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2009 DIGILAW 260 (JK)

Sanjay Diesels v. Mir Engineers & Builders

2009-05-25

MOHAMMAD YAQOOB MIR

body2009
1. Quashment of the complaint filed by the respondents under Section 138 of Negotiable Instruments Act [for short hereinafter referred to as "N.I.ACT"] and the cognizance taken thereof by the Court of learned Chief Judicial Magistrate, Kathua on 29th of April 2008 is sought. 2. Respondent (Complainant) being the dealer of `Greaves Cotton Generator Sets was required as per the order placed by the petitioner to supply 54 Diesel Generator Sets of 6 KVA and 27 Diesel Generator Sets of 15 KVA, costs of which is Rs. 1,63,35,000/-. According to respondent (complainant) 54 D.G. Sets of 6 KVA of the value of Rs. 88,02,000/- were supplied to the petitioner and 27 D.G. Sets of 15 KVA of the value of Rs. 75,33,000/- were lying ready for dispatch to the respondents. The Cheque bearing No. 1945601 dated 17th of September 2007 for sum of Rs. 73,35,000/- (Rupees Seventy three lacs thirty five thousands only) drawn at the Jammu and Kashmir Bank Ltd; Rawalpora, District Budgam, on presentation was returned unpaid by the Banker of the petitioner with the remarks "Payment stopped by the Drawer." Dishonoured Cheque along with memo was received by the respondents from its Banker i.e. Jammu and Kashmir Ltd. Govindsar, Kathua. After service of requisite notice respondents filed the complaint under Section 138 of N.I.ACT. Learned Chief Judicial Magistrate, Kathua took cognizance vide order dated 29th of April 2008. 3. From the records what emerges is that order for supply has been placed on 5th of August 2007. Copy of the Email dated 13th of September 2007 placed on the record reveals that the respondents after referring to telephonic and personal discussions, has requested the petitioner to send the following payments at the earliest: i) One Cheque in favour of M/s Sanjay Diesels for 45 no. of D.G. sets for security purposes (from the Bank account of M/s Engineers & Builders) for Rs. 73.35 Lacs; ii) One Demand Draft for Rs. 35 to 40 Lacs as part payment against the first lot of the D.G. sets payable at Delhi in favour of M/s Sanjay Diesels. 4. Requisite security Cheque has been sent to the respondents which is dated 17th of September 2007. 5. "Security Cheque" above said has been presented to the Banker but same has been returned unpaid with the remarks (Payment stopped by the Drawer). 4. Requisite security Cheque has been sent to the respondents which is dated 17th of September 2007. 5. "Security Cheque" above said has been presented to the Banker but same has been returned unpaid with the remarks (Payment stopped by the Drawer). Consequent thereof, notice for demand has been issued on the 18th of March 2008 by Manager Ajit Singh. Thereafter petitioner has filed the suit on 18th of April 2008, which is pending on the file of Additional District Judge, Srinagar. In the suit, it is projected that 54 D.Gen. Sets do not function properly neither service back up was provided by the respondents, petitioner cancelled the supply order for remaining 27 D.G. Sets. In the meantime, respondents filed the complaint under Section 138 of N.I.ACT. 6. Appearing counsel for the petitioner first contended that the Cheque was by way of security so was not required to be presented for encashment as at the time Cheque was issued, there was no liability to be discharged. The position of the Cheque being "Security Cheque" in terms of Email above referred is clear. Now the important question which emerge for consideration is as to whether "Security Cheque" can be presented for encashment, if yes, when? 7. The "Security" in common parlance is the security for debts. It can be in different modes. The mode of "Security Cheque" is more effective as it makes the money more assured in its payment and facilitates rapid recovery. This mode is adopted to secure the debts with hassle free recovery. Webster defines "Security" as being anything given or deposited to secure the payments of debt or the performance of the contract when a party defaults in performance of contact and the amount of debt becomes enforceable, the "Security Cheque" can be presented for encashment. The bouncing of such Cheque will give rise to the filing of complaint on satisfaction of three important ingredients of Section 138 of N.I.ACT. 8. Section 139 of the N.I.ACT raises presumption but the presumptions are rebuttable and the presumption is only in regard to the second ingredient. Same position is supported by the law as has been laid down in the judgment reported in AIR 2008 SC Page 1325 (Krishana Janardan Bhat Vs. Dattatraya G. Hegde) it is quite relevant to quote Para nos. 20 & 21 of the said judgment, which reads as under: - "20. Same position is supported by the law as has been laid down in the judgment reported in AIR 2008 SC Page 1325 (Krishana Janardan Bhat Vs. Dattatraya G. Hegde) it is quite relevant to quote Para nos. 20 & 21 of the said judgment, which reads as under: - "20. Indisputably, a mandatory presumption is required to be raised in terms of Section 118(b) and Section 139 of the Act. Section 13(1) of the Act defines "negotiable instrument" to mean "a promissory note, bill of exchange or cheque payable either to order or to bearer. Section 138 of the act has three ingredients viz.; i) that there is a legally enforceable debt; ii) that the cheque was drawn from the account of bank for discharge in whole or in part of any debt or other liability which presupposes a legally enforceable debt; and iii) that the cheque so issued had been returned due to insufficiency of funds. 21. The proviso appended to the said section provides for compliance of legal requirements before a complaint petition can be acted upon by a court of law. Section 139 of the Act merely raises a presumption in regard to the second aspect of the matter. Existence of legally recoverable debt is not a matter of presumption under Section 139 of the Act. It merely raises a presumption in favour of a holder of the cheque that the same has been issued for discharge of any debt or other liability." 9. In the present facts and circumstances of the case, whether there is legally enforceable debt is a fact to be proved by the respondents and open to be disputed by the petitioner. The contention of the learned counsel that the "Security Cheque" cannot be presented for encashment is not tenable. To hold it otherwise would amount to rendering the purpose of "Security Cheque" as illogical and will shake the faith in the system of Security in concerned commercial circles. 10. The contention of the learned counsel for the petitioner that complaint has been lodged only after civil suit has been filed by the petitioner. Same is correct but it is to be noted that "Security Cheque" has been presented but returned unpaid on 26th of February 2008. Notice of demand has been issued on 18th of March 2008, so respondent had to wait for the expiry of statutory period for filing the complaint. Same is correct but it is to be noted that "Security Cheque" has been presented but returned unpaid on 26th of February 2008. Notice of demand has been issued on 18th of March 2008, so respondent had to wait for the expiry of statutory period for filing the complaint. It is in between the petitioner has filed the civil suit, pendence thereof will not disturb the proceedings in the compliant under Section 138 N.I.ACT. This submission is accordingly repelled. 11. Learned counsel would contend that the cost of 54 DG Sets supplied is Rs. 88.02 Lacs out of which Rs. 59 Lacs were paid and only Rs. 29 Lacs are balance. "Security Cheque" of the value of the Rs. 73 Lacs could not be presented for encashment. This submission cannot be accepted at this stage because according to the respondents as per the supply order 54 D.G. Sets were supplied and further 27 D.G. Sets were ready for dispatch, but for cancellation of the order, so the total cost of Rs. 1,63,35,000/- was recoverable. 12. The question which arises for consideration is as to whether Rs. 73,35,000/- was legally recoverable debt from the petitioner. Same needs trial. Nothing prevents the petitioner from projecting before the Magistrate that no debt is legally enforceable and it is for the Magistrate during the trial to decide the same. 13. Next learned counsel would contend that the notice for demand has been issued by Mr. Ajit Singh, Manager who was neither the holder of the Cheque nor the payee, therefore, was incompetent to issue the notice. No doubt, power of Attorney stands in his name but same has been executed on 5th of April 2008. Complaint based on the cause which has arisen on the basis of the notice is also incompetent. This submission at this stage is only to be rejected because respondents have produced one more Power of Attorney shown to have been executed on 5th of March 2008 and is contended to be a previous Power of Attorney. What would be the value of this Power of Attorney as well as the subsequent Power of Attorney is a matter, which requires trial. But on the cursory look of these two Power of Attorneys what emerges is that there is proper authorization for issuance of notice as well as for filing the complaint by the holder of the Cheque and the Payee. But on the cursory look of these two Power of Attorneys what emerges is that there is proper authorization for issuance of notice as well as for filing the complaint by the holder of the Cheque and the Payee. This submission accordingly fails at this stage. 14. Filing of the complaint is not the "be all and end all" as petitioner has every right to defend during the trial and to establish that there is no legally enforceable debt. 15. Learned counsel during the course of submissions had relied on the various judgments in support of his contentions. In the Judgment reported in 1998 CR.L.J. Page 419, it is held that for filing the compliant by Manager, there shall be specific authorization in that behalf. 16. Judgment reported in (2006) 6 SCC, Page 39, it has been held that Court has to presume the Negotiable Instrument to be for consideration unless the existence of consideration is disproved. 17. The judgment reported in (2007) 5 SCC Page 264, it has been that presumption under Section 139 and 118(a) of N.I.ACT are rebuttable. Same principle has also been laid down in the Judgment reported in (2008)1 SCC Page 258. 18. The contention of the learned counsel for the petitioner that 54 Gen Sets supplied were defective and further more for lack of service backup, petitioner had cancelled the supply order for 27 Gen Set. Therefore, the petitioner is entitled to compensation for breach of Contract and it is in that context he has filed the suit for the damages amounting to Rs. 65 Lacs deducting Rs. 29 Lacs as being balance debt of 54 D.Gen. Sets, petitioner is entitled to 36 Lacs. That is the matter to be settled by the Civil Court but at the same time it shall be open for the petitioner to highlight the same while projecting his defence to the effect that there is no legally enforceable debt which would warrant encashment of the "Security Cheque". 19. Sets, petitioner is entitled to 36 Lacs. That is the matter to be settled by the Civil Court but at the same time it shall be open for the petitioner to highlight the same while projecting his defence to the effect that there is no legally enforceable debt which would warrant encashment of the "Security Cheque". 19. Petitioner has every right to justify his action of issuing the instructions to his Banker to stop the payment of "Security Cheque" i.e. he can project; i) There was no legally enforceable debt; ii) He had sufficient funds in his account but payment was stopped for reasons of no liability to pay; iii) To show that the instructions for stoppage was issued as the amount of the "Security Cheque" would exceed limit of debt if at all found enforceable. 20. In my view I am fortified by the judgment captioned M.M.T.C Ltd, and Another Vs. M/s Medchi Chemicals and Pharma (P) Ltd, and Another reported in (2002) 1 SCC 234. It shall be quite apt to quote para no. 19 of the judgment. "19. Just such a contention has been negatived by this Court in the case of Modi Cements Ltd. v. Kuchil Kumar Nandi. It has been held that even though the cheque is dishonoured by reason of "stop-payment" instruction an offence under Section 138 could still be made out. It is held that the presumption under Section 139 is attracted in such a case also. The authority shows that even when the cheque is dishonoured by reason of stop-payment instructions by virtue of Section 139 the court has to presume that the cheque was received by the holder for the discharge, in whole or in part, of any debt or liability. Of course this is a rebuttable presumption. The accused can thus show that "stop-payment" instructions were not issued because of insufficiency or paucity of funds. Of course this is a rebuttable presumption. The accused can thus show that "stop-payment" instructions were not issued because of insufficiency or paucity of funds. If the accused shows that in his account there were sufficient funds to clear the amount of the cheque at the time of presentation of the cheque for encashment at the drawer bank and that the stop-payment notice had been issued because of other valid causes including that there was no existing debt or liability at the time of presentation of cheque for encashment, then offence under Section 138 would not be made out The important thing is that the burden of so proving would be on the accused. Thus a court cannot quash a complaint on this ground. 21. It is trite that invocation of power under section 561-A Cr.P.C has to be exercised with circumspection. The power has to be exercised so as to avoid the abuse of process of law and to secure the ends of justice. But at the same time, roving enquiry while examining the matter under Section 561-A Cr.P.C is not permissible. 22. For the stated reasons and circumstances, I am not persuaded to exercise the power under Section 561-A Cr.P.C in favour of the petitioner. 23. The petition is accordingly dismissed. Observations made herein above shall not have the effect on the trial and merit thereof of the case or on the merit as may emerge on trial of the suit as is pending. 24. This brings me to the question of deciding as to whether transfer of the complaint from the Court of Chief Judicial Magistrate, Kathua to any Court at Srinagar is warranted or not. 25. In this connection a separate motion i.e. Cr.T.A no. 28/2008 has been filed wherein it is projected that the mother of the petitioner is a Heart Patient and the petitioner is the only person to look after her. Furthermore, the law and order situation has been highly communally surcharged in Kathua for the last two months due to the Amarnath land row agitation, the persons belonging to Valley have been subjected to difficult situation. Therefore, petitioner has a life scare. 26. So far as second ground is concerned, same is not now available. The position, no doubt, for a particular period was disturbing but now that phase is over. It is now normal. Therefore, petitioner has a life scare. 26. So far as second ground is concerned, same is not now available. The position, no doubt, for a particular period was disturbing but now that phase is over. It is now normal. That situation reportedly prevailed for a month or two. 27. The first ground taken that the mother of the petitioner is a Heart Patient requires care, but for that petitioner has other modes available i.e. to seek dispensation of his personal appearance before the trial Court. The trial Court on the motion being filed on behalf of the petitioner for dispensing with his personal attendance shall consider the same and pass appropriate orders i.e. to dispense with the personal appearance of the petitioner in case his engaged counsel appears on every date of hearing and subject to condition that the petitioner will remain present on such hearing wherein personal appearance shall be dispensable for progress of the case otherwise mere presence on the dates of hearing can be taken care of by the presence of the engaged counsel. 28. No ground for the transfer of the case is made out, therefore, disposed off as above.