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2017 DIGILAW 595 (AP)

Myneni Sambasiva Rao v. State of Andhra Pradesh

2017-09-22

B.SIVA SANKARA RAO

body2017
ORDER : The petitioner is the sole accused of C.C.No.139 of 2017 on the file of Judicial Magistrate of First Class for Prohibition & Excise, Guntur, where the learned Magistrate has taken cognizance for the offence under Section 138 of the Negotiable Instruments Act (for short the Act) against him on the private complaint of the 2nd respondent for the so called dishonour of 2 cheques for Rs.55,00,000/- (cheque bearing No.657426 for Rs.25,00,000/- and another cheque bearing No.657427 for Rs.30,00,000/- dated 12.03.2017 drawn on SBH, Secunderabad). 2. Before coming to the contentions in the quash petition, as per the complaint averments, said cheques when presented for collection at SBI, Personal Banking Division, Brundavan Gardens Branch, Guntur, on 13.03.2017 same were returned dishonoured on 15.03.2017 and the complainant issued statutory notice dated 16.03.2017 that was returned saying refused and from accrual of cause of action in filing the complaint. The complaint averments further show that the accused promoted a company and registered as unlisted company in ROC with CIN No. U85100 TG 2009 PTC 065599 by name M/s. Kiranmaye Institute of Medical Sciences Private Limited on 23.10.2009 with registered office at Gagan Mahal, Domalguda, Hyderabad, and the accused is the Chairman and Whole Time Director of it and one Dr. K.S. Varaprasad was appointed as Managing Director of it from 22.02.2014 and the business was while running in loss from the beginning, the Managing Director taken over responsibility of running the company from 12.02.2015 and even he tried his best, he could not and on the request of accused Mr. Myneni Sambasivarao and one Dr. N. Kishore, who is one of the additional Directors of the company, he arranged funds from his available source to pay to the bank otherwise the account leads to NPA and in that period the Managing Director Dr. Varaprasad requested the complainant Smt. K. Jyothi to invest amount for the company and the accused also expressed his willingness to take over assets and liabilities of the company along with his associates and it is on the request of Varaprasad and Kishore supra along with their associates, Dr. Rambabu and Dr. Varaprasad requested the complainant Smt. K. Jyothi to invest amount for the company and the accused also expressed his willingness to take over assets and liabilities of the company along with his associates and it is on the request of Varaprasad and Kishore supra along with their associates, Dr. Rambabu and Dr. Nageswararao accepted to act as mediators and after discussions of all points before mediators supra, there was a compromise-cum-settlement agreement dated 20.03.2016 and there was another modified settlement agreement on 11.01.2017 and at that time the accused issued 2 post dated cheques in compliance to the total sale consideration of Rs.9 crores and as per condition No.3 of the agreement, it is agreed that the transferee will issue cheque for the balance amount of Rs.55 lakhs and hand it over to arbitrators to be passed on to the lenders and one of the arbitrators Dr. Rambabu handed over the said cheques to the complainant one of the lenders and when she presented the cheques, same were returned dishonoured. Thereby the complaint from non-payment despite statutory notice. Along with the complaint, there are 7 documents filed viz., the cheques presented for collection, return memo, statutory notice with postal receipt and returned legal notice as refused and copy of the agreement dated 11.01.2017. The original agreement dated 20.03.2016 not filed with the complaint for whatever the reason. 3. The contentions in the quash petition impugning the said complaint maintainability and the taking of cognizance and its sustainability including as to any giving of cheque much less for any debt or legally enforceable liability concerned in nutshell are that the condition No.3 of the modified agreement dated 11.01.2017 in fact speaks of the transferee to issue cheque for the balance amount of Rs.55 lakhs and hand it over to arbitrators to be passed on to the external lenders and the complainant is not an external lender, for she being one of the additional directors of the company with effect from 06.06.2013 having 21.54% holding in the company and also no other than wife of Dr. K.S. Varaprasad, the Managing Director of that company and the external lenders does not mean the internal directors and additional directors, but outside debts and the blank cheques given by collusion cause filled by naming the complainant as if payee to have wrongful gain and engaged some advocate of Dr. Varaprasad and Dr. K.S. Varaprasad, the Managing Director of that company and the external lenders does not mean the internal directors and additional directors, but outside debts and the blank cheques given by collusion cause filled by naming the complainant as if payee to have wrongful gain and engaged some advocate of Dr. Varaprasad and Dr. Kishore, in cause issuing the legal notice for the alleged dishonour and the complaint alleges mediators handover the cheques to her which is not even correct for the blank cheques filled the names of the payee are clear to a perusal and there is no legally enforceable debt and the complainant is also party to the original settlement agreement dated 20.03.2016 where she agreed with other parties in settlement of the controversies, differences and disputes through arbitration consisting of 2 arbitrators Dr. Rambabu and Dr. Nageswararao. Clauses 20 & 21 of the said agreement dated 20.03.2016 reflected the above among the other that the transferors shall not have any right to file any case/litigation, civil and criminal proceedings. For the decision of the arbitrators be final and binding. It is also contended that the prosecution thereby not maintainable apart from no legally enforceable debt and there is no even service of notice and the alleged endorsement of left or refused are manipulated and when petitioner/accused addressed letter to the postal authorities about said false endorsement without even intimation of such legal notice to him. It is also contended that legal notice issued by same advocate to the petitioner/accused earlier when received, the question of returning the same does not arise but for manipulation or fabrication for the endorsement and the taking of cognizance and continuation of complaint is unsustainable and is liable to be quashed for same tantamounts to abuse of process of Court. It is also contended the Court at Guntur has no jurisdiction otherwise. 4. The learned counsel for the petitioner/accused reiterated the same in the course of hearing. Whereas it is the submission of the learned counsel for the 2nd respondent-complainant that the quash petition is liable to be dismissed and various contentions have no legs to stand and the factual aspect is not in dispute is a matter of adjudication for the cheques in question not in dispute of bearing signature of the accused and routed from his account, thereby sought for dismissal. 5. 5. So far as jurisdiction aspect concerned, M/s. Bridgestone India Private Limited Vs. Inderpal Singh 2016 (2) SCC 75 referring to Dashrath Rupsingh Rathod Vs. State of Maharashtra (2014) 9 SCC 129 and amendment to the Act in 2015 that even the bank where cheque presented for collection got jurisdiction. Thus there is nothing to hold the Court which has taken cognizance has no territorial jurisdiction or no part of cause of action taken place to confer jurisdiction on that Court in relation to the cheque presentation and dishonour. 6. Coming to the sustainability of the criminal complaint, no doubt as per the Indian Contract Act an agreement in total and absolute restraint of legal proceedings is unenforceable. No doubt the accused/petitioner filed the copy of original compromise- settlement agreement dated 20.03.2016 with the quash petition to consider though the complainant did not file the same with the complaint, since the contents not in dispute by the complainant even, the Court can receive the same in a quash petition as also held by the expression of the Apex Court in Rukmini Narvekar Vs. Vijay Sataredkar 2008 (4) JCC 2879. Thus by virtue of the expression the said compromise cum settlement agreement dated 20.03.2016 can be looked into as both also referred the contents therein in the course of hearing. This document got some bearing of the case on hand undisputedly to refer to this agreement the complainant and her husband Dr. Varaprasad are signatories undisputedly at each of the pages, her husband arrayed as 2nd among 4 parties including the petitioner/accused. At Para 4 the accused/petitioner at serial No.1 shows having 75,000 shares with 1.47% holding, the defacto complainant Smt. Jyothi at serial No.12 got 11,00,000 shares with 21.54% holding and her husband at serial No.11 is having 3,00,000 shares with 5.87% holding. Dr. Kishore Nagalla shown having at serial No.9 1,70,000 shares with 3.33% holding and Nagalla Seethal and Nagalla Varalakshmi at serial Nos.4 & 5 got 3,00,000 & 3,30,000 shares with 5.87% & 6.46% holding besides Keerthi Kishore Nagalla & N.Krishna Teja at serial Nos.7 & 8 with 5,00,000 & 2,00,000 shares with 9.78% and 3.91% holdings. It is thereby clear that the complainant is one of the share holders and not one of the outside lenders. Apart from it after Para 6 agreed terms particularly one among 21 speak that Dr. Sambasivarao petitioner/accused the transferee and Dr. It is thereby clear that the complainant is one of the share holders and not one of the outside lenders. Apart from it after Para 6 agreed terms particularly one among 21 speak that Dr. Sambasivarao petitioner/accused the transferee and Dr. Varaprasad and Dr. Kishore are the 2 transferors and said 2 transferors agreed to transfer their and their associates entire equity shares in the company of 3,40,00,000/- equivalent to 34 lakhs of fully paid up equity shares of Rs.10/- each to the transferee or his associate at the instruction of transferee, and the transferee agreed to acquire the said shares from the transferors. Clause 2 speak said transferors shall deposit their and their associates share certificates along with duly executed transfer deeds in the joint custody of Dr. V.Nageswara Rao and Dr. P.Rambabu supra are arbitrators who shall hold the same till completion of obligations of the transferee that is payment of consideration and release of collateral security given by Dr. N.Kishore and Smt. K.Jyothi as per this agreement, for the benefit of the transferors. It is also mentioned in clause 4 of details of liabilities other than unsecured loans from Dr. Varaprasad, Kishore & Sambasiva Rao are listed as Schedule-I of agreement. Clauses 5 & 6 speak in consideration of the acquiring of shares of the transferors and their associates supra, the transferee shall discharge the loans and liabilities of the company bringing in an amount of Rs.9 crores and said amount brought in by the transferee shall first be utilized to repay the loans taken from the bank and remaining amounts should be used for repaying other creditors/liabilities including Dr. Pavan Kumar and Dr. Laxmi Narayana and the amount received through KSN Murthy basing on resolution dated 27.10.2015 and consultants service providers etc. Clauses 7 & 8 speak appointment of independent auditor to ascertain how much amounts of Dr. Varaprasad, Kishore and Sambasiva Rao brought into company as unsecured loan to meet the day to day expenses of the company before closing period and after ascertaining the same will be repaid to the respective parties and the parties agreed that unsecured loan brought in by them shall be repaid along with interest @ 12% per annum. Varaprasad, Kishore and Sambasiva Rao brought into company as unsecured loan to meet the day to day expenses of the company before closing period and after ascertaining the same will be repaid to the respective parties and the parties agreed that unsecured loan brought in by them shall be repaid along with interest @ 12% per annum. Clauses 9 to 11 speak that the parties agree that they should negotiate with all the creditors to arrive at a onetime settlement to reduce their claims to settle the liabilities of the company within the amounts made available by the transferee and in case the amount so brought by the transferee is not sufficient to repay the entire amount/liability then the transferors and transferee shall contribute in the proportion of their share holding to repay the loan/liabilities in excess of Rs.9 crores and in case after repayment of the loans/liabilities of the company any amount is left out from said Rs.9 crores then the excess amount shall be distributed among transferors and the transferee in the proportion of their share holding. Clauses 12 to 14 speak Dr. N. Kishore and Smt. Jyothi providing collateral security to SBH for the loans availed by the company and the transferors have also providing personal guarantees to the said Bank and the transferee and the company agreed to undertake and declare that they will pay consideration amount and to release the collateral security offered by Dr. N.Kishore and Jyothi and personal guarantees of the transferors provided to SBH for the term loan facilities availed by the company on or before 30.07.2016 and the parties agree to authorize the transferee to represent the company in cases filed by and against the company and the transferors to cooperate to pass such resolution and sign such document required to fulfill the terms of the agreement. Clause 15 speaks that the date on which the transferee completes his obligations on or before the closing date shall be closing date and the following events happen on or before closing date viz., Dr. Nageswara Rao and Dr. Clause 15 speaks that the date on which the transferee completes his obligations on or before the closing date shall be closing date and the following events happen on or before closing date viz., Dr. Nageswara Rao and Dr. P.Rambabu shall handover the share certificates with duly executed transfer deeds of the transferors and their associates to the transferee or their nominees for transferring the shares and after receipt of the share certificates with duly executed transfer deeds, the transferee or their nominees will submit the same to the Board of Directors of the company for executing the transfer of shares and post the closing date, a board meeting of the company for approving the transfer of the sale shares from transferors to the transferee or their nominees and the transferors shall resign as directors and transferee should file the returns with the Registrar of companies intimating the same. The transferee and the company agreed to fully indemnify the transferors against all claims, damages or losses etc. The transferors agreed that after the closing date shall not have any right against the company or transferee and the transferee and the company agreed that the transferors after closing date will not be responsible for the liabilities etc., of the company and the transferee and the company shall jointly indemnify, defend and hold harmless and the transferors against any losses or in connection the company and its business and management. Clause 20 speaks upon signing of this compromise and settlement agreement and from the closing date the transferors shall not have any right to file any case/litigation both civil and criminal proceedings. 7. It is very clear from clause No.20 supra of there is a bar for any legal proceedings by transferors and their associates. The complainant herein is not only the associate of her husband one of the 2 transferors, but also one of the share holders and not an outside lender even from what are the clauses referred supra. 7. It is very clear from clause No.20 supra of there is a bar for any legal proceedings by transferors and their associates. The complainant herein is not only the associate of her husband one of the 2 transferors, but also one of the share holders and not an outside lender even from what are the clauses referred supra. Now coming to whether the bar is absolute and totally in restraint of legal proceeding to make it invalid or only clarified with other remedy provided is concerned, clause 21 is important which speaks specifically that very clauses (a) to (e) that with arbitration clause that the agreement is made and shall be governed and construed for all purpose in accordance with laws of India and subject to arbitration, the Court at Hyderabad, Telangana, India shall have exclusive jurisdiction. If any dispute arises between the parties hereto during subsistence of this agreement or thereafter in connection with the validity, interpretation, implementation or alleged material breach of any provision of this agreement or regarding a question as to the termination of agreement by one party, the parties shall endeavour to settle the dispute amicably and if failed after reasonable attempts for 30 days, give notice thereafter to other party in writing, all disputes, controversies and differences of opinion arising out of or in connection with this agreement or for the material breach thereof which cannot be settled amicably by the parties hereto shall be settled by arbitration in accordance with the Arbitration Act, 1996 by the 2 arbitrators viz., Dr. V.Nageswara Rao and Dr. P.Rambabu and in case arbitrators are unwilling to act as such or it is impossible to appoint as arbitrators then the transferors and the transferee within 30 days after receiving notice, appoint one arbitrator each and the 2 arbitrators so appointed shall appoint third one as Chairman of the 3 arbitrators panel and in the event of failure to one to appoint an arbitrator, the other party is entitled to make application to Court for appointment. The decision of the arbitrator panel shall be final and binding on parties and the venue shall be either Hyderabad or Guntur. The parties herein agree that this compromise and settlement agreement as per clause 22 shall supersede all other agreements and understandings. The decision of the arbitrator panel shall be final and binding on parties and the venue shall be either Hyderabad or Guntur. The parties herein agree that this compromise and settlement agreement as per clause 22 shall supersede all other agreements and understandings. Once such is the case and the complainant is also one of the signatories to the agreement and the terms and contents not in dispute, she is not the outside lender as referred supra and she also being party to refer any dispute for one of the associates of her husband as one of the 2 transferors of the agreement, to arbitration and not to enforce for any of the recoveries covered by the agreement to criminal legal remedy or otherwise civil legal remedy and thereby it is not an absolute legal bar, but clarified and not totally hit by Section 28 of the Indian Contract Act. Was the same is enforceable and by virtue of the waiver of other legal remedies, but for invoke the present one it cannot be said it is invalid agreement so far as restricting of the available legal remedies concerned though not directly in issue the Apex Court expression in Lalit Kumar Sharma Vs. State of U.P. (2008) 5 SCC 638 is crystal clear that once the cheque dishonour case filed, complaint was withdrawn by obtaining another cheque pursuant to the agreement pending complaint even the 2nd cheque pursuant to the agreement for payment not honoured there is a bar for maintaining of the complaint based on the 2nd cheque under Section 138 of the Act. Further more the debt or other liability must be a legal enforceable one within the meaning of Section 138 explanation and Section 139 of the Act and it can be said though not covered by the Lalit Kumar Sharma supra in specific words, that by virtue of any agreement as to enforceability for the cheque dishonour other than criminal liability it can be said it is not a legally enforceable debt so far as criminal liability concerned. Leave it as it is for no more necessity further dwelling to this aspect, for even disputed question of fact also where the facts are available before the Court in quash petition can be gone into for no absolute bar as the 2 cheques in question concerned, the first agreement dated 20.03.2016 supra did not mention anything about giving of cheques and it is not even the case of either complainant or the accused that the post dated cheques in question given by or on the date of subject agreement dated 20.03.2016 as per the complaint and the sworn statement of the complainant the agreement dated 20.03.2016 is referred and it is also referred about subsequent modified agreement dated 11.01.2017 and it is stated accused issued 2 post dated cheques on 12.03.2017 saying handover the same to the mediators in compliance to the total sale consideration of Rs.9 crores. In fact the total consideration of Rs.9 crores is referred by the agreement dated 20.03.2016 particularly after first 6 clauses among 22 clauses at clause 5 (page 4 end) it speaks regarding the shares of transferors and other associates the transferee shall discharge the amount. Thus if at all the cheques in question is only in relation to the said Rs.9 crores covered by said agreement dated 20.03.2016 and not for any other debt or other liability. From this coming to modified agreement dated 11.01.2017 to the original agreement dated 20.03.2016 it speaks from 8 clauses in 2 pages covering clause No.1 is that as against Rs.9 crores, Sambasiva Rao (accused/petitioner) as transferee so far paid to bank Rs.1.54 crores and expenses incurred for power bill, water charges, property tax etc., of Rs.42.50 lakhs and provisions kept reserved for BRS, Vendors, consultants and in house consultant of Dr. Keerthi Kishore of Rs.30.50 lakhs and to repay the T/L due to SBH Rs.5.43 crores and after deducting the said amount, the transferee should discharge the balance out of the sale consideration of Rs.9 crores Rs.7.70 crores=Rs.1.30 crores. The condition No.2 of it speaks that out of said Rs.1.30 crores, Rs.75 lakhs will be kept with the transferee (Sambasiva Rao, petitioner/accused) to meet the dues payable to Mr. Rama rao and his associates which is considered and the cheques already issued by the transferee (petitioner/accused). The condition No.2 of it speaks that out of said Rs.1.30 crores, Rs.75 lakhs will be kept with the transferee (Sambasiva Rao, petitioner/accused) to meet the dues payable to Mr. Rama rao and his associates which is considered and the cheques already issued by the transferee (petitioner/accused). Condition No.3 speaks that it is also agreed that the transferee will issue a cheque for the balance amount of Rs.55 lakhs and hand it over to the arbitrators to be passed on to the external lenders. Condition No.4 speaks further that it is agreed that the transferors will give their and their associates share certificates along with transfer deeds to the transferee at his will. Here condition No.3 used the word external lenders and condition No.2 used the word payable to Mr. Rama Rao and his associates are relevant. Here the defacto complainant Jyothi W/o. Dr. Varaprasad, one of the 2 arbitrators along with Kishore and associates, are not part of Rama Rao and associates or external lenders. So far as Rs.55 lakhs to be handed over to the arbitrators by cheque concerned, coming to the 2 cheques in question mentioned as Rs.25,00,000/- + Rs.30,00,000/- payable dated 12.03.2017, and not even on the modified agreement dated 11.01.2017 from clause No.3 leave about giving of cheque for Rs.55,00,000/- and not even the 2 cheques to the arbitrators by the transferee Sambasiva Rao (petitioner/accused) to pass on to the external lender. In fact clause II of the modified agreement dated 11.01.2017 speaks regarding cheques already issued by the transferee which is for Rs.75 lakhs kept with the transferee Sambasiva Rao to meet the dues payable to Rama Rao and associates. 8. In this regard a perusal of the 2 cheques in question show K.Jyothi the name of the payee is appeared with different writing when compared to the other written contents of the 2 cheques issued by the accused transferee Sambasiva Rao. In this regard it is also relevant to consider the complaint enclosed document No.4 office copy of the statutory notice dated 16.03.2017 and the sworn affidavit of the complainant Jyothi for taking cognizance and this also no way speak in different version to the complaint contents. In this regard it is also relevant to consider the complaint enclosed document No.4 office copy of the statutory notice dated 16.03.2017 and the sworn affidavit of the complainant Jyothi for taking cognizance and this also no way speak in different version to the complaint contents. Thus it no way requires repetition, but for to say in the complaint page No.2 3rd Para and the sworn statement page 1 last Para last line speak as if the word used in clause No.3 of the modified agreement dated 11.01.2017 as lender and not external lenders. In fact the word used is crystal clear of external lender from the agreement and the complainant in question is not the external lender. From the combined reading of the agreement dated 20.03.2016 and 11.01.2017 from the contents also referred supra having discussed at length. Since the complainant Jyothi is party to the agreement as discussed supra from the contents of the agreement not in dispute apart from covered by the 1st transferors and his associates being his wife with specific reference clause of made for discharge of internal debts and liabilities. In this regard it is also relevant to see the notice dated 15.04.2017 issued by the Kishore and Jyothi complainant to the accused Sambasiva Rao. There having referred 2 settlement agreements supra and accepted with the conditions therein mentioned of condition No.3 of the modified agreement agrees that the transferee issued cheque for Rs.55 lakhs and to handover to the arbitrators to pass on to lenders that is Jyothi. It is not there as referred supra since clause 3 speaks of only external lenders. From the notice issued by Sri T.Purnachandra Rao to the accused/petitioner Sambasiva Rao on behalf of Varaprasad and Kishore, the 2 transferors and their associates, dated 18.02.2017 Para 15 clause (g) speaks that the accused issued post dated cheques for Rs.55,00,000/- and handover the same to the mediators in compliance to the total sale consideration of Rs.9 crores. Here it did not speak whether it is a mistaken outcome of mention of external lenders instead of lenders anywhere. Here it did not speak whether it is a mistaken outcome of mention of external lenders instead of lenders anywhere. Even taken for arguments, reference of external lenders instead of lenders of a reference of cheque may include cheques but for to represent Rs.55,00,000/- that were not directly given to the complainant but to the arbitrators i.e., 2 arbitrators and even for the 2 mediators to handover to the complainant there is a procedure including from clause 21 provided by the original agreement dated 20.03.2016 which is in force and the arbitration clause is re-enforced including by modified agreement to give to the cheques to the arbitrators as mediators. 9. Thus apart from the bar of the criminal prosecution, but for to go for any arbitration for the amount concerned and the giving of cheques speaks only to external lenders, thereby the sustainability of the very prosecution for the offence under Section 138 of the Act is bleak. 10. Though the inchoate instrument not even naming the payee, comes within the purview of Section 20 of the Act civil liability enforcement if at all from the showing of the said cheques given to the 2 arbitrators/mediators for settlement and if it is shown it was given by them pursuant to the consensus arrived at the settlement by the arbitrators. 11. Having regard to the above and with the observations, without prejudice to the enforcement of civil liability and all defence therein by holding that the criminal prosecution is not sustainable in the factual scenario, the Criminal Petition is allowed by quashing the proceedings. 12. No doubt on the expressions of the debt or other liability within the meaning of existence of legally enforceable debt or liability does not cover for any advance payment for supply of goods once the goods are not supplied for the cheques given as advance. Here also when the arbitration settlement and giving of cheques pursuant to that even given external lender by taking within the meaning of lender from any mistake so to refer, there is no legally enforceable debt so far as the offence under Section 138 of the Act concerned though subject to showing of the mediators finalization and giving of the cheque to the complainant if any for civil liability to enforce within the meaning of Section 20 of the Act as an authorization to fill the name of the payee. Consequently, miscellaneous petitions, if any shall stand closed.