legal notice dated 27.02.2012 was duly sent by complainant to the accused in this regard, but to no avail. That accused persons sent one false and frivolous reply dated 20.03.2012 to the complainant in this regard. That accused persons failed to pay the cheque amount within the RAKESH statutory period. Hence, the present complaint under KUMAR SINGH Section 138 of Negotiable Instruments Act, 1881 Digitally signed by RAKESH (hereinafter referred to as 'NI Act')".KUMAR SINGH Date: 2023.05.15 18:33:14 +0530 CA Nos. 78/2018, 79/2018, 80/2018, 81/2018, 82/2018, 83/2018 & 84/2018, Page 3 of 14
3. From the perusal of record, it appears that business transaction itself is not in dispute between the parties. Handing over the cheques and signatures thereon are also not in dispute. What is really in dispute is the fact that liability was not crystallized. This was dealt with by the Ld. Trial Court in very detailed manner. The relevant portions from the judgment are reproduced as under :
"....Thus, even assuming that accused persons had no legally enforceable liability on the date of issuance of cheques in question, it is beyond doubt that there was in existence legally enforceable liability on the date of presentation of cheques in question since it is not disputed that cheques in question were presented for encashment after delivery of material by the complainant. Hence, there appears to be absolutely no merit in defence of the accused about cheques in question being mere security cheques. Ld. counsel for the accused has argued that material as supplied by the complainant was not in conformity with the orders placed by the accused and inferior quality material was supplied by the complainant. He has further argued that the said material had to be sold by the accused persons as scrap and certain debit notes had been issued by the accused persons in this regard and since the said debit notes had not been adjusted by the complainant from the amount of invoices, it can not be said that accused were under liability to pay any specific amount on the date of presentation of cheques RAKESH in question. However, I do not find much merit in KUMAR arguments of ld. counsel for the accused. As already SINGH Digitally signed mentioned above, it is not in dispute that material was by RAKESH KUMAR SINGH supplied by complainant to the accused. As per section 42 Date: 2023.05.15 18:33:24 +0530 of Sale of Goods Act, 1930, buyer of goods is deemed to CA Nos. 78/2018, 79/2018, 80/2018, 81/2018, 82/2018, 83/2018 & 84/2018, Page 4 of 14 have accepted the same when he does any act in relation to such goods which is inconsistent with ownership of the seller, or when, he retains such goods without intimating the seller that the same have been rejected, even after lapse of reasonable time. In the case in hand, no such notice of rejection of goods was ever given by accused to the complainant. In fact, it was stated by accused no.2 during his testimony as DW-1 that issue of supply of defective material was brought to knowledge of the complainant and he was asked to supply material as per specification, meaning thereby, that as per the accused himself, complainant was only asked to supply material as per specification and no communication was made to the complainant to the effect that goods already supplied by it were rejected being defective. It is also very pertinent to note here that it was stated by DW-5 Narender Singh that some of the goods supplied by the complainant were sold as scrap to some parties. Invoices pertaining to the same were also tendered into evidence by the said Narender Singh. The very act of the accused of selling material supplied by the complainant to third party(ies) is indicative of the fact that goods supplied by the complainant had been accepted by the accused. Thus, in my considered opinion, property in goods had already passed to the accused before presentation of cheques in question and, hence, accused can not now contend that they were not liable to pay the cheque amount due to supply of inferior quality goods. It has been argued by ld. counsel for the accused that RAKESH as per the agreement, complainant was bound to KUMAR SINGH supply steel of ESSAR company whereas steel actually Digitally signed by supplied by the complainant was of SAIL and, hence, RAKESH KUMAR SINGH Date: 2023.05.15 debit notes had been issued by the accused in this regard.
18:33:32 +0530 However, accused persons have not led any evidence in CA Nos. 78/2018, 79/2018, 80/2018, 81/2018, 82/2018, 83/2018 & 84/2018, Page 5 of 14 this regard and the same is merely an oral
assertion of the accused. There is absolutely no evidence of any request or demand or objection having been raised on behalf of the accused about supply of inferior quality goods. In fact, going a step backwards, there is absolutely nothing on record to prove that there was any agreement between the complainant and accused to the effect that steel of ESSAR make had to be supplied by the complainant. Hence, there appears to be absolutely no merit in defence taken by the accused about inferior quality goods having been supplied by the complainant. Since accused persons have failed to prove that goods supplied by the complainant were of inferior quality, there is no question of accused being entitled to any adjustment or set off against the invoices involved in the present case on the basis of debit notes issued by the accused persons. Hence, there appears to be little merit in plea of the accused about there not being in existence ascertained liability of accused qua the cheques in question on the date of presentation of the same.
Coming to the next defence of the accused, ld. counsel for the accused has argued that invoices involved in the present matter contain a clause pertaining to delay payment charges of 4% and as per agreement between the parties, the said clause was cancelled by the accused from the copy of invoices on which acknowledgment of accused regarding delivery of material was taken by the RAKESH complainant. It has been further contended by ld. counsel KUMAR for the accused that the said copy containing SINGH acknowledgment of the accused has been deliberately Digitally signed by RAKESH concealed by the complainant and it was falsely stated by KUMAR SINGH Date: 2023.05.15 AR of the complainant that one copy of invoices was sent 18:33:41 +0530 to the Excise Department. However, the said argument is CA Nos. 78/2018, 79/2018, 80/2018, 81/2018, 82/2018, 83/2018 & 84/2018, Page 6 of 14 absolutely misplaced. Admittedly, amount mentioned in invoices involved in the present case was sans the said 4% delay payment charges. It is also an admitted position of parties that cheques in question were issued for an amount corresponding to the amount of invoices involved. It was stated by DW1 during his testimony that "It is correct that the cheques in question have been given in regard to the supplied made by the complainant companies and not with respect to delayed payment charges". Hence, the issue whether clause pertaining to 4% delay payment charges was subsisting between the parties or not is not material for the purposes of present proceedings and it has no bearing upon merits of the present case. In this view, there is absolutely no significance of the fact whether the said clause was cancelled by the accused at the time of giving their acknowledgment on the invoices and whether complainant has deliberately not filed the said invoices containing the alleged cancellation. It has been vehemently argued by ld. counsel for the accused that copy of invoices wherein delay payment clause was cancelled by the accused at the time of accepting delivery has deliberately not been filed in the present case by the complainant and it has been falsely stated by AR of the complainant that one copy of invoices was sent by complainant to the Excise Department, whereas there was no such requirement of sending copies of invoices to the Excise Department. However, as already discussed above, the question whether clause pertaining to 4% delay charges was cancelled or not is not germane to the present proceedings. Hence, I do not deem it fit to go into the RAKESH KUMAR question as to whether any copy of invoices involved in SINGH the present matter was sent by complainant to the Excise Digitally signed by RAKESH KUMAR Department or not.SINGH Date: 2023.05.15 18:33:50 +0530 CA Nos. 78/2018, 79/2018, 80/2018, 81/2018, 82/2018, 83/2018 & 84/2018, Page 7 of 14
It has further been argued on behalf of the accused that there was no crystallized liability of the accused persons on the date of presentation of cheques in question as accused were entitled to obtain discount at the rate of Rs.1,000/- per ton and also discount of Rs.125/- per ton as loading-unloading charges. Ld. counsel for the accused has argued that since the said amount/discount was not set off from the amount mentioned in invoices in question, it can not be said that accused persons had liability to pay the amount of cheques in question. However, the said defence taken by the accused persons is devoid of much merit as there is absolutely no evidence on record to prove that accused were entitled to obtain the said discount. The same is merely ipsi dixit of the accused, with no evidentiary basis whatsoever. There is no written agreement between the parties to this effect. Invoices involved in the present matter also do not contain any such clause regarding any such discount to be given to the accused. It is also very pertinent to note here that as per the accused persons, debit notes were issued by the accused to the complainant regarding inferior quality material supplied by the complainant. However, admittedly, no such debit notes were ever issued by the accused regarding the above mentioned discount of Rs.1,000/- per ton. There is absolutely no explanation coming forth from the accused as to why no such debit notes were raised by the accused regarding the said discount to which the accused were allegedly entitled. RAKESH Failure of the accused to issue the said debit notes, KUMAR SINGH moreso in the face of assertion of the accused that debit notes were issued regarding inferior quality material, Digitally signed by RAKESH KUMAR SINGH shows that defence taken by the accused is sham and Date: 2023.05.15 18:33:59 +0530 without much merit as there is no logic as to why a company would issue debit notes regarding one particular CA Nos. 78/2018, 79/2018, 80/2018, 81/2018, 82/2018, 83/2018 & 84/2018, Page 8 of 14 aspect (quality of goods in this case) and not issue the same regarding other aspects (above mentioned discount). It is also very pertinent to note here that it was stated by accused no.2 during his testimony as DW-1 that accused were eligible for a discount of Rs.1,000/- per ton in case accused took a supply of 50 ton per month. It was further stated by DW-1 that "The discount of Rs.1,000/- per ton was to be paid to us after the end of financial year along with Rs.125 per ton as unloading charges". Accused further went on to say that the said payment was requested from the complainant in April, but complainant kept on lingering the matter. Thus, from the testimony of DW-1 it is clear that the payment/discount of Rs.1,000/- per ton and of Rs.125/- per ton, if any, was to be given to the accused as separate payment after the end of relevant financial year. Testimony of DW-1 makes it clear that the said discounts, if any, were never meant to be adjusted and set off from the amount of invoices as it was stated by DW-1 that payment in accordance with the said discounts had to be made by the complainant after the end of relevant financial year. Hence, it can not be said that accused were not liable to pay amount of cheques in question as the said discounts were not factored in the invoices involved in the present matter. Since as per accused no.2 himself, the said discounts were applicable in the nature of separate payment to be made to the accused, the said argument may be relevant in a civil suit for recovery. However, the same has absolutely no bearing in the present proceedings".
RAKESH KUMAR 4. Perusal of the record shows that there is no reason to take a SINGH Digitally signed by view different from that of the Ld. Trial Court. Neither in the RAKESH KUMAR SINGH Date: 2023.05.15 appeal petition nor during the arguments, the Ld. Counsel has 18:34:12 +0530 CA Nos. 78/2018, 79/2018, 80/2018, 81/2018, 82/2018, 83/2018 & 84/2018, Page 9 of 14 been able to justify any contrary view. When the receiving of supplied goods itself is not in dispute, the onus lies on the receiver to establish that he had rejected the goods on account of inferiority or any other defects. Unless this is done, it has to be accepted that the supplier had performed his part of the contract. In the present case, the receiver company had, in fact, utilized the supplied goods. Once this was so, it cannot claim that the goods were of inferior quality or that for crystalization of liability, both the parties should have sit together and sorted out the differences. It is held that the company, namely, Radlay Metal had the liability.
5. I do not find any force in the arguments of the Ld. Counsel for the accused that at the time of giving of the cheques, there was no liability and therefore, no case is made out. The existence of liability has to be seen at the time of presentation of the cheque. At that point of time, the goods were already supplied and therefore, liability was in existence in respect of the consideration mentioned in the cheques. Section-118 and 139 NI Act will come into picture and existence of liability will get further strength from the presumptions mentioned therein.
6. Ld. Counsel for accused has also contended that complainant has been using pressure tactics to extort money. I am RAKESH of the view that this argument does not have any merit for a KUMAR simple reason that offence U/s 138 NI Act has no concern with SINGH Digitally signed by the mens rea and once a cheque is admitted to have liability, its RAKESH KUMAR SINGH Date: 2023.05.15 dishonour will certainly result in an offence.
18:34:21 +0530 CA Nos. 78/2018, 79/2018, 80/2018, 81/2018, 82/2018, 83/2018 & 84/2018, Page 10 of 147. Defence of undated or security cheques as taken by the accused has been adequately dealt with by the Ld. Trial Court. I am of the view that once liability exists at the time of presentation of cheques, concept of security cheque loses its significance. So far as date is concerned, once the cheque is signed, it becomes immaterial as to who is filling the other particulars in the cheque(s).
8. I am of the view that the complainant company is justified in prosecuting the accused company and the Ld. Magistrate is justified in convicting the accused company. Accused Naresh Kumar is signatory of the cheques and therefore, he is clearly liable U/s 141(2) NI Act in terms of the Judgment of Hon'ble Supreme Court in 'S.M.S. Pharmaceuticals Ltd vs Neeta Bhalla' 2005 (4) KLT 209. Therefore, the Ld. Magistrate was also justified in convicting Naresh Kumar.
9. However, so far as accused Vimmi Kakkar is concerned, it appears that Ld. Magistrate has not properly appreciated the situation. Perusal of the complaint shows that in paragraph-4, accused Vimmi Kakkar has been implicated only because she is director of the company. Precisely, it indicates that "The accused No.2 & 3 are and have at all times been lawful directors of accused No.1. The accused No.2 & 3 therefore, have been and are incharge & responsible for today-to-day business and all RAKESH activities of accused no.1". It shows that accused No.3 i.e., KUMAR SINGH Vimmi Kakkar has been simply implicated on the premise that Digitally signed by RAKESH she is director. Subsequent paragraphs of the complaint show that KUMAR SINGH Date: 2023.05.15 18:34:30 +0530 the complainant has just tried to include this Vimmi Kakkar CA Nos. 78/2018, 79/2018, 80/2018, 81/2018, 82/2018, 83/2018 & 84/2018, Page 11 of 14 always with Naresh Kumar as if every act was done by them jointly. It seems that if the complainant is to be believed, then both the persons were uttering same statements to the complainant. It seems that Vimmi Kakkar is wife of Naresh Kumar and the complainant has everywhere included her with the said Naresh Kumar just to claim a vicarious liability. This becomes further clear from a reading of paragraph-9 of the complaint in which the complainant has indicated that he made supplies to accused No.1, 2 & 3. Further, in paragraph-11, the complainant has indicated that cheques were deliberately dishonoured by accused No.1, 2 & 3 by issuing a stop payment instruction. It shows that complainant has included everyone in everything. It is clear that accused No.3 Vimmi Kakkar has been made vicariously liable by the complainant only on account of the fact that she is a director.
10. Section-141 NI Act is premised on the fact that a juristic entity like a company has to act through a human face and therefore, if it commits an offence, such human face should also be made liable. This provision nowhere talks about liability of director. It talks about liability of a person who is incharge of day-to-day affairs of a company. Now, any person can be incharge of the company but there is no presumption that every director shall be treated as incharge of the company. If it is accepted, the specific wordings of Section-141(1) NI Act will RAKESH lose its significance.
KUMAR SINGH
11. The Ld. Trial Court in its judgment appears to have Digitally signed by RAKESH KUMAR SINGH misconstrued that the cheques were issued by accused No.3 Date: 2023.05.15 18:34:41 +0530 CA Nos. 78/2018, 79/2018, 80/2018, 81/2018, 82/2018, 83/2018 & 84/2018, Page 12 of 14 Vimmi Kakkar. However, the cheques were apparently not signed by Vimmi Kakkar therefore there is no question of her issuing the cheques. The Ld. Trial Court has further relied upon certain ITR, director's report, balancesheet which are purportedly signed by accused No.3. I am of the opinion that signing of certain documents for filing before the authorities does not make any person incharge of the company. It can only make such person having concern with the affairs of the company. The requirement of law is that the person should be in charge of, and is responsible to, the company for the conduct of the business of the company. Clearly, there two points which are required to be satisfied i.e. firstly, the person should be incharge, and secondly, he should also be responsible to the company. Only one ingredient will not satisfy the requirement. Here the material on record does not show that accused No.3 Vimmi Kakkar is incharge of the company. Though she may have concern with the company and may have been filing reports before the authorities, the same can only show that she is responsible but will not show that she is also the incharge. I am of the view that the Ld. Trial Court erred in imputing vicarious liability on the accused No.3 Vimmi Kakkar.
12. In view of the aforesaid discussion, accused No.1 company along with accused No.2 Naresh Kumar are convicted whereas RAKESH accused No.3 Vimmi Kakkar is acquitted. To this extent, the KUMAR SINGH Judgment of conviction as passed by the Ld. Trial court is Digitally signed by RAKESH modified. KUMAR SINGH Date: 2023.05.15 18:34:52 +0530 CA Nos. 78/2018, 79/2018, 80/2018, 81/2018, 82/2018, 83/2018 & 84/2018, Page 13 of 14
13. So far as the sentence is concerned, it seems that fine was imposed by the Ld. Trial Court. Apparently, the fine was not only paid by the accused persons but has also been released in favour of the complainant. The only modification which is required in the order of sentence is that the liability indicated against accused No.3 Vimmi Kakkar shall not exist independently and the fine amount shall be deemed to have been imposed on the accused no.1 company and accused no.2 Naresh Kumar.
14. With the aforesaid modification and clarification, the appeals are partly allowed. Accused Vimmi Kakkar shall furnish bail bond and surety bond to the tune of Rs.10,000/- each for the purpose of Section-437-A CrPC.
15. The Trial Court record along with a copy of this Judgment be sent back.
16. The appeal file be consigned to the Record Room.
ANNOUNCED IN THE OPEN COURT TODAY ON THIS 15th DAY OF MAY, 2023 Digitally signed by RAKESH RAKESH KUMAR KUMAR SINGH Date: 2023.05.15 SINGH 18:35:07 +0530 (RAKESH KUMAR SINGH) ADDITIONAL SESSIONS JUDGE (SOUTH) SAKET COURTS : NEW DELHI CA Nos. 78/2018, 79/2018, 80/2018, 81/2018, 82/2018, 83/2018 & 84/2018, Page 14 of 14