Delhi District Court
Saurabh Kumar Banerjee vs . Pooja Agarwal on 27 March, 2021
1
IN THE COURT OF MS. SWATI GUPTA, METROPOLITAN
MAGISTRATE (SOUTH) 04 N.I. ACT, SAKET COURTS: NEW DELHI
CT Cases 5633/2017
SAURABH KUMAR BANERJEE Vs. POOJA AGARWAL
1. Complaint Case number : 5633
2. Name of the complainant : Saurabh Kumar Banerjee
S/o Sh. Sanat Kumar
R/o T-25/1, Malviya Nagar
New Delhi.
3. Name and address of the accused : Pooja Aggarwal
D/o Sh. Sunil Aggarwal
R/o A-52, DLF Regal
Garden, Sec-90, Gurgaon.
4. Offence complained of or proved : Under Section 138 of the
Negotiable Instruments
Act, 1881.
5. Plea of the accused : Pleaded not guilty
6. Final Order : Acquittal
7. Date of institution : 11.05.2017
8. Date on which reserved for judgement : 10.03.2021 9. Date of judgement : 27.03.2021 Digitally signed SWATI by SWATI GUPTA GUPTA Date: 2021.03.27 16:21:30 +0530 2 BRIEF STATEMENT OF FACTS FOR THE DECISION
1. Briefly, the case of complainant is that he is the proprietor of M/s Exotica Business Solution. The said company appointed accused as an Assistant Account Development Manager vide employment agreement dated 07.07.2016 for an annual salary of Rs. 7.5 lakh and additional performance acknowledgement incentive of Rs. 1.3 lakh.
As a surety for employment agreement, the accused issued a cheque bearing no. 949955, dated 07.02.2017 for an amount of Rs. 2.4 lakh drawn on Punjab National Bank, Shivaji Park, Alwar, Rajasthan. The legal team of complainant sent an e-mail dated 01.02.2017 for recovery of amount of Rs.2.4 lakh to the accused but no response was received from her. Complainant presented the cheque for encashment twice and the same got dishonoured with remarks "FUNDS INSUFFICIENT" vide return memos dated 09.02.2017 and 18.03.2017. Complainant then sent legal demand notice dated 25.03.2017 to the accused, demanding payment of the amount of cheque in question within 15 days. The accused replied to the legal demand notice vide reply dated 07.04.2017 denying any liability towards the complainant. Since the amount of cheque in question was not paid by the accused within 15 days of receipt of the legal demand notice, the complainant has instituted the present proceedings under section 138 of the Negotiable Instruments Act, 1881 (hereinafter referred to as "the NI Act").
2. The accused was summoned and after her appearance, she was served with notice under section 251 Criminal Procedure Code (hereinafter referred to as "Cr.P.C.") wherein the accused admitted the employment agreement, the signatures on the cheque in question, the receipt of legal demand notice but denied any liability towards the complainant and claimed that the cheque in question has been misused by the complainant.
3. The complainant examined himself as CW1. After her application under section 145(2) of the NI Act was allowed, the accused cross-examined the 3 complainant, wherein he reiterated his case. After complainant evidence was closed, statement of accused was recorded under section 313 Cr.P.C. Thereafter, the accused examined herself as defence witness under section 315 Cr.P.C. No other evidence was led on behalf of the accused.
4. Arguments were heard for both the parties and record of the case perused. Upon consideration of the same, this court observes as follows:
a) Admittedly, the cheque in question was issued as a security for the employment agreement between the parties. This means that on the date of issuance of the cheque in question there was no existing legally enforceable liability.
b) It is peculiar that nowhere in the complaint or his evidence on affidavit has the complainant disclosed as to how and when the amount mentioned in the cheque in question became due or payable. A suggestion is discernible from a perusal of Ex. CW1/C i.e. the email for recovery of Rs. 2.4 lakh sent by the legal team of the complainant to the accused. The said email mentions that the accused was on leave from 06.01.2017 to 09.01.2017 but she proceeded on No Call No Show leaves from 10.01.2017 to 24.01.2017. Thus, the complainant is claiming the amount of Rs. 2.4 lakh to have become due or payable as the accused was "absconding from work for more than 3 days without information", which was one of the conditions in the employment agreement for encashment of the cheque in question.
c) It emerges that the liability alleged in the present case is in the nature of claim for damages for breach of employment agreement allegedly committed by the accused. The damages have been quantified in the agreement itself at Rs. 2.4 lakhs. The provision regarding recovery of damages for breach of contract, where a sum is named in the contract itself, is covered under section 74 of the Indian Contract Act, 1872. Such damages can be either in nature of liquidated sum of money, which is the genuine pre-estimate of loss anticipated to be suffered in case 4 of breach of contract or it can be stipulated by way of penalty, which is essentially in terrorem to deter the parties from committing breach of the contract.
d) It is not the case of the complainant that the amount of Rs. 2.4 lakh has been mentioned in the employment agreement as liquidated damages or as a genuine pre-estimate of the loss anticipated to be suffered by employer due to the absence of the employee. Even if the same was so claimed, it is rather unjustifiable from a reasonable person's standard, that an employer would suffer loss of Rs. 2.4 lakh due to 3 days' absence or even 14 days' absence (from 10.01.2017 to 24.01.2017, as claimed in the email for recovery, Ex CW1/C) of an employee whose annual salary is about Rs. 7.5 lakhs. Thus, the amount of Rs. 2.4 lakhs in the employment agreement, which is quite unconscionable, is essentially in terrorem and the same is stipulated by way of 'penalty'.
e) The crucial question that arises here is whether such a claim for the entire amount of sum stipulated by way of penalty can be said to be a legally enforceable liability so as to sustain the proceedings under section 138 NI Act?
f) In the landmark decision cited as Fateh Chand vs. Balkishan Das; 1964 SCR (1) 515, the constitution bench of the Hon'ble Supreme Court of India held that duty not to enforce penalty clause but only to award reasonable compensation is statutorily imposed upon the court by section 74 (referring to the Indian Contract Act, 1872). Thus, in case of breach of an agreement, a party is not entitled to recover the entire amount mentioned in the agreement as penalty but only to a reasonable compensation. When an agreement stipulates a penalty clause for breach and a cheque is issued at the time of execution of such agreement for securing the penalty clause, such that the amount of cheque equals the entire amount of penalty stipulated, the cheque is essentially for an amount exceeding a reasonable compensation. As such, in the event of breach of such an agreement, the entire amount of cheque does not become due or payable. Accordingly, such a 5 cheque cannot be said to have been issued in discharge of a legally enforceable liability.
g) Further, it has been recently laid down by a three judge bench of the Hon'ble Supreme Court of India in decision cited as P. Mohanraj & Ors. Vs. M/s Shah Brothers Ispat Pvt. Ltd. in Civil Appeal 10355 of 2018 , date of decision 01.03.2021, that section 138 NI Act is really a hybrid provision to enforce payment under a bounced cheque if it is otherwise enforceable in civil law. Since penalty clauses, in entirety, are not enforceable even under civil law, the necessary conclusion is that any cheque issued at the time of execution of an agreement for securing the penalty clause cannot be used to enforce the payment of the entire amount of penalty. Therefore, if such a cheque is dishonoured then provision under section 138 NI Act cannot be used to enforce payment thereunder which is not legally due or enforceable.
h) In view of the above analysis and also the fact that the complainant has not disclosed anywhere that on what basis he is claiming the entire amount of penalty to have become due or payable, this court holds that the cheque in question being issued for securing the penalty clause of the employment agreement, the same cannot be said to have been issued in discharge of a legally enforceable liability and therefore, proceedings under section 138 NI Act cannot be used to enforce payment thereunder.
i) Next, in order to establish existence of a legally enforceable liability, the complainant has placed reliance on the decision of the Hon'ble High Court of Delhi cited as Capt. Deepak Verma Vs. Pawan Hans Helicopters Ltd.; 2018(3) AD(Delhi) 690. The reliance is misplaced as the said decision dealt with recovery of liquidated damages upon an indemnity bond for service contract in a civil suit and has no application to the present proceedings under section 138 of NI Act.
j) Lastly, the complainant has contended that since the accused has admitted her signatures on the cheque in question, the complainant is not required to prove 6 the existence of a legally enforceable liability. It is contended that legally enforceable liability shall be presumed under section 139 of the NI Act and it is incumbent upon the accused to rebut the same.
k) In the decision cited as Krishna Janardhan Bhat v. Dattatraya G. Hegde; AIR 2008 SC 1325, the Hon'ble Supreme Court of India held as follows:
"....20. Section 138 of the Act has three ingredients, viz.:
(i) that there is a legally enforceable debt;
(ii)that the cheque was drawn from the account of bank for discharge in whole or in part of any debt or other liability which pre- supposes a legally enforceable debt; and
(iii)that the cheque so issued had been returned due to insufficiency of funds.
21. The proviso appended to the said section provides for compliance of legal requirements before a complaint petition can be acted upon by a court of law. Section 139 of the Act merely raises a presumption in regard to the second aspect of the matter. Existence of legally recoverable debt is not a matter of presumption under Section 139 of the Act. It merely raises a presumption in favour of a holder of the cheque that the same has been issued for discharge of any debt or other liability......"
Thus, the settled position of law is that before a court sets about raising presumption under section 139 of the NI Act and delves into its rebuttal, first and foremost it is imperative to examine whether the case of the complainant can even stand on its own legs by establishing the legal requirements of section 138 NI Act. The existence of a legally enforceable liability is one of the three legal requirements to be fulfilled by the complainant. Until this is proved by the complainant, a complaint under section 138 NI Act cannot be sustained. Thus, if from the pleadings and the evidence of complainant, no legally enforceable liability is made out, the presumption under section 139 NI Act will not come to the rescue of the complainant and facilitate him to enforce the cheque for an amount which is not legally due or enforceable. Therefore, the last contention of the accused is also not tenable, hence rejected.
75. In view of the foregoing findings, this court holds that the case of the complainant collapses for want of a legally enforceable liability. The complainant has failed to prove the offence under section 138 NI Act against the accused. Consequently, the accused Ms. Pooja Aggarwal is acquitted of the offence under section 138 of the Negotiable Instruments Act, 1881.
Pronounced in the (SWATI GUPTA)
open court on 27.03.2021 MM-04/NIAct/South/Saket
New Delhi