Delhi District Court
G.S. Sandhu vs M/S Kish Exports Ltd on 4 February, 2014
04.02.2014 1 C. C. No. 5668/1/09
IN THE COURT OF MS KIRAN GUPTA
SENIOR CIVIL JUDGE-CUM-RENT CONTROLLER
NEW DELHI DISTRICT, PATIALA HOUSE COURTS,\
NEW DELHI
C. C No. 5668/1/09
Unique ID No. 02403R0447172007
In the matter of:
G.S. Sandhu
Sandhu Farms
P.O. Box No. 18
Rudrapur,
District Udham Singh Nagar
Uttaranchal .................. Complainant
VERSUS
1 M/s Kish Exports Ltd
2 Sh M K Lakhwani
Director,M/s Kish Exports Ltd
3 Sh Paresh Nayar,
Director,M/s Kish Exports Ltd
Office at: 885, Udyog Vihar, Phase-V
Gurgaon, Haryana 122016
Also at: House No. G-543, Sri Niwaspuri
New Delhi-110015
.................... Accused persons
Date of Institution : 02.07.2007
G S Sandhu v Kish Exports Ltd and others Page no. 1 of17
04.02.2014 2 C. C. No. 5668/1/09
Date of Arguments: 31.01.2014
Date of Judgment : 04.02.2014
JUDGMENT :
1 Present complaint is under section 138 read with section 142 of the N I Act in respect of cheque no 912658 dated 19.3.2007 for Rs.21,00,000/-, drawn on Canara Bank, Parliament Street, Delhi (hereinafter referred as "cheques in question").
2 The case of the complainant is that accused no. 2 being the director of accused no. 1 expressed his desire to have a look at the factory of complainant, i.e. M/s Tarai Foods Ltd at Rudrapur which is engaged in the business of food processing through the process of freezing. Since accused no. 2 desired that complainant should inform them of the critical areas of frozen food processing, it was deliberated and agreed between complainant and accused no. 1 through accused no. 2 that accused no. 1 would make payment of Rs. 30 lacs towards fee, out of which Rs.21 lacs was to be paid before 31.3.2007 and balance in the next financial year, i.e. 2007-2008 effective from 1.4.2007. For obtaining the consultancy in the aforementioned business, accused no. 1 issued the cheque in question which was signed by both accused no. 2 and 3 on behalf of accused no. 1. Complainant being satisfied with the seriousness of the accused in availing the consultancy service, provided his expert G S Sandhu v Kish Exports Ltd and others Page no. 2 of17 04.02.2014 3 C. C. No. 5668/1/09 advise/consultancy in various areas of frozen food business. He also took accused no. 2 to the unit of M/s Tarai Foods Ltd. at Rudrapur where he explained him the functioning of the machines installed therein. The detailed information about the working, flow of activities was provided in a very highly professional and integrated manner by the complainant being an expert in this line having experience of more than two decades in the said business. He in fact started to prepare a report which was to be submitted to the accused on various aspects of frozen food business. The accused not issued the cheque in question on 19.03.07 towards the consultancy services which were to be provided by complainant.
3 When the complainant deposited the cheque in question with his banker, the same was dishonoured by the bank vide memo dated 9.4.2007 with remarks "payment stopped by the drawer". Immediately he informed accused no. 2 who assured him that the cheque be presented again and shall be honoured this time. On 25.4.2007, complainant wrote a letter to accused no. 1 informing him that he is again presenting the cheque in question and also wrote about the consultancy provided by him. The said letter was sent by speed post on 30.4.2007, however, the said letter was received back with remarks "left without address". A copy of the said letter was also sent by e-mail at e-mail ID of accused no. 2. In the said letter, after receiving consent from accused no. 2, complainant was to represent the cheque on 3.5.2007. Consequently, he represented the cheque to his banker on 3.5.2007, however, the same was again returned G S Sandhu v Kish Exports Ltd and others Page no. 3 of17 04.02.2014 4 C. C. No. 5668/1/09 unpaid on 4.5.2007 and he was informed that the payment has been stopped by the drawer. It is alleged that the cheque in question was issued by no. 2 and 3 on behalf of accused no. 1 in discharge of their liability, however, they deliberately stopped the payment despite the fact that complainant has spent considerable period and parted with critical consultancy in frozen food processing business. Complainant was in midst of preparing a detailed report which was to be handed over to the accused only after encashment of the cheque. Complainant sent the legal notice to the accused persons on address at 885, Udyog Vihar, Phase-V, Gurgaon, Haryana by registered AD on 14.05.2007 which has been duly replied by the accused persons vide reply dated 21.05.2007, wherein they concocted a false story denying the legitimate right of the complainant. It is alleged that despite receiving the legal notice, accused persons have not made any payment, hence the present complaint.
4 Accused no. 1 is a company while accused No. 2 and 3 are the Directors of the company. All the three accused persons were summoned by the Ld. Predecessor vide order dated 03.11.2007.
5 Notice u/s 138 of the NI Act was framed against all accused persons on 16.07.2010 to which they pleaded not guilty and claimed trial stating that the notice dated 12.05.2007 has been duly replied by the company vide reply dated 21.05.2007, hence there is no liability either of the company or any of the Directors in respect of G S Sandhu v Kish Exports Ltd and others Page no. 4 of17 04.02.2014 5 C. C. No. 5668/1/09 the alleged amount cheque in question.
6 The complainant in order to prove his case has examined himself as CW1 and tendered his evidence by way of affidavit Ex. C-1, reiterating the entire facts of the complaint. He has further relief upon documents Ex. CW1/A to Ex. CW1/F. CW1/1 is the original cheque in question dated 19.3.2007, Ex. CW1/B is the memorandum issued by Canara Bank on 9.4.2007 with remarks "payment stopped by drawer", Ex. CW1/C is the envelope alongwith original letter dated 25.4.2007, Ex. CW1/D is the memorandum of UTI Bank dated 4.5.2007 with the remarks "that the payment has been stopped by drawer", Ex. CW1/E is the demand notice and Ex. CW1/F are the postal receipts. CW1/G is the reply to the legal notice sent by the accused persons. Complainant evidence was closed on 18.08.2012.
7 Thereafter statement of accused no. 2 and 3, being the directors of accused no. 1, was recorded after putting all the incriminating evidence to which they denied and pleaded innocence. They both stated that Mr. Treman Alluhwalia introduced them to the complainant for purchase of M/s. Tarai Foods Limited of which complainant is the Managing Director. They had visited the factory of M/s. Tarai Foods Limited at Rudrapur and had shown interest to purchase the business of M/s. Tarai Foods Limited. One Mr. Amit Khosla was supposed to finance accused no. 1 for purchase of M/s. Tarai Foods Limited and during meeting, offer was made by accused G S Sandhu v Kish Exports Ltd and others Page no. 5 of17 04.02.2014 6 C. C. No. 5668/1/09 no. 1 to purchase the business of M/s. Tarai Foods Limited for Rs. 4.4 Crores. After the said meeting dated 05.03.2007, a draft memorandum of understanding was drawn between complainant and accused no. 1 regarding purchase of business of M/s. Tarai Foods Limited. Subsequently on 19.03.2007, accused no. 1 issued the cheque in question in favour of complainant to show its serious intention to buy the business of M/s. Tarai Foods Limited. Only after the issue of the cheque in question, complainant allowed them to take inventory of all the plant, machinery and other assets of M/s. Tarai Foods Limited. On 21/22.03.2007, they visited the factory premises at Rudrapur where they came to know that M/s. Tarai Foods Limited was in BIFR, therefore, instruction was given to the banker of accused no. 1 to stop payment against the cheque in question. It is stated that the cheque in question was drawn in the name of complainant as he was holding majority shares of M/s. Tarai Foods Limited. The cheque in question was given to Mr. Kanwarjeet Singh, CA of complainant and was to be deposited only after finalization of the deal between accused no. 1 and M/s. Tarai Foods Limited. There was never any discussion about any sort of consultancy, hence no question of paying Rs. 30,000,00/- as consultancy fee to the complainant arose. The correspondence regarding sale of the business of M/s. Tarai Foods Limited was exchanged between the parties through E-mails, mark C to H. Both the accused persons categorically denied of availing any consultancy service or that the cheque in question was issued as payment towards consultancy service. They further stated that the cheque was to be presented only after finalization of the deal G S Sandhu v Kish Exports Ltd and others Page no. 6 of17 04.02.2014 7 C. C. No. 5668/1/09 regarding purchase of the business of M/s. Tarai Foods Limited by accused no. 1 and before presenting the cheque for encashment, complainant had not obtained the consent of either of the Director. The accused no. 1 admitted that he has instructed his banker to stop payment in respect of the cheque in question as complainant attempted to defraud them by not divulging the complete facts. They further stated that complainant met them only once when they went for the first time with Mr. Treman Alluhwalia. During their visit at Rudrapur on 21/22.03.2007, complainant did not meet them but deputed some of his staff for preparing the inventory of plant and assets.
8 Accused persons in support of their defence examined accused no. 3 Mr. Paresh Nayar as DW-1, accused no. 2 M.K. Lakhwani as DW-2 and Sh. Treman Alluhwalia as DW-3. Accused no. 2 and 3 during their examination in chief have reiterated the defence taken by them during their statement under section 313 CrPC as has already been discussed above in para no. 6. The accused persons have relied upon certain documents. The list of assets of the company is mark B and was subsequently exhibited as Ex. DW1/2, Draft copy of MOU is Ex. DW1/2. E-mails Ex. DW1/3 to Ex. DW1/8 regarding the transaction were exchanged with the CA of the complainant.
9 Heard arguments on behalf of both the parties and perused the complete record file.
G S Sandhu v Kish Exports Ltd and others Page no. 7 of17 04.02.2014 8 C. C. No. 5668/1/09 10 Case of the complainant is that the accused persons issued the cheque in question as fees towards the consultancy services which he had rendered in respect of functioning of frozen food business, he being an expert in this field having experience of more than 2 decades. The documents relied by the complainant are the cheque in question as well as the return memos of the bank, legal notice and certain postal receipts. The fact that the cheque in question was issued by accused no. 1 in the name of complainant, bearing the signatures of accused no. 2 and 3 is admitted, however, it is stated that the cheque in question was issued not towards fees of any consultancy services but in respect of the transaction regarding the purchase of business of M/s. Tarai Foods Limited by accused no. 1 from complainant who was the majority share holder of M/s. Tarai Foods Limited.
11 Since the signature on the cheque and the fact that the cheque was issued by accused no. 2 and 3 in favour of the complainant is admitted, the presumption under section 139 of the NI Act is in favour of the complainant. The said presumption is rebuttable and the burden is upon the accused to rebut the same. In the present case both the complainant and accused persons have taken different stands in respect of the purpose for which the cheque in question was issued. Now what has to be considered is whether the accused persons have succeeded in rebutting the presumption.
12 As per the complainant the cheque was towards payment of fee of consultancy service which he has rendered in G S Sandhu v Kish Exports Ltd and others Page no. 8 of17 04.02.2014 9 C. C. No. 5668/1/09 respect of providing expertise knowledge in the business of frozen food articles. Complainant has been cross-examined in detail on this point by learned defence counsel. CW1 during his cross-examination admitted that as per the income tax returns filed by him for the financial year 2006-07 and assessment year 2007-08, he had profit. He admitted that in his income tax return for the financial year 2006-07, he has not shown any income from any business of consultation. When he was specifically asked as to when he has started his business of consultancy, he promptly replied that he is not in the business of consultancy. Further he had given his service of consultancy only in the transaction between him and accused. He further deposed that the only occasion when he gave his consultancy services is the one between him and the accused persons and there was no other transaction of consultancy between him and any other person. He further stated that he has given consultancy services in his personal capacity. He deposed that he does not do any other business from the office of M/s. Tarai Foods Limited. He admitted that accused had never given him in writing to the effect that they wanted his consultancy services. He further deposed that he has not given any opinion to the accused in writing. He volunteered that the report is ready but the same is not given to the accused as they had not paid him the money. He admitted that he has no document in writing to show that the sum of Rs. 21 lacs/- was to be paid towards consultancy services. He admitted that he has no technical qualification from any recognized technical institute. He has not received any offer letter from the accused to provide consultancy services. Neither he had G S Sandhu v Kish Exports Ltd and others Page no. 9 of17 04.02.2014 10 C. C. No. 5668/1/09 issued any letter of offer in favour of the accused to provide his consultancy services and the scope of services. He admitted that he has not raised any invoice against the accused regarding consultancy services but volunteered that since the work was not managed, hence invoice was not raised. He admitted that he has no document in writing to show that the settlement was effected between him and accused for Rs. 30 lacs/- as mentioned in the complaint. He admitted that the cheque in question was given to him in the office of his CA and that he has never visited the office of accused and that accused were in the business of garment exports. He was asked to provide consultancy services in presence of Mr. Treman Alluhwalia, Mr. M.K. Lakhwani and Mr. Paresh Nayar. Only one meeting took place regarding consultancy services and the charges to be provided were settled verbally. He deposed that he does not remember the date when he was asked to provide consultancy services. Though he deposed that the cheque in question was received by him in his personal name as part of consultation fee, however he stated that he does not remember as to prior to 19.03.2007, when did he meet accused persons. He admitted that in the income tax return filed by him for the assessment year 2007-08, he has got salary of Rs. 60,000/- per annum besides agricultural income. He has not shown any other source of his income. He admitted that he has no record with him to show when he provided the advice as mentioned at page no. 2 of his letter Ex.CW1/C dated 25.04.2007 concerning items 1 to
22. G S Sandhu v Kish Exports Ltd and others Page no. 10 of17 04.02.2014 11 C. C. No. 5668/1/09 13 From the testimony of CW1, it is evident that no offer letter for providing consultancy services was received either by the complainant or the accused persons. Further, no written document was executed between the complainant and accused persons for rendering or receiving the consultancy services. CW-1 admitted that accused persons are in the business of exporting garments. He further admitted that accused persons never gave him in writing that they wanted his consultancy services. Except the consultation to the accused persons, no consultation for any purpose till date has been given by the complainant to any other person. He neither possesses any technical qualification nor has earned any salary on account of rendering consultation services as per the income tax return filed by him. It is beyond comprehension that a person would take consultation in respect of the business, which is going in losses, from such a person who neither possesses any technical qualification and further has not given any other consultation prior and would part away with the huge amount of Rs.21,00,000/- for consultation. Though complainant has stated that he has prepared the draft of consultation as per the oral agreement, however, no such draft has been placed on record by the complainant. CW-1 has admitted that the talks about the consultancy services was made in the presence of Treman Ahluwalia, however, he has not examined him to support his contention. On the contrary, said Treman Ahluwalia has been examined by the accused persons as DW3, who during his examination-in-chief has categorically deposed that in the meeting it was decided that Tarai Foods Ltd will sell its assets for consideration G S Sandhu v Kish Exports Ltd and others Page no. 11 of17 04.02.2014 12 C. C. No. 5668/1/09 of around 4 to 4.25 crores and the cheque in question was given towards the sale of assets. During cross-examination he denied the suggestion put to him by counsel for the complainant that the cheque was towards consultation fee. Admittedly, the meeting between complainant and accused persons was held in the office of the CA of complainant, however, complainant has not examined him. In the absence of any evidence, either documentary or oral, on the basis of above discussion, complainant has miserably failed to prove that the cheque in question was towards fee of consultation services rendered by him to the accused persons. Merely because the cheque has been issued in the name of the complainant does not proves the case of the complainant that cheque was issued towards consultancy services.
14 Now coming to the defence of the accused that the cheque in question was issued to show their bonafide and seriousness that they were interested in purchasing the assets of the Tarai Foods Ltd and further that they deliberately stopped the payment when they came to know that the said company is under BIFR. Both DW1 and DW2 during their examination in chief have categorically deposed that the cheque in question was issued towards purchase of assets of Tarai Foods Ltd. DW1 Sh Paresh Nayyar during his cross-examination stated that he was not interested in the purchase of business of Tarai Foods Ltd, but was more interested in the land owned by Tarai Foods Ltd. He was aware that Mr. Sandhu is running the business in losses for several years. He was informed by Mr. Sandhu that land is in the name of the company. The cheque in G S Sandhu v Kish Exports Ltd and others Page no. 12 of17 04.02.2014 13 C. C. No. 5668/1/09 question for the amount of Rs. 21,00,000/- was given towards purchase of assets of Tarai Foods Ltd and in order to show their interest and bona fide. He came to know by the end of March, 2007 that the company is under the BIFR and this was the reason that the MOU towards sale of assets of Tarai Foods Ltd was not signed and instructions were issued to the banker to stop the payment. He was not aware on 21-22/3/2007 when inventory was prepared that company was under the BIFR. He came to know from other director, i.e. Mr. M K Lakhwani about the BIFR. Even DW2 has categorically denied that the cheque in question was not towards purchase of assets, but for consultancy services.
15 DW3 Sh Treman Ahluwalia, during his examination in chief deposed that in the meeting, it was decided that Tarai Foods Ltd will sell its assets for consideration of around 4 to 4.25 crores. A cheque for Rs. 21,00,000/- was given with the understanding that accused persons will taken inventory and after signing the MOU, the cheque will be presented for encashment. He alongwith Mr. Paresh went to Tarai Foods Ltd for taking inventory. When they came back, then Mr. Lakwani came to know that it was under BIFR and decided to withdraw. Mr. Sandhu and his family was holding the majority of shares of Tarai Foods Ltd and the cheque was given in the name of Mr. Sandhu as he was holding majority shares. He further stated that the cheque was given towards the sale of assets of Tarai Foods Ltd and not for any other purpose and that Mr. Lakhwani never asked for any consultation from Mr. Sandhu in his presence. G S Sandhu v Kish Exports Ltd and others Page no. 13 of17 04.02.2014 14 C. C. No. 5668/1/09 16 Further, CW-1 during his cross examination admitted that at the time of delivery of cheque Ex.CW1/A, his company owed the sum of Rs. 2, 15,00,000/- to IDBI, Rs. 1, 25, 00, 000/- to IFCI, Rs. 1, 25, 00, 000/- to Standard Chartered bank and Rs. 1, 95, 00, 000/- to State Bank of Travancore. He denied the suggestion that the meeting at Maurya Hotel was fixed regarding the sale of M/s. Tarai Foods Limited, however admitted that in the meeting, matter of sale of M/s. Tarai Foods Limited was also discussed. He admitted that on his behalf, his chartered accountant prepared an MOU and sent the same to accused persons. He stated that he does not know whether mark A is the copy of the same MOU as sent by his chartered accountant on his behalf to the accused persons. He admitted that many matters were discussed during the meeting and one of the matter was that if M/s. Tarai Foods Limited company would be sold, then the company of Mr. Amit Khosla namely, D.B. Zwirn & Company, L. P would finance the deal. He admitted that during the negotiations, accused no. 3 visited the factory of M/s. Tarai Foods Limited and made an inventory of all the assets. He stated that he is not aware as to whether regarding the sale of M/s. Tarai Foods Limited, E-mails were exchanged between his CA, Mr. Amit Khosla and accused persons. He admitted that the case of M/s. Tarai Foods Limited was pending before BIFR. Though he denied the suggestion that the sale consideration was finalized at Rs. 4,25,00,000/-, however volunteered that he has received an offer from the accused persons. He further volunteered that an offer was made from accused persons that G S Sandhu v Kish Exports Ltd and others Page no. 14 of17 04.02.2014 15 C. C. No. 5668/1/09 allegedly the funding of Rs. 2, 72,00,000/- would be made available by D.B.Zwirn & Company, L. P to clear the liability of financial institutions. He stated that he had permitted accused no. 3 to prepare inventory of the assets of M/s. Tarai Foods Limited because the accused persons had shown their interest in purchasing the same. He admitted that after the meeting at Maurya Sharaton Hotel, a draft of memorandum of understanding was prepared and there were talks about financing by Mr. Lakhwani and accused persons were trying to impress him that they were having necessary arrangement of funds to purchase the company or to set up a new company. He received the cheque Ex.CW1/A on 19.03.2007. He admitted that the inventory of the articles of the company was prepared, however showed ignorance about the date when the same was prepared. He admitted that Mr. Paresh Nayar visited his company and he had allowed him to prepare the inventory of assets of company and has also spared some of his employees to assist Mr. Paresh Nayar for preparing the inventory. He further admitted that he had allowed Mr. Paresh Nayar to visit his company and to prepare the inventory of assets only after receiving cheque Ex.CW1/A. He admitted that his company was going in losses and therefore he was looking for other options, including selling out the same. He admitted that accused had approached him to purchase the company. At the time of transaction with the accused, there were about 14 crore shares in M/s. Tarai Foods Limited and disclosed the name of two Directors, one being himself and other his wife Smt. Kiran Sandhu but showed ignorance about the name of other Directors. 17 During his cross examination he further admitted that G S Sandhu v Kish Exports Ltd and others Page no. 15 of17 04.02.2014 16 C. C. No. 5668/1/09 M/s. Tarai Foods Limited is in losses since 1993 till date. (Though he denied that the amount of the cheque in question was towards part payment in respect of the same of shares in M/s. Tarai Foods Limited, however stated that their might be that some communication had taken place between his CA and accused regarding sale of his shares in M/s. Tarai Foods Limited. He stated that he is not aware whether there was E-mail correspondence between Mr. Treman Alluhwalia and his CA Mr. Kanwaljeet and accused persons and Mr. Amit Khosla about the sale of M/s. Tarai Foods Limited.
18 Thus, it is evident from the testimony of CW1 that the cheque in question was received by him on 19.3.2007 and he allowed the accused persons to make the inventory of the assets of Tarai Foods Ltd. after receiving the cheque. Further CW admitted that during the meeting at Maurya Sheraton, the matter of sale of Tarai Foods Ltd was also discussed and that on his behalf, his CA prepared the MOU and sent the same to accused persons. When he was shown the copy of the MOU, he did not denied the same, but showed his ignorance to the fact as to whether it is the same MOU or not. He admitted that amongst the other matters, the accused persons showed their willingness for purchasing the assets of Tarai Foods Ltd and that Mr Paresh Nayyar visited his company at Rudrapur to prepare the inventory. He was assisted by his staff for preparing the inventory. As a common sense, a person would prepare the inventory of certain articles, if, either he is willing to sell or purchase the same and not for obtaining any consultancy services. Accused persons G S Sandhu v Kish Exports Ltd and others Page no. 16 of17 04.02.2014 17 C. C. No. 5668/1/09 have succeeded in proving that the cheque in question was issued towards the purchase of assets of Tarai Foods Ltd and not towards consultancy services and when the fact that Tarai Foods Ltd is under the BIFR came to their knowledge, they stopped the payment of the cheque in question.
19 In view of the above discussion and in facts and circumstances of the case, complainant has failed to prove that the cheque in question was issued by the accused no. 2 and 3 being the directors of accused no. 1 towards the discharge of liability, i.e. fee towards consultancy services. Accordingly, all the three accused persons are acquitted for the offence u/s 138 NI Act. Bail bond of accused no. 2 and 3 are extended for the further period of six months under section 437A CrPC. File be consigned to record room.
Announced in the open ( KIRAN GUPTA ) court on 04.02.2014 SCJ-CUM-RC:PHC:NEW DELHI G S Sandhu v Kish Exports Ltd and others Page no. 17 of17