Gujarat High Court
Bharat Overseas Bank Limited vs Ashima Limited on 12 April, 2004
Equivalent citations: (2004)2GLR529, [2004]54SCL292(GUJ)
Author: K.A. Puj
Bench: K.A. Puj
JUDGMENT K.A. Puj, J.
1. This Appeal From Order is filed against the order passed by the learned City Civil Judge below an application Exh.6-7 in Civil Suit No. 854 of 2003 on 22.04.2003 whereby the notice of motion application taken out by the present respondent - original plaintiff was allowed and the appellant was restrained from the recovery of the debts of the respondent, by way of temporary injunction and further restrained from enforcing any security or use any negotiable instruments including four post dated cheques aggregating to Rs. 449.52 lacs drawn on HDFC Bank, Ahmedabad and lying to the custody of the appellant, on the ground that the respondent was protected under the BRU notification dated 11.11.2002 issued by the State Government, Labour and Employment Department in favour of the respondent under the Bombay Relief Undertaking (Special Provisions) Act, 1958 till the said notification remained in force i.e. upto 11.11.2003. The said period was further extended by one year i.e. upto 10.11.2004 by another notification dated 20.10.2003, a copy of which was placed on the record of this Court, during the course of hearing of the present Appeal From Order.
2. The brief facts giving rise to the present Appeal From Order are that the respondent Company has made a request to the appellant Bank to sanction in its favour a bill discounting facility of Rs. 500 Lakhs and as a security for the payment of the Company's liability to the appellant, the respondent had issued the following three post dated cheques in favour of the appellant.
Sr. Date Amount (Rs.)
No.
1. 05.02.2002 Rs.2,01,48,725/-
2. 08.02.2002 Rs.1,53,81,300/-
3. 13.02.2002 Rs.1,44,94,675/-
3. All the aforesaid three cheques were presented by the appellant on their due dates and the said cheques were bounced. The appellant bank, therefore, filed criminal complaints on 22.03.2002 & 27.03.2002 in the Court of the Metropolitan Magistrate, Ahmedabad for offences under Section 138 read with Section 142 of the Negotiable Instruments Act against the Company and its Directors. The Court had issued process to all the accused. On 23.03.2002, the respondent Company requested the appellant Bank to convert the outstanding bills into Working Capital Demand Loan and agreed to pay the entire outstanding dues to the bank in six quarterly installments as follows :-
Installment Amount Date of payment (in Rupees) of Installment.
25,00,000/- 30.09.2002
25,00,000/- 31.12.2002
100,00,000/- 31.03.2003
100,00,000/- 30.06.2003
100,00,000/- 30.09.2003
149,52,000/- 31.12.2003
4. The appellant vide its letter dtd. 30.03.2002 sanctioned the above arrangement. The respondent Company had also agreed to give as collateral security six postdated cheques bearing the said dates and for the said amounts and requested for return of the earlier cheques. Accordingly, a Working Capital Demand Loan Agreement dated 30.03.2002 was executed between the Company and the appellant Bank and the respondent Company under cover of its letter dated 30.03.2003 enclosed six postdated cheques against the earlier cheques. The respondent company's Chairman Shri Chintan N. Parikh had also executed in favour of the appellant - Bank a continuing guarantee agreement dated 30.03.2002. The respondent Company had made payment of Rs. 50 Lakhs against the postdated cheques of 30.09.2002 and 31.12.2002. The respondent Company's Chairman also made a declaration on oath on 29.04.2002 declaring interalia that the respondent Company had issued the said six postdated cheques and that he had already executed and signed continuing Letter of Guarantee dated 30.03.2002 in favour of the Bank in his personal and individual capacity for guaranteeing and securing due repayment of the outstanding sum of Rs. 4,99,52,000/- together with further interest, charges and costs.
5. The State Government issued a notification dated 11.11.2002 declaring the respondent Company as a relief undertaking for 12 months with effect from 11.11.2002 under Section 3 of the Act and directing that except in the case of Govt. dues in relation to the said undertaking rights, privileges, obligations, liabilities (other than those liabilities etc. towards its employees) accrued or incurred before the said undertaking was declared as a relief undertaking and remedy in the enforcement thereof shall be suspended and proceedings relating thereto pending before any Court, Tribunal, Officer or Authority shall be stayed, during one year commencing on 11.11.2002.
6. In anticipation that the Bank would encash the postdated cheque of 31.03.2003 for Rs. 100 Lakhs, the Company by its letter dated 20.03.2003 requested the appellant - Bank that the Company was facing a lot of problems on issue of postdated cheques from other secured creditors, Bankers and Board Members and that till the matter was settled in totality, the respondent Company requested the appellant Bank not to deposit the postdated cheque of 31.03.2003 for Rs. 100 Lakhs. The appellant Bank by its letter dated 22.03.2003 requested the respondent Company to take necessary steps to honour the Company's commitment when the cheque for Rs. 100 Lakhs was presented for payment on 31.03.2003. On presumption that the appellant Bank would deposit the cheque on its due date, the respondent Company filed Civil Suit No. 654 of 2003 and obtained an ex-parte ad-interim order on 28.03.2003 which was confirmed till the period mentioned in the date of notification was over, by an order dated 22.04.2003.
7. It is this order dated 22.04.2003 which was passed below application Exh.6-7 in Civil Suit No. 654 of 2003 is under challenge in the present Appeal From Order.
8. The appellant Bank has also filed Civil Application praying for stay against the operation and implementation of the impugned order and further praying for permission to deposit and present the cheque dated 30.03.2003 for Rs. 100 Lakhs and to further deposit remaining three cheques dated 30.06.2003, 30.09.2003 and 31.12.2003.
9. This Court had admitted the Appeal From Order on 01.05.2003 and as far as Civil Application is concerned, it was decided that the same should be heard along with the main Appeal From Order in the month of July, 2003 and hence, no formal order was passed on the said Civil Application.
10. During the pendency of this Appeal as well as Civil Application, this Court has passed orders, on the joint request of the parties, on 29.09.2003, 10.03.2004 and 18.03.2004 in respect of revalidation of the cheques and pursuant to these orders, the respondent Company has made necessary endorsement on the original cheques for their revalidation.
11. Mr. S.B. Vakil, learned Senior Counsel along with Mr. S.S. Panesar, learned advocate appearing for the appellant - Bank submitted that the respondent Company has filed the present suit and obtained injunction against the appellant - Bank with malafide intention to delay and if possible to prevent prosecution of the Company's Directors for offences under Section 138 read with Section 142 of the Negotiable Instruments Act, in the event of bouncing of the cheques, when presented. The respondent Company has sought the injunction against the appellant Bank not because the same was warranted under the BRU notification, but because the Company wanted to shelter its Directors against the unavoidable consequences of being prosecuted if the cheques were bounced. By obtaining an injunction preventing the appellant to present the cheque, the respondent Company has fraudulently obtained a stay against the operation of the provisions contained in Section 138 & 141 of the Negotiable Instruments Act. The respondent Company, therefore, indirectly succeeded in achieving what he could not have succeeded directly. In this connection, he relied on the decision of the Hon'ble Supreme Court in the case of INDERJIT C. PAREKH AND OTHERS V. B.K. BHATT AND ANOTHER, A.I.R. 1974 SUPREME COURT 1183 wherein while dealing with the Provisions contained in Section 4 (1) (a) (iv) of the Bombay Relief Undertakings (Special Provisions) Act, 1958, in the context of the individual liabilities of Directors and officers under Employees Provident Funds Scheme, 1952, the Hon'ble Supreme Court has held that the immunity cannot be extended to cover the individual obligations and liabilities of the directors and other officers of the undertaking as distinct from the obligations or liabilities of the undertaking. Neither the language of the statute nor its object would justify the extension of the immunity so as to cover the individual obligations and liabilities of the directors and other officers of the undertaking. If they have incurred such obligations or liabilities as distinct from the obligations or liabilities of the undertaking, they are liable to be proceeded against for their personal acts of commission and omission. The remedy in that behalf cannot be suspended nor can a proceeding already commenced against them in their individual capacity be stayed. Indeed, it would be strange if any such thing was within the contemplation of law.
12. Mr. S.B. Vakil has further relied on the decision of this Court in the case of THE VIJAY MILLS CO. LTD., AHMEDABAD AND OTHERS V. STATE OF GUJARAT AND OTHERS, 1990 (1) G.L.R. 557 wherein, while interpreting the Provisions contained in Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985, in the context of the sales tax liabilities, it is held that Section 22 of the Act clearly shows that the section does not take within its sweep the criminal prosecution against the company. However, when any criminal proceeding is instituted on account of non-payment of such amount, it cannot be said that the proceeding is for the winding up of the industrial company or for execution, distress or the like against the properties of the industrial company. Therefore, the provisions of Section 22 of the Act would not come in the way of launching of criminal prosecution under the provisions of Gujarat Sales Tax Act, 1969, when it is shown that the amount of Sales Tax dues have not been paid by the dealer.
13. Mr. Vakil has further relied on the decision of the Hon'ble Supreme Court in the case of M/S. KUSUM INGOTS AND ALLOYS LTD. V. M/S. PENNAR PETERSON SECURITIES LIMITED AND OTHERS, A.I.R. 2000 S.C. 954 wherein it is held that a Company and its Directors can be proceeded against for having committed an offence under Section 138 of the Negotiable Instruments Act, even if the company has been declared sick under the provisions of Sick Industrial Companies (Special Provisions) Act (SICA) before the expiry of the period for payment of the cheque amount. Section 22 of SICA does not provide for any legal impediment for payment of the amount for which the cheques were drawn for which reason the company cannot be taken to have committed an offence under S. 138 of Negotiable Instruments Act. The Hon'ble Supreme Court has further held that the contention that if the criminal case is proceeded with and the company/Directors are convicted and sentenced to fine, then it will be necessary to realise the amount of fine from the assets of the company which would be impermissible in view of the provisions of Sec. 22 of the SICA, is premature and farfetched as the occasion to realise fine from the accused company or its directors will arise only in case they are convicted and fine is imposed against them. That is not a ground to hold that the criminal proceeding should be foreclosed at the threshold. Similarly remote and farfetched is the contention that if the Directors of the company on being convicted are arrested and kept in jail, the efforts of the BIFR for reconstruction/revival of the company will not be possible and in that event the very purpose of inquiry by the BIFR will be rendered futile.
14. Mr. Vakil has further submitted that the plaint on the face of it is grossly under valued and does not bear requisite Court Fees and is, therefore, not admissible on record of the Court. The Company's under valuation of the plaint is clearly indicative that the Company has merely indulged into a speculative frivolous suit as a matter of gamble at little cost. The Company has filed the suit only on the Court Fee Stamp of Rs. 30/and obtained injunction against presentation of cheques worth Rs. 499.52 Lacs. The Trial Court has committed a very serious error in law in entertaining the suit and granting injunction despite the fact that the issue regarding inadequate Court Fees was raised by the present appellant.
15. Mr. Vakil has further submitted that bare perusal of the notification dated 11.11.2002 makes it clear that the protection envisaged under Section 4 (1) (a) (iv) of the BRU Act would not be made available in as much as under the said Provision, the exercise of right, privilege, obligation or liability accrued or incurred before the undertaking was declared a relief undertaking was not to be suspended, but only remedy for its enforcement was to be suspended and all proceedings relating thereto pending before any Court, Tribunal etc. was to be stayed. However, by grant of the interim injunction against the appellant, the very exercise of right of the appellant Bank to present the cheques in clearing has been injected which is not permissible under the law. In support of his contention, he relied on the decision of this Court in the case of M/S. D.S. PATEL & CO. V. THE GUJARAT STATE TEXTILE CORPORATION LIMITED AND OTHERS, 13 G.L.R. 33 wherein it is held that a bare reference to Sec. 4 of the Bombay Relief Undertaking (Special Provisions) Act shows that the only restriction which it contemplates is that of temporary suspension of the rights and liabilities relating to the relief undertaking in question. It is undoubtedly true that sub-clause (iv) is so worded that on plain reading it gives an impression that what is suspended is not only the remedy for the enforcement of the right to hold but also the right itself. But on true construction of this sub-clause it is found that the right itself is not suspended but only the remedy for the enforcement of the right is suspended. Therefore, when the sub-clause speaks about "suspension of a right, it only means suspension of its execution or enforcement. The incidents of a right, except its executability are, therefore, not suspended by the sub-clause.
16. Mr. Vakil has further submitted that the Trial Court has failed to appreciate the distinction between the exercise of a right and the remedy for the enforcement of the right. The appellant's case involves contractual right created by acts of parties. A cheque confers on the payee a right to collect the sum therein specified from the drawee bank. IN case of a bearer cheque by the payee presenting it to the drawee bank and in the case of a crossed cheque or a payee account cheque by collecting the amount from the drawee bank in some bank account or in the payee's account. Such collection is the exercise or enjoyment of the right under the cheque and not adopting any remedy for enforcement of the right. Only when the payee fails to enforce the right by encashing or collecting the amount of the cheque that the question of the payee resorting to some remedy provided by law to recover the amount arises. In this connection, he relied on the decision of the Rajasthan High Court in the case of TOTALAL V. THE STATE, A.I.R. 1963 RAJASTHAN 6 wherein it is held that the word "enforce" used in Sec. 295(3) Companies Act, 1956, means the taking of such action on the part of the creditor which compels the debtor to effect repayment of the loan, such as, the institution of a suit, attachment or sale of the latter's properties etc. Making a demand from the debtor to repay the loan would not amount to enforcing repayment. A demand may only be a request or may be accompanied by some threat of legal action but the element of force which compels obedience which the word 'enforce' carries is absent from it. Merely obtaining of a mortgage from the debtor would not amount to enforcing the repayment of the loan within the meaning of sub-sec. (3) of Sec. 295. For it might be that the loan which was unsecured became secured after the mortgage, still the amount remained in the hands of the debtor.
17. Mr. Vakil has further relied on the decision of the Hon'ble Supreme Court in the case of THE PREMIER AUTOMOBILES LTD. V. KAMLEKAR SHANTARAM WADKE OF BOMBAY AND OTHERS, (1976) 1 S.C.C. 496 wherein while rejecting the contention raised by Mr. Sorabjee appearing for the respondents that even if the Civil Court has no jurisdiction to entertain a suit for enforcement of a right created under the Act, as in England, Courts in India also could not make an order for injunction to prevent the threatened injury or breach of the right, the Hon'ble Supreme Court has held that "the principle of separate remedy only for the purpose of injunction available in a Court of Chancery, which was kept intact even after the Judicature Act of 1873 is not applicable in India. Historically, the Chancery Court had assumed certain special jurisdiction under its original jurisdiction to take cognizance of a special kind of right even though the common law court may not have such jurisdiction. In India under Section 9 of the Code, the courts have subject to certain restrictions, jurisdiction to try suits of civil nature excepting suits of which their cognizance is either expressly or impliedly barred. There are no different systems of civil courts for enforcement of different kinds of rights. In the instant case taking cognizance of a suit in relation to an industrial dispute for the enforcement of any kind of right is not expressly barred. But if it relates to the enforcement of a right created under the Act, as stated above, by necessary intendment, the jurisdiction of the civil court is barred." Applying the ratio of this decision, Mr. Vakil has submitted that the appellant's right to present the cheque in the Bank and on its bouncing, right to file criminal complaint, is created under the Negotiable Instruments Act and the enforcement of the said right is sought to be stayed by filing the present suit and by obtaining an ex-parte injunction restraining the appellant to deposit the cheque. It is clearly barred under Section 9 of the C.P.C.
18. Mr. Vakil has further relied on the decision of the Hon'ble Supreme Court in the case of B. GANGADHAR V. B.G. RAJALINGAM, A.I.R. 1996 S.C. 780 wherein it is held that the owner in possession of the thing has the right to exclude all others from the possession and enjoyment of it. If he is wrongfully deprived of what he owns, the owner has a right to recover possession of it from the person who wrongfully gets into possession of it. The right to ownership of a property carries with it the right to its enjoyment, right to its access and of other beneficial enjoyment incidental thereto. If any obstruction or hindrance is caused for its enjoyment or use, the owner of necessity has the remedy to have it removed. This decision was relied on for the purpose of bringing out a distinction between enjoyment and exercise of right on the one hand and enforcement of remedy on the other hand.
19. Mr.Vakil has further relied on the decision of the Hon'ble Supreme Court in the case of CHAIRMAN, RAILWAY BOARD AND OTHERS V. MRS. CHANDRIMA DAS AND OTHERS, A.I.R. 2000 S.C. 988 wherein it is held that where a public functionaries are involved and the matter relates to the violation of fundamental rights or the enforcement of public duties, the remedy would still be available under the public law notwithstanding that a suit could be filed for damages under private law. It was more so when it was not a mere matter of violation of an ordinary right of a person but the violation of Fundamental Rights which was involved as petitioner was a victim of rape which is violative of the Fundamental Right of a person guaranteed under Art. 21 of the Constitution.
20. Mr. Vakil has further relied on the decision of the Hon'ble Supreme Court in the case of DHANNALAL V. KALAWATIBAI AND OTHERS, A.I.R. 2002 S.C. 2572 wherein while referring to certain legal maxims, the Hon'ble Supreme Court has held that there is no wrong without a remedy where there is a right there is a forum for its enforcement. If a man has a right, he must have a means to vindicate and maintain it and a remedy if he is injured in the exercise and enjoyment of it, and, indeed, it is vain thing to imagine a right without a remedy, for want of right and want of remedy are reciprocal.
21. Mr. Vakil has further relied on the decision of the Hon'ble Supreme Court in the case of RABINDRA NATH GHOSAL V. UNIVERSITY OF CALCUTTA AND OTHERS, A.I.R. 2002 S.C. 3560 wherein it is held that there can be no dispute with the proposition of law that a claim in public law for compensation for contravention of human rights and fundamental freedom, the protection of which is guaranteed in the Constitution is undoubtedly an acknowledged remedy for protection and enforcement of such right and such a claim based on strict liability made by resorting to a constitutional remedy, provided for the enforcement of fundamental right is distinct from, and in addition to the remedy in private law for damages for the tort.
22. Mr. Vakil has, therefore, submitted that by virtue of the injunction granted by the Trial Court, what was stayed was exercise and enjoyment of the appellant's right, over and above, the enforcement of remedy which is not contemplated by BRU notification. Mr. Vakil has further submitted that postdated cheques are given prior to date of BRU notification. However, the dates shown on the cheques are subsequent to the date of BRU notification. The liability of the company, therefore, accrues or arises or the right of the appellant bank accrues or arises on the date shown on the cheque, which is subsequent to the BRU notification. Hence, the appellant's right to presentation of cheque is not affected by this notification. In this connection, he relied on the decision of the Hon'ble Supreme Court in the case of JIWANLAL ACHARIYA V. RAMESHWARLAL AGARWALLA, A.I.R. 1967 S.C. 1118 wherein it is held that where a postdated cheque is accepted conditionally and it is honoured, the payment for purposes of S. 20 of the Limitation Act can only be on the date which the cheque bears and cannot be on the date the cheque is handed over, for the cheque, being postdated, can never be paid till the date on the cheque arrives.
23. Mr. Vakil has further relied on the decision of the Hon'ble Supreme Court in the case of ANIL KUMAR SAWHNEY V. GULSHAN RAI, (1993) 4 S.C.C. 424 wherein it is held that "a cheque under Section 6 of the Act is also a bill of exchange but it is drawn on a banker and is payable on demand. Thus a bill of exchange even though drawn on a banker, if it is not payable on demand, it is not a cheque. A "postdated cheque" is only a bill of exchange when it is written or drawn, it becomes a "cheque" when it is payable on demand. The postdated cheque is not payable till the date which is shown on the face of the said document. It will only become cheque on the date shown on it and prior to that it remains a bill of exchange under Section 5 of the Act."
24. Mr. Vakil has further relied on the decision of the Hon'ble Supreme Court in the case of SHRI ISHAR ALLOYS STEELS LTD. V. JAYASWALS NECO LTD., A.I.R. 2001 S.C. 1161 wherein it is held that "to make an offence under Section 138 of the Act, it is mandatory that the cheque is presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier. It is a cheque drawn which has to be presented to the bank within the period specified therein. When a postdated cheque is written or drawn, it is only a bill of exchange. The postdated cheque becomes a cheque under the Act on the date which is written on the said cheque and the six months period has to be reckoned, for the purposes of Section 138 of the Act, from the said date. The same principle has been reiterated by the Hon'ble Supreme Court in the case of ASHOK YESHWANT BADEVE V. SURENDRA MADHAVRAO NIGHOJAKAR AND ANOTHER, A.I.R. 2001 S.C. 1315.
25. Mr. Vakil has lastly submitted that Trial Court has failed to appreciate that there was no prima facie case in favour of the respondent Company so as to grant any interim injunction in its favour. It is necessary that the respondent Company must have the prima facie case in the suit meaning thereby a relatively stronger case than that of the appellant Bank and that if there is any doubt about the relative strength of the parties case, the Court should not have granted any injunction as held by the Hon'ble Supreme Court in the case of COLGATE PALMOLIVE COMPANY V. HINDUSTAN LEVER LIMITED (1999 (7) S.C.C. 1). wherein it is held that "The object of interlocutory injunction is to protect the plaintiff against the injury by reason of violation of his right and relief by way of interlocutory injunction is granted to mitigate the risk of injustice to the plaintiff during the period before the uncertainty could be resolved. Generally, the interlocutory remedy by way of a grant of an order of injunction is intended to preserve and maintain in status-quo the rights of the parties and to protect the plaintiff, being the initiator, of the action against incursion of his rights and for which there is no appropriate compensation being quantified in terms of damages. The basic principle of the grant of an order of injunction is to assess the right and need of the plaintiff as against that of the defendant and it is a duty incumbent on to the law Courts to determine as to whether the balance lies. Another redeeming feature in the matter of grant of interlocutory injunction is that in the event of a grant of injunction in regard to a party defendant whether the latter's enterprise has commenced, and in that event the consideration may be somewhat different from that where the defendant is yet to commence its enterprise."
26. Mr. Vakil has further relied on the decision of this Court in the case of ASHIMA LIMITED V. GREATER BOMBAY COOPERATIVE BANK LTD. (A.O. No. 244 of 2003) dated 31.07.2003 wherein after reiterating the ratio laid down by this Court in the case of M/S. D.S. PATEL & CO. (SUPRA), it is held that what is barred under Section 4 of the Act of 1958 is the remedy for enforcement of the right and not the right itself and the Court has further held that if the suit transactions is covered by the notification, the bar under Section 4 of the Act of 1958 would be against the proceedings for recovery of the loan amount and not against the recovery of the loan amount by encashing the suit cheques in ordinary course of business and in that case, the Bank would not have been able to enforce the recovery. But it certainly would not be debarred from encashing the cheques deposited with the Bank. The Court has, therefore, held that the plaintiff has no right to restrain the Bank from encashing the cheques deposited with the Bank.
27. Mr. Vakil has further relied on the another decision of this Court in the case of ASHIMA LIMITED V. DOMBIVLI NAGARIK SAHAKARI BANK LTD., A.O. No. 253 of 2003 dated 11.09.2003 wherein also the same view was taken by this Court and it was held that the plaintiff Company has no right to restrain the Bank from enforcing either the postdated cheques deposited with the Bank or by encashing the property by way of collateral security.
28. In the above view of the matter, Mr. Vakil has strongly urged that the impugned order passed by the Trial Court is absolutely contrary to the provisions of the Act and also against the binding judgment of this Court as well as the judgment of the Hon'ble Supreme Court and hence, the same deserves to be quashed and set aside.
29. Mr. S.I. Nanavati, learned Senior advocate appearing for the respondent has submitted that the Trial Court has rightly granted injunction and the said order does not call for any interference by this Court while exercising the appellate powers under O.43, R.1 of C.P.C. He has submitted that for the last few months, prior to filing of the suit, the respondent Company was facing financial crisis and hence, it was necessary to come out of that period and to revive or restructure the financial base of the Company and hence, the Company was registered under the Bombay Relief Undertakings (Special Provisions) Act as relief undertaking to avail of temporary reliefs as per the scheme of the said BRU Act. The main object of the BRU Act is to make temporary provisions for industrial relations, to conduct or to provide loan, guarantee or financial assistance for the conduct of certain industrial undertaking and thereby to prevent unemployment or to provide for unemployment reliefs. He has further submitted that by virtue of the provisions contained in Section 4 (1) (a) (iv), no right, privilege, obligation or liability accrued or incurred before the undertaking was declared a relief undertaking and remedy for enforcement thereof shall be suspended and all proceedings relating thereto pending before any court, tribunal, officer or authority shall be stayed. In the case of the Company, the Govt. has come to the conclusion that the Company could not stand on its legs without getting some temporary relief in the payment of its huge liability towards the financial institutions. After considering the picture submitted by the Company, the State Government has thought it fit to issue the notification in favour of the Company and has suspended all or any of the liabilities, rights and obligations of the Company as per the Provisions of Section 4 (1) (a) (iv) of the said BRU Act. By issuance of the Notification on 11.11.2002, the State Government has suspended all the liabilities which were discharged by the Company and since the postdated cheques were issued by the Company in favour of the Bank prior to the notification issued by the State Government, the liability arose in respect thereof was also suspended. By virtue of this notification, all rights, liabilities as well as remedy of enforcement are suspended and the bank is estopped by law from depositing the cheques which are in its possession till the notification is in force. The rights of the Company would be frustrated and unnecessarily the Company would be put in an awkward position if the Bank was not restrained from depositing cheques and hence, the injunction was rightly granted by the Trial Court.
30. Mr. Nanavati has further submitted that the decision of this Court in the case of M/S. D.S. PATEL & CO. (SUPRA) really helps to the respondent Company rather than it helps to the appellant Bank, as in that case, the Court has clearly held that the right itself is not suspended, but only the remedy for the enforcement of right is suspended. The Court has further clarified that the suspension of the rights means suspension of its execution or enforcement. If the appellant Bank is allowed to deposit the cheques, it is nothing but the enforcement of the remedy and even otherwise, it is a step towards the direction of the executability and hence, such right of execution or enforcement is also suspended under Section 4 (1) (a) (iv) of the BRU Act.
31. Mr. Nanavati has further submitted that the postdated cheques were given by way of security and it is also clearly mentioned in the agreement and once the said cheques are given by way of securities, it is not open for the appellant Bank to encash that security during the life time of the notification. There is no material difference between enforcement of right or enforcement of remedy as sought to be canvassed by the appellant Bank before the Trial Court as well as before this Court. In this connection, he has invited the Court's attention to the meaning of the word 'Remedy' as given in Black's Law Dictionary, Sixth Edition, Page 1294 which shows that the remedy means by which a right is enforced or the violation of a right is prevented, redressed, or compensated. The means employed to enforce a right or redress an injury, as distinguished from right, which is a well founded or acknowledged claim. The rights given to a party by law or by contract which that party may exercise upon a default by the other contracting party, or upon the commission of a wrong (a tort) by another party. The remedy means any remedial right to which an aggrieved party is entitled with or without resort to a tribunal. "Rights" includes remedies. On the basis of this meaning, Mr. Nanavati has further submitted that cheques are the means and by depositing the said cheques in the Bank, a right is enforced and enforcement of such right or remedy is prohibited by virtue of the notification. Even this Dictionary meaning conveys that rights includes remedies. If there is a ban on enforcement of remedies, that has to be equally applied to the enforcement of rights. Taking any view of the matter, during the life time of the notification, the appellant Bank is not entitled to exercise its right of depositing the cheques in the Bank. The Trial Court has come to the correct conclusion by holding that Section 4 (1) (a) (iv) deals with two aspects, namely, suspension of remedy and stay of proceedings and hence, it relates to the stage prior to proceedings have been filed and, therefore, interim injunction was rightly granted in favour of the respondent Company.
32. Mr. Nanavati has further submitted that the Hon'ble Supreme Court has laid down the principles of granting interim injunction in the case of COLGATE PALMOLIVE COMPANY V. HINDUSTAN LEVER LIMITED (1999 (7) S.C.C. 1) (SUPRA). He has further submitted that what is to be looked at the interlocutory stage is that the Court/Commission is not really concerned with the factum of establishment of any truth or falsity but merely a prima facie case or an arguable case resulting in establishment of a prima facie case. It is on this backdrop that exercise of discretion by the Commission shall have to be considered. Once having established the prima facie case before the Court, it is to be seen as to whether balance of convenience is in whose favour. If the appellant Bank is not restrained at this stage from depositing the cheque, it would adversely affect to the revival prospects of the Company and the purpose for which the relief undertaking status was granted to the Company would be frustrated as the Company had earmarked its funds towards realisation of the cheques given for discharging current liabilities and to that extent, its other commitments would not have been fulfilled. As against this, by granting interim relief, the appellant Bank did not suffer any loss as only the payment was postponed or deferred to a future date and there would not be any question of limitation as the limitation is saved in the Act itself. All other securities are available with the appellant Bank and to that extent, amounts advanced to the Company are fully secured. The Hon'ble Supreme Court has further held that balance of convenience or inconvenience ought to be considered as an important requirement, even if there is a serious question of prima facie case in support of the grant. As far as third essential ingredient i.e. irreparable loss is concerned, if the injunction would not have granted, the Company would have virtually failed in achieving its goal of revival of the undertaking and restructuring the financial substratum. Therefore, the Trial Court has rightly granted the interim injunction.
33. As far as the issue regarding criminal liability of the Directors is concerned, Mr. Nanavati has submitted that the Directors have not filed the suit before the Court nor any relief was sought for in their protection. The whole argument was canvassed on the assumption that if the cheques are allowed to be presented, the same would be bounced and on that assumption, the criminal complaint would be filed against the Directors. There is no justifiable reason for such assumption as the Company is discharging all its other commitments on priority basis and the Company is also a running unit and is maintaining adequate balance in the account looking to its requirements. If the cheques are presented and if there is a balance which is kept for discharging other liabilities and if those cheques are realised against the balance which was lying in the Bank, the Bank's other liabilities would not have been fulfilled. There is no basis for making an allegation that the suit was filed malafide only with a view to protect the interest of the Directors and to absolve them from any criminal liability.
34. In the above view of the matter, the Appeal filed by the appellant Bank against the impugned order of the Trial Court granting interim injunction to the respondent deserves to be dismissed and the order of the Trial Court is required to be confirmed by this Court.
35. After having heard the learned advocates appearing for the respective parties and after having considered their rival submissions, authorities cited in their favour and after having examined and appreciated the impugned order passed by the Trial Court in the light of the papers and documents produced and in the context of the statutory provisions, BRU Notification and decided case-law, the Court is of the prima facie opinion that the learned Trial Judge is not justified in granting injunction against the appellant Bank by restraining it from depositing the postdated cheques on their respective due dates.
36. From the foregoing discussion, the issues which arose before the Court for its careful consideration are:-
(i) Whether BRU Act and the Notification issued thereunder by the State Government grants protection to the Company against the Bank in respect of its right to deposit postdated cheques on their due dates ?
(ii) Whether an act of depositing the cheque is an act of exercise of right or it is an act of enforcement of remedy ?
(iii) Whether filing of suit and obtaining an injunction in Notice of Motion application by the Company is considered to be malafide to save its Directors from the rigour of criminal proceedings to be initiated against them under the Provisions of Sections 138 & 142 of the Negotiable Instruments Act ?
(iv) Whether the Trial Court is justified in granting interim injunction in view of the three celebrated principles of prima facie case, balance of convenience and irreparable loss or injury ?
37. All issues indicated above are inter-connected and are, therefore, dealt with together.
38. The main object of the Bombay Relief Undertakings (Special Provisions) Act, is to make temporary provision for industrial relations, to conduct or to provide loan, guarantee or financial assistance for the conduct of certain industrial undertakings and thereby to prevent unemployment or to provide for unemployment relief. Section 2 (2) of the Act defines 'relief undertaking' which means an industrial undertaking in respect of which a declaration under Section 3 is in force. Section 3 (1) empowers the State Government to declare an industrial undertaking to be a relief undertaking. Section 3 (2) prescribes the time limit during which, the Notification remains in force. Section 4 confers power on the State Government to prescribe industrial relations and other facilities temporarily for relief undertakings. Section 4 (1) (a) (iv) states that :-
"Notwithstanding any law, usage, custom, contract, instrument, decree, order, award, submission, settlement, order or other provision whatsoever, the State Government may, by notification in the Official Gazette direct that - (a) in relation to any relief undertaking and in respect of the period for which the relief undertaking continues as such under Sub-section (2) of Section 3 -
(i) ...................
(ii)...................
(iii)..................
(iv) any right, privilege, obligation or liability accrued or incurred before the undertaking was declared a relief undertaking and any remedy for the enforcement thereof shall be suspended and all proceedings relating thereto pending before any Court, Tribunal, office or authority shall be stayed;
39. As stated earlier, the above provisions have come up for consideration before this Court in the case of M/s. D.S. PATEL AND CO. (SUPRA) and the Division Bench in no uncertain terms, has held that a bare reference to Section 4 of the Act shows that the only restrictions which it contemplates is that of temporary suspension of the rights and liabilities relating to the relief undertaking in question. The wordings of sub-clause (iv) at first sight, give an impression that what is suspended is not only the remedy for the enforcement of the right to hold but also the right itself. This is, however, not so. On true construction of the said sub-clause, the right itself is not suspended but only the remedy for the enforcement of the right is suspended. It is, therefore, held that when the sub-clause speaks about suspension of a right, it only means suspension of its execution or enforcement. The incidents of a right, except its executability are, therefore, not suspended by the sub-clause. An act of presentation of postdated cheque in the bank on its due date is one of the incidents of right which is not suspended and it can never be assumed to have reached the stage of executability.
40. Presentation of cheque in the Bank is more akin to make a demand from the debtor to repay the loan, but it would not amount to enforcing repayment. The words enforcement of remedy used in sub-clause (iv) convey the meaning of institution of suit, attachment or sale of the Company's properties etc. Presentation of cheque may be an incident of right, or may be accompanied by some threat of legal action, but the element of threat which compels obedience which the words 'enforcement of remedies carry, is absent from it and hence, this right of presentation of a cheque is not suspended under sub-clause (iv) of Section 4 (1) (a) of the Act.
41. This discussion now leads me to deal with the second issue, namely, nature and character of postdated cheques and the effect of BRU notification on the exercise of the appellant's right to present it for encashment and the protection given to the Company in the form of suspension of enforcement of remedies. It makes no difference even if postdated cheques are given to the appellant Bank by way of securities whether they are given by way of securities or by way of some instruments of repayment of debt, they are merely piece of papers till they are presented for encashment on their due dates. The drawer's liability would arise only on the date which the said cheques bear. If the date on the cheque falls subsequent to the date of notification, its presentation can not be restrained on the ground that because of BRU notification, the remedy for enforcement of right is suspended. The Hon'ble Supreme Court has held in the case of Jivanlal Achariya (Supra) that payment for purposes of Section 20 of the Negotiable Instruments Act can only be on the date which cheque bears and cannot be on the date the cheque is handed over. This ratio has been applied and followed by the Hon'ble Supreme Court in all subsequent decisions in the case of Anil Kumar Sawhney (Supra), Shri Ishar Alloys Steels Ltd. (Supra) and Ashok Yeshwant Badeve (Supra) and the Court has taken the view that the postdated cheque is not a cheque on the date it is drawn. It becomes a cheque only on the date written on it. Till such date, postdated cheque remains only a bill of exchange. If the amount stated in the cheque becomes due and payable after the company is declared relief undertaking, the appellant's right to presentation attached therewith which accrues or arises on the date shown on the cheque is not affected. It is conscious act on the part of the Company to discharge its obligation or liability, qua the cheque amount, which accrues or incurs on the date shown on the cheque and if falls subsequent to the date on which Company is declared as relief undertaking, the BRU notification containing such declaration may not come to the Company's rescue. The Company is not restrained from making any payment to its creditors, and suppliers of goods or services. The Trial Court is, therefore, not justified in granting stay against the presentation of postdated cheques by the appellant on their due dates.
42. The next issue on which much arguments were canvassed by both the parties is the purpose or motive behind filing the suit and obtaining injunction. The appellant's case is that the suit was filed with a malafide intention and oblique motive to shield or shelter its Directors from the rigour of the provisions of Sections 138 to 142 of the Negotiable Instruments Act. The Company's answer to this allegation or argument is that there is basic falacy in this argument and it is based on mere assumption or presumption that the postdated cheques will be bounced on presentation. The Company is a running unit making payment to its creditors and suppliers in a phased manner. The balance is maintained for these purposes in the account from which the postdated cheques are given. If the cheques are allowed to be presented and realised, it would upset the whole arrangement. This argument looks to be very attractive but does not tend to reasons. As observed earlier, the Company is not restrained from allowing the postdated cheques given to the appellant to be cleared. Even if these cheques are bounced on presentation, the appellant cannot take any civil action against the Company, either by filing suit or putting the Company's assets on sale or auction. On bouncing of cheques, the appellant may initiate criminal proceedings under Section 138 of the Negotiable Instruments Act against the Directors, where Company may be joined as a formal party. The shoe really pinches here. The Hon'ble Supreme Court made it clear in the case of Indrajit C. Parekh & Others (Supra) that the immunity can not be extended to cover the individual obligations and liabilities of the Directors and other officers of the undertaking as distinct from the obligations or the liabilities of the undertaking. In the case of Kusum Ingots and Alloys Ltd. (Supra), the Hon'ble Supreme Court negatived and ruled out all such arguments which are similar to one canvassed in this matter, by branding them premature, farfetched or remote and on that ground, the criminal proceedings can not be foreclosed at the threshold. If the pending criminal proceedings against the Company and its Directors can not be stayed because of BRU notification or the unit becomes sick under SICA, there is no reason or justification in forestalling the process of the exercise of the appellant's right to presentation of cheques and other incidents of such right, which may ultimately give rise to filing of criminal complaint under Section 138 to 142 of the Negotiable Instruments Act, against the Company and its Directors, which is neither barred nor stayed to be proceeded with. On the basis of this legal position, it can obviously be inferred or believed that the suit is filed with oblique motive to save its Directors and officers from the clutches of the Provisions of Sections 138 to 142 of the Negotiable Instruments Act.
43. The only issue which remains to be dealt with now is the due observance of the three celebrated principles of granting injunction, namely, prima facie case, balance of convenience and irreparable loss or injury. From the above discussion, it can hardly be said that any of the above ingredients is found in the present case which inspires the Court to grant injunction in favour of the Company. There is no dispute about the Company's liability to pay. There is also no dispute about the fact that the Company has given postdated cheques to the appellant. The presentation of these postdated cheques on their due dates would not affect the Company in either way as in case of their realisation, the Company's liabilities would be reduced and in case of bouncing, its Directors will have to face criminal proceedings. Hence, there is neither prima facie case nor balance of convenience in favour of the Company. No monetary loss is caused to the Company or no monetary gain is made to the appellant simply by presentation of postdated cheques. However, preventing the appellant from exercising its legal right by an indirect method and with an oblique motive to save its Directors is certainly an irreparable injury or loss caused to it and it is this area where the Trial Court should have restrained itself from granting discretionary and equitable relief to the Company.
44. The impugned order dated 22.04.2003 passed by the Trial Court is hereby quashed and set aside. This Appeal From Order is accordingly allowed and Rule made absolute in Civil Application No. 2961 of 2003.
45. At this stage, Mr. S.I. Nanavati, learned Senior counsel appearing for the respondent Company requested for stay against the operation of this judgment and further requested to continue stay granted by the Trial Court and which is continued till this date, for some time so as to enable the respondent Company to challenge it before the higher forum. Mr. S.B. Vakil, learned Senior Counsel appearing for the appellant Bank, however, objected to any such extension of interim relief. Having regard to the facts and circumstances of the case and having regard to the fact that stay is in operation till this date, it is further extended till 30.04.2004.