Delhi District Court
Shree Sainath Wires (P) Ltd. & Ors. vs . Pec Ltd. on 3 November, 2015
IN THE COURT OF SH. REETESH SINGH, ASJ-02/FTC
NEW DELHI DISTRICT PATIALA HOUSE COURTS, DELHI
Crl. Appeal No. 22/14
I.D. No 02403R0100062014
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Crl. Appeal No. 23/14
I.D. No 02403R0099782014
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Crl. Appeal No. 24/14
I.D. No 02403R0100092014
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Crl. Appeal No. 25/14
I.D. No 02403R0099822014
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Crl. Appeal No. 26/14
I.D. No 02403R0099882014
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Crl. Appeal No. 27/14
I.D. No 02403R0099772014
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Crl. Appeal No. 28/14
I.D. No 02403R0099832014
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Crl. Appeal No. 29/14
I.D. No 02403R0099942014
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Crl. Appeal No. 30/14
I.D. No 02403R0100032014
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Crl. Appeal No. 31/14
I.D. No 02403R0100052014
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Shree Sainath Wires (P) Ltd. & Ors. vs. PEC Ltd.
CA Nos. 22/14 to 39/14 1/27
Crl. Appeal No. 32/14
I.D. No 02403R0100082014
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Crl. Appeal No. 33/14
I.D. No 02403R0100012014
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Crl. Appeal No. 34/14
I.D. No 02403R0100042014
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Crl. Appeal No. 35/14
I.D. No 02403R0099862014
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Crl. Appeal No. 36/14
I.D. No 02403R0099812014
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Crl. Appeal No. 37/14
I.D. No 02403R0099902014
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Crl. Appeal No. 38/14
I.D. No 02403R0099802014
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Crl.Appeal No. 39/14
I.D. No 02403R0099842014
1. M/s Shree Sainath Wires Pvt. Ltd.
B-2602, Oberoi Garden
Thakur Village, Kandivali (E)
Mumbai-400101
Through Managing Director
2. Mr. Satpal Jain, Managing Director
C-504, Oberoi Garden Co-operative Housing Society,
Kandivali East, Mumbai-400101.
......Appellants
Shree Sainath Wires (P) Ltd. & Ors. vs. PEC Ltd.
CA Nos. 22/14 to 39/14 2/27
Versus
PEC Limited
Having its registered office at
Hansalaya, 15, Barakhamba Road,
New Delhi-110001.
Through Authorized Representative
Sh. S.K. Majumdar
......... Respondent
Date of institution of the appeals : 14.07.2014
Date of reservation of orders : 10.09.2015
Date of announcement of orders : 03.11.2015
JUDGMENT
1. These are a set of eighteen separate appeals which arise out of a set of eighteen separate complaints filed by the respondent / complainant against the appellant for the offence under Section 138 of the Negotiable Instruments Act, 1881 (hereinafter referred to as 'NI Act'). The appellants stand convicted in all the eighteen complaints by separate impugned orders dated 30.05.2014 and also sentenced vide separate impugned orders dated 30.05.2014. In all these cases the Appellant no.2 Satpal Jain was sentenced to undergo simple imprisonment for one year for the offence punishable under Section 138 IPC. Both the appellants i.e. appellant no.1 M/s Shree Sainath Wires Pvt. Ltd. and appellant no.2 Satpal Jain, Managing Director of appellant no.1 were directed to pay Rs.51,00,000/- as compensation in each case to the complainant, in default of which appellant no.2 Satpal Jain was directed to undergo further simple imprisonment for a period of six months.
2. As the parties to all the appeals are the same and Shree Sainath Wires (P) Ltd. & Ors. vs. PEC Ltd.
CA Nos. 22/14 to 39/14 3/27common questions arise for determination, all the appeals are thus being decided together by this common judgment.
3. The facts giving rise to the present appeals are that in June 2010, the respondent / complainant filed eighteen complaints before the Ld. Trial Court contending that it was a wholly owned public sector company incorporated under the Indian Companies Act, 1956 under the Ministry of Commerce and Industry, Department of Commerce Govt. of India. The focus areas of the complainant are business thrusts in exports, imports, deemed exports, third country trading, arranging finance, logistics, project exports and management. It was stated that the appellant company, of which appellant no. 2 Satpal Jain is Managing Director, was engaged in the business of manufacture, supply and export of MS and GI wires. It was stated that the appellant approached the complainant at its office in New Delhi for facility and assistance to effect import of 5050 MT (+- 5%) and 1350 MT (+-5%) of Prime Hot Rolled Wire Rods from M/s Rizhao Steel Wires Co. Ltd. and Ever Gain International Corporation, Hong Kong respectively. On the basis of the assurances and representations made by the appellant, the complainant, at New Delhi, entered into two agreements dated 18.03.2008 and 03.04.2008, described as 'Associateship Agreements' to effect import of the said goods from the said foreign suppliers.
4. It was further stated in the complaint that upon execution of the said agreements, receipt of indent margin money, postdated cheques (PDCs) the complainant imported the said goods from the said foreign suppliers vide two letters of credit bearing number DCGLC 9032-/08 dated 19th March, 2008 and DCGLC 9041-N 08 dated 9 April, 2008. Subsequently, the appellant and the complainant entered into two Shree Sainath Wires (P) Ltd. & Ors. vs. PEC Ltd.
CA Nos. 22/14 to 39/14 4/27agreements at New Delhi dated 13.05.2008 and 26.06.2008 described as 'High Seas Sale Agreements' by which the said goods were purchased by the appellant from the complainant in terms of the previous two Associateship Agreements. It was stated that the total quantity of goods imported by the complainant and as purchased by the appellant were 4938.676 MT worth USD 4,370,728.27 under LC No. 9032 and 1372.633 MT worth USD 1,365,769.84 under LC No. 9041.
5. It was stated in the complaint that the appellant had issued undated PDCs to the complainant to secure payments of the goods purchased by the complainant. In addition, the appellant had issued undertakings in favour of the complainant by which it was assured that the cheques would be honoured upon demand without demur and protest. The complainant stated that it was on the basis of the said consideration that the complainant had agreed to open foreign letters of credit (LOC). It is further stated that on the representations made by the appellant, possession of the goods imported were handed over to the appellant which revoked its charge and released the same from its pledge. The complainant thus received physical delivery of the said goods.
6. It was further stated in the complaint that the complainant had made payments to the bankers / foreign suppliers of the said goods on 10.02.2009 and 22.05.2009. The appellant vide correspondence dated 07.09.2009 acknowledged its outstanding liability qua the complainant and undertook to pay the same. Despite several letters issued by the complainant, the appellant did not make payments of the outstanding amounts. In the last correspondence dated 11.03.2010, the complainant had requested the appellant to make payment of its Shree Sainath Wires (P) Ltd. & Ors. vs. PEC Ltd.
CA Nos. 22/14 to 39/14 5/27outstanding amounts with up to date interest amounting to Rs.9,89,44,149/- by 15.03.2010. The appellant in response to the said communication wrote a letter dated 24.03.2010 admitting their liability but failed to make any payments. It was stated that as on 31.03.2010, the total outstanding liability of the appellant was Rs.9,94,98,634/- against the said imports. In these facts and circumstances, the complainant presented the cheques (handed over by the appellant at the time of execution of the said agreements) for payment at New Delhi towards part discharge of the outstanding amounts payable by the appellant. The details of the cheques presented for payment (complaint and appeal wise) are tabulated below:-
Crl. A. No. C.C No. Cheque No.& date Amount
22/14 902/2011 274655 dt.31.03.10 Rs.50,00,000/-
23/14 894/2011 274652 dt.31.03.10 Rs.50,00,000/-
24/14 903/2011 274651 dt.31.03.10 Rs.50,00,000/-
25/14 906/2011 274793 dt.31.03.10 Rs.50,00,000/-
26/14 898/2011 274789 dt.31.03.10 Rs.50,00,000/-
27/14 157/2013 274788 dt.31.03.10 Rs.50,00,000/-
28/14 905/2011 274791 dt.31.03.10 Rs.50,00,000/-
29/14 912/2011 274654 dt.31.03.10 Rs.50,00,000/-
30/14 910/2011 274659 dt.31.03.10 Rs.50,00,000/-
31/14 911/2011 274659 dt.31.03.10 Rs.50,00,000/-
32/14 901/2011 274657 dt.31.03.10 Rs.50,00,000/-
33/14 909/2011 274792 dt.31.03.10 Rs.50,00,000/-
34/14 899/2011 274653 dt.31.03.10 Rs.50,00,000/-
35/14 900/2011 274658 dt.31.03.10 Rs.50,00,000/-
36/14 907/2011 274790 dt.31.03.10 Rs.50,00,000/-
37/14 897/2011 274786 dt.31.03.10 Rs.50,00,000/-
38/14 908/2011 274785 dt.31.03.10 Rs.50,00,000/-
39/14 904/2011 274787 dt.31.03.10 Rs.50,00,000/-
Shree Sainath Wires (P) Ltd. & Ors. vs. PEC Ltd.
CA Nos. 22/14 to 39/14 6/27
7. The above cheques were presented for payment by the complainant at New Delhi with its banker Punjab National Bank, Branch ECE House, New Delhi, but all were returned dishonoured vide return memos with the remarks "exceeds arrangement". Upon receiving intimation of the said dishonour, the complainant issued legal notice dated 26.04.2010 by registered post AD and UPC calling upon the appellant to make payments of the cheque amounts. Instead of making payments, the appellant sent a reply dated 19.05.2010 in which it admitted its liability to make payment of the dues of the complainant. However, no such payment was made. In these facts and circumstances the complainant filed the above mentioned complaints in the Trial Court with respect to the above mentioned eighteen cheques. Upon recording of pre-summoning evidence, the Ld. Trial Court by order dated 07.06.2010 issued summons on the complaints to the appellant. The appellants appeared before the Trial Court which by order dated 24.01.2012 framed notice under section 251 of the Cr. P.C. against the appellants. In response to the question regarding their defence, the appellant no. 2 gave the following answer:-
"Question: Whether you plead guilty or have defence to make?
Answer: I plead not guilty and have a defence to make. Question: What is your defence?
Answer: I am the Managing Director of the accused company. The accused no. 3 is merely a director. She is a house wife. In 2005, the complainant had approached me for business and informed me that the complainant is in the business of issuing letters of credit. During 2005 to 2008, I did business worth 79 crores with the complainant. The present cheque was given to the complainant as part of 59 cheques in 2008. The cheques were given as security cheques without any date. The cheques were in relation to two Letters of Credit issued by the complainant in March 2008 and April 2008.
Shree Sainath Wires (P) Ltd. & Ors. vs. PEC Ltd.CA Nos. 22/14 to 39/14 7/27
The procedure of the complainant involves payment of 10% margin money at the time of opening of the Letter of Credit (LC) and deposit of cheques worth 95% as security. Once the LC is opened and the goods are transported by the seller, the complainant used to ask the accused to enter into a High Sea Sales Agreement. The goods were ultimately delivered at the customs warehouse in the name of the complainant. The delivery orders were issued by the complainant after receipt of value of the goods plus commission plus interest and difference in foreign exchange. The customs duty and excise duty was paid by the accused company. The goods received under the aforesaid two LCs were bought at a rate of 895 $ per ton and 935 $ per ton. While the transaction was being conducted, the exchange rate of USD change from Rs. 38 to Rs. 47.8. The accused company paid the complainant at the rate of Rs. 47.8 per dollar. The total difference of this foreign exchange was 6.10 crores. Due to a meltdown in the market, the selling price of the goods went down by 50 per cent and the accused company suffered total losses of Rs. 16.8 crores.
At the time of the melt down, the understanding with the complainant was that the accused company would issue two cheques i.e. one for the realizable value and the second for the difference between the cost/complainant's value and the realizable value. The cheques of the realizable value have been encashed by the complainant. The other cheques have not been encashed. The complainant should have encashed those cheques instead of presenting the security cheques issued in 2008 (including the present cheque). Before presentation of the present cheque, the accused had a meeting with the CMD Mr. Arun Meer Chandani, ED Mr. Rajeev Chaturvedi and Chief General Manager Sh. S.K. Majumdar. In the meeting it was decided that the amount of Rs. 8 crores was to be taken back in installments of Rs. 10 lakhs each per month. Also, it was decided that the complainant would revive business with the accused company and issued fresh LCs.
After the aforesaid meeting, the accused company gave another 80 cheques to the complainant worth Rs. 10 lakhs each. The said cheques are still with the complainant.
In compliance of the agreement reached in the aforesaid meeting, the complainant issued the accused company LC worth Rs. 2.2 crores. The accused company Shree Sainath Wires (P) Ltd. & Ors. vs. PEC Ltd.CA Nos. 22/14 to 39/14 8/27
has paid Rs. 14 lakhs in respect of the said LC. Thereafter, the complainant company has not issued any LC and not presented the aforesaid 80 cheques. The agreements Ex. CW 1/12 do not bear my signatures."
8. After framing of notice, the Ld. Trial Court by order dated 21.02.2012 observed that the defence taken by the appellants in all the cases were identical and since they arose from the same liability, it was directed that all the complaints would be tried together. Evidence would be recorded only in CC No. 894 of 2011 (Criminal Appeal No. 23 of 2014). Thus although there were separate complaints, evidence was recorded only in CC No. 894 of 2011.
9. The complainant had examined S.K. Majumdar, its Chief General Manager as CW1 who had deposed by way of affidavit Ex.CW1/A and subjected to cross-examination by the appellants after their application under Section 145 (2) of the NI Act was allowed. Thereafter the complainant closed its evidence on 27.09.2013.
10. Statement of the appellant no.2 was recorded under Section 313 of the Cr.P.C. on 28.01.2013. In response to the first question, appellant no.2 has stated that he did not sign on the two Associateship Agreements but admitted that two LOCs were opened by the complainant. With respect to the cheques in question, the appellant no.2 admitted handing over of the cheques but claimed that they were been given as security at the time of opening of the LOCs and not towards the discharge of any liability. He admitted having received the legal notice of demand sent by the complainant and stated that he had replied to the same. He stated that he did not have any occasion to make any payment as there was no liability owed to the complainant. He Shree Sainath Wires (P) Ltd. & Ors. vs. PEC Ltd.
CA Nos. 22/14 to 39/14 9/27further stated that S.K. Majumdar had come out with liability of Rs.8.04 crores for which PDCs were taken and thereafter he (appellant no.2) had agreed to pay Rs.10 lacs per month to the complainant. He further stated that it was also agreed that LOC of Rs.2.5 crores per month would be opened and out of the money earned, the appellant no.2 would pay Rs.10,00,000/- against each LC but only one LC of Rs.2.5 crores was opened which earned profit of Rs.14,00,000/- which the appellant no.2 returned to the complainant but thereafter no LC was opened by the complainant. The appellant no.2 wanted to lead evidence in defence.
11. As the appellants wanted to lead evidence in defence, the Ld. Trial Court posted the matter for defence evidence. However on 01.03.2014, the appellants stated they only wished to place on record certified copies of the Arbitration proceedings pending between them which were filed and taken on record. The appellants stated that they did not wish to examine any witness in defence and on their statement, defence evidence was closed by the Ld. Trial Court on 01.03.2014.
12. After considering the evidence on record, the Ld. Trial Court by the impugned orders convicted and sentenced the appellants as recorded above.
13. Before this Court, arguments were addressed on behalf of the appellants by Sh. Nalin Jain and Sh. RK Sahani, Advocates.
14. Sh. Nalin Jain had argued that three sets of cheques were handed over by the appellant to the complainant. The first set had 59 blank undated cheques which were handed over on 18.03.2008. The Shree Sainath Wires (P) Ltd. & Ors. vs. PEC Ltd.
CA Nos. 22/14 to 39/14 10/27second set were handed over between 03.06.2008 to 13.07.2009 against delivery of the imported items and the third set of 80 cheques for Rs.10 lacs each were handed over on 06.10.2009. He submitted that it had been agreed between the parties that the appellants would be permitted to repay the outstanding amounts in installments and the money for the repayment were to be generated through opening of additional LOCs by the complainant. He submitted that the complainant had opened one LOC for Rs.2.34 crores bearing number 285 against which goods were imported and the appellant had paid Rs.14 lacs to the complainant through pay orders. However despite assurances of the complainant, no fresh LOCs were issued and the appellant was unable to generate the resources to make payment of the outstanding amounts.
15. Sh. Nalin Jain further submitted that all the eighteen cheques which were the subject-matter of the complaints were part of the first set of cheques handed over by the appellant. The same were security cheques and were not handed over to meet any existing outstanding liability. He further submitted that the complainant had concealed material facts from the Trial Court. He submitted that the complainant had an office at Mumbai which was admitted by by CW-1 in his cross-examination on 07.08.2013. There was thus no reason for the complaint to have been filed in Delhi. He relied on a document Exhibit CW-1/D5, a letter dated 08.04.2008 was written by Neelam Chandra to PEC in Mumbai which had been counter-signed by CW-1 in support of this contention. He submitted that even the High Seas Sale Agreements dated 13.05.2008 and 26.06.2008 were executed in Mumbai and thus the Courts at Delhi did not have the territorial jurisdiction to entertain the complaints. He submitted that the cheques were presented in Delhi for Shree Sainath Wires (P) Ltd. & Ors. vs. PEC Ltd.
CA Nos. 22/14 to 39/14 11/27payment only to create artificial jurisdiction for the Courts at Delhi, although, jurisdiction would be at the Courts at Mumbai.
16. Sh. Nalin Jain further submitted that document Ex. CW1/2 Associateship Agreements were forged as the signatures of on the same were not that of the appellant. He argued that all the agreements entered into between the parties had arbitration clauses and thus it was not open to the complainant to have institute proceedings under Section 138 of NI Act against the appellants on the same cause of action. He submitted that no criminal liability could be attributed to the appellant and at best the liability was civil. He further argued that CW-1 was not clear whether the cheques were post-dated or not. He relied on the cross-examination of CW-1 dated 27.09.2013 and submitted that as per him, no cheque was presented in Delhi for payment prior to 31.03.2010. He argued that the findings of the Ld. Trial Court in para 20 of the impugned order were not correct. He submitted that under law no holder had the authority to fill the dates on undated signed cheques. He relied on the cross-examination of CW-1 dated 27.09.2013 to submit that the cheques which were in question were blank. He submitted that in appeal the complainant had concealed the fact that the cheques were filled up by the complainant in his complaint. He submitted that all the cheques which were in possession of the complainant were blank cheques and the same were filled by the complainant and deposited although the complainant had no authority to do so. He submitted that Section 20 of the NI Act was not attracted to cheques. He further submitted that the complainant had not filed its statement of accounts but the same were filed during course of cross-examination of CW1. He relied on the cross-examination of CW1 dated 27.09.2013 and submitted that CW1 admitted that he was not working in the Finance Shree Sainath Wires (P) Ltd. & Ors. vs. PEC Ltd.
CA Nos. 22/14 to 39/14 12/27Department of the complainant. He lastly submitted that while the complainant is required under law to prove its case beyond any reasonable doubt, the appellants can raise probable defences on the basis of which statutory presumptions under Section 118 and 139 of the NI Act can be rebutted.
17. Further arguments were addressed by Sh. R K Sahni, Counsel for the appellant who submitted that Exhibit CW-1/2 were the was Agreement dated 18.03.2008. Clause-1 of the said only expressed a desire to import goods and no actual imports had taken place on 18.03.2008. Clause-3 provided for advance of 10% over 110% of the LOC. Clause-4 provided for security in the form of PDC against the imports for 95%. Clause-15 made provisions of release of hypothecated goods while clause-18 provided for payment of interest to the associate. Clause-19 contained right to dispose off the goods. He relied upon Exhibit CW-1/4, which was an undated undertaking mentioning the cheque numbers 274785-274795. He submitted that the said undertaking was actually issued on 18.03.2008, which was admitted by CW-1 in his cross-examination in which he stated that the undertaking was given with the Associateship Agreement. He further submitted that the second undertaking was in respect of cheque numbers 274651 to 274688. He submitted that the complainant itself had stated in para-6 of the complaint that PDCs were issued. He submitted that both these undertakings were with respect to the proposed imports of the goods and not actual imports. He submitted that as per the terms of the Associateship Agreements, goods upon import could be sold by the complainant to anyone if the appellant did not make payments and thus the complainant did not have any right to present the said cheques for payment when it had the option of selling the imported goods to recover Shree Sainath Wires (P) Ltd. & Ors. vs. PEC Ltd.
CA Nos. 22/14 to 39/14 13/27its dues.
18. Sh. R K Sahni, Counsel further argued that the High Seas Sale Agreement dated 13.05.2008, Mark 'A' did not refer to any Associateship Agreement or any undertaking. He submitted that the liability, if any, of the appellant fell under the High Seas Sale Agreement which was created for the first time on 13.05.2008, upon execution of the said agreement while the cheques in question were never issued in pursuance of the said agreement. No cheques at all were issued by the appellant at the stage of execution of the High Seas Sale Agreement.
19. Sh. R K Sahni, further submitted that Mark 'M' i.e. delivery order dated 03.02.2009, reflected that delivery had been executed against a new set of PDCs dated 05.04.2009 and not against the cheques, which were the subject-matter of the complaints. He submitted that at the time of the delivery order, the appellant handed over six fresh cheques. He relied upon Section 25 of Sale of Goods Act, regarding liability. He further submitted that Mark 'N' i.e. delivery order dated 13.07.2009, had also been issued against submission of two fresh PDCs. The same were indicated in the letter dated 13.07.2009, Mark 'O', sent by the appellant to the complainant. He relied upon Mark 'P', letter dated 24.08.2009, vide which there was an agreement for a repayment schedule. He relied upon Mark 'S', which was a letter dated 31.08.2009, of the complainant, which mentioned giving of 8 cheques by the appellant at the time of issuance of delivery orders. Mark 'T' communication dated 30.10.2009 of the complainant reflected payments being made against High Seas Sale Bill and Mark 'U' letter dated 17.11.2009 mentioned five other PDCs. Mark 'H' was a letter dated 31.03.2010 of PEC, by which the complainant had asserted its rights to Shree Sainath Wires (P) Ltd. & Ors. vs. PEC Ltd.
CA Nos. 22/14 to 39/14 14/27present the said PDCs, which were undated.
20. Sh. R K Sahni, submitted that it was apparent that the cheques were filled on 31.03.2010 and presented for payment on the same day without issuing any notice or giving any hearing to the appellant. He submitted that these cheques were not issued on 31.03.2010 but had been issued much earlier in 2008 but its dates were filled on 31.03.2010. Lastly, Sh. R K Sahni, submitted that Mark 'Y' was the statement of accounts relied upon by the complainant, which was a computerized statement. He submitted that the said document was not admissible in evidence as there was no certificate under Section 65 of the Indian Evidence Act in support of the same and thus the document did not comply with the provisions of Section 34 of the said Act. He further submitted that the appellant has disputed the entries in the said statement of account, which CW-1 admitted that he did not maintain himself.
21. Ld. Counsel for the appellants had relied upon the following case law:-
(i) Ms/ Collague Culture & Ors. vs. Apparel Export Promotion Council & Anr.; 2007 [4] JCC [NI] 388;
(ii) Judgment of Hon'ble Delhi High Court in the case of Ravi Kumar D. vs. State of Delhi & Anr., Cril. M.C. Nos. 4378/09, 78/10 and 79/10 decided on 01.03.2011;
(iii) Rangappa vs. Sri Mohan, (2010) 11 SCC 441;
(iv) M.S. Narayana Menon @ Mani vs. State of Kerala & Anr., 2006
(3) RCR (Criminal) 504;
(v) Veena Rai Chhabra vs. Manju Rohida, 152 (2008) DLT 447;
(vi) Bharat Barrel and Drum Manufacturing Company vs. Amin
Chand Payrelal, 1992 (2) RCR (Civil) 615;
(vii) Laxminivas Agarwal vs. Andhra Semi Conductors Pvt. Ltd.
Hyderabad & Ors., 2006 (1) DCR 355;
(viii) A.C. Narayanan & Anr. vs. State of Maharashtra & Ors. 2013 Legal Eagle (SC) 630;
Shree Sainath Wires (P) Ltd. & Ors. vs. PEC Ltd.
CA Nos. 22/14 to 39/14 15/27(ix) Venkatesh Bhat, A. v. Rohidas Shenoy, 2010 Crl.L.J. 1061;
(x) Export India and Anr. vs. State & Anr., 2006 Legal Eagle (DHC) 891;
(xi) A.R. Dower vs. Sohan Lal Anand & Ors., AIR 1937 Lahore 816;
(xii) C.T. Joseph vs. I.V. Philip, 2001 SCC OnLine Ker 88;
(xiii) judgment of Hon'ble Supreme Court in the case of Vijay vs. Laxman & Anr., Crl. Appeal No.261 of 2013 decided on 07.02.2013;
(xiv) Griffiths vs. Dalton, Vol. 163 The Law Times 359 Nov. 30, 1940;
(xv) Krishna Janardhan Bhat vs. Dattatraya G. Hegde, (2008) 4 SCC 54;
(xvi) Kapadvanj Peoples Co-operative Bank Ltd. vs. Jayantibhai Talasaji Marawadi and Anr., 2013 (1) DCR 270;
(xvii) P. Venugopal vs. Madan S. Sarathi, (2009) 1 SCC 492; (xviii) Order of the Hon'ble Madras High Court in the case of Ramakannan vs Chettiar & Co., Crl. R.C.No. 1439 of 2004 decided on 23.11.2006;
(xix) Bareilly Electricity Supply Co. Ltd. vs. Workmen, 1971 Legal Eagle (SC) 396;
(xx) Judgment of Hon'ble Supreme Court in the case of M/s Indus Airways Pvt. Ltd. & Ors. vs. M/s. Magnum Aviation Pvt. Ltd. & Anr., Crl. Appeal No. 830 of 2014 decided on 07.04.2014; and (xxi) Mojj Engineering Systems Ltd. and Ors. vs. A.B. Sugars Ltd., 154 (2008) DLT 579.
22. On behalf of the respondent / complainant Sh. Sanjeev Narula and Ms. Surbhi Sharma, Advocates had argued that there was no infirmity in the impugned orders. They relied upon the judgments of the Hon'ble High Court in the cases of Suresh Chandra Goyal vs. Amit Singhal, Crl. A. No. 601 of 2015 decided on 14.05.2015 and Credential Leasing & Credits Ltd. vs. Shruti Investments and Ors., Crl. L.P. No. 558 of 2014 decided on 29.06.2015 and submitted that the Hon'ble High Court had settled the question regarding complaints under Section 138 of the NI Act being maintainable on the basis of security cheques. They submitted that the appellants were falsely claiming that the Associateship Agreements were forged or that the same did not have the signatures of the appellant no.2. They submitted that this contention Shree Sainath Wires (P) Ltd. & Ors. vs. PEC Ltd.
CA Nos. 22/14 to 39/14 16/27was a question of fact which had to be established by the appellants by leading appropriate evidence. The appellants did not lead evidence in defence despite expressing a desire at the stage of recording of their statements under Section 313 of the Cr.P.C. They further submitted that the appellants had moved an application under Section 45 of the Evidence Act for sending the Associateship Agreements for examination in the CFSL but had withdrawn the said application in the Trial Court on 11.02.2014. They thus submitted that there was no question of the said agreements being forged. Counsel for the respondents had also relied upon the following case law:-
(i) Hitenbhai Parekh Proprietor-Parekh Enterprises vs. State of Gujarat & Anr., 2009 GLH (3) 742;
(ii) Judgment of Hon'ble Supreme Court in the case of Ashok Yeshwant Badave vs. Surendra Madhvarao Nighojakar & Anr., Appeal (Crl.) 293 of 2001 decided on 14.03.2001;
(iii) Magnum Aviation (Pvt.) Ltd. vs. State & Ors., I (2011) BC 21;
(iv) Sri Binay Debnath vs. The State of Tripura, 2012 (4) GLT 640;
(v) Judgment of Hon'ble Gujarat High Court in the case of Ahmedabad vs. Rangoli, First Appeal No.4582 of 2001 decided on 25.04.2012; and
(vi) Sitaram vs. State of M.P., 2010 (3) MPHT 460.
23. I have heard counsel for the parties and have perused the record of the Trial Court. Before proceeding to deal with the submissions of the counsel for the appellants, it will be appropriate to consider their submissions that the two Associateship Agreements dated 18.03.2008 and 03.04.2008 Ex.CW1/2 (colly.) were fabricated and did not bear the signatures of the appellant no.2. In this regard, I may first refer to the statement of the appellant no.2 recorded at the time of framing of notice under Section 251 of the Cr.P.C. on 24.01.2012 when he was asked to disclose his defence. He stated that the said agreements did not bear his signatures. The same stand was reiterated by the appellant no.2 when his statement under Section 313 of the Cr.P.C. was recorded on Shree Sainath Wires (P) Ltd. & Ors. vs. PEC Ltd.
CA Nos. 22/14 to 39/14 17/2728.01.2014. Having claimed that these agreements did not bear his signatures, the onus to prove the said contention was on the appellants.
24. The appellant no.2 desired to lead evidence in defence but did not avail the opportunity. The appellants had also moved applications before the Ld. Trial Court for sending these agreements for examination to the CFSL but they had withdrawn the same before the Trial Court on 11.02.2014. In these facts and circumstances the appellants did not discharge their onus to prove that the said agreements did not bear the signatures of the appellant no.2. In fact the appellant no.2 after having filed a specific application for this purpose withdrew it from the Trial Court. The appellants therefore gave up their contention that the said agreements were forged. Having given up the said contention before the Trial Court, it is not open for the appellants to raise the said contention before this Court.
25. In the opinion of this Court, the sum and substance of the submissions made by Sh. Nalin Jain as well as Sh. R. K. Sahni, on behalf of the appellants are that:-
(i) the cheques in question were security cheques and that they were handed over to the complainant by the appellant at the time of execution of the Associateship Agreements in 2008, at which point of time no actual imports were effected;
(ii) that there was no outstanding liability qua the appellants on the date on which these cheques were issued and liability, if any, arose at the time of execution of the High Seas Sale Agreements but at that time the appellant had issued and handed over a different set of Shree Sainath Wires (P) Ltd. & Ors. vs. PEC Ltd.CA Nos. 22/14 to 39/14 18/27
PDCs to the complainant;
(iii) that the complaints were not maintainable on the basis of cheques as they did not relate to any outstanding liability on the part of the appellant on the date of their issuance.
26. In the cases of Suresh Chandra Goyal vs. Amit Singhal (supra) and Credential Leasing & Credits Ltd. vs. Shruti Investments and Ors. (supra), the Hon'ble High Court of Delhi was pleased to consider the often raised defence of 'security cheque'. The Hon'ble High Court was pleased to hold that when one party gives a security to the other, implicit in such transaction is an understanding that in case of failure of the principal obligation, the security may be enforced. It was held that the fact that a debtor has given security in the form of a post dated cheque or a current cheque with the agreement that it was security for fulfillment of an obligation to be discharged on a future date was itself sufficient to read into the arrangement an agreement, that in case of failure of the debtor to make payment on the due date, the security cheque may be presented for payment for recovery of the debt due. The Hon'ble High Court held that there was no merit in the defence raised by an accused that only on account of the fact that the cheque in question was issued as security in respect of a contingent liability, complaint under Section 138 of the NI Act would not be maintainable. It was held that the scope of Section 138 of the NI Act would cover cases where the ascertained and crystallized debt or other liability exists on the date when the cheque is presented and not only to cases where the debt or other liability exists on the date on which it was delivered to the seller as a post dated cheque or as a current cheque with credit period. The liability however should be in relation to the transaction in respect of Shree Sainath Wires (P) Ltd. & Ors. vs. PEC Ltd.
CA Nos. 22/14 to 39/14 19/27which the cheque was given and not for some other independent liability. It was held that if on the date when the cheque is presented, the ascertained and crystallized debt or other liability relatable to the dishonoured cheque exists, the dishonour of cheque would invite action under Section 138 of the NI Act. It was further held that the onus to raise a probable defence would lie on the accused in view of the presumptions in favour of the holder of the dishonoured cheque that it was issued in respect of debt or other liability by effective cross- examination of the witnesses of the complainant or by leading appropriate evidence in defence.
27. The defence raised by the appellants that the cheque in question was a security cheque is of no consequence in view of the law laid down in the cases of Suresh Chandra Goyal vs. Amit Singhal, and Credential Leasing & Credits Ltd. vs. Shruti Investments and Ors. (supra). In view of the presumptions under Section 118 read with Section 139 of the NI Act, the onus to raise a probable defence was on the appellants who were required to demonstrate that there was no ascertained and crystallized debt or other liability relatable to the said dishonoured cheques existing on the date of their presentation.
28. The genesis of the proceedings arise out of the two Associateship Agreements dated 18.03.2008 and 03.04.2008 Ex.CW1/2 (colly.). The agreement dated 18.03.2008 pertains to import of 5050 MT (+- 5%) of goods from M/s Rizhao Steel Wires Co. Ltd. and the agreement dated 03.04.2008 pertains to import of 1350 MT (+-5%) of goods from Ever Gain International Corporation, Hong Kong. The terms and conditions of both the agreements are the same. Both the agreements record that the appellant (described as the Associate in the Shree Sainath Wires (P) Ltd. & Ors. vs. PEC Ltd.
CA Nos. 22/14 to 39/14 20/27Agreements) was desirous of importing the above mentioned articles from the said suppliers. The role of the appellants were to give their indent for import to the complainant which would contain details of the items to be imported as well as the details of supplier. The appellants would be responsible for the price, selection, quantity, quality etc. The appellants were to pay advance to the complainant at 10% of 110% of the total value in cash at the time of placing indent and also to give PDC for 95% of the value of the consignment to be imported which would include the trading margin of the complainant, bank charges etc. On receipt of indent and advance, the complainant described as PEC was obliged to establish LOC for a maximum period of 180 days in favour of the suppliers of these goods. It was the appellant who is responsible for pre-shipment inspection of the goods to be supplied by the foreign supplier and also for getting the same insured under Marine Insurance. After the foreign supplier dispatches the goods, the complainant PEC was obliged to execute sale of these goods to the appellant or its nominee through execution of a separate High Seas Sale Agreement. Once the goods reached Indian shores it was the appellant or its nominee who was obliged to pay customs duties, port handling charges, warehousing charges etc., Inland Transportation charges, sales tax / VAT. The appellant agreed to hypothecate the imported goods with first charge vesting with the complainant. Release of the imported / hypothecated goods to the Associate or its nominee was dependent on the payment of the cost of the imported goods as well as trading margin of the complainant. The agreements also provided for rights to the complainant to dispose off the imported goods upon the failure of the Associate to make payment of the entire cost of the consignment and any loss caused to the complainant would be borne by the appellant.
Shree Sainath Wires (P) Ltd. & Ors. vs. PEC Ltd.
CA Nos. 22/14 to 39/14 21/2729. Thus the gist of the said agreements are essentially for providing of finance by the complainant to parties wanting to import certain goods. The goods and supplier were to be determined by the desirous party described as Associate with the imports to be effected by the complainant with an agreement to sell the title in the goods in favour of the Associate or its nominee on the basis of High Seas Sale. The processing of the import would be effected by opening of LOC by the complainant subject to the Associate entering into the said agreement, paying 10% advance and also securing the balance by way of PDCs. PDCs being handed over by the Associate were the bedrock of the said agreements failing which PEC would not have opened LOC to import goods from the foreign supplier selected by the appellant. The PDCs were therefore very much an integral part of the transaction.
30. Ex.CW1/4 (colly.) are the two undertakings furnished by the appellants to the complainant. As contended by the Ld. Counsel for the appellants and admitted by CW1 in his cross-examination on 04.09.2013, these undertakings along with the cheques had been handed over by the appellants to the complainant at the time of execution of the Associateship Agreements. The terms of these undertakings are clear and unambiguous. They refer to the respective foreign suppliers and the goods to be imported and contained the cheque numbers and the total amounts. They assure the complainant that these cheques would be honoured at the time of presentation. They also recognize that the LOCs were opened by the complainant only on the faith of the said undertakings and PDCs. Ex.CW1/4 fortify the fact that these cheques were the basis on which the entire transactions were initiated.
Shree Sainath Wires (P) Ltd. & Ors. vs. PEC Ltd.
CA Nos. 22/14 to 39/14 22/2731. There is no dispute that the goods mentioned in the Associateship Agreements were imported. There is no dispute that the possession of these goods have been handed over and received by the appellants. The appellant no.2 in his statement of defence recorded on 24.01.2012 has taken a stand that the said cheques were issued by the appellants in relation to two LOCs issued by the complainant in March, 2008 and April, 2008. The appellants themselves have admitted that the cheques in question were directly related to the imports effected by the complainant on their behalf. In the said statement recorded on 24.01.2012, the appellants have admitted that there were dues amounting to Rs.8 crores which were payable by the appellants to the complainant in respect of said two LOCs. The appellants therefore did not dispute that they owed money to the complainant. The appellants themselves have contended that the cheques in question were handed over by them to the complainant along with undertakings Ex.CW1/4 (colly.) which detailed the cheques in question and had made representations to the complainant that they would be honoured upon presentation.
32. During course of cross-examination of CW1, a question was put to him as to whether he could produce the statement of accounts to establish that there were outstanding liability on the part of the appellants. Cross-examination of CW1 was deferred for this purpose on 07.08.2013 and then taken up on 08.08.2013. On 08.08.2013, CW1 produced ledger statements w.e.f. 01.04.2007 to 15.08.2011 Ex.CW1/ D2 (colly.) which very clearly disclosed the outstanding dues payable by the appellants to the complainant. These statements were not challenged by the appellants in cross-examination of CW1. Only a question was put to him regarding his personal knowledge to which he Shree Sainath Wires (P) Ltd. & Ors. vs. PEC Ltd.
CA Nos. 22/14 to 39/14 23/27has stated that he was not working in the Finance Department. The appellants on their part have not produced any statement of accounts to dispute the accuracy of the amounts payable by them. In his statement recorded on 24.01.2012 while disclosing his defence, the appellant no.2 himself has stated that there were dues of about Rs.8 crores payable on their part to the complainant. These dues have arisen directly from the imports effected under the Associateship Agreements.
33. The Hon'ble Supreme Court in a catena of decisions including Vijay v. Laxman, (2013) 3 SCC 86 has held that in a case under Section 138, the NI Act raises two presumptions: firstly, in regard to the passing of consideration as contained in Section 118 (a) and under Section 139 that the holder of the cheque received the same in discharge, in whole or in part, any debt or other liability. The said presumptions are however rebuttable with the standard of proof for such rebuttal being preponderance of probabilities. Thus apart from there being a statutory presumption about consideration, the complainant has reinforced the said presumption by producing ledger statement which was further fortified by the statement on the part of the appellant no.2. In the present case the appellants have been unable to dislodge the said presumptions even on a measure of preponderance of probabilities.
34. Several documents, which were photocopies, were referred to by the Ld. Counsel for the appellants even though the same were not proved in the Trial Court in terms of the same being marked as exhibits after production of their originals. One of them is Mark-H, letter dated 31.03.2010 of the complainant stating that it was going to present the cheques in question for payment. The said letter itself clearly specifies that the appellants owed Rs.9,94,98,634.00 under the said Shree Sainath Wires (P) Ltd. & Ors. vs. PEC Ltd.
CA Nos. 22/14 to 39/14 24/27LOCs as on 31.03.2010. Ex.CW1/5, a letter dated 24.03.2010 of the appellant admits liability of Rs.8 crores and the reply to the legal notice Ex.CW1/12 sent by the appellants does not dispute outstanding liabilities. Thus even as per the document relied upon by the appellants, there was an outstanding amount of Rs.9,94,98,634.00 payable by the appellants to the complainant as on 31.03.2010.
35. The above discussion reveals that the case at hand is squarely covered by the ratio laid down by the Hon'ble High Court of Delhi in the cases of Suresh Chandra Goyal vs. Amit Singhal (supra) and Credential Leasing & Credits Ltd. vs. Shruti Investments and Ors. (supra), i.e. the cheques in question are directly related to the two LOCs and the Associateship Agreements executed between the parties and there was an ascertained and crystallized debt relatable to the dishonoured cheques existing on the date of their presentation on 31.03.2010.
36. I shall now deal with the other contentions raised by the appellants. Reliance was placed on Section 25 of the Sale of Goods Act to contend that the complainant had reserved its rights to sell the goods to recover its outstandings. However in the present case, the appellants executed High Seas Sale Agreements in their favour and also took possession of the goods. Hence there was no occasion for the complainant to have recovered its dues through sale of goods which had already been taken away by the appellants. It was contended that other cheques / PDCs were issued at the time of taking of delivery of the the goods by the appellants. However this would not take away the right to the complainant to present the cheques in question as the agreements and imports were based on the same. It was contended Shree Sainath Wires (P) Ltd. & Ors. vs. PEC Ltd.
CA Nos. 22/14 to 39/14 25/27that Mark-Y was a computerized statement of accounts which was inadmissible in evidence. However as recorded above ledger accounts were produced by CW1 during his cross-examination which was not challenged and the documents relied upon by the appellants also mentioned the outstandings. This is apart from the statutory presumption regarding consideration which the appellants have not been able to rebut. The submission that the agreements had arbitration clauses has no merit as dishonour of a cheque is a penal offence under the NI Act and it is settled law that merely because a single transaction gives rise to civil as well as criminal remedies will not be a bar to availing of criminal remedy or both. It was also contended that the Courts at Delhi did not have the territorial jurisdiction to entertain the complaints and that the jurisdiction at Delhi was created artificially. It is to be seen that the complainant has its registered office at New Delhi. The agreements Ex.CW1/2 (colly.) record that they were executed at Delhi. They bear the signatures of the appellant no.2. The cheques were presented for payment at Delhi. Merely because the complainant had a branch office at Mumbai would not make it compulsory for the complainant to have instituted the complaints at Mumbai specially when all the transactions took place at Delhi. Several case law had been relied upon by the Ld. Counsel for the appellants but all of them fade into insignificance in view of ratio laid down by the Hon'ble High Court in the cases of Suresh Chandra Goyal vs. Amit Singhal (supra) and Credential Leasing & Credits Ltd. vs. Shruti Investments and Ors. (supra) in which the Hon'ble High Court has been pleased to review the existing law on the subject as well as most of the case law relied upon by the appellants.
37. For the reasons recorded above the impugned orders do Shree Sainath Wires (P) Ltd. & Ors. vs. PEC Ltd.
CA Nos. 22/14 to 39/14 26/27not suffer from any infirmity or perversity. The appeals have no merit and are dismissed.
38. TCR alongwith copy of this judgment be sent to the Ld. Trial Court. Appeal files be consigned to the record room.
Announced in the open Court (REETESH SINGH)
on 3rd November, 2015 ASJ-02/FTC, PHC/NDD
03.11.2015
Shree Sainath Wires (P) Ltd. & Ors. vs. PEC Ltd.
CA Nos. 22/14 to 39/14 27/27