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2004 DIGILAW 1028 (AP)

Suvidha Systems v. Y. N. Mahendra

2004-09-17

P.S.NARAYANA

body2004
JUDGMENT M/s. Suvidha Systems. represented by its proprietor, aggrieved by the acquittal recorded in C.C. No. 903 of 1995 and C.C. No. 784 of 1995 on the file of 11th Metropolitan Magistrate, Secunderabad, as against R-2 herein, Dr. V.B. Narsinga Rao, preferred these Criminal Appeals respectively. Though A-1 and A-3 are also shown as R-1 and R-3 in these Criminal Appeals, it is not in controversy that these were discharged. Both these complaints were filed by the appellant complainant on the ground that the two cheques issued by R-2-accus~d bearing No. 636303, dated 25-6-1995 for Rs. 15,000/- drawn on State Bank of Hyderabad, Osmania University branch and cheque No. 636304, dated 25-7-1995 for Rs. 60,000/- drawn on State Bank of Hyderabad, Osmania University branch had not been honoured on the ground of insufficient funds and hence these complaints were filed under Section 138 of the Negotiable Instruments Act, here-in-after in short referred to as 'the Act' for the purpose of convenience. The case of appellant-complainant is that A-1 approached the complainant for hiring two computers and accessories and the complainant supplied two computers on 25-3-1995, the accused did not pay the hire charges and when the complainant went to the house of A-1, he found the computers were missing from the house of A-1. Then A-2 approached the complainant and entered into an agreement on 26-5-1995 for settlement. For that, A-2 had issued the cheques aforesaid and the complainant presented the said cheques which were returned with an endorsement insufficient funds. Hence, after issuing the legal notices, inasmuch as the accused are liable to be punished under Section 138 of the Act, these complaints were filed in C.C. No. 903 of 1995, and C.C. No. 784 of 1995 before the learned XIth Metropolitan Magistrate, Secunderabad. The learned Magistrate in C.C. No. 903 of 1995 recorded the evidence of P.W.1 and DW.1 and also marked Exs. P-1 to P-11 and after recording the findings, recorded acquittal. Likewise, the learned Magistrate in C.C. No. 784 of 1995 also 'recorded the evidence of P.W.1 and D.W.1 and marked Exs. P-1 to P-10 and on' appreciation of evidence recorded acquittal. Aggrieved by the same, the present appeals are preferred. 2. Sri Akella Srinivasarao, the learned Counsel representing the appellants made the following submissions: The learned Counsel maintained that there is no dispute or controversy relating to execution of the agreement for settlement of Ex. P-1 to P-10 and on' appreciation of evidence recorded acquittal. Aggrieved by the same, the present appeals are preferred. 2. Sri Akella Srinivasarao, the learned Counsel representing the appellants made the following submissions: The learned Counsel maintained that there is no dispute or controversy relating to execution of the agreement for settlement of Ex. P-1. The learned Counsel also contended that the finding recorded that Ex. P-1 is void and unenforceable, in view of Section 23 of the Indian Contract Act cannot be sustained, since from the reading of the terms and conditions of the agreement Ex. P-1, the so called unlawful object cannot be culled out and hence beyond the terms and conditions specified in Ex. P-1, nothing more can be read into while appreciating the agreement. The learned Counsel would maintain that in view of the same, the findings recorded by the learned Magistrate cannot be sustained. Apart from this aspect of the matter, the prosecution had been further proceeded with and the same was not dropped and hence Section 23 of the Indian Contract Act is not applicable. The learned Counsel also submitted that the issuance of the cheques also is not in dispute or in controversy and all other legal formalities to be complied with as per the provisions of the Act had been complied with and hence the finding recorded that there is no legal enforceable debt, also cannot be sustained. 3. Per contra, Sri Anandarao, the learned Counsel representing A-2 had drawn the attention of this Court to para-5 of the complaint and specifically pointed out to the averments, wherein it was stated that on the assurance of the police complaint being withdrawn, the agreement was entered into and hence the same is opposed to public policy in view of Section 23 of the Indian Contract Act. The learned Counsel also pointed out that even P.W.1 admitted that the cheque was issued by A-2 outside Kushaiguda Police Station. Apart from this aspect of the matter, the evidence of D.W.1 is also available in this regard. The learned Counsel also submitted that the amount specified in the notice of demand is much higher than the alleged amount to be due and in this view of the matter, the notice issued in this regard is also invalid. The learned Counsel also placed reliance on certain decisions to substantiate his contentions. 4. The learned Counsel also submitted that the amount specified in the notice of demand is much higher than the alleged amount to be due and in this view of the matter, the notice issued in this regard is also invalid. The learned Counsel also placed reliance on certain decisions to substantiate his contentions. 4. It is not in controversy that A-1 and A-3 were discharged by an order in Crl.M.P.No. 2166 of 1996 and these complaints were proceeded with as against A-2 only. The version of the defence is that in view of the fact that A-2 is working as Reader in Osmania University. Due to threat and coercion, Ex. P-1 agreement and the cheques in question Ex. P-2 were executed and hence there is no legal enforceable debt. At para-5 of the complaint, it was averred as follows: "There upon accused No.2 approached the complainant and represented that the Accused No.2 is a reader in Osmania University, drawing a monthly salary of Rs. 13,000/- and that the amount due will be paid and so the police complaint has to be withdrawn. Accordingly an agreement was entered into by the accused and the complainant on 26-5-1995. The said agreement was drafted under the instructions and the presence of both the accused and the complainant respectively." This is the admitted' case of the complainant as averred in the complaint itself. It is no doubt true that there is no controversy in between the parties as far as the execution of Ex. P-1 is concerned. But the fact remains that Ex. P-1 was brought into existence even as per the averments made in the complaints under the circumstances specified at para-5 referred to supra. 5. Section 23 of the Indian Contract Act dealing with what considerations and objects are lawful, and what not: "The consideration or object of an agreement is lawful, unless- It is forbidden by law; or is of such a nature that, if permitted, it would defeat the provisions of any law, or in fraudulent, or involves or implies injury to the person or property of another; or the Court regards it as immoral, or opposed to public policy. In each of these cases, the consideration or object of an agreement is said to be unlawful. Every agreement of which the object or consideration is unlawful is void. In each of these cases, the consideration or object of an agreement is said to be unlawful. Every agreement of which the object or consideration is unlawful is void. Illustration (h) reads as hereunder: A promises B to drop a persecution which he has instituted against B for robbery, and B promises to restore the value of the things taken. The agreement is void, as its object is unlawful." 6. Reliance was placed on V. Narasimharaju v. Guru Murthy Raju AIR 1963 SC 107 wherein it was held as follows: "While dealing with the aspect of opposed to public policy Stifling prosecution - Pending criminal case regarding non-compoundable offence - Arbitration agreement between parties in consideration of withdrawal of prosecution. As such agreement is invalid as being opposed to public policy. The Apex Court observed at page 112 at para 15 to 18 as follows: The appellant has stated on oath in support of his case that respondent No.1 agreed to withdraw the criminal case and not to prosecute it and it was in consideration of that promise that he entered into the arbitration agreement. In his evidence he has added that after the criminal complaint was filed the partnership books were seized and the joint business did not continue. According to him, Mr. Murthy offered to effect a compromise if a reference was made to him and get the case withdrawn. It was at that stage that pleaders of both the sides prepared the draft of the agreement. Then the witness has narrated how respondent No.1 went to the court and stated that he was unable to prove his case whereupon the complaint was dismissed. Then the parties came out and the agreement was delivered over to Mr. Murty. The evidence of this witness clearly shows that the agreement was executed by him because he was promised that the criminal case would be taken out if he executed the agreement. That is the evidence adduced by the appellant in support of his case that the consideration of the agreement was the promise of respondent No.1 not to prosecute his case and that in fact the document was given over to the arbitrator after the promise was carried out by respondent No.1 and the criminal case was dismissed. Respondent No.1 in his evidence has not made any categorical statement to the contrary. Respondent No.1 in his evidence has not made any categorical statement to the contrary. He has admitted the circumstances disclosed by the appellant and his witnesses as to the place where, the time when and the manner in which the agreement came to be executed. He only stated that he could not say whether the talk of reference to the arbitrator in question cropped up before or after the dismissal of the case. He admits that he pleaded his inability to prove his case in the criminal Court and that the arbitrator then entered upon arbitration. It would thus be seen that the evidence adduced by the appellant is cogent, satisfactory and categorical, whereas the evidence of respondent No.1 and of the arbitrator examined by him is not categorical to the contrary and at best is ambiguous. Even according to respondent No.1 and the arbitrator, the agreement was drafted within the premises of the criminal Court just before the criminal case was taken out. In other words, the place where the agreement was drafted and the time at which it was drafted, are significant. It was known that the criminal case would be heard in the afternoon of December 30, 1943 and so, the sequence of events clearly indicates that the parties entered into an understanding, the essence of which was that respondent No.1 was to get the criminal case dismissed and as a consideration for that, the appellant and the other accused persons had to agree to refer their dispute to the arbitration of Mr. Murty. In this connection, it is very significant that the final draft which was executed and attested was handed over to the arbitrator after the criminal case was withdrawn. Therefore the circumstances attending the execution of the document and the sequence of events disclosed in the evidence clearly show that the promise of respondent No.1 to withdraw and not to prosecute the criminal case was a consideration for which the appellant and his friends entered into the arbitration agreement. This is not a case where it can be reasonably said that the withdrawal of the criminal case may have been a motive and not the consideration for the impugned transaction. Then again cl.5 of the agreement corroborates the appellant's case that the withdrawal and non-prosecution of the criminal complaint was a consideration for the arbitration agreement. This is not a case where it can be reasonably said that the withdrawal of the criminal case may have been a motive and not the consideration for the impugned transaction. Then again cl.5 of the agreement corroborates the appellant's case that the withdrawal and non-prosecution of the criminal complaint was a consideration for the arbitration agreement. That is why the arbitrator was authorized to decide as to who and in what manner are to bear the expenses incurred in criminal proceedings. The Intimate connection of the criminal proceedings and their withdrawal with the arbitration agreement is thus clearly established. That is another fact or which supports the appellant's case. 7. No doubt certain submissions were made that the prosecution in relation to Cr. No.113 of 1991 was further proceeded with and the same was not dropped. No doubt there is some controversy between the parties on this aspect. Be that as it may, this aspect need not detain this Court any longer for the reason that even as per the averments made in the respective complaints, it is clear that for the purpose of withdrawal of the prosecution alone, Ex. P-1 was thought of between the parties which is illegal and immoral being opposed to public policy and hence Section 23 of the Indian Contract Act would come into play. Apart from this aspect of the matter, P.W.1 also admitted that these cheques were issued outside the Kushaiguda Police Station. This would probablise the version of the defence. It is not in controversy between the parties relating to the issuance of cheques in question and also the compliance of the legal formalities under the provisions of the Act. But, however, on the aspect of vagueness of notice, certain submissions were made that there is variation between the actual amount due and what had been demanded in notice. 8. The reliance was placed in Gopal Debi Ozha v. Sujit Pau IV (1996) CCR 174. Wherein it was held as follows at page 176: "So the wording in Clause (b) to the proviso of Section 138 "a demand for payment of the said amount of money giving a notice, in writing, to the drawer of the cheque", refers to the cheque amount and not any other amount either smaller or higher than the amount mentioned in the cheque. So the notice need to be given demanding the cheque amount. So the notice need to be given demanding the cheque amount. If any bigger amount or smaller amount than the cheque amount is mentioned, in my view, that will create difficulty to the drawee to know how much amount he has to payor she has to pay as the case may be and that makes the notice insufficient and vague and the notice will become illegal. This view has found support in a Single Bench decision of this Court in the case of Arcon Engineering Company Private Limited (supra) In the instant case the cheque amount was Rs. 5,79,000/- whereas a demand was made from the petitioner herein by the opposite party No.1 for a sum of. Rs. 6,50,000/-. That was not the cheque amount, and as such, the notice is vague and insufficient and the said notice cannot be sustained in law. Reliance was placed on G.B. Lingam v. Vitta Muralikrishna Murthy. 9. In the facts and circumstances of the case, inasmuch as, Ex. P-1 itself came into existence under the circumstances referred to supra and in pursuance thereto, the cheques in question were issued and also taking into consideration the discharge which had been already recorded as against A-1 and A-3, the reasons recorded by the learned Magistrate cannot be found fault in any way. Several other contentions which had been advanced by the respective Counsel need not be adverted to in the light of the reasons recorded supra. 10. Accordingly, the findings are hereby confirmed. These appeals shall stand dismissed.