Delhi District Court
Of The Hon'Ble Supreme Court Reported As ... vs T. on 27 October, 2007
1
IN THE COURT OF MS. ANU GROVER BALIGA
MM, NEW DELHI
CC No. 109/1/04,2446/1/04,2447/1/04, 2448/1/04,2449/1/04, 2450/1/04,
2451/1/04,2452/1/04,2453/1/04,2454/1/04,2455/1/4,2502/1/04,2507/1/4,
2579/1/04,2580/01/04,2581/01/04, 2582/1/04, 2583/1/04
M/s. United Ink & Varnish Co. Ltd.
Subhash Road, Ville Parle (East),
Mumbai 400057
Branch Office at:
B-30, Community Centre, Janakpuri,
New Delhi - 110058
Vs
1. Howard Ink Co. Pvt Ltd.,
22-23, Community Centre, Mayapuri,
New Delhi
2. Sh. S. R. Narula, Managing Director,
Howard Ink Co. Pvt Ltd.,
22-23, Community Centre, Mayapuri,
New Delhi
JUDGEMENT
Vide the present judgment I shall decide eighteen complaint cases filed by the complainant company against the accused persons and applications filed by the accused u/s 340 Cr. P. C. in all the said complaint cases. A common judgment is being passed since in all the eighteen cases the facts and circumstances leading to the cause of action are common and the accused has also taken a common defence. Both the Ld. counsels for the parties had also stated before me on 31.08.07 that they have no objection to the passing of a single common judgment.
21. In all the 18 complaint cases it has been averred by the complainant company that it is a manufacturer of printing ink and the accused No. 1 company was its authorised dealer for its products. It has been averred that accused No. 2 is the Managing Director of accused No. 1 company and is responsible for its day to day affairs. It is the case of the complainant that it used to supply goods to the accused company from time to time and after receipt of the goods the accused in turn agreed to remit the value of the invoices raised within the stipulated period and that in partial discharge of this liability he issued various cheques in favour of the complainant.
2. In 17 complaint cases it has been averred that the accused had issued a cheque for a sum of Rs. 6,75,000/- which was dishonoured on presentation. In the 18th complaint case namely CC No. 2583/01 it has been averred that two cheques bearing No. 389919 & 389921 dt. 31.12.00 for Rs. 4,68,351/- were issued by the complainant and that the same were dishonoured on presentation. In all the 18 complaint cases it has been alleged that cheque was dishonoured for the reasons "payment stopped by the drawer". It has been further alleged in all the 18 complaint cases that when the accused inspite of receipt of legal notice failed to make the payment towards the cheque in dispute, the complaint was filed.
3. In all the aforementioned complaint cases accused No. 2 after making an appearance was admitted to bail and thereafter a notice u/s 251 Cr. P. C. was framed against him to which he 3 pleaded not guilty.
4. In all the complaint cases the AR of complainant Sh. J.
K. Saharia, Branch Manager has filed his affidavit for the purposes of his evidence and he has been duly cross examined in all the complaint cases. The contents of the affidavit filed are different in different cases, however the defence put forward by the accused is the same. On the basis of affidavits filed by the AR various documents have been exhibited. The entire incriminating evidence was also put to the accused in each of the case and his statement was also recorded separately in all the 18 complaint cases.
5. In all the cases accused has given a statement that cheques were given in blank and that the complainant had no authority to fill up the cheques in its own name. Accused had also appeared in witness box as DW 1 and he has filed his detailed affidavit on record. In the said affidavit it has been deposed by the accused that for the last 45 years he had been promoting and establishing the business of the complainant company in the Delhi Market and according to him it was only due to his efforts that the sale of ink products of the complainant company was established in the Delhi Market. As per the accused his transactions with the complainant company were taking place smoothly till July 1998 but thereafter, after the death of Sh. M. D. Sathe (the earlier Director of the complainant company) the new Directors of the complainant company entered into unfair dealings with the other distributors and dealers in Delhi without 4 consent of the accused, causing much loss to the business of the accused. It has been deposed by the accused that on account of the acts and deeds of the new Directors after the death of Sh. M. D. Sathey, huge amounts were retained by the dealers and other users of the complainant's products, which was sold by the accused and on account of these acts of the complainant company, the accused suffered huge loss. As per the accused in November 1999 he was approached by the Directors of the complainant company with a proposal that they could arrange a loan for him from the market so that payments could be released against the outstanding market dues. As per the accused, a memorandum of understanding Ex DW1/A was signed between the parties where in it was agreed interalia that 24 blank cheques would be issued on behalf of accused in the name of the proposed financers. Keeping in mind the cordial relations with Late Sh. Sathe, the accused is stated to have handed over 24 blank cheques to the complainant company, but according to the accused, the complainant filled its own name in this said 24 cheques and have filed now false complaints against him. The accused had contended that no finance was arranged by the complainant from the market. The accused was duly cross examined by the Ld. counsel for complainant in all the cases and it was suggested to him that he had put a false defence.
6. I have heard both the Ld. counsels at length. Both the Ld. counsels have also filed written submissions on record. There are certain preliminary objections taken on behalf of the accused and before proceeding to decide the case on merits I would be 5 dealing with these preliminary objections. The preliminary objections raised by the accused are as follows:
i) The accused No. 2, the Managing Director of accused No. 1 company was not given a separate legal notice u/s 138 NI Act as stipulated in Section 138 NI Act and therefore he can not be held guilty by virtue of Section 141 of NI Act. For this purpose reliance has been placed upon the judgment of the Hon'ble Supreme Court reported as SMS Pharmaceuticals Ltd. Vs Neeta Bhalla and Anr. JT 2005 (8) SC 450.
ii) The cheques in dispute were presented by the complainant after the instruction of the accused to his bank to stop the payment and this fact was known to the complainant and therefore the accused can not be held liable for offence u/s 138 NI Act. For this purpose reliance has been placed upon the judgment of the Hon'ble Supreme Court reported as K.K. Sidharthan vs T. P. Praveena Chandran and Anr. (1996) Supreme Court cases (Cri) 1340
iii) The AR of complainant company can not depose on behalf of the complainant company since he could not have been authorised to depose in place of the complainant company. The contention is that though a power of attorney can "act" on behalf of its principal, the term "act" would not include the deposing in place and instead of the principal. For this purpose reliance has been placed upon the judgment of the Hon'ble Supreme Court reported as Janki Vashdeo Bhojnani and Anr. Vs Indusind Bank 6 Ltd. and Ors., JT 2004 (10) SC 264.
7. As regards the first preliminary objection raised by the Ld. defence counsel it has been rightly pointed out by the Ld. counsel for complainant that legal notice was duly served upon the accused company and that the accused No. 2 being its Managing Director is deemed to have been served with this legal notice. In a judgment relied upon by the Ld. counsel for complainant reported as Wing Commander R. R. J. Das Vs Satya Bhama Lal, 100 (2002) DLT 105, the Hon'ble Delhi High Court has held that there is no legal requirement to give individual notice to the Directors or the Officers incharge of the accused company. It has been observed by the Hon'ble High Court that the Directors of a company become liable to be prosecuted and punishable by virtue of Section 141 NI Act which does not talk of any separate notice. The Hon'ble Supreme Court has also held in SMS Pharmaceuticals Ltd. Vs Neetu Bhalla, JT 2005, (8) SC, 450 that a Managing Director by virtue of his designation itself is a person incharge of a company is also responsible for its conduct and therefore he becomes liable for the offence of cheque dishonouring by virtue of such position itself. Further in the same judgment it has been held that though the criminal liability is created by Section 138 NI Act, Section 141 extends such criminal liability in case of a company to every person, who at the time of the offence was incharge and responsible for the conduct of the company. In view of these judgments it becomes clear that in case complainant is able to prove that a legal notice was duly served upon a company, guilty of cheque dishonour and is 7 further able to prove that the cheque issued by a company for consideration has been dishonoured and that the legal notice has been served upon the accused company, then its Managing Director would be vicariously liable for the offence committed by the company.
8. The second preliminary objection raised by the Ld. defence counsel also can not be upheld because the judgment of the Hon'ble Supreme Court reported as K. K. Sidharthan vs T. P. Praveena Chandran and Anrs. has been over ruled by the Hon'ble Supreme Court in its subsequent decision pronounced in Modi Cement Ltd. Vs Kuchil vs Nandi(1998) 3 Supreme Court Cases
249. In this judgment Hon'ble Supreme Court has held that even if a cheque is dishonured because of "stop payment" instructions to the bank Section 138 NI Act would be attracted.
9. As regards the 3rd preliminary objection raised by the defence, in my considered opinion the judgment relied upon by the Ld. defence counsel is not at all applicable to the facts and circumstances of the present case. The judgment of the Hon'ble Supreme Court in Janki's case was dealing with a situation where the complainant was an individual and it was in those circumstances it was held that the power of attorney of a person can not depose for the principal in respect of the matter. In the present case, complainant is a company and therefore it has to act through some human agency. Necessarily therefore some person authorised by the company has to depose on its behalf. The Hon'ble Supreme Court has held in a matter reported as 8 Associated Cement Co. Ltd. Vs Keshvanand (1998) 1 Supreme Court cases 687 that "
"when in a case the complainant is a body corporate it is the dejure complainant and it must necessarily associate a human being as de facto complainant to represent the former in court proceedings".
10. Coming now to the merits of the case, according to the Ld. counsel for complainant, once the accused has admitted his signatures on the cheques and hence the execution of the negotiable instrument, there is a presumption that same were issued for consideration. He further contends that accused has failed to rebut this presumption raised against him and infact has himself admitted in his cross examination that he did owe a huge amount to the complainant. Ld. counsel for complainant has further contended that the defence of the accused that the cheques were issued in blank is a sham defence raised by him. He contends that letters written by the accused himself, Ex. DW1/CX dated 24.03.99 and Ex. DW1/CZ dated 03.01.00 clearly show that the accused was always aware that he had issued 24 cheques for Rs. 6.75 Lacs in favour of the complainant. He further submits that complainant had filed a civil suit for recovery against the accused in the Hon'ble High Court of Delhi and in the written statement filed by the accused in that case the accused has taken a totally different defence with respect to the cheques in dispute. He submits that the contradictory stands taken by the accused in different proceedings itself show that the accused is making false 9 submissions before this Court.
11. On the other hand it is being contended by the Ld. counsel for accused that the cross examination of AR of complainant clearly proves that the very premises on the basis of which the present complainants have been filed has been proved to be false and hence the complaints must fail. He has pointed out that though in all the complaints filed, it has been averred that the cheques were issued against supply of ink, the AR of the complainant has admitted in his cross examination that the cheques were not issued against any particular transaction of supply of ink but that they had been issued towards the repayment of loan amount pending against the accused. He has pointed out that contrary to its own pleadings, in the evidence led by the complainant, it has been deposed that the cheques were issued by the accused against a loan amount of Rs. 1.37 crores.
12. Ld. defence counsel also contends that the accused has been able to prove that the cheques were not issued in favour of the complainant but were issued in blank to be filed in the name of the proposed financiers, as and when the loan was arranged from the market. He contends that since no loan could be arranged from the market, the complainant had no authority to fill up the cheques in their own name. It is further pointed out by him that the documents proved on record clearly show that after the signing of memorandum of understanding in October 1998 and after the handing over the cheques in dispute, infact the accused cleared the outstanding of the complainant and the memorandum 10 of understanding entered into between the parties in September 1999 and the correspondence exchanged thereafter clearly reflect these facts.
13. In rebuttal to this arguments Ld. counsel for complainant has made the following contentions in his written submission namely that:
" In the year 1998-99 accused No. 1 company was debted to the complainant company to the tune of Rs. 280 lacs and above. The said huge liability was the result of liberal and cooperative attitude on the part of the complainant company. Various meetings took place between the parties, various memorandum of understandings were signed between the complainant through its Managing Director, accused No. 2, wherein accused agreed to pay reasonable rate of interest on the outstanding amount on account of delay in payments. Accordingly, the complainant company bifurcated the liability of accused No. 1 company and nomenclatured the same as "Loan Account No. 1", Loan Account No. 2, Loan Account No. 3 and Loan Account No. 4". The only object of such nomenclature was to enable the accused No. 1 company interest thereon. The entire liability of accused No. 1 company consisted of outstanding amounts arising out of the commercial transactions and reasonable interest thereon agreed to be paid for the delayed payment". When confronted with the query as to why these contentions were not part of the pleadings of the complainant, Ld. counsel for complainant has contended that in a case filed u/s 138 NI Act it is not the duty of the 11 complainant to plead or prove the consideration against which the disputed cheque has been issued but it is for the accused to rebut the presumption raised against him by virtue of Section 139 NI Act. He further points out that even otherwise once the accused has himself admitted that at the time of issuance of the cheques, payment of huge amount was pending against his account, the discrepancy between the pleadings and the evidence led by the complainant does not come to the aid of the accused.
14. I have carefully considered the submissions made by the Ld. counsels and have perused the entire record. In order to appreciate the rival contention of the parties it becomes necessary at this stage to consider some documents filed by the parties on record. The accused has placed on record four material documents:
i) Copy of a memorandum of understanding entered into between the parties on 13.10.98 Ex. DW 1/A.
ii) Copy of a memorandum of understanding entered into between the parties on 09.08.99 Ex. DW 1/C.
iii) Copy of plaint filed by the complainant (in the suit filed for recovery ) in the Hon'ble High Court of Delhi, Ex. DW1/F and
iv) A letter dt. 06.09.99 Ex. DW 1/D written by the complainant to the accused.
15. All the four documents are admitted by the complainant, 12 though as per them, there are certain interpolations made by the accused in Ex. DW1/C. Now the first of these documents, namely Ex. DW1/A proves that as on 13.10.98, it was agreed between the parties that a loan of Rs. 100/- lacs would be arranged from the market and the financiers cheque of loan would be payable directly to the complainant and the accused would complete the formalities of loan and would also issue cheques in the names of the financiers. In other words, loan amount would directly come to the complainant and the accused would pay loan repayment installments to the financiers. The contention of the accused is that the cheques in dispute were issued in blank against this loan arrangement and this contention is further fortified by the pleadings of the complainant itself in the suit filed in the Hon'ble High Court of Delhi. In para 6 of its plaint, the complainant has averred that the accused herein had agreed that the complainant would arrange loan in its name, and the accused and its associate companies would take care of interest and other charges and that against this arrangement the accused issued for them 24 post dated cheques. Though it has been contended by the complainant in this plaint that these cheques were issued by the accused in the name of the complainant, it is being rightly contended by the accused, there was no occasion for him to issue cheques in favour of the complainant, for this arrangement as is clear from Ex. DW1/A and Ex. DW 1/CY (a document filed by the complainant) stipulated that the financiers will pay the amount directly to the complainant company and the accused would issue cheques in favour of the financiers for repayment of the loan. I do have to agree with the accused that it can not be imagined that both the 13 loan amount and its repayment amount would go to the complainant. Further, though it is being contended by the Ld. counsel for complainant that subsequent to 13.10.98 this arrangement was not followed by the parties and the accused himself issued cheques in favour of the complainant in December 1998 for discharging his loan liability, this contention can not be accepted in view of the clear averments made by the complainant in para 6 of its plaint filed in the Hon'ble High Court of Delhi. One also can not lose sight of the fact that each time there was a reconciliation of account or a proposal of the accused to clear his outstanding, a memorandum of understanding was executed between the parties. Admittedly the complainant has not filed on record, any memorandum of understanding vide which the accused in December 1998 agreed to repay the complete loan on his loan and issued the cheques in dispute.
16. As regards the contention of the complainant that letters written by the accused Ex. DW1/CX dt. 24.03.99 and Ex. DW1/CZ dt. 03.01.2000 prove that the cheques were not issued in blank and that the accused himself had filled up the figures therein, the explanation of the accused that he came to know from the officials of the complainant itself, after the dishonouring of the first cheque, that the cheques had been filled up in its own name for an amount of Rs, 6.75 lacs each is very probable and acceptable. In so far as the contention that the written statement filed by the accused in the Hon'ble High Court of Delhi, shows that the accused is taking a false stand, in this court, it is to be observed that though the AR of the complainant was confronted with the plaint filed by the complainant, the accused was never 14 confronted with his written statement and therefore he was not given an opportunity to explain this discrepancy.
17. In my considered opinion the contention of the accused that the cheques were issued in blank is also strengthened by the averments made by the complainant in para 7 of its plaint filed in the Hon'ble High Court. In this para 7, the complainant has shown that as on 24.03.99 in loan A/c No. 4 (A/c of Rs. 1.37 crores which the cheques in dispute have been allegedly issued) it had in its possession cheques issued by the accused for an amount totaling to Rs. 1,37,58,351/-. One of the cheques in dispute has been allegedly issued for Rs. 4,68,351/- - if this amount is deducted from Rs. 1,37,58,351/-, a balance of Rs. 1,32,09,000/-, remains. By no amount of calculation is this no. divisible by Rs. 6.75 lacs. Hence as on 24.03.99 the complainant had itself not filled up all the cheques lying with it. What appears to have been done by the complainant is that since the entire loan outstanding of the all the four accounts ( loan 1, 2, 3 &4) as on 24.03.99 was Rs. 1,62,58,351/-, it on its own, after calculating the interest on this figure, has filled up the cheques lying with it in the amount of Rs. 6.75 each.
18. In view of my discussion hereinabove it is to be concluded that the accused has been able to prove that the cheques in dispute were handed over in blank to the complainant, for the purpose of arranging a loan from the market.
19. Another limb of the contention of the Ld. counsel for 15 complainant is that even if the accused is able to show that cheques were issued against the alleged loan arrangement, even then he can not escape from his liability u/s 138 NI Act. He contends that the fact that there was a huge amount, outstanding against the account of the accused is sufficient to hold him guilty of the offence u/s 138 NI Act if the cheques issued by him were dishonoured. As per this contention so long a person has a liability to pay, any cheque issued by him for whatever purpose it may be, can be deemed to have been issued against the outstanding liability and if the cheque is dishonoured and payment is not received thereafter inspite intimation he has to be held guilty for the offence u/s 138 NI Act. He contends that a creditor i.e. the complainant in the present case was fully authorised to fill up the cheques given by the accused to clear up the outstanding amount.
20. I am afraid this contention of the Ld. counsel for complainant cannot be upheld because in my considered opinion, the existence of a civil liability alone has not been made the basis of making a person liable of an offence u/s 138 NI Act. The criminality is attracted only when a person issues a negotiable instrument for discharge of his liability and the Negotiable Instrument is thereafter not honoured and the payment is not made even after receipt of information of dishonour. In the present case, not only has the accused been able to show that cheques were not issued against any particular loan account, he has been further able to show that the account between him and the complainant were not reconciled even as late as in August 16 1999 and therefore at no point can it be said that he had admitted his liability to the tune of 1.66 crores to the complainant and thereby impliedly authorised the complainant to fill up the cheques to the extent of this amount.
21. The memorandum of understanding dt. 09.08.99 Ex. DW 1/C shows that both the parties agreed to reconcile their accounts
- in other words, the statement of account arrived on 13.10.98 was agreed to be reconciled and modified. This memorandum of understanding also makes it clear that out of the total outstanding, an amount of Rs. 60 lacs which was the consolidated amount of interest was kept frozen and left entirely to the conscious judgment of the accused. Further the letter dt. 06.9.99 Ex. DW 1/D shows that Rs. 71,83,460/- was collected by the complainant on behalf of the accused and this was also credited to the account of the accused. This entire material on record does show that the complainant at no time had been authorised to fill up the blank cheques in its possession to the tune of Rs. 1.66 lacs.
22. Thus, in my considered opinion the entire facts and circumstances brought on record by the accused clearly show that he had handed over blank cheques to the complainant and that he had a valid cause and was justified in issuing "stop payment"
instructions to his bank. In view of my discussion hereinabove in all the 18 complaint cases I hereby acquit both the accused of the charges of offence 138 NI Act. Bail bonds of accused no. 2 ( M.D. of accused No. 1 Company ) are cancelled, surety stands discharged, endorsement if any on the documents be cancelled as 17 per rules.
23. It is further relevant to mention herein that in all the 18 connected complaint cases, accused has moved an application u/s 340 Cr. P. C. against the authorised representative and the Directors of the complainant company praying therein that a complaint should be filed against these persons for deposing falsely in court and for entering into a conspiracy to falsely implicate him. It is vehemently contended by the Ld. counsel for accused that the AR of complainant Sh. J. K. Saharia has deliberately given false affidavits in court and the evidence on record has proved that the cheques deposited by the accused with the complainant company were fabricated, manipulated and used by the complainant to create a false claim and charge against the accused. I have given considerable thought to the submissions made by the Ld. defence counsel - in my considered opinion it is not expedient in the interest of justice to take any action against the AR of complainant or its Directors. Present is not a case where the perjury complained of is so serious that prosecution should be resorted to. Mere contradictions made by the AR in his evidence can not be a ground for attracting the operation of the provision of Section 340 Cr. P. C. I am of the considered opinion that there is no material on record to suggest that the contradictions made in the deposition of the AR were conscious or deliberate in order to thwart the administration of justice. It is well settled law that complaint u/s 340 Cr. P. C is not to be undertaken only to satisfy the private grudge of the litigants but it is to be only undertaken in the interest of justice. As stated 18 hereinabove I am of the considered opinion that no interest of justice would be met if prosecution is directed against the AR of complainant or its Director. Hence the applications filed stand dismissed. A copy of this judgment and order be kept in all the 18 complaint cases. Files be cosigned to Record Room.
Announced in the open court on 27.10.07 (Anu Grover Baliga) Metropolitan Magistrate New Delhi 19 CC No. M/s. United Ink & Varnish Co. Ltd.
Subhash Road, Ville Parle (East), Mumbai 400057 Branch Office at:
B-30, Community Centre, Janakpuri, New Delhi - 110058 Vs
1. Howard Ink Co. Pvt Ltd., 22-23, Community Centre, Mayapuri, New Delhi
2. Sh. S. R. Narula, Managing Director, Howard Ink Co. Pvt Ltd., 22-23, Community Centre, Mayapuri, New Delhi ORDER 27.10.2007 Present : AR of complainant with counsel.
Accused No. 2 (Managing Director of accused no. 1 Company ) on bail with counsel Vide separate judgment announced today, both accused are acquitted of the offence U/s. 138 of N.I. Act.
Accused No. 2 on bail. His bail bond stands cancelled, surety stands discharged. Endorsement if any on the documents be cancelled as per rules. File be consigned to Record Room.
(Anu Grover Baliga) Metropolitan Magistrate New Delhi 20