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2018 DIGILAW 2974 (MAD)

D. Napolean v. M. V. M. Traders

2018-09-17

N.ANAND VENKATESH

body2018
JUDGMENT : N. Anand Venkatesh, J. The sole accused who is facing prosecution for the offence under Section 138 of the Negotiable Instruments Act, has filed the present petition seeking to quash the proceedings. 2. A reading of the complaint reveals the fact that the petitioner along with Vijaya Prakash, representing Global Media Works and Anand allegedly approached the respondent during the 3rd week of October 2016, seeking for a loan of Rs. 1,10,00,000/-, for the purpose of taking a movie. The respondent also agreed to give the loan. Accordingly a sum of Rs. 60,00,000/- was transferred by the respondent from his current account to the Bank account of Global Media Works. A further sum of Rs. 10,00,000/- was transferred by the respondent from his current account to the account of Global Media Works by way of RTGS transfer and a further sum of Rs. 40,00,000/- was paid by way of cash on 12.12.2016 to the said Global Media Works. As such a total sum of Rs. 1,10,00,000/- was borrowed by the Global Media Works represented by Vijaya Prakash. The further case in the complaint is that the said Vijay Prakash and Anand have paid a sum of Rs. 56,46,000/- and they failed to pay the balance amount. Subsequently, the petitioner along with Vijay Prakash and Anand paid further sum of Rs. 25,00,000/-. Later the petitioner has issued a post dated cheque dated 15.07.2017 in favour of the respondent for a sum of Rs. 28,54,000/-. When this cheque was presented, the same was dishonoured on the ground "payment stopped by the drawer". Subsequently, statutory notice was issued and a complaint has been filed by the respondent against the petitioner. 3. Mr. John Sathyan, learned Counsel appearing for the petitioner would submit that the respondent has not established the existence and subsisting liability/enforceable debt against the petitioner and therefore complaint itself is liable to be quashed. The learned Counsel would further submit that the petitioner only stood as a guarantor and as per the recitals in Ex.P 2 and Ex.P 3, the liability was primarily on the above said Vijaya Prakash and Anand who had given cheque to the respondent and the petitioner gave assurance that if in case Vijaya Prakash and Anand did not pay the amount, the petitioner will take the responsibility and repay the amount and the petitioner gave his cheques only as a security. The learned Counsel would further submit that the entire complaint is silent with regard to the cheques given by Vijay Prakash and Anand and it is not known whether they had paid the balance amount to the respondent. Therefore, the learned counsel would submit the contingency to pay the balance amount will arise for the petitioner only if the above said Vijaya Prakash and Anand fail to make payment and till then, there is no subsisting lability/ legally enforceable debt insofar as the petitioner is concerned. 4. The learned Counsel relied upon a judgment of the Bombay High Court in Kartik and another Vs HDFC Bank Ltd and another in Criminal Application No.4568 of 2009. 5. Per contra, the learned Senior Counsel Mr. Ajmal Khan, appearing for the respondent would submit that the fact that the petitioner stood as a guarantor itself is enough to make the petitioner liable for the debt towards which the petitioner admittedly issued cheques and therefore there is no requirement for the respondent to wait for the payment from the Principal Debtors namely Vijaya Prakash and Anand. 6. The learned Senior Counsel in order to substantiate his arguments relied upon the judgment of the Hon'ble Supreme Court in ICDS Ltd Vs. Beena Shabeer and another, (2002) 6 SCC 426 and also the judgment of the Hon'ble Supreme Court in Don Ayengia and State of Assam and Another reported in (2016) 3 SCC 1 . 7. This Court has carefully considered the submissions made on either side. 8. It is an admitted case that the petitioner stood as a guarantor for the balance amount of Rs. 28,54,000/- payable by Vijaya Prakash and Anand. The relevant portion in the letter of undertaking dated 06.06.2017 is extracted hereunder; “XXXXXXXX” 9. This document is also not in dispute. A reading of the above clause shows that the balance amount of Rs. 28,54,000/- was promised to be paid by Vijaya Prakash on or before 15.07.2017 and two cheques were given by them and the petitioner has also given his cheque dated 15.07.2017 as security. 10. The only issue that has to be considered by this Court is whether the respondent can proceed against the petitioner straight away without proceeding against the Principal Debtors on the ground that the petitioner stood as a guarantor for the repayment of loan by the Principal Debtors. 11. 10. The only issue that has to be considered by this Court is whether the respondent can proceed against the petitioner straight away without proceeding against the Principal Debtors on the ground that the petitioner stood as a guarantor for the repayment of loan by the Principal Debtors. 11. It will be useful to deal with the judgments cited by the learned Counsel appearing on either side. 12. The relevant portion of the judgment of the Bombay High Court in Kartik and another Vs HDFC Bank Ltd and another in Criminal Application No.4568 of 200, is extracted hereunder. "10. The loan agreement dated 22nd November 2005 between the complainant and the Company shows that the Company had undertaken to provide personal guarantee of Rajesh or a corporate guarantee of M/s Neelam India Pvt. Ltd. by way of additional security. Accordingly, Rajesh had issued a personal guarantee on 22nd November 2005. Though not contemplated by the loan agreement, similar personal guarantees were also issued by Kartik and Neelam. The guarantees issued by the applicants are identically worded. Para 1 of the operative part of the deeds of guarantee is material and is quoted herein below: "In consideration of the Bank having agreed to grant the said facility the Guarantor hereby irrevocably and unconditionally guarantee that the Borrower shall from time to time repay/ liquidate the facility to the Bank, together with interests and all other monies payable in respect thereof under the said Loan Agreement and shall perform and observe all terms and conditions of the said Loan Agreement and that in the event of the Borrower failing to pay or discharging his liability to the Bank the facility of Rs. 150 lacs or any part thereof together with interest and other monies in terms of the said Loan Agreement or committing or happening of any event of default as defined in the said Loan Agreement, the Guarantor shall on written demand by the Bank pay to the Bank without any demur and/or contestation and notwithstanding any dispute between the Bank and the Borrower and without going into regularity or veracity of such demands and notwithstanding any objection on the part of the Borrower the sum outstanding with interest and all other monies payable in respect thereof under the said Loan Agreement." (underlining supplied) Under the deed of guarantee the liability of Rajesh, Kartik and Neelam as guarantors was to arise on a written demand made by the complainant bank. The cheque in question was issued in pursuance of this deed of guarantee dated 22nd November 2005. The liability, for which the cheque is claimed to have been issued was to crystalise only on a demand made by the complainant on them. Before the presentation of the cheque, no demand was made by the complainant on the guarantors, namely Rajesh, Kartik or Neelam. Therefore, on the day when the cheque was presented by the complainant to the ICICI Bank in July 2006, the guarantors were not liable under the deed of guarantee as their liability had not arisen in the absence of any prior demand. Consequently, it must be held that the cheque was not issued in respect of any present liability. The liability was contingent upon the principal debtor not paying and the complainant making a demand on the guarantors." 13. The relevant portion of the judgment of the Hon'ble Supreme Court in ICDS Ltd Vs.Beena Shabeer and another, (2002) 6 SCC 426 , is extracted hereunder. "8. The High Court, as noticed above, did allow the Petition upon a categorical finding that being a cheque from the guarantor it could not be said to have been issued for the purpose of discharging any debt or liability and the complaint under Section 138 of the Negotiable Instruments Act, 1881, thus cannot be maintained. 9. "8. The High Court, as noticed above, did allow the Petition upon a categorical finding that being a cheque from the guarantor it could not be said to have been issued for the purpose of discharging any debt or liability and the complaint under Section 138 of the Negotiable Instruments Act, 1881, thus cannot be maintained. 9. As noticed hereinbefore, the principal reason for quashing of the proceeding as also the complaint by the High Court was by reason of the fact that Section 138 of the Act provides for issuance of a cheque to another person towards the discharge in whole or in part of any debt or liability and on the factual context, the High Court came to a conclusion that issuance of the cheque cannot be co-related for the purpose of discharging any debt or liability and as such complaint under Section 138 cannot be maintainable. 10. The language, however, has been rather specific as regards the intent of the legislature. The commencement of the Section stands with the words "Where any cheque". The above noted three words are of extreme significance, in particular, by reason of the user of the word "any" the first three words suggest that in fact for whatever reason if a cheque is drawn on an account maintained by him with a banker in favour of another person for the discharge of any debt or other liability, the highlighted words if read with the first three words at the commencement of Section 138, leave no manner of doubt that for whatever reason it may be, the liability under this provision cannot be avoided in the event the same stands returned by the banker unpaid. The legislature has been careful enough to record not only discharge in whole or in part of any debt but the same includes other liability as well. This aspect of the matter has not been appreciated by the High Court, neither been dealt with or even referred to in the impugned judgment. 11. The issue as regards the co-extensive liability of the guarantor and the principal debtor, in our view, is totally out of the purview of Section 138 of the Act, neither the same calls for any discussion therein. 11. The issue as regards the co-extensive liability of the guarantor and the principal debtor, in our view, is totally out of the purview of Section 138 of the Act, neither the same calls for any discussion therein. The language of the Statute depicts the intent of the law-makers to the effect that wherever there is a default on the part of one in favour of another and in the event a cheque is issued in discharge of any debt or other liability there cannot be any restriction or embargo in the matter of application of the provisions of Section 138 of the Act: 'Any cheque' and 'other liability' are the two key expressions which stands as clarifying the legislative intent so as to bring the factual context within the ambit of the provisions of the Statute. Any contra interpretation would defeat the intent of the legislature. The High Court, it seems, got carried away by the issue of guarantee and guarantor's liability and thus has overlooked the true intent and purport of Section 138 of the Act. The judgments recorded in the order of the High Court do not have any relevance in the contextual facts and the same thus does not lend any assistance to the contentions raised by the respondents. 12. It is to be noted, however, that both the parties during the course of arguments have made elaborate submissions on Sections 126 and 128 of the Contract Act, but in our view, by reason of the specific language used by the legislature, question of consideration of the matter from the point of view of another Statute would not arise, neither we would like to express any view since that may have some effect as regards the merits." 14. The relevant portion of the judgment of the Hon'ble Supreme Court in Don Ayengia and State of Assam and Another, (2016) 3 SCC 1 , is extracted hereunder. 13. It is important to note that it was not a case where no debt or liability was determined or acknowledged to be payable. If cheques were issued in relation to a continuing contract or business where no claim is made on the date of the issue nor any determinate amount payable to the holder, one could perhaps argue that the cheques cannot be presented or prosecution launched on a unilateral claim of any debt or liability. If cheques were issued in relation to a continuing contract or business where no claim is made on the date of the issue nor any determinate amount payable to the holder, one could perhaps argue that the cheques cannot be presented or prosecution launched on a unilateral claim of any debt or liability. The present is, however, a case where the existence of the debt/liability was never in dispute. It was on the contrary acknowledged and a promise was made to liquidate the same within one month. Failure on the part of the debtor to do so could lead to only one result, viz. presentation of the cheques for payment and in the event of dishonour, launch of prosecution as has indeed happened in the case at hand. 14. The argument that the respondent had no liability to liquidate the debt owed by Nazimul Islam, has not impressed us. What is important is whether the cheques were supported by consideration. Besides the fact that there is a presumption that a negotiable instrument is supported by consideration there was no dispute that such a consideration existed in as much as the cheques were issued in connection with the discharge of the outstanding liability against Nazimul Islam. 15. The Bombay High Court has held in the judgment referred that the complainant has to make his claim with the Principals Debtors to begin with and only thereafter the guarantor's liability will come into play. In other words, unless the complainant has made a demand from the Principal Debtors, the liability of the guarantor will never crystallize and the liability was contingent upon the Principal Debtor not paying. By relying upon this judgment, the learned Counsel for the petitioner would submit that the same will apply to the facts of the present case. 16. It is important to take note of the judgment of the Hon'ble Supreme Court in this regard. The Hon'ble Supreme Court in ICDS Ltd cited supra, has categorically held that in view of the language used under Section 138 of the Negotiable Instruments Act, "any cheque" which has been drawn for whatever reasons it may be, the liability under the provision cannot be avoided. The Supreme Court also went on to hold that issue as regards coextensive liability of the guarantor and the Principal Debtor is totally out of the purview of Section 138 of Negotiable Instruments Act. The Supreme Court also went on to hold that issue as regards coextensive liability of the guarantor and the Principal Debtor is totally out of the purview of Section 138 of Negotiable Instruments Act. The Hon'ble Supreme Court by relying upon the two expressions "any cheque" and "other liabilities'' has categorically held that the moment the cheque is issued in discharge of any debt or other lability, there cannot be any restriction or embargo in the matter of application of the provisions of Section 138 of Negotiable Instruments Act. The application of Sections 126 and 128 of the Contract Act will have no relevance in a case under Section 138 of Negotiable Instruments Act. 17. It is also relevant to take note of the judgment of the Hon'ble Supreme Court in Don Ayengia's case referred supra, wherein the Supreme Court in categorical terms has held that where ever, the cheque is supported by consideration, in the form of debt or liability, the same will attract the provisions of Section 138 of the Negotiable Instruments Act. 18. In view of the judgment of the Supreme Court, it is clear that the respondent need not really wait for the Principal Debtor to repay and they can always proceed against the petitioner who, admittedly stood as guarantor and issued cheque as security. The undertaking dated 06.06.2017 clearly states that the Principal Debtors will repay the amount of Rs. 28,54,000/-. The moment the Principal Debtors fail to make payment, the liability of the petitioner as a guarantor will come into operation. Since the principal debtor did not make any payment, the respondent proceeded to deposit the cheque on 09.10.2017. Even factually, this Court is of the considered view that on the day when the cheque was presented that is on 09.10.2017, there was existing liability insofar as the petitioner is concerned since the Principal Debtors failed to make payment of balance amount on or before 15.07.2017. As held by the Hon'ble Supreme Court, the language used under Section 138 of Negotiable Instruments Act, is so wide that law makers wanted to bring in "other type of liabilities" within the purview of the provision the moment the cheque is supported by consideration. 19. As held by the Hon'ble Supreme Court, the language used under Section 138 of Negotiable Instruments Act, is so wide that law makers wanted to bring in "other type of liabilities" within the purview of the provision the moment the cheque is supported by consideration. 19. In view of the above discussion, this Court does not find any ground to quash the proceedings and the petitioner has to face the proceedings before the Court below and raise all the defence available to him. It is made clear that the findings given in this order will have no bearing on the proceedings before the Court below and the petitioner is at liberty to raise all the contentions before the Court below and the Court below shall decide the case strictly on its own merits. 20. In the result the criminal original petition is dismissed. Consequently, CrlOP (MD) No. 1845 of 2018 is closed. 21. At this stage, the learned counsel for the petitioner submitted that the presence of the petitioner before the Court below may be dispensed with for the reason that the petitioner is staying in USA and taking care of his son's treatment. 22. Accepting the said submission, the presence of the petitioner before the trial Court shall be dispensed with on condition that he shall be present at the time of questioning under Section 313 of Cr.P.C and at the time of passing judgment. On all the other occasions the petitioner shall be represented by counsel. The learned counsel representing the petitioner shall cross-examine the witnesses on the day they are examined in Chief.