Gauhati High Court
Don Ayengia vs The State Of Assam And Anr on 2 April, 2014
Equivalent citations: 2014 ACD 499 (GAU), (2014) 139 ALLINDCAS 326 (GAU), (2014) 3 CIVILCOURTC 792, (2014) 3 GAU LR 779, (2014) 4 BANKCAS 118, (2014) 2 GAU LT 573, (2014) 3 RECCIVR 421, (2014) 2 NIJ 283, (2014) 3 RECCRIR 374, (2015) 1 CURCC 19, 2014 (86) ACC (SOC) 43 (GAU)
IN THE GAUHATI HIGH COURT
(THE HIGH COURT OF ASSAM: NAGALAND: MIZORAM
AND ARUNACHAL PRADESH)
Criminal Appeal No.10 of 2012
Sri Don Ayengia,
S/o Late Bormota Ayengia,
Partner of M/s Ayaan Consortium,
GS Road, Guwahati-5
Dist-Kamrup, Assam
.................. Appellant
-Versus-
1.The State of Assam
2. Sri Haren Mudoi,
S/O Late Nanda Mudoi,
House No.11, Hatigaon Road
Lakhimi Nagar Tiniali, Guwahati-38
PS-Dispur, Dist.Kamrup, Assam
................ Respondents
Criminal Revision Petition No.41 of 2012
Sri Haren Mudoi,
S/O Late Nanda Mudoi,
House No.11, Hatigaon Road
Lakhimi Nagar Tiniali, Guwahati-38
PS-Dispur, Dist.Kamrup, Assam
............... Petitioner
-Versus-
Sri Don Ayengia,
S/o Late Bormota Ayengia,
Partner of M/s Ayaan Consortium,
GS Road, Guwahati-5
Dist-Kamrup, Assam
................... Respondent
Crl. Appeal No. 10 & Crl. Rev. P. No. 41 of 2012 Page 1 of 11
PRESENT
HON'BLE MR. JUSTICE B D AGARWAL
Advocates for the appellant : Sri AK Bhuyan, Smti B Bhuyan,
Sri I Sharma, Sri RS Deuri, Smti
P Pathak, Sri A Saikia
Advocates for the respondent : Sri AB Choudhury,Sri AK
Purkayastha, Sri MJ Baruah
Sri K Munir, Addl. PP, Assam.
Date of Hearing : 27.03.2014
Date of Judgment : 02.04.2014
JUDGEMENT AND ORDER (CAV)
(Agarwal, J)
In this case the moot question to be decided is as to whether
a person indemnifying the holder of a cheque can be said to have
legally enforceable debt or other liability towards the holder of the
cheque when the payer defaults in payment of the cheque amount
u/s 138 of the Negotiable Instruments Act, 1881.
2. The appeal and revision petition are directed against the
judgment dated 09.11.2011, passed by the learned Sessions Judge
in Criminal Appeal Nos. 9 of 2010, affirming the judgment of the
learned Judicial Magistrate, passed in CR Case No. 270 of 2008
dated 05.01.2010, whereby the accused has been convicted u/s 138
of the NI Act.
3. I have heard Sri AK Bhuyan, learned counsel for the
appellant and the respondent/accused was represented by Sri AB
Choudhury, learned senior counsel, who was ably assisted by Sri
MJ Baruah, learned counsel. Also heard Sri K Munir, Additional
Public Prosecutor for the State of Assam.I have also gone through
Crl. Appeal No. 10 & Crl. Rev. P. No. 41 of 2012 Page 2 of 11
the impugned judgments and the oral and documentary evidence,
proffered by both the parties.
4. The complaint U/s 138 r/w S 142 of the NI Act was filed by
the appellant in Criminal Appeal No. 10 of 2012 pleading that the
complainant was a partner of a firm, named and styled as M/S
Ayaan Consortium. The said firm had entered into a development
agreement with the accused No.2, Nazimul Islam. The agreement
was executed on 6.7.2007 and as per the terms and conditions of
the agreement the complainant paid a sum of Rs.10 lakhs as
advance to the accused Nazimul Islam against construction of a
multi-storied building over a certain plot of land. However, the
agreement could not materialize and it was cancelled by way of
execution of a 'Promissory Note' on 13.8.2007. As per the terms of
the Promissory Note the accused Nazimul Islam promised to refund
the advance amount of Rs.10 lakhs to the complainant within a
month and for a limited period of one month the said accused
deposited as many as five cheques with the complainant as security.
The accused Nazimul Islam further agreed to pay interest for one
month for the delay in refunding the money. Though the accused
Nazimul Islam promised to refund the loan amount within one
month the post-dated cheques were issued on the date of execution
of Promissory Note dated 13.8.2007. The cheques were dated
5.9.2007, 7.9.2007, 9.9.2007 and 11.9.2007 and those were
deposited by the complainant in his bank even before the due date
i.e. expiry of one month period of the Promissory Note. Cheques
were presented in the bank twice. The fact of dishonour of the
cheques in the first round came to be known to the complainant on
15.9.2007. On this date the accused No.1/ respondent Haren Mudoi
came into picture. The respondent indemnified the complainant and
ratified that earlier cheques, handed over to Nazimul Islam, were
actually issued by him, by way of making an endorsement in the
original Promissory Note. On the basis of this endorsement the
Crl. Appeal No. 10 & Crl. Rev. P. No. 41 of 2012 Page 3 of 11
complainant again deposited the cheques in his bank on 5.11.2007,
only to be dishonoured by the bank. It was followed by a statutory
Notice on 27.11.2007. The notice was replied by accused
No.1/respondent on 7.12.2007 through his lawyer, under Exhibit-
21, denying that he had any knowledge of handing over of the
cheques to the complainant by Nazimul Islam and also about the
dishonour of the cheques due to insufficient fund prior to 25.9.2007
(sic 15.9.2007). Though the respondent also pleaded that he had no
business relation with the complainant he took the responsibility to
pay the whole amount of Rs.10 lakhs tentatively in the second week
of January, 2008 by issuing fresh cheques. On the basis of the
respondent's endorsement in the Promissory Note and his certain
admissions in the reply to the notice of the complaint the
respondent in Criminal Appeal No. 10 of 2012 has been convicted
u/s 138 of the NI Act.
4.1 Since there are counter appeal and revision petition I would
refer the parties as complainant and accused hereinafter in this
judgment.
5. As noted earlier five cheques were issued by the respondent
and each cheque was of Rs.2 lakhs only. After the conviction of the
respondent the trial court has sentenced the accused to undergo
simple imprisonment for one year and also imposed compensation
of Rs.12 lakhs. However, the appellate court has set aside the
prison sentence and, instead, imposed a fine of Rs.2000/-, while
upholding the compensation of Rs.12 lakhs. This modification in
the sentence is under challenge in Criminal Appeal No. 10 of 2012
in view of the judgments of the Hon'ble Supreme Court, rendered
in the case of Sivasuryian -vs- Thangavelu: reported in (2004) 13
SCC 795 and also the Judgment rendered by the Apex Court in the
case of R.Vijayan -vs- Baby; reported in 2011 SAR (Criminal) 903.
In these judgments, it has been held that both fine and
Crl. Appeal No. 10 & Crl. Rev. P. No. 41 of 2012 Page 4 of 11
compensation cannot be imposed together. At best the amount of
fine can be imposed as compensation u/s 357 (3) of Code of
Criminal Procedure, 1973.
6. Learned counsel for the accused/respondent has argued that
in absence of any deed of guarantee the accused cannot be treated
as a 'Guarantor' to hold him liable against the debts of the
payer/drawer of the cheque. According to Sri Choudhury, learned
senior counsel for the accused, the appellant at best can be treated
as a mediator. The impugned judgments have also been assailed on
the ground that neither the Promissory Note (Exhibit-2) nor the
endorsement made thereon on 15.9.2007(Exhibit-3) can transfer the
liability from the principal debtor (A-2) to the mediator/accused
No.1. The appellant further argued that the cheques were handed
over to accused No.2, Nazimul Islam, only to be used as security
with the complainant but the accused No.1 never admitted his
liability in unequivocal terms. Learned counsel for the accused
further argued that even Exhibit-2 cannot be construed as a
'Promissory Note' within the meaning of Section 4 of the NI Act.
The learned counsel for the appellant also relied on certain
authorities from different High Courts, which will be discussed
later.
7. Per contra, Sri Bhuyan, learned counsel for the complainant
argued that the cheques were admittedly issued by the accused No.1
and also there is no dispute that the cheques have been dishonoured
by the bank on its presentation in the bank twice. Sri Bhuyan
further submitted that even if the accused was not the principal
debtor he stepped into the shoes of the accused No.2 and he has
been rightly convicted u/s 138 since he failed to discharge his
liability. The learned counsel further submitted that section 138
provides prosecution and punishment to the persons who may not
be the principal debtors but if it is found that they have some 'other
Crl. Appeal No. 10 & Crl. Rev. P. No. 41 of 2012 Page 5 of 11
liability' towards the holder of the cheque. In support of these
submissions the learned counsel has cited some other judgments,
which will be discussed hereinafter.
8. Referring to the endorsements made in the Promissory Note,
admissions made in the lawyer's reply (Exhibit-21) and the
admissions made in the oral deposition of the accused the learned
counsel for the complainant submitted that the cheques were issued
by the accused in the capacity of a guarantor, which falls under
'other liability' prescribed u/s 138 of the NI Act.
9. To appreciate the rival submissions it is necessary to look at
the Promissory Note and the endorsement made thereon minutely.
Hence, the contents of Exhibit-2 and 3 are reproduced below in
extenso:
" PROMISSORY NOTE Dated: 13.8.2007
I Shri Nazimul Islam s/o Late Sirajul Islam resident of
Bishnu Rabha Path Beltola do hereby declare that after mutual
discussion between us (the parties) as per agreement dated
06/07/07 have decided to cancel the said agreement and as such
the advance amount of Rs.10,00,000( Rupees Ten Lakhs) only
shall be refunded within a period of one month from today. The
amount is being refunded vide cheques Nos. 191254 dated
05.09.2007, 191255 dated 07.09.2007, 191256 dated 09.09.2007
191257 dated 11.09.2007 and cheque No.191258 dated 13.09.2001
which has been acknowledged by Mr. Dhan Ayengia, resident of
Nabagrah Road, Guwahati. It may here be mentioned that these
cheques have been issued as a security and shall be returned to
me as and when the payments are received from me, within the
mentioned period. Further it may be also be mentioned that one
month's bank interest shall be paid by me, after the payment is
cleared, within the stipulated period.
(Nazimul Islam) 13.8.2007
Crl. Appeal No. 10 & Crl. Rev. P. No. 41 of 2012 Page 6 of 11
The above cheques are issued by me
to Nazimul Islam to deliver to Mr. Don
Ayengia the cheques are already been
bounce. Now, we have requested Mr. Dona
Ayengia to represent the cheques after
25.09.2007 to contact me. 15.09.2007
(H. Mudoi)
10. In order to establish his case the complainant examined
himself as PW-1. He also examined two officers from the bank to
prove the fact of deposit and dishonour of the cheques. On the other
hand, the accused No.1 Haren Mudoi examined himself as DW-1.
The accused No.2 Nazimul Islam was murdered about a week prior
to the filing of the complaint case in the court. Despite that the
original debtor was impleaded as A-2 due to ignorance of his death
by the complainant.
11. "Promissory Note" has been defined under Section 4 of the
NI Act and the definition of promissory note is as below:
"A 'promissory note' is an instrument in writing (not being a
bank-note or a currency-note) containing an unconditional
undertaking signed by the maker, to pay a certain sum of money only
to, or to the order of a certain person or to the bearer of the
instrument."
A few Illustrations as to what would constitute a promissory
note and which instrument would not be construed so have also
been appended to Section 4. As per the definition of 'Promissory
Note' given under Section 4 and the illustrations, I hold that if X
gives an undertaking to Y to pay a sum on certain conditions it
would not amount to a promissory note in the eye of law.
12. In the instant case, the complainant's case is primarily based
on the promissory note (Ext-2) and the endorsement made thereon
Crl. Appeal No. 10 & Crl. Rev. P. No. 41 of 2012 Page 7 of 11
by the accused No. 1. In the first part of the so-called promissory
note itself the principal debtor, Nazimul Islam himself declared that
the cheques were being kept with the creditor as a security for one
month. There is no clear stipulation that the cheques were issued by
the debtor to the creditor as full and final payment of his liability.
Even otherwise, the admitted fact is that the cheques mentioned in
the first part of the promissory note were not in the name of
Nazimul Islam (principal debtor) but the cheques belonged to the
appellant, Haren Mudoi. At this stage, it would also be apposite to
mention here that according to PW-2, cheques under Exhibits- 4 to
8 were written in two different inks. In other words, the signatory
was different and the contents of the cheques were written by some
other person. This fact is in consonance with the defence case that
the cheques were handed over by the accused No. 1 to accused No.
2, Nazimul Islam and not directly to the complainant. It is true that
in view of the endorsement dated 15.09.2007 and the reply of the
accused to the statutory notice A-1 had subsequently ratified that
the cheques may be used by the complainant after 25.09.2007.
However, these endorsements and admissions would not bring
Exhibits- 2 and 3 within the meaning of 'Promissory Note' defined
under Section 4.
13. Under Explanation to Section 138 of the NI Act the "debt or
other liability means a legally enforceable debt or other liability".
Since the principal loan of Rupees Ten Lakhs was paid by the
complainant to A-2 and since the respondent/A-1 herein was not a
party to the original agreement dated 06.07.2007 the complainant
cannot execute the promissory note and recover the amount from
the respondent/A-1 by way of instituting a civil suit in a court. In
my considered opinion, a debt which cannot be recovered in a civil
suit cannot be allowed to be recovered by way of instituting a
criminal case under Section 138 of the NI Act.
Crl. Appeal No. 10 & Crl. Rev. P. No. 41 of 2012 Page 8 of 11
14. Sri Bhuyan, learned counsel for the appellant argued that a
'guarantor' stands on the same footing with that of the principal
debtor. In support of this submission, the learned counsel referred
to a judgment of the Apex Court, rendered in the case of ICDS Ltd
- Vs- Bina Shabir; (2002) 6 SCC 426 and a judgment of the Delhi
High Court given in the case of Pratap Singh Yadav -Vs- Atal
Bihari Pandey;(2003) CriLJ 705. In the first case, a wife had
issued a cheque to the creditor on behalf of her husband as a
guarantor and in that context the Hon'ble Supreme Court held that a
proceeding under Section 138 of the NI Act is maintainable.
However, the Hon'ble Judges have reiterated the basic rule that to
maintain a case U/s 138 the cheques should be issued against any
other debt or other liability. I have already discussed the
Explanation appended to Section 138 wherein it has been stipulated
that the liability should be legally enforceable. In other words, the
husband's liability is recoverable from the wife as a guarantor.
However, in the case before me, there was no any contract of
guarantee in between the complainant and Accused No.1. In this
way, the authority of ICDS Ltd. (supra) stands on different footing
and is not applicable in the present case.
14.1 In the judgment of Delhi High Court, a son had issued a
cheque to the creditor to discharge the liability of his father. When
the cheque was bounced from the bank the payee lodged a case
under Section 138 of the NI Act. When processes were issued by
the court against father and son the accused persons approached the
High Court for quashing of the criminal proceeding. The High
Court quashed the proceeding against the father and held that when
the cheque was issued by the son the proceeding would continue
only against the son. However, in the case before me, there is no
family relationship between the complainant and A-1 nor is there
any legally enforceable debt of the accused towards the
complainant. Besides this, in Exhibit-2, there is a clear averment
Crl. Appeal No. 10 & Crl. Rev. P. No. 41 of 2012 Page 9 of 11
that the cheques were deposited with the payee only as a security
and that too for a limited period. In the case of Sudhir Kumar
Bhalla -Vs- Jagdish Chand; (2008) 7 SCC 137, the Hon'ble
Supreme Court has held that only those cheques, which are issued
against a legally enforceable liability or debt, can attract the
provisions of Section 138 and not against the cheques which are
issued on account of security. In this way, the Delhi High Court
judgment is also distinguishable on facts.
15. On the other hand, learned counsel for the respondent relied
upon a judgment of the Kerala High Court, given in the case of
Arumughan Pillai -Vs- State of Kerala; (2005 CriLJ 3259). In this
case, the complainant had a dispute with DW-1 and the second
respondent played the role of mediator and he issued a cheque to
the complainant/appellant to compromise the dispute. The dispute
between the appellant and DW-1 led to filing of a civil case and
ultimately, the appellant withdrew the civil case and no
consideration was given to DW-1. Referring to Section 43 of the NI
Act, the High Court has held that the cheque was issued by the
mediator without any consideration. Hence, it would not create any
obligation on the part of the drawer of the cheque. The case before
me is squarely covered by the aforesaid decision. Here also,
cheques were issued by the accused without any consideration nor
against any business transaction nor as a guarantor. At best, the
cheques were issued by A-1 to A-2 to be kept as collateral security
with the complainant. However, such collateral security cannot be
executed or enforced by way of filing a criminal proceeding under
section 138 of the NI Act.
16. For the reasons, assigned hereinabove, I hold that no person
can be convicted or prosecuted in a proceeding under Section 138
of the NI Act, who indemnifies the principal debtor for his liability
towards the complainant unless such guarantor enters into an
Crl. Appeal No. 10 & Crl. Rev. P. No. 41 of 2012 Page 10 of 11
agreement with the holder of the cheque. In the present case,
neither A-1/respondent had any legally enforceable debt towards
the holder of the cheque nor did he stand as a guarantor on the basis
of any valid contract of guarantee. Besides this, blank cheques were
handed over to the principal debtor (A-2) to be kept as security
against his liability and not against any legally recoverable debt or
liability against A-1/respondent. Hence, the conviction of the
respondent/petitioner in Criminal Revision Petition No. 41 of 2012
is against the law and is hereby set aside.
17. In the result, Criminal Revision Petition No. 41 of 2012
stands allowed. The conviction of the said petitioner, namely Haren
Mudoi, vide impugned judgments, is hereby set aside. He is
acquitted from the offence under Section 138 of the NI Act.
18. In view of the aforesaid result, Criminal Appeal No. 10 of
2012, filed by the complainant has become infructuous and
accordingly, the same is closed.
.
JUDGE Nivedita/dtg Crl. Appeal No. 10 & Crl. Rev. P. No. 41 of 2012 Page 11 of 11