Gujarat High Court
Shamrock Chemie Private Limited & 2 vs State Of Gujarat & on 28 April, 2017
Author: J.B.Pardiwala
Bench: J.B.Pardiwala
R/SCR.A/6595/2015 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
SPECIAL CRIMINAL APPLICATION (QUASHING) NO. 6595 of 2015
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SHAMROCK CHEMIE PRIVATE LIMITED & 2....Applicant(s)
Versus
STATE OF GUJARAT & 1....Respondent(s)
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Appearance:
MR. BHADRISH S RAJU, ADVOCATE for the Applicant(s) No. 1 - 3
MR. VIJAY O SHARMA, ADVOCATE for the Applicant(s) No. 1 - 3
MR PARESH M DARJI, ADVOCATE for the Respondent(s) No. 2
MR. NEHAL N SHAH, ADVOCATE for the Respondent(s) No. 2
MS SHRUTI PATHAK, APP for the Respondent(s) No. 1
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CORAM: HONOURABLE MR.JUSTICE J.B.PARDIWALA
Date : 28/04/2017
ORAL ORDER
1. Rule returnable forthwith. Ms. Pathak, the learned APP waives service of notice of rule for and on behalf of the respondent No.1 State of Gujarat. Mr. Paresh Darji, the learned advocate waives service of notice of rule for and on behalf of the respondent No.2 original complainant.
2. By this writapplication under Article226 of the Constitution of India, the writapplicants have prayed for the following reliefs: 9(a) To allow the present petition;
(b) To quash and set aside the complaint being Criminal Case No.454/2015 filed before the Ld. Additional Chief Metropolitan Magistrate (NI Act) Court No.30, Ahmedabad and all further proceedings therein;
(c) Pending admission, final hearing and disposal of this application, Page 1 of 13 HC-NIC Page 1 of 13 Created On Wed Aug 16 08:40:06 IST 2017 R/SCR.A/6595/2015 ORDER to stay further proceedings of Criminal Case No.454/2015 pending before the Ld. Additional Chief Metropolitan Magistrate (NI Act) Court No.30, Ahmedabad;
(d) To pass any other and further orders as may be deemed fit and proper.
3. It appears from the materials on record that the respondent no.2 herein filed a complaint for the dishonour of cheque punishable under Section138 of the N.I. Act in the Court of the learned Additional Chief Metropolitan Magistrate, Ahmedabad. The complaint came to be registered as the Criminal Case No.454 of 2015 in the Court of the learned Court of the learned Additional Chief Metropolitan Magistrate, Ahmedabad.
4. The case of the complainant in his own words as averred in the complaint is as under:
3. The Complainant submits that the Accused approached to the Complainant Company for purchase of 4500MT of Linear Alky Benzene (hereinafter referred to as the said Chemical) and placed purchase Order No.211114 dated 21st November, 2014 for 4500MT. Hereto annexed and marked as Exhibit "B" is a copy of the said Purchase Order dated 21st November, 2014 issued by the Accused company.
4. The complainant submits that as per the order placed by the Accused under purchase order dated 21st November, 2014, the complainant sold and supplied the Accused said chemicals. The accused accepted the same and done other formalities to transfer the title on their name and lifted the same on or before 31st January, 2015.
5. The complainant submits that as per the order placed by the Accused under purchase order dated 21st November, 2014 the Accused incurred legally enforceable debt and liability to the tune of Rs.60,00,000/ (Rs. Sixty Lakhs Only.) The Accused No.1 to 3, acknowledging the legally enforceable debt and liability incurred by the Accused towards the Complainant.
6. The Complainant submits that the Accused issued cheque bearing No.023513 dated 12th November, 2014 for sum of Rs. 60 Lakhs (Rs. Sixty Lakhs) drawn on State Bank of Mysore, Ahmedabad Page 2 of 13 HC-NIC Page 2 of 13 Created On Wed Aug 16 08:40:06 IST 2017 R/SCR.A/6595/2015 ORDER branch and gave assurance that cheque will be cleared on the same date towards part payment of the legally enforceable debt liability. Hereto annexed and marked as Exhibit "C" copy of cheque dated 12th November, 2014 issued by the Accused Company to the complainant company.
7. The Complainant submits that by letter dated 20th December 2014, addressed by the Accused to the Complainant admitted to the issuance of the above mentioned cheque and also admitted that the said cheque was issued being the payment against the said purchase order No.211114 dated 21st November 2014. However, the Accused have raised the flimsy issues stating that the Department of Revenue Intelligence have forced them to stop the Activities. The Accused also categorically admitted that they are not in position to take delivery of the said goods and demanded back the above cheque. The complainant vide their email dated address by 24th December, 2014, address by Mr. Kamal Chaturvedi, Vice President of the Complainant, replied to letter dated 20th December, 2014, issued by the Accused, specifcally stating that the Accused are having malafide intentions which are reflected in letter dated 20th December, 2014. The complainant through Mr. Kamal Chaturvedi, Vide President of the Complainant called upon the Accused to make the payment of the above cheque with clear intimation that the said cheque would be presented to the bank for realization on 24th December 2014, and the Accused are duty bout to honour the same. The Complainant craves leave of this Hon'ble Court to refer and rely upon the letter dated 20th December, 2014, and email dated 24th December 2014, respectively as and when produced.
8. The Complainant submits that as per the said email dated 24th December, 2014, the Complainant presented the above stated cheque for realization/ payment through their bankers Punjab National Bank on or about 26th December, 2014. The complainant further submits that to their utter shock and surprise the said cheue bearing no.023513 is dishonoured and returned unpaid by Accused bankers with remarks and endorsement as "Payment Stopped by Drawer". The complainant received an intimation of the said dishnour of the aforesaid cheque form their bank on 29th December, 2014. Hereto annexed and marked as Exhibit "D" are the copies of the memo of dishonour of the aforesaid cheque.
9. The Complainant Company submits that the Accused No.2 and 3 with a malafide intention requested the Complainant Company to deliver and supply the 4500MT of Linear Alky Benzene, being unaware of the actual intention of the Accused; the Complainant Company agreed to sell and supply the said Chemicals.
5. Thus, according to the complainant, the accused persons Page 3 of 13 HC-NIC Page 3 of 13 Created On Wed Aug 16 08:40:06 IST 2017 R/SCR.A/6595/2015 ORDER purchased 4500MT Linear Alky Benzene. For the purchase of the said product, the accused issued a cheque in question to the complainant and the cheque was not cleared as the accused persons issued 'stop payment instructions' to their bankers. The principal argument of the learned counsel appearing for the applicants that it is true that his clients did place an order for purchase of the product manufactured by the complainant, but at no point of time, the said product was supplied to the applicants. To put in other words, according to the learned counsel, the product was not lifted by the applicants from the premises of the complainant.
6. To substantiate such arguments, the learned counsel first invited my attention to a letter dated 20/12/2014 addressed by the applicants herein to the complainant for the purpose of cancelling the order. The letters reads as under: Dated 20th December, 2014 To, Mr. Kamal Chaturvedi, Vice President, Hazel Mercantile Limited, 701/702 A, Embassy Centre, Nariman Point, Mumbai 400 021, India.
Subject : With reference to our Purchase Order No.211114 Dated 21/11/2014.
Dear Sir, This is with reference to our Purchase Order No.211114 Dated 21/11/2014 for the purchase 4000MT of Linear Alkyl Benzene and your subsequent teleconvesation with our Director Mr. Paresh Patel on the subject.
We would like to inform you that as your aware that we are going through issues with Department of Revenue Intelligence related to same material. In view of the same, we are forced to stop all our Page 4 of 13 HC-NIC Page 4 of 13 Created On Wed Aug 16 08:40:06 IST 2017 R/SCR.A/6595/2015 ORDER activities related to the said product. Hence, we are not in position to take delivery of the same product as per clause 8 of our Purchase Order. We further would like to inform you that this is temporary situation and as soon as we restart our activities, we will again do business with you. We have issued a cheque bearing no.023513 dated 12/11/2014 amounting Rs.60,00,000/ towards payment against the same order as well as has deposited Rs.50,00,000/ towards security deposit.
We would request you to keep our security deposit in view of future business, however, return the cheque bearing no.023513 dated 12/11/2014 amounting Rs.60,00,000/ to us immediately, same has been stopped by us by informing to our bank.
Further we would also like to request you to re credit the quantity and value of our advance license as mentioned below and return the original licenses:
1. 0810128563 18.4 MT
2. 0810133356 285.12. MT
3. 0810128706 95.04 MT
4. 0810128566 72 MT
5. 0810129199 253.44 MT TOTAL 724.00 MT Thanking you and looking forward to your kind support.
Regards Mr. Jaimin Jani, Shamrock Chemle Pvt. Ltd.
Encl:
Copy of Purchase Order No.211114 dated 21/11/2014. Copy of Cheque bearing No.023514 dated 12/11/2014.
7. The letter referred to above was replied by the complainant through Email. The contents are at Page48, which reads as under: Subject : 24 DECEMBER 2014 EMAIL From : JAIMIN JANI ([email protected]) T0 : [email protected];
Date : Wednesday, October 7, 2015 5:31 PM Dear Vijaybhai, Please find below email of 24th December.
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R/SCR.A/6595/2015 ORDER
From : "KAMAL CHATURVERI (HML)"<[email protected]> Date : 24 December 2014 at 3:37:25 PM IST T0 : CMD <[email protected]>, JAIMIN JANI ([email protected]) Cc : "SATISH JADHAV(HML)"<satish.j@hmlindia>, "DINESH AGGNISHOTRI (HML)"<[email protected]>, "Nayan Patel "<[email protected]>, yogin soni <[email protected]>, "DHARMESH AGASHIVALA (HML)"<[email protected]> Subject : LAB Business Dare Paresh Bhai This referes to our several ongoing discussions on phone/by e mails, last being your letter dated 20th December, 2014 contents of which reflect malafide intnetion in order to breach the contract.
We don't agree to your reasoning of Force Majeure as any Government department proceeding against an Individual/ company has no bearing on the contracts and it can not be reason for Force Majeure of the plaint, moreover, you have mentioned that this is a temporary situation rather contrading for remote consideration.
We have taken your cheque no.02342 dated 12.11.14 for Rs.60,00,000 for security deposit and not deposited in the bank on good faith on your assurance to clear the same if deposited after 22.12.2014 when your additional limits are released from bank. Needless to mention, the same is being deposited today. Do ensure it is cleared.
Under the situation, you are called upon to:
1. Clear the cheque for Rs.60 lacs when presented to bank.
2. Pay Rs.71 lacs towards storage charges.
3. Pay for the product and lift the same without any further delay.
4. Fulfill the commitment of the contract or we reserve our rights.
Please arrange the above and remit the payments by RTGS as promised, failing which were reserve our rights to proceed at your cost and conseuences.
8. Thereafter, the learned counsel invited my attention to the reply given by the applicants to the statutory notice issued by the complainant.
The reply reads as under:
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R/SCR.A/6595/2015 ORDER
Regd.AD
To, Date:060202015
Shri Rahul Karnik
Advocate
Office No.36, 4th floor,
Western India Building,
Above bombay Store, Nr. CITI Bank,
Fort, Mumbai - 400 001.
I, Manish J. Patel, Advocate under the instructions of my clients (i) Shamrock Chemie Pvt. Ltd. (ii) Mr. Paresh Patel and (iii) Mr. Brijesh Patel, all at 201/202, University Plaza, Nr. Vijay Char Rasta, Navranpura, Ahmedabad - 380 009 give your reply to your notice dated 28012015 issued on and behalf your client M/s. Hazel Mercantile Limited, Mumbai is as under:
1.. The averments made in your notice is denied by my clients in toto. In your notice, your have not narrated that, how there is legal enforceable debt when your client have deposited the alleged cheque, so first you have to send copies of the same which indicate that, alleged cheque was issued against any legal enforceable debt or liability as there was no goods ever been supplied or delivered from your end qua the said transaction.
2.. As per say of my client, in per last transaction there is credit of Rs.50 Lac remain with your client's custody as may client's security for further transaction. After completion of first transaction, for second transaction an eorder dated 15102014 has been sent to your client which your client has confirmed in your notice. As per the terms of said eorder it has been stated in "6(b) Cash and carry against every D.O. Desired". As per said terms, if my client has to lift the materials, then he has to make advance payment, so when my client has not lifted any materials then there is no question is arisen that alleged cheque was issued for any legal debtor a liability.
It is also stated in that eorder in para 9 "If the remarkable crude prices are lowered, this has to be also consider from your side". So, if prices of crude/ oil is down by more than 30% in International Market, from day of eorder, then your client has to consider said aspects also. This eorder dated 15102014 has been accepted by your client and never objected for any terms of the same.
3.. It is say of my client that, as per one terms of said eorder that, my client has kept security of Rs.1 Crore with your client and as per Page 7 of 13 HC-NIC Page 7 of 13 Created On Wed Aug 16 08:40:06 IST 2017 R/SCR.A/6595/2015 ORDER that, earlier Rs. 50 lac is already been kept as security in your client's account and further trade difference of more than 50 lacs exist as total payment of 5,87,23,970/ was done by my client against your client's total invoice value of 5,29,96,250/, further even for payments made, your client is yet to supply 13 MT of material from last order. Hence, there is more than Rs.1 crore of my client available with your client. This indicate that, my client has credit in your client's account even though your client has not fulfilled deliveries completely as per the last order.
4.. It is say of my client that, they have send a letter dated 2012 2014 addressed to your client Shri Kamlesh Chaturvedi Vice President Hazel Mercantile Limited stating that, the payment of alleged cheque was stopped in the Bank as there is an issue pertain to Revenue Department is going on. It was also stated that, original licenses which had been issued from the concerned department of Govt. of India pertain to our future transaction which have been send to your client which also may be returned back to my client. But neither cheque nor any license have ever been send back to my clients and without any legal debt or liability, your client has deposited alleged cheque and issued this notice which never do constitute any offence under the Negotiable Instruments Act, 1881.
5.. It is also say of my client that, Shri Brijesh Patel to whom your have stated as Director as No.3 in your notice has never looked after day to day business of my client company nor he remains as incharge of business of the company. Shri Brijesh Patel has never signed any documents/ correspondence or any instruments also.
It is further say of my clients that, your clients are well aware that, alleged cheque was issued in advance for future transaction as against alleged payment your client has to send the materials/ goods, but alleged cheque was never issued after receipt of any goods/ materials, so not issued against any legal enforceable debt or any other liability.
6.. Your clients are well aware that, they have no right to asked for any payment when there is no legal dues was pending as there was no material which has been supplied to my client nor any past dues were also pending.
But even after knowing this facts, your clients have misused the cheque of my client to show their debt which is not permissible under any of the law, so your client has committed an offence for Criminal Breach of Trust and cheating with my client which is punishable under sec.406 and 420 of the Indian Penal Code. By sending this notice reply and notice call upon your clients that to withdraw this notice immediately otherwise my clients have also right to file appropriate Page 8 of 13 HC-NIC Page 8 of 13 Created On Wed Aug 16 08:40:06 IST 2017 R/SCR.A/6595/2015 ORDER criminal complaint against your clients and who were responsible for the same.
It is also say of my clients that, by sending this reply cum notice, my clients call upon you to return back rs.1 crore which is lying with your clients as security deposit of my clients for which they have no right to keepand also your client must return advance licenses of my client your client is holding illegitimately.
By sending this reply, my clients call upon your client to comply with the above stated things.
Due to your client's initiation, my clients have to give this reply, for which a cost quantified Rs.15,000/ as reply to notice and notice charges which is payable by your clients that also be noted."
9. The above is not disputed by the complainant. Thus, it appears from the undisputed documents that although the applicants did place an order for purchase of the product, yet the product was not lifted. In such circumstances, without the actual product being supplied to the applicants or without being taken over by the applicants, if 'stop payment instructions' came to be issued to the bank concerned, then in my view, no offence under Section138 of the N.I.Act could be said to have been committed.
10. As explained by the Supreme Court in the case of 'Sampelly Satyanarayana Rao Vs. Indian Renewable Energy Development Agency Limited' reported in 2016 (10) SCC 458, the crucial point is whether the cheque represents discharge of existing enforceable debt or liability or whether it represents advance payment without there being subsisting debt or liability. In the case of Sampelly (Supra) the Supreme Court referred to its earlier decision in the case of Indus Airways Private Limited v. Magnum Aviation Private Limited reported in (2014) 12 SCC 539 and distinguished the same in the facts of that case by observation as under: Page 9 of 13 HC-NIC Page 9 of 13 Created On Wed Aug 16 08:40:06 IST 2017 R/SCR.A/6595/2015 ORDER
11. Judgment in Indus Airways (supra) is clearly distinguishable. As already noted, it was held therein that liability arising out of claim for breach of contract under Section 138, which arises on account of dishonour of cheque issued was not by itself at par with criminal liability towards discharge of acknowledged and admitted debt under a loan transaction. Dishonour of cheque issued for discharge of later liability is clearly covered by the statute in question. Admittedly, on the date of the cheque there was a debt/liability in presenti in terms of the loan agreement, as against the case of Indus Airways (supra) where the purchase order had been cancelled and cheque issued towards advance payment for the purchase order was dishonoured. In that case, it was found that the cheque had not been issued for discharge of liability but as advance for the purchase order which was cancelled. Keeping in mind this fine but real distinction, the said judgment cannot be applied to a case of present nature where the cheque was for repayment of loan installment which had fallen due though such deposit of cheques towards repayment of installments was also described as "security" in the loan agreement. In applying the judgment in Indus Airways (supra), one cannot lose sight of the difference between a transaction of purchase order which is cancelled and that of a loan transaction where loan has actually been advanced and its repayment is due on the date of the cheque.
12 Crucial question to determine applicability of Section 138 of the Act is whether the cheque represents discharge of existing enforceable debt or liability or whether it represents advance payment without there being subsisting debt or liability. While approving the views of different High Courts noted earlier, this is the underlying principle as can be discerned from discussion of the said cases in the judgment of this Court.
13 In Balaji Seafoods (supra), the High Court noted that the cheque was not handed over with the intention of discharging the subsisting liability or debt. There is, thus, no similarity in the facts of that case simply because in that case also loan was advanced. It was noticed specifically therein as was the admitted case of the parties that the cheque was issued as "security" for the advance and was not intended to be in discharge of the liability, as in the present case.
14 In HMT Watches Ltd. v. M.A. Abida, (2015) 11 SCC 776 relied upon on behalf of the respondent, this Court dealt with the contention that the proceedings under Section 138 were liable to be quashed as the cheques were given as "security" as per defence of the accused. Negativing the contention, this Court held : "10. Having heard the learned counsel for the parties, we are of Page 10 of 13 HC-NIC Page 10 of 13 Created On Wed Aug 16 08:40:06 IST 2017 R/SCR.A/6595/2015 ORDER the view that the accused (Respondent 1) challenged the proceedings of criminal complaint cases before the High Court, taking factual defences. Whether the cheques were given as security or not, or whether there was outstanding liability or not is a question of fact which could have been determined only by the trial court after recording evidence of the parties. In our opinion, the High Court should not have expressed its view on the disputed questions of fact in a petition under Section 482 of the Code of Criminal Procedure, to come to a conclusion that the offence is not made out. The High Court has erred in law in going into the factual aspects of the matter which were not admitted between the parties. The High Court further erred in observing that Section 138(b) of the NI Act stood uncomplied with, even though Respondent 1 (accused) had admitted that he replied to the notice issued by the complainant. Also, the fact, as to whether the signatory of demand notice was authorised by the complainant company or not, could not have been examined by the High Court in its jurisdiction under Section 482 of the Code of Criminal Procedure when such plea was controverted by the complainant before it.
11. In Suryalakshmi Cotton Mills Ltd. v. Rajvir Industries Ltd. [(2008) 13 SCC 678], this Court has made the following observations explaining the parameters of jurisdiction of the High Court in exercising its jurisdiction under Section 482 of the Code of Criminal Procedure: (SCC pp. 68587, paras 17 & 22) "17. The parameters of jurisdiction of the High Court in exercising its jurisdiction under Section 482 of the Code of Criminal Procedure is now well settled. Although it is of wide amplitude, a great deal of caution is also required in its exercise. What is required is application of the wellknown legal principles involved in the matter.
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22. Ordinarily, a defence of an accused although appears to be plausible should not be taken into consideration for exercise of the said jurisdiction. Yet again, the High Court at that stage would not ordinarily enter into a disputed question of fact. It, however, does not mean that documents of unimpeachable character should not be taken into consideration at any cost for the purpose of finding out as to whether continuance of the criminal proceedings would amount to an abuse of process of court or that the complaint petition is filed for causing mere harassment to the accused. While we are not oblivious of the fact that although a large number of disputes should ordinarily be determined only by the civil courts, but criminal cases are Page 11 of 13 HC-NIC Page 11 of 13 Created On Wed Aug 16 08:40:06 IST 2017 R/SCR.A/6595/2015 ORDER filed only for achieving the ultimate goal, namely, to force the accused to pay the amount due to the complainant immediately. The courts on the one hand should not encourage such a practice; but, on the other, cannot also travel beyond its jurisdiction to interfere with the proceeding which is otherwise genuine. The courts cannot also lose sight of the fact that in certain matters, both civil proceedings and criminal proceedings would be maintainable."
12. In Rallis India Ltd. v. Poduru Vidya Bhushan [(2011) 13 SCC 88], this Court expressed its views on this point as under: (SCC p. 93, para 12) "12. At the threshold, the High Court should not have interfered with the cognizance of the complaints having been taken by the trial court. The High Court could not have discharged the respondents of the said liability at the threshold. Unless the parties are given opportunity to lead evidence, it is not possible to come to a definite conclusion as to what was the date when the earlier partnership was dissolved and since what date the respondents ceased to be the partners of the firm."
15 We are in respectful agreement with the above observations. In the present case, reference to the complaint (a copy of which is Annexures P7) shows that as per the case of the complainant, the cheques which were subject matter of the said complaint were towards the partial repayment of the dues under the loan agreement (para 5 of the complaint).
11. I may also refer to and rely on the observations of the Supreme Court as contained in Para15 of the Indus Airways Private Limited v. Magnum Aviation Private Limited reported in (2014) 12 SCC 539:
15. The above reasoning of the Delhi High Court is clearly flawed inasmuch as it failed to keep in mind the fine distinction between civil liability and criminal liability under Section 138 of the N.I. Act. If at the time of entering into a contract, it is one of the conditions of the contract that the purchaser has to pay the amount in advance and there is breach of such condition then purchaser may have to make good the loss that might have occasioned to the seller but that does not create a criminal liability under Section 138. For a criminal liability to be made out under Section 138, there should be legally enforceable debt or other liability subsisting on the date of drawal of the cheque. We are unable to accept the view of the Delhi High Court that the issuance of cheque towards advance payment at the time of signing Page 12 of 13 HC-NIC Page 12 of 13 Created On Wed Aug 16 08:40:06 IST 2017 R/SCR.A/6595/2015 ORDER such contract has to be considered as subsisting liability and dishonour of such cheque amounts to an offence under Section 138 of the N.I. Act. The Delhi High Court has traveled beyond the scope of Section 138 of the N.I. Act by holding that the purpose of enacting Section 138 of the N.I. Act would stand defeated if after placing orders and giving advance payments, the instructions for stop payments are issued and orders are cancelled. In what we have discussed above, if a cheque is issued as an advance payment for purchase of the goods and for any reason purchase order is not carried to its logical conclusion either because of its cancellation or otherwise and material or goods for which purchase order was placed is not supplied by the supplier, in our considered view, the cheque cannot be said to have been drawn for an existing debt or liability.
12. In view of the uncontroverted facts, the proceedings initiated against the applicants for the dishonour of the cheques deserves to be quashed.
13. In the result, this application is allowed. The proceedings of the Criminal Case No.454 of 2015 filed before the Learned Additional Chief Metropolitan Magistrate (N.I. Act) Court No.30, Ahmedabad, are hereby quashed. All consequential proceedings pursuant thereto stands terminated.
Rule is made absolute to the aforesaid extent. Direct service is permitted.
(J.B.PARDIWALA, J.) aruna Page 13 of 13 HC-NIC Page 13 of 13 Created On Wed Aug 16 08:40:06 IST 2017