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Gujarat High Court · body

2018 DIGILAW 241 (GUJ)

SAMARTH v. STATE OF GUJARAT

2018-01-24

J.B.PARDIWALA

body2018
JUDGMENT : 1. Rule returnable forthwith. Mr. Dharmesh Devnani, the learned APP waives service of notice of rule for and on behalf of the respondent No.1 State of Gujarat. Mr. Suraj Shukla, the learned advocate waives service of notice of rule for and on behalf of the respondent No.2original first informant. 2. By this application under Section-482 of the Code of Criminal Procedure, 1973, the applicants-original accused seek to invoke the inherent powers of this Court praying for quashing of the proceedings of the Criminal Case No.9026 of 2017 pending before the Court of 11th Additional Chief Judicial Magistrate, Rajkot, arising from a complaint filed by the respondent no.2 herein for the offence of dishonour of cheques punishable under Section-138 of the Negotiable Instruments Act. 3. It appears from the materials on record that the applicant no.1 is a Partnership Firm. The applicants nos.2, 3 and 4 are the Partners of the Partnership Firm. In connection with some transactions relating to the plots of land, two cheques came to be drawn, duly signed by the applicant no.2 on behalf of the Partnership Firm in favour of the respondent no.2 – original complainant. The details of the cheques are as under: (1) Cheque No.000321 drawn on the HDFC Bank, dated 05/05/2017 for the amount of Rs.8,00,000/-. (2) Cheque No.000320 drawn on the HDFC Bank, dated 05/05/2017 for the amount of Rs.32,00,000/-. 4. It appears that after the cheques were issued, the applicants herein instructed their bank to stop the payment. In such circumstances, the two cheques referred to above, were not cleared. The complainant was informed about the same by his bank and on receipt of the intimation from the bank about the dishonour of the cheques, the respondent no.2 issued a statutory notice to the applicants herein dated 11/08/2017. The two paragraphs in the statutory notice are important for the purpose of deciding this matter. The complainant was informed about the same by his bank and on receipt of the intimation from the bank about the dishonour of the cheques, the respondent no.2 issued a statutory notice to the applicants herein dated 11/08/2017. The two paragraphs in the statutory notice are important for the purpose of deciding this matter. The last two paragraphs of the legal notice issued by the respondent no.2 – complainant reads as under: (6) As mentioned above, the cheques given by your partners of the partnership firm, has returned and whereas, the cheques given to my client by you, was as per accounts of the partnership firm, has returned and whereas, till date you have not bothered to pay the amount towards the share of my client and therefore, you have tried to commit an offence as Section406, 420 and 114 of the Indian Penal Code of criminal breach of trust as well as cheating and conditions of partnership and committed an offence as per section 138 of the Negotiable Instruments Act. (7) By serving this final notice to the partnership firm no.1 and partners nos.2, 3 and 4 my client is informing you that within 15 days of receipt of the present notice, pay the amount liable as per accounts of the firm to my client or else by pursuing legal recourse my client is legally entitled to recover damages/compensation. 5. As the applicants failed to make the payment during the statutory time period, as provided in law, the respondent no.2 lodged a complaint, which came to be registered as the Criminal Case No.9026 of 2017 in the Court of 11th Additional Chief Judicial Magistrate, Rajkot. The court concerned after recording the verification of the complainant on oath, issued process to the applicants herein for the offence punishable under Section138 of the Negotiable Instruments Act. 6. Being dissatisfied with such order of issue of process, the applicants are here before this Court seeking quashing of the complaint and the order of the process. 7. The principal argument or rather the only argument canvassed by the learned counsel appearing for the applicants is that the legal notice issued by the respondent no.2 could not be said to be in accordance with law. 7. The principal argument or rather the only argument canvassed by the learned counsel appearing for the applicants is that the legal notice issued by the respondent no.2 could not be said to be in accordance with law. The argument of the learned counsel is that if the notice is read as a whole, then it is clear that there is no specific demand of a particular amount. According to the learned counsel, it is not just sufficient to state in the notice that the amount due and payable according to the accounts maintained by the Firm, should be paid to the complainant. To put it in other words, according to the learned counsel, the demand in the legal notice could be terms as “omnibus”. In such circumstances referred to above, according to the learned counsel, the complaint should fail. To make a complaint under section138 of the Negotiable Instruments Act maintainable in law, it is obligatory on the part of the complainant to show that he had issued a proper and legal notice as envisaged under Section138 of the Negotiable Instruments Act. In the absence of the same, the complaint is liable to be quashed. In support of his submissions, the learned counsel has placed reliance on a decision of the Supreme Court in the case of (i) Rahul Builders Vs. Arihant Fertilizers & Chemicals & Anrs., reported in (2008) 2 SCC 321 ; and (ii) Suman Sethi Vs. Ajay K. Churiwal and Another (2002) 2 SCC 380. Mr. Kakkad, the learned counsel, therefore, prays that there being merit in this application, the same be allowed and the complaint be quashed. 8. On the other hand, this application has been vehemently opposed by Mr. Suraj Shukla, the learned counsel appearing for the respondent no.2. According to Mr. Shukla, the legal notice issued by his client to the applicants could not be said to be deficient in any manner. To put it in other words, according to the learned counsel, all the materials particulars necessary to be brought to the notice of the accused persons, have been stated in the notice. The argument proceeds on the footing that it cannot be said that the applicants were taken by surprise on receipt of such notice. To put it in other words, according to the learned counsel, all the materials particulars necessary to be brought to the notice of the accused persons, have been stated in the notice. The argument proceeds on the footing that it cannot be said that the applicants were taken by surprise on receipt of such notice. The applicants knew that they had issued two cheques of a particular amount referred to above and those cheques, when presented by the complainant before his banker, were not cleared, as the applicants had issued stop payment instructions. In such circumstances referred to above, Mr. Shukla, the learned counsel appearing for the complainant prays that there being no merit in this application, the same be rejected. 9. Having heard the learned counsel appearing for the parties and having considered the materials on record, the only question that falls for my consideration is, whether the complaint should be quashed. 10. The two relevant paragraphs of the legal notice have been referred to above. In my view, the contention of the learned counsel herein for the applicants that the demand could be termed as “omnibus” deserves to be accepted. Although there may be a reference of the two cheques and the amount in the legal notice, yet, when it comes to a specific demand, the complainant has not said anything in the legal notice. In the legal notice, the complainant called upon the applicants to pay the amount due and payable according to the statement of accounts of the Firm within a period of 15 days. Such demand, in my view, could be termed as “omnibus”. 11. I had an occasion to consider the two Supreme Court judgments referred to and relied upon by the learned counsel appearing for the applicants in the case of 'Durairaj Mills Limited, Through Managing Director and Another Vs. State of Gujarat and Another'; Special Criminal Application No.7314 of 2017. I may quote the relevant observations made therein: 10. In Rahul Builders (supra), the appellant was a partnership firm. The respondent No.1 therein entered into a contract with it for construction of a building and factory premises. The appellant executed the said contract. The appellant submitted bills for execution of the contractual work for a sum of Rs.26,46,647/-. The respondent No.1 made payment of Rs.17,74,238/- and a balance of Rs.80,72,409/- was outstanding. The respondent No.1 therein entered into a contract with it for construction of a building and factory premises. The appellant executed the said contract. The appellant submitted bills for execution of the contractual work for a sum of Rs.26,46,647/-. The respondent No.1 made payment of Rs.17,74,238/- and a balance of Rs.80,72,409/- was outstanding. The cheque for a sum of Rs.1,00,000/- was drawn on the Federal Bank Limited, Indore, by the respondent No.1 in favour of the appellant. Upon presentation of the said cheque, it was not honoured on the ground that the respondent No.1 had closed its account with the Bank. A notice dated 31.10.2000 was sent by the appellant to the respondent No.1 stating that: ...Your Cheque No.69336 dated 30.4.2000 for Rs.1,00,000/- has also been returned unpassed by the Bank authorities with the plea that A/c No1461 has already been closed. Hence the undersigned is now free to take up any legal step against you to get the amount of my pending bills. In view of the above, you are requested to remit the payment of my pending bills within 10 days from the date of receipt of this letter otherwise suitable action as deemed fit will be taken against you. 11. Despite receipt of the notice, the respondent No.1 did not make any payment. A complaint was filed under Section 138 of the NI Act. In para 4, the Supreme Court observed as under: 4. The High Court, however, by reason of its impugned order, in exercise of its jurisdiction under Section 482 of the Code of Criminal Procedure (Code), has quashed the criminal proceedings pending against it holding: (i) 15 days notice having not been served upon Respondent No. 1, the same was not valid in law. (ii) The complainant by reason of the said notice having demanded a sum of Rs. 8,72,409/- as against the cheque which was for a sum of Rs. 1,00,000/- only, the notice was vague and did not serve the statutory requirements of Provisos (b) and (c) of Section 138 of the Act. 12. In para 5, the submissions canvassed on behalf of the appellant were noted. Para 5 reads as under: 5. Mr. 8,72,409/- as against the cheque which was for a sum of Rs. 1,00,000/- only, the notice was vague and did not serve the statutory requirements of Provisos (b) and (c) of Section 138 of the Act. 12. In para 5, the submissions canvassed on behalf of the appellant were noted. Para 5 reads as under: 5. Mr. Sushil Kumar Jain, learned counsel appearing on behalf of the appellant submitted that the High Court committed a serious error in passing the impugned judgment so far as it failed to consider: (i) Section 138 of the Act does not postulate a 15 days notice; (ii) Nonpayment of the amount of cheque being Rs. 1,00,000/- being a part of the demand sum of Rs. 8,72,409/-, no exception thereto could be taken. 13. While dismissing the appeal and upholding the order passed by the High Court quashing the complaint, the Supreme Court observed as under: “8. Section 138 does not speak of a 15 days notice. It contemplates service of notice and payment of the amount of cheque within 15 days from the date of receipt thereof. When the statute prescribes for service of notice specifying a particular period, it should be expressly stated. In absence of any such stipulation, it is difficult to hold that 15 days notice was thereby contemplated. The High Court, therefore, was not correct in arriving at the aforementioned finding. 9. We have noticed hereinbefore the notice dated 31.10.2000 issued by the appellant to Respondent No. 1. An information thereby was only given that the cheque when presented was returned "unpassed" by the bank authorities on the plea that the account had been closed. It was averred that in such a situation the complainant was free to take any legal steps against the accused to get the amount of his pending bills. By the operative portion of the said notice, the respondent was called upon to remit the payment of his pending bills, otherwise suitable action shall be taken. 10. Service of a notice, it is trite, is imperative in character for maintaining a complaint. It creates a legal fiction. Operation of Section 138 of the Act is limited by the proviso. When the proviso applies, the main Section would not. Unless a notice is served in conformity with Proviso (b) appended to Section 138 of the Act, the complaint petition would not be maintainable. It creates a legal fiction. Operation of Section 138 of the Act is limited by the proviso. When the proviso applies, the main Section would not. Unless a notice is served in conformity with Proviso (b) appended to Section 138 of the Act, the complaint petition would not be maintainable. The Parliament while enacting the said provision consciously imposed certain conditions. One of the conditions was service of a notice making demand of the payment of the amount of cheque as is evident from the use of the phraseology "payment of the said amount of money". Such a notice has to be issued within a period of 30 days from the date of receipt of information from the bank in regard to the return of the cheque as unpaid. The statute envisages application of the penal provisions. A penal provision should be construed strictly; the condition precedent wherefor is service of notice. It is one thing to say that the demand may not only represent the unpaid amount under cheque but also other incidental expenses like costs and interests, but the same would not mean that the notice would be vague and capable of two interpretations. An omnibus notice without specifying as to what was the amount due under the dishonoured cheque would not subserve the requirement of law. Respondent No. 1 was not called upon to pay the amount which was payable under the cheque issued by it. The amount which it was called upon to pay was the outstanding amounts of bills, i.e., Rs. 8,72,409/-. The noticee was to respond to the said demand. Pursuant thereto, it was to offer the entire sum of Rs. 8,72,409/-. No demand was made upon it to pay the said sum of Rs. 1,00,000/- which was tendered to the complainant by cheque dated 30.04.2000. What was, therefore, demanded was the entire sum and not a part of it. 11. Mr. Jain relied upon a decision of this Court in Suman Sethi v. Ajay K. Churiwal and Another [ (2000) 2 SCC 380 ] wherein it was stated: "8. It is a wellsettled principle of law that the notice has to be read as a whole. In the notice, demand has to be made for the "said amount" i.e. the cheque amount. If no such demand is made the notice no doubt would fall short of its legal requirement. It is a wellsettled principle of law that the notice has to be read as a whole. In the notice, demand has to be made for the "said amount" i.e. the cheque amount. If no such demand is made the notice no doubt would fall short of its legal requirement. Where in addition to the "said amount" there is also a claim by way of interest, cost etc. whether the notice is bad would depend on the language of the notice. If in a notice while giving the breakup of the claim the cheque amount, interest, damages etc. are separately specified, other such claims for interest, cost etc. would be superfluous and these additional claims would be severable and will not invalidate the notice. If, however, in the notice an omnibus demand is made without specifying what was due under the dishonoured cheque, the notice might well fail to meet the legal requirement and may be regarded as bad. 9. This Court had occasion to deal with Section 138 of the Act in Central Bank of India v. Saxons Farms 3 and held that the object of the notice is to give a chance to the drawer of the cheque to rectify his omission. Though in the notice demand for compensation, interest, cost etc. is also made the drawer will be absolved from his liability under Section 138 if he makes the payment of the amount covered by the cheque of which he was aware within 15 days from the date of receipt of the notice or before the complaint is filed." [Underlining is ours for emphasis] As therein, some other sums were indicated in addition to the amount of cheque, it was, therefore, not held to be a case where the dispute might be existing in respect of the entire outstanding amount. 12. On this aspect of the matter, we may consider K.R. Indira v. Dr. G. Adinarayana [ (2003) 8 SCC 300 ] wherein this Court upon noticing Suman Sethi (supra) stated the law, thus: "11...However, according to the respondent, the notice in question is not separable in that way and that there was no specific demand made for payment of the amount covered by the cheque. We have perused the contents of the notice. G. Adinarayana [ (2003) 8 SCC 300 ] wherein this Court upon noticing Suman Sethi (supra) stated the law, thus: "11...However, according to the respondent, the notice in question is not separable in that way and that there was no specific demand made for payment of the amount covered by the cheque. We have perused the contents of the notice. Significantly, not only the cheque amounts were different from the alleged loan amounts but the demand was made not of the cheque amounts but only the loan amount as though it is a demand for the loan amount and not the demand for payment of the cheque amount, nor could it be said that it was a demand for payment of the cheque amount and in addition thereto made further demands as well. What is necessary is making of a demand for the amount covered by the bounced cheque which is conspicuously absent in the notice issued in this case. The notice in question is imperfect in this case not because it had any further or additional claims as well but it did not specifically contain any demand for the payment of the cheque amount, the noncompliance with such a demand only being the incriminating circumstance which exposes the drawer for being proceeded against under Section 138 of the Act" 13. As in the instant case, no demand was made for payment of the cheque amount, we are of the opinion that the impugned judgment cannot be faulted. 14. The principle of law explained by the Supreme Court in the above referred decision is that the service of a notice in case under the NI Act is mandatory. One of the conditions of a valid notice is making demand of the amount of cheque. The Supreme Court took the view that an omnibus notice without specifying as to what was the amount due under the dishonoured cheque, would not sub-serve the requirement of the law. In the case before the Supreme Court, the cheque amount was Rs.1,00,000/- whereas, the accused was called upon to pay the outstanding amount of bills, i.e. Rs.8,72,409/-. This vague demand in the notice weighed with the Supreme Court. 15. In the case on hand, the notice in question cannot be termed as imperfect because there is a discrepancy in the amount demanded. This vague demand in the notice weighed with the Supreme Court. 15. In the case on hand, the notice in question cannot be termed as imperfect because there is a discrepancy in the amount demanded. The complaint is liable to be quashed, if it fails to contain a specific demand in the payment of the cheque amount. 16. Mr.Jain, the learned Counsel appearing for the complainant is justified in submitting that the issue raised in this application is not even addressed by the accused persons in their reply to the statutory notice issued by the complainant. No dispute in this regard has been raised by the accused persons in their reply dated 18th March, 2015. Mr.Jain also pointed out that in the statutory notice issued by the complainant, there is a clear reference of the cheque bearing No.042330 including the amount of Rs.80,80,198/-(Rupees Eighty Lakh Eighty Thousand One Hundred & Ninety Eight Only). Besides the same, Mr.Jain pointed out that in the reply of the accused applicants, there is a reference of the cheque No.042330 for the amount of Rs.80,80,198/-. 12. In the case of Durairaj (Supra) having regard to the facts and circumstances of the case, I declined to quash the complaint because in my view, the demand was not “omnibus”. In the case of 'Durairaj Mills Limited (Supra), the cheque amount was of Rs.80,80,198/-, whereas, the demand in the legal notice was for the amount of Rs.90,39,198/-. Atleast, there was some demand in terms of a particular figure. So far as the case on hand is concerned, there is no demand at all as is evident from the two paragraphs of the legal notice i.e. Paragraphs – 6 & 7 referred to above. 13. If the legal notice as envisaged under the Provisions of the Negotiable Instruments Act is found to be not in accordance with law, then the complaint should fail. The service of a valid legal notice in a case under section138 of the Negotiable Instruments Act, is mandatory. 14. In the result, this application succeeds and is hereby allowed. The proceedings of the Criminal Case No.9026 of 2017 pending before the Court of 11th Additional Chief Judicial Magistrate, Rajkot, is hereby ordered to be quashed. All consequential proceedings pursuant thereto shall stand terminated. 14. In the result, this application succeeds and is hereby allowed. The proceedings of the Criminal Case No.9026 of 2017 pending before the Court of 11th Additional Chief Judicial Magistrate, Rajkot, is hereby ordered to be quashed. All consequential proceedings pursuant thereto shall stand terminated. It is needless to clarify that the quashing of the complaint for the offence punishable under section138 of the Negotiable Instruments Act, shall not come in the way of the complainant in initiating any other appropriate proceedings before the appropriate forum in accordance with law, including filing of a civil suit for recovery of the cheque amount and if permissible in law file a complaint or F.I.R. for the offence of cheating. Rule is made absolute to the aforesaid extent. Direct service is permitted.