Delhi District Court
India Cement Capital Ltd vs M/S Haryana Petrochemicals Ltd on 15 November, 2011
IN THE COURT OF SH. NAVJEET BUDHIRAJA, METROPOLITAN MAGISTRATE ,
SPECIAL COURT - 06, DWARKA COURTS, NEW DELHI.
INDIA CEMENT CAPITAL LTD.
VERSUS
M/S HARYANA PETROCHEMICALS LTD.
PS.: Hauz Khaz
U/s: 138 Negotiable Instruments Act
1. Serial No./CC No. of the case : 28591/1
2. Name of the complainant : M/s India Cement Capital Ltd.
(Formerly known as M/s Aruna Sugars
Fianance Ltd.)
Having it office at
B 29, (Ground Floor), Palmohan Plaza,
11/56, D.B. Gupta Road, Karol Bagh,
New Delhi 110 005
3. Date of institution : 19.04.1997
4. Name of the accused, his : 1. M/s Haryana Petrochemicals Ltd. 101
parentage and residence 102, Surya Mansion, 1, Kaushalaya
Park, Hauz Khas, New Delhi - 110 016
2. Mr. Rajiv Aggarwal, Joint Managing
Director, M/s Haryana Petrochemicals
Ltd., 101102, Surya Mansion, 1,
Kaushalaya Park, Hauz Khas, New
Delhi - 110 016
3. Mr. S.S.Verma, Executive Director, M/s
Haryana Petrochemicals Ltd. 101102,
Surya Mansion, 1, Kaushalaya Park,
Hauz Khas, New Delhi - 110 016
5. Date when Judgment was : 23.08.2011
reserved
CC No 28591/1 1 of 12
6. Date when Judgment was : 15.11.2011
pronounced
7. Offence complained of and : Section 138 Negotiable Instruments Act
proved
8. Plea of accused : Pleaded not guilty and claimed trial
9. Final Judgment : Accused not found guilty of offence under
Section 138 Negotiable Instrument Act and is
acquitted for the same.
:J U D G M E N T:
1 Vide this Judgment, I shall decide the present complaint filed by the
complainant M/s India Cement Capital Ltd. (earlier name M/s Aruna Sugar Finance Ltd.)
under Section 138 of Negotiable Instruments Act (hereinafter referred to as "NI Act")
against the accused number 1 M/s Haryana Petrochemicals Ltd., accused number 2
Rajeev Aggarwal and accused number 3 S.S.Verma.
2 Factual matrix of the present case is that the complainant company is dealing in
hire purchase, leasing of assets and bill discounting etc, and at the request of accused
number 1 a bill discounting facility to the tune of Rs.29,00,000/ was sanctioned to and
availed of by accused number 1 and in consideration thereof accused number 1 through
accused number 2 executed the hundi and the relevant documents. It is averred that
accused number 1 defaulted in making the payment of the bills and made only a part
payment of the amount availed of by accused number 1 and finally after mutual
negotiations an agreement was drawn on 17.07.1996 between the complainant and
accused number 1 which was signed by accused number 3 for and behalf of accused
no. 1 whereby all the accused persons agreed to make the payment in installments and
for that purpose accused number 1 issued 17 post dated cheques to be presented on
the due dates mentioned in the said cheques. It is further averred that accused also
CC No 28591/1 2 of 12
gave an undertaking to the complainant that they would provide enough fund/provision
in their bank account to meet the post dated cheques when presented and shall keep
the bank account operative during the tenure of the post dated cheques and also that
they will not issue any stop payment instructions to their bankers with regard to the post
dated cheques. Thereafter, complainant deposited two cheques bearing number
795458 and 795459 dt. 01.01.1997 and 01.02.1997 of Rs.55,000/ each which were
returned unpaid with the remarks "Account is freeze". Thereafter, legal demand notice
dt. 19.03.1997 was issued to the accused persons calling upon the them to make the
payment of the cheque amount but since they failed to make the payment, hence the
present complaint was filed.
3 After taking cognizance of the offence summons were issued to the accused
post which accused number 2 entered appearance and was admitted to bail on 23rd
March, 2000. Accused number 3 avoided the process of law and was declared
proclaimed offender vide order dt. 01st August, 2005. Thereafter, notice under Section
251 Cr.P.C encompassing all the accusations against the accused persons was served
upon accused number 1 and 2 to which they pleaded not guilty and claimed trial.
4 In complainant's evidence, complainant got examined Sh. Vishal Bhatt, who
is the authorized representative (hereinafter referred as "AR") of the complainant who
tendered his evidence by way of affidavit which is Ex.CW1/1. Other documents relied
upon by the complainant are the power of attorney Ex.CW1/A, agreement dt.
17.07.2007 Ex.CW1/B, undertaking Ex.CW1/C, cheques Ex.CW1/D and Ex.CW1/E,
returning memo Ex.CW1/F and Ex.CW1/C, legal notice Ex.CW1/H, postal receipts, UPC
Ex.CW1/I to Ex.CW1/N. In his cross examination CW1 i.e AR for the complainant
admitted that the cheques in question were received by the complainant as post dated
cheques and also that the reason of dishonour of the cheques was that the account of
the accused company was frozen. AR denied the suggestion that Rajeev Aggarwal has
no personal liability because he signed only as a director. AR stated that he did not
know whether the account of the accused company was frozen vide order of the Debt
Recovery Tribunal. AR further denied the suggestion that the complainant company
CC No 28591/1 3 of 12
presented the cheques inspite of being aware that the account of the accused company
was frozen. Complainant's evidence got closed vide order dt. 23rd December, 2010.
5 After the complainant's evidence matter was fixed for statement of accused
under Section 313 Cr.P.C and defence evidence. But Ld. Counsel for the complainant
sought exemption of the accused and also gave statement that did not want to lead
defence evidence, therefore, statement of the accused under Section 313 Cr.P.C was
dispensed with and defence evidence stood closed vide order dated 26.02.2011.
Thereafter, matter got fixed for final arguments.
6 Learned counsels for complainant and accused addressed their respective
final arguments at length. Before appreciating the evidences and arguments of both the
parties, it would be appropriate to advert to the relevant provisions of N.I Act.
Section 138 of N.I Act reads as under
Section 138 of NI Act reads as under:
S. 138 Dishonour of cheque for insufficiency, etc. of funds
in the account - where any cheque drawn by a person
on an account maintained by him with a banker for
payment of any amount of money to another person
from out of that account for the discharge, in whole or in
part, of any debt or other liability, is returned by the
bank unpaid, either because of the amount of money
standing to the credit of that account is insufficient to
honour the cheque or that it exceeds the amount
arranged to be paid from that account by an agreement
make with that bank, such person shall be deemed to
have committed an offence and shall, without prejudice
to any other provision of this Act, be punished with
imprisonment for a term which may extend to twice the
amount of the cheque or with both.
Provided that nothing contained in this section shall apply unless
(a) The cheque has been presented to the bank within a
period of six months from the bank within a period of six
months from the date on which it was drawn or within
the period of its validity, whichever is earlier.
(b) The payee or the holder in due course of the cheque,
CC No 28591/1 4 of 12
as the case may be, makes a demand for the payment
of the said amount of money by giving a notice, in
writing, to the drawer of the cheque, within thirty days of
the receipt of information by him from the bank
regarding the return of the cheque as unpaid; and
(c) the drawer of such cheque fails to make the payment of
the said amount of money to the payee or as the case
may be, to the holder in due course of the cheque,
within 15 days of the receipt of the said notice.
Explanation - For the purposes of this section, "debt or other liability" means a
legally enforceable debt or other liability.
7 Section 138 of the NI Act has three ingredients, viz., (i) that there is a legally
enforeceable 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
enforeceable debt; and (iii) that the cheque so issued had been returned due to
insufficiency of funds. The proviso appended to the said section provides for compliance
of legal requirements before a compliant petition can be acted upon by a court of law.
8 I would now embark upon the evidences adduced and the arguments
advanced by both the parties.
9 It is contended by learned counsel for the complainant that accused no. 1
availed the discounting facility to the tune of Rs 29,00,000/ from the complainant
company and when accused no. 1 defaulted in making the payment of bills then after
mutual negotiations, an agreement dt 17th July, 1996 was executed between the
complainant and accused no. 1 which was signed by accused no. 2 and 3 whereby all
the accused persons agreed to make the payment in installments and for that purpose
accused no. 1 issued 17 post dated cheques out of which 2 cheques form the subject
matter of the present complaint. It is further contended that complainant presented
cheques in question for encashment but the same were returned unpaid thereby
committing offence under section 138 of N.I Act. On the other hand, learned counsel for
the accused has contended that the account of the accused was attached pursuant to
CC No 28591/1 5 of 12
the order of Debt Recovery Tribunal therefore the said cheques were returned unpaid
with the remarks "account frozen" which does not fall within the purview of section 138
of N.I Act.
10 Apart from the aforesaid contentious issue, both the parties have raised
some other issues also but before delving upon those other issues I would like to give
my finding on the aforesaid issue.
11 Counsel for the accused has contended that the account of the accused
company got frozen pursuant to the order of Debt Recovery Tribunal dt. 30.01.1997. In
support of his submission, counsel for the accused has placed on record copy of the
application filed by State Bank of Travancore against the accused M/s Haryana
Petrochemical Ltd. & Ors.. Perusal of the said application shows that one of the interim
relief prayed by State Bank of Travancore was to restrain the respondent i.e the
accused company in the present complaint from withdrawing any amount from the current account of the Haryana Petrochemical Ltd. maintained by it with Syndicate Bank, Hauz Khaz, New Delhi and from its another current account maintained with the Punjab National Bank, Hauz Khaz, New Delhi. It was also prayed that the said bankers may also be restrained from parting with, disposing of or paying any amount from the said current account of the respondent to anyone. Vide order dt. 30.01.1997, the aforesaid prayer of the applicant State Bank of Travancore was allowed and interim injunction was granted. Certified copy of the said order of DRT is placed on record by the accused. Although the same has not been exhibited by the accused in evidence but the judicial notice of the same can be taken and for the sake of the convenience the said order is marked as Annexure 'A'. The cheques in question Ex.CW1/D and Ex.CW1/E pertain to the account of the accused in the Syndicate Bank and the said cheques got dishonoured vide returning memo dt. 05.03.1997 Ex.CW1/F and Ex.CW1/G. The said cheques were dishonoured with the remarks "Account is Freeze". Complainant has not taken any objection to the aforesaid order of the DRT. Although in cross examination CW1 has feigned ignorance regarding the said order of DRT. So there is no dispute regarding the fact that the cheques in question got dishonoured with CC No 28591/1 6 of 12 the endorsement "Account is Freeze" pursuant to the order of attachment passed by DRT.
12 The main bone of contention between the parties is that whether the reason of dishonour i.e the account is freeze falls within the purview of Section 138 of NI Act. Counsel for the complainant submits that Vide document Ex.CW1/C an undertaking was given by accused to provide for post dated cheques for prompt discharge of the terms and conditions of the agreement and also to provide enough funds in its bank account to meet the PDC's when presented for payment and also undertakes to keep the bank account operative during the tenure of the PDC's. It is further submitted by counsel for the complainant that in view of the aforesaid undertaking given by the accused, it was incumbent on the accused to honour the cheques in question and even if the said cheques got dishonored with the remarks "Account is Freeze" still that will fall with the ambit of Section 138 of NI Act. To bolster his submission, counsel for the complainant has placed reliance upon the Judgment of Madras High Court on "Counter Point P. Ltd. Vs. Harita Finance Ltd", 03.03.2006. To controvert this, Ld. Counsel for the accused has contended that accused company could not have provided for the funds as the account of the accused company got frozen vide order of DRT and the said reason of dishonour does not come within the ambit of Section 138 NI Act. In support of his contention Ld. Counsel for the accused has placed reliance upon the following Judgments. :
1. Kusum Ingots & Alloys Ltd. Vs. Pennar Peterson Securities Ltd.
& Ors., (2000) 2 Supreme Court Cases 745.
2. Omkar Nath Goenka Vs. M/s Gujarat Lease Finance Ltd., 2009 [2] JCC [NI] 109.
3. Prem Chand Gupta Vs. State & Anr., 2010 (115) DRJ 80 13 Before deciding the aforesaid issue, let me advert to Section 138 of NI Act. Literal interpretation of Section 138 NI Act gives an indication that it pertains to dishonor of the cheque on the ground of insufficiency of funds in the account of the drawer of CC No 28591/1 7 of 12 cheque. But the Apex court of India and various High Courts across the country have given wide interpretation to the aforesaid provision by including certain other grounds like "payment stopped by drawer", "account closed", "refer to drawer" in the ambit of Section 138 of NI Act in order to protect the interest of the payee and to impose liability upon the unscrupulous drawer of the cheque. It has been observed in catena of Judgments of Supreme Court and various High Courts that if the dishonor takes place due to act of the drawer like "Stop payment" or "account closed" then the drawer cannot be allowed to evade his liability merely because the aforesaid grounds of dishonor are not categorically provided for in Section 138 of NI Act. Now arises the question whether if dishonor of cheque takes place not due to any act of the drawer but because of the reasons beyond his control then in such circumstance, can the drawer be held liable. This has been answered in various Judgments quoted by Ld. Counsel for the accused. 14 In Onkar Nath (Supra), para 8 and 9 of the Judgment are relevant and are reproduced below : 8 The penultimate issue in the instant matter is whether or not the petitioner on the date on which the cheque was dishonoured and the date on which the payment in compliance of legal notice dated 13.07.1998 should have been made, was incapable of making the payment on account of the orders of CBI. The case of the petitioner before this court is that he could not make payment, in view of the fact that CBI had freezed the account of the petitioner. This fact is also evident from the return memo of the bank, copy of which has been filed at page 28 of the paper book which shows the endorsement "Account frozen". Counsel for the petitioner further submits that the company has also gone into liquidation. The petitioner has also filed on record the order dated 15.06.1998 whereby the DRT of Delhi restrained M/s Premier Vinyl Flooring Ltd., of which the petitioner was the Managing Director, from disposing of or alienating or parting which the possession of its assets. The existence of the order dated 15.06.1998 predates the event of dishonor of cheques. It thus becomes explicit that inasmuch as the petitioner was also restrained by the order dated 15.06.1998 from alienating, selling, disposing of or parting with the possession of the assets of this company M/s Premier Vinyl Flooring Ltd., the petitioner as such could not have touched any of its properties movable or immovable.
CC No 28591/1 8 of 12
9 Further, from the facts of the case and documents on
record, it is explicit that the petitioner, by virtue of the order dated 15.06.1998 of the DRT of Delhi and the order of CBI by virtue of which the account of the petitioner was freezed, was debarred from complying with the legal notice dated 13.07.1998 which let to the dishonor of the cheques. Even otherwise the petitioner is protected by the law in Kusum, Ingots (Supra) whereby the Apex Court has unequivocally opined that where dishonor of cheque takes place for reasons, beyond the control of the directors of a company, it would be unjust and unfair and against the intent and purpose of the Legislature to compel the Directors to face trial in a criminal case. The impugned complaint bearing CC No. 5427/1 arranging the petitioner for the offence under Section 138 of the Negotiable Instruments Act, 1881 is bad in law, and therefore, hereby stands quashed.
15 Similarly in the Judgment in Prem Chand Gupta (Supra) para 9 is relevant and is reproduced below : 9 In fact, the issued involved in this case is no mere resintegra, in view of the decision of the Hon'ble Supreme Court in 'Kusum Ingots Vs. Pennar Piterson Securities Ltd.' AIR 2000 SC 1654 where the Hon'ble Supreme Court inter alia held as under:
"The question that remains to be considered is whether S.22A of SICA affects a criminal case for an offence under S. 138 NI Act. In the said section provision is made enabling the Board to make an order in wring to direct the sick industrial company not to dispose of, except with the consent of the Board, any of its' assets
(a) during the period of preparation or consideration of the scheme under S. 18; and (b) during the period beginning with the recording of opinion by the Board for wining up of the company under subsec.(1) of S.20 and up to winding up before the concerned High Court. This exercise of the power by the Board is conditioned by the prescription that the Board is of the opinion that such a direction in necessary in the interest of the sick industrial company or its creditors or shareholders or in the public interest.
In a case in which the BIFR has submitted its report declaring a company as 'sick' and has also issued a direction under S.22A restraining the company or its directors not to dispose of any of its assets except with consent of the Board then the contention raised on behalf of the appellants that a criminal case or the alleged offence under S. 138 NI Act cannot be instituted during the period in which the restraint order passed by the BIFR remains operative cannot be rejected outright. Whether the contention can be CC No 28591/1 9 of 12 accepted or not will depend on the facts and circumstances of the case. Take for instance, before the date on which the cheque was drawn or before expiry of the statutory period of 15 days after notice, a restraint order of the BIFR under S. 22A was passed against the company then it cannot be said that the offence under S. 138 NI Act was completed. In such a case it may be reasonable be said that the dishonouring of the cheque by the bank and failure to make payment of the amount by the company and/or its Directors is for reasons beyond the control of the accused. It may also be contended that the amount claimed by the complainant is not recoverable from the assets of the company in view of the ban order passed by the BIFR. In such circumstances it would be unjust and unfair and against the intent and purpose of the statute to hold that the directors could be compelled to face trial in a criminal case" (emphasis supplied) 16 In both the aforesaid Judgments the account of the accused was attached by either DRT or BIFR and eventually the cheque in the aforesaid cases got dishonored with the remarks "Account freeze" . In both the aforesaid Judgments, the Judgment of the Apex court in Kusum Ingots (Supra) pertaining to the same issue has been mentioned. The golden thread in the Judgments referred above is that where dishonour of cheques takes place for reason beyond the control of the drawer then it would be unjust and unfair against the intend and purpose of the legislature to compel the drawer to face trial in a criminal case. Same is the case in the present complaint where the cheques in question got dishonored with the remarks "Account Freeze" pursuant to the order of DRT. Complainant has not disputed the reason of the dishonor of the cheques. In fact, in the legal notice Ex.CW1/H sent by the complainant to the accused and also in the cross examination of AR for the complainant, it is an admitted position that the cheques in question got dishonored because of the frozen account. 17 It is also pertinent to mention that complainant has not placed on record any material or evidence which could evince that on the date of dishonor of the cheques, funds were not sufficient in the account of the accused. Had there been any evidence to that effect then it might have lent some credence to the case of the complainant. In view of the aforesaid discussion and referring to the various case laws discussed above, I opine that the reason of dishonour of the cheques in question i.e. "Account CC No 28591/1 10 of 12 freeze" does not fall within the purview of Section 138 of NI Act, therefore, offence under Section 138 NI Act is not made out against the accused. 18 As regards the Judgment in Counterpoint (Supra) relied upon by Ld counsel for the complainant is concerned, although it has been held in para 8 of the said Judgment that the accused company cannot escape the criminal liability on the ground that the cheques were dishonored only on account of the freezing of the accounts of the accused. But that Judgment has been passed by the single bench of Madras High Court which holds a contrary view then the Judgments passed by the Delhi High Court as discussed above. In such a scenario to resolve the logjam, view of the apex court on that point has to be considered. In "Rakhi Roughwani and Ors Vs. Union of India and Ors." 144 (2007) DLT 443 (DB), it has been held in para 8 that it is entirely unarguable that where a Supreme Court Judgment is available it must be followed in its true tenor regardless of the pronouncement of benches of the High Court. 19 In both the Judgments of the Delhi High Court as discussed above, Judgment of the Apex court in Kusum Ingots and alloys Ltd. (Supra), is mentioned wherein it has been held that where dishonor of cheque takes place for reason beyond the control of the drawer then it would be unfair to compel the drawer to face trial in a criminal case. In view of this, Judgment relied upon by Ld. Counsel for the accused in Counterpoint (Supra) does not hold good.
20 The present complaint stands disposed of in view of the aforesaid finding, therefore, there is no need to embark upon the other arguments raised by both the parties. In the present complaint post dated cheques dt. 01.01.1997 and 01.02.1997 were issued by accused no. 1 which were presented for encashment in the month of March, 1997 and which got dishonored with the remarks "Account is freeze" as by that time the account of the accused company got frozen pursuant to the order of DRT dt. 30.01.1997. Complainant has failed to make out the case against accused no. 1 company, therefore, accused no. 2 being the director of accused no. 1 stands acquitted CC No 28591/1 11 of 12 of the offence under Section 138 NI Act.
21 Bail bond stands discharged.
22 File be consigned to Record Room
ANNOUNCED IN THE OPEN (NAVJEET BUDHIRAJA)
COURT ON 15.11.2011 METROPOLITAN MAGISTRATE
SPECIAL COURT 06,
DWARKA COURTS, DELHI.
CC No 28591/1 12 of 12
CC No.
India Cement Ltd. Vs. Haryana Petrochemical Ltd.
15.11.2011
Present: AR for the complainant.
Counsel for the accused
Accused no. 2 absent.
Accused no. 3 declared PO.
On the last date of hearing counsel for the accused was directed to trace the fresh address of the accused no. 2. Today he submits that fresh address of the accused no. 2 could not be traced and submits that final order may be pronounced in his absence.
As per section 353 Cr.P.C in case of acquittal of the accused his presence is not required before the court for pronouncement of the judgment. In the present complaint, offence under Section 138 is not made out against the accused.
Therefore, vide separate order announced in open court accused no. 2 being the director of the accused no.1 stands acquitted for the offence under Section 138 NI Act.
File be consigned to Record Room.
(Navjeet Budhiraja)
MM:Dwarka:Delhi
15.11.2011
CC No 28591/1 13 of 12