Delhi High Court
Icon Buildcon Pvt.Ltd. vs Aggarwal Developers Pvt. Ltd. & … on 23 April, 2014
Author: S. Muralidhar
IN THE HIGH COURT OF DELHI AT NEW DELHI
CRL.L.P. No. 257 of 2013
ICON BUILDCON PVT. LTD. ….. Petitioner
Through: Mr. Ankit Jain, Advocate
versus
AGGARWAL DEVELOPERS PVT. LTD. & ORS ….. Respondents
Through: Mr. Sanjay Manchanda & Mr.
Anand Chaudhari, Advocates
WITH
CRL.L.P. 258 of 2013
ICON BUILDCON PVT. LTD. ….. Petitioner
Through: Mr. Ankit Jain, Advocate
versus
AGGARWAL DEVELOPERS PVT. LTD. & ORS ….. Respondents
Through: Mr. Sanjay Manchanda & Mr.
Anand Chaudhari, Advocates
WITH
CRL.L.P. 259 of 2013
ICON BUILDCON PVT.LTD. ….. Petitioner
Through: Mr. Ankit Jain, Advocate
versus
AGGARWAL DEVELOPERS PVT. LTD. & ORS….. Respondents
Through: Mr. Sanjay Manchanda & Mr.
Anand Chaudhari, Advocates
WITH
CRL.L.P. 260 of 2013
CRL.LP. Nos. 257-262 of 2013 Page 1 of 14
ICON BUILDCON PVT. LTD. ….. Petitioner
Through: Mr. Ankit Jain, Advocate
versus
AGGARWAL DEVELOPERS PVT. LTD. & ORS….. Respondents
Through: Mr. Sanjay Manchanda & Mr.
Anand Chaudhari, Advocates
WITH
CRL.L.P. 261 of 2013
ICON BUILDCON PVT. LTD. ….. Petitioner
Through: Mr. Ankit Jain, Advocate
versus
AGGARWAL DEVELOPERS PVT. LTD. & ORS….. Respondents
Through: Mr. Sanjay Manchanda & Mr.
Anand Chaudhari, Advocates
AND
CRL.L.P. 262 of 2013
ICON BUILDCON PVT. LTD. ….. Petitioner
Through: Mr. Ankit Jain, Advocate
versus
AGGARWAL DEVELOPERS PVT. LTD. & ORS….. Respondents
Through: Mr. Sanjay Manchanda & Mr.
Anand Chaudhari, Advocates
CORAM: JUSTICE S. MURALIDHAR
ORDER
23.04.2014
1. The challenge in these petitions is to the orders dated 18 th February 2013 passed by the learned Metropolitan Magistrate („MM‟) in Complaint Case Nos. 2207/1/07; 2208/1; 417/1; 2175A/1; 2190/1 and 2175/1, filed by the Petitioner/Complainant Icon Buildcon Pvt. Ltd. („IBPL‟) against Agarwal Developers Pvt. Ltd. („ADPL‟) and its Directors who were arrayed as Accused Nos. 2, 3 and 4 in the complaints.
2. The facts leading to the filing of the present petitions is that on 30 th December 2006, IBPL entered into an agreement to sell in respect of land admeasuring 24 bighas 12 biswas situated in village Khaira, Tehsil Najafgarh, New Delhi with the owners of the said land. On 2nd January 2007, IBPL entered into two further separate agreements to sell in respect of land measuring 10 bighas and 14 biswas and 45 bighas and 4 biswas respectively situated in the same village with the respective land owners. The total sale consideration was Rs.1.15 crores per acre. IBPL paid Rs.1,92,92,500 to the owners as part consideration. According to IBPL, ADPL offered to purchase the rights of IBPL under the aforementioned three agreements with a profit of Rs.10 lakhs per acre. Accordingly, an agreement dated 24th February 2007 was entered into between IBPL and ADPL whereby all rights of IBPL under the three agreements to sell were transferred to ADPL.
3. It is stated that ADPL handed over the following six cheques dated 24th February 2007 to IBPL towards the payment of the consideration under the aforementioned agreements:
Sl. No. Cheque No. Amount
01. 520572 1,08,31,500/-
02. 520573 51,21,530/-
03. 520574 22,29,167/-
04. 520575 94,16,667/-
05. 520599 58,98,000/-
06. 520600 25,63,000/-
4. The aforementioned six cheques were dishonoured and complaints were filed under Section 138 of the Negotiable Instruments Act, 1881 („
NI Act‟) which were dismissed by six separate impugned orders of the same date. Accordingly the present petitions have been filed seeking leave to appeal against the said judgments.
5. According to IBPL, ADPL had assured that the cheques when presented for payment will be honoured. IBPL states that when it first presented the cheques for payment, they were returned on 1 st March 2007 with the remarks “effects not yet cleared, please present again”. When IBPL again presented the cheques, they were returned on 8 th March 2007 with the remarks „funds insufficient‟. When the cheques were presented for payment on 29th March 2007 for the third time, they were returned dishonoured with the remarks „payments stopped by the drawer‟.
6. The last dishonour of the cheques led IBPL to issue a legal notice dated 20th April 2007 thereby initiating the proceedings under Section 138 NI Act. When no payment was forthcoming the complaints were filed in June 2007.
7. On behalf of IBPL, Mr. G.N. Bashista, an authorized representative was examined as CW-1. Mr. Parvesh Garg, an officer of the Punjab National Bank, in which the account of IBPL was maintained, was examined as CW-2. Mr. R.K. Saini, Junior Technical Assistant in the office of Registrar of Companies („ROC‟) was examined as CW-3. Mr. Vipin Kumar Singh, an officer of the ICICI Bank on which the impugned cheques were drawn and with whom ADPL‟s account was maintained was examined as CW-4.
8. When the incriminating evidence was put to the Respondents under Section 313 Cr PC, they denied the allegations. On behalf of the Respondents, Mr. Rajiv Kumar Pandey, who was working as an Accountant with ADPL was examined as DW-1. Mr. Sarjit Singh, Patwari from Tehsil Najafgarh, South West District, New Delhi, was examined as DW-2. He brought the records of the property in question and proved that an order had been passed by the SDM requiring status quo to be maintained and that the said status quo was in force. Mr. Nitin Kumar, Junior Judicial Assistant of this Court was examined as DW-3. He placed on record the order sheets in CS (OS) No. 416 of 2007. He confirmed that the said suit has been filed on 2 nd March 2007 and that the court fee filed in the said suit bears the date as 27 th February 2007. In his cross-examination, he confirmed that the first date of hearing was 5th March 2007. Mr. Satbir, Property Dealer was examined as DW-4. He confirmed that the three agreements to sell were executed between IBPL and the villagers in respect of the land in question and that the said agreements were valid till 15th-17th February 2007. He stated that IBPL failed to get the sale deeds registered in their favour.
9. From an analysis of the testimonies of CW-1 and CW-4, the trial Court came to the conclusion that the three agreements between IBPL and the land owners (Ex.P-2 to Ex.P-4) were executed at different points in time and at different places and that they did not bear signatures of any official of IBPL. Further, the trial Court held that certain conditions were to be fulfilled by both the parties under the agreements to sell for IBPL to get transferable rights in respect of the properties in question. However, it had nowhere been shown on record that the parties performed their respective obligations thereunder. With the land owners not obtaining a „no objection certificate‟ („NOC‟) from the concerned authorities, the question of vesting of any right or title to the properties in question in favour of IBPL under the three agreements did not arise. Therefore, at the time when the cheques in question were issued no legally enforceable liability arose. It was concluded by the learned trial Court that the cheques were not issued for discharging of legal enforceable liability. Finally, the trial Court also held that the legal notice did not appear to be served upon the address of the accused persons and, therefore, there was no proper service of the notice upon them under Section 138 NI Act. Consequently, the Respondents were acquitted of the offence under
Section 138 NI Act.
10. Mr. Ankit Jain, learned counsel for IBPL submitted that the trial Court committed a grievous error in holding that on the date of issuance of the cheques, i.e., 24th February 2007 no legally enforceable liability had arisen. Relying on the decision of the Supreme Court in M.M.T.C. Limited v. Medchl Chemicals & Pharma (P) LimitedAIR 2002 SC 182, Mr. Jain submitted that even though the cheques were dishonoured by reason of stop payment instructions, the offence under
Section 138NI Act would still be attracted. By virtue of
Section 138 read with
Section 139 NI Act, the Court was required to presume that the cheques in question were received by the holder for the discharge of a legally enforceable liability, though this was a rebuttable presumption. The accused had to show that (i) there were sufficient funds in the account to clear the amount of the cheques at the time of their presentation and (ii) that the stop payment instruction had been issued for valid and bona fide cause including that there was no existing debt or liability at the time of presentation of the cheques for encashment. It is submitted that, in the present case, on the first occasion when the cheques were presented for payment they were returned dishonoured for insufficient funds and, therefore, the first requirement was not met. Relying on the decision of the Supreme Court in
Laxmi Dyechem v. State of Gujarat195 (2012) DLT 111 (SC), learned counsel for the Petitioner submitted that the holder of the cheque should be presumed to have received the cheque for discharge of debt or other liability and that unless the contrary was proved, the drawer of the cheque had to demonstrate that he had bona fide reasons to stop the payment. It is submitted that in the present case the reason for stopping the payment was not bona fide. On the date the cheques were issued, i.e., 24th February 2007, there was no doubt as regards the rights of IBPL to title to the properties in question which rights IBPL agreed to sell to ADPL.
11. Countering the above submissions, Mr. Sanjay Manchanda, learned counsel for the Respondents, submitted that the land in question was represented at the time of the agreement dated 24th February 2007 to be free from encumbrances. However, as deposed by DW-2, an order had been passed by the SDM on 16th January 2007 directing maintenance of status quo. The third party with whom the agreements to sell had been entered into with respect to the very same land had filed CS (OS) No. 461 of 2007 in which an order was passed on 5 th March 2007 by this Court restraining the land owners from creating any third party interest in the properties in question. The evidence of DW-4 further showed that Mr.R.C.Agarwal, Director of ADPL had come to know of the dispute between the villagers and the third party and had been requesting IBPL not to present the cheques in question. It had also come in the evidence of CW-1 and CW-4 the IBPL had unilaterally cut a para of the agreement dated 24th February 2007 and had failed to hand over the originals of the Agreements between the villagers and the IBPL and this was in breach of the agreement dated 24th February 2007. It is submitted that the fact that IBPL did not issue any notice to the villagers requiring compliance of the three agreements and seeking to transfer its inchoate rights in the properties in question to ADPL showed that IBPL in fact had no valid transferable right in the properties in question which could be transferred to ADPL. Therefore, even assuming ADPL paid IBPL the amounts of the dishonoured cheques, IBPL was in no position to ensure that ADPL got the right, title and interest in the properties in question free from encumbrances. In the circumstances, the issuance by ADPL of stop payment instructions in respect of the cheques in question was bona fide.
12. The Supreme Court in a series of decisions has dealt with the question of dishonour of cheques due to stop payment instructions. In the present case, on the first occasion when the cheques were returned dishonoured due to insufficient funds, IBPL did not initiate any action under Section 138 NI Act. It is only after the dishonour of the cheque on the third occasion on 29th March 2007 on account of the stop payment instructions that IBPL decided to initiate action under
Section 138 NI Act. Therefore, for all practical purposes, the present cases must be treated as belonging to the category where the dishonour of the cheques was on account of stop payment instructions.
13. In M.M.T.C. Limited v. Medchl Chemicals & Pharma (P) Limited (supra), the Supreme Court clarified that dishonour on account of stop payment instructions would also be covered under
Section 138 NI Act and that presumption under
Section 139 NI Act would be attracted even in such a case. However, it was clarified that the said presumption is rebuttable. As long as the Respondents were able to show that the stop payment instructions were issued for bona fide reasons, no liability under
Section 138 NI Act would be attracted. As far as the second requirement i.e., the drawer having to show that as on the date of the presentation of the cheques the fund in its account was sufficient to honour the cheques, it is seen that it was in context of the facts in
M.M.T.C. Limited v. Medchl Chemicals & Pharma (P) Limited. In the present case, however, IBPL did not urge before the trial Court that the offence under
Section 138 NI Act was attracted due to insufficient funds. The proceedings under
Section 138 NI Act were initiated only when the cheques when presented for the third time on 29 th March 2007 were dishonoured on account of the stop payment instructions. No question was asked of the defence witnesses as to whether on the date of the presentation of the cheques in question for third time on 29 th March 2007, the balance in the accounts of ADPL was sufficient to honour the cheques.
14. In Laxmi Dyechem v. State of Gujarat (supra), the issue was addressed in the context of dishonour of the cheque due to closure of the account. After referring to the decision of the Supreme Court in
Rangappa v. Sri Mohan (2010) 11 SCC 441, it was held that “even in such cases, the question whether or not there was a lawfully recoverable debt or liability for discharge whereof the cheque was issued would be a matter that the trial Court will examine having regard to the evidence adduced before it and keeping in view the statutory presumption that unless rebutted the cheque is presumed to have been issued for a valid consideration”. In the concurring judgment of Gyan Sudha Misra, J. it was further clarified as under:
“7. As already noted, the Legislature intends to punish only those who are well aware that they have no amount in the bank and yet issue a cheque in discharge of debt or liability which amounts to cheating and not punish those who bona fide issues the cheque and in return gets cheated giving rise to disputes emerging from breach of agreement and hence contractual violation. To illustrate this, there may be a situation where the cheque is issued in favour of a supplier who delivers the goods which is found defective by the consignee before the cheque is encashed or a post-dated cheque towards full and final payment to a builder after which the apartment owner might notice breach of agreement for several reasons. It is not uncommon that in that event the payment might be stopped bona fide by the drawer of the cheque which becomes the contentious issue relating to breach of contract and hence the question whether that would constitute an offence under the NI Act. There may be yet another example where a cheque is issued in favour of a hospital which undertakes to treat the patient by operating the patient or any other method of treatment and the doctor fails to turn up and operate and in the process that patient expires even before the treatment is administered. Thereafter, if the payment is stopped by the drawer of the cheque, the obvious question would arise as to whether that would amount to an offence under
Section 138 of the NI Act by stopping the payment ignoring
Section 139 which makes it mandatory by incorporating that the offence under
Section 138 of the NI Act is rebuttable. Similarly, there may be innumerable situations where the drawer of the cheque for bona fide reasons might issue instruction of „stop payment‟ to the bank in spite of sufficiency of funds in his account.
8. What is wished to be emphasized is that matters arising out of „stop payment‟ instruction to the bank although would constitute an offence under Section 138 of the NI Act since this is no longer res-integra, the same is an offence subject to the provision of
Section 139 of the Act and hence, where the accused fails to discharge his burden of rebuttal by proving that the cheque could be held to be a cheque only for discharge of a lawful debt, the offence would be made out. Therefore, the cases arising out of stop payment situation where the drawer of cheques has sufficient funds in his account and yet stops payment for bona fide reasons, the same cannot be put on par with other variety of cases where the cheque has bounced on account of insufficiency of funds or where it exceeds the amount arranged to be paid from that account, since
Section 138 cannot be applied in isolation ignoring
Section 139which envisages a right of rebuttal before an offence could be made out under
Section 138 of the Act as the Legislature already incorporates the expression “unless the contrary is proved” which means that the presumption of law shall stand and unless it is rebutted or disproved, the holder of a cheque shall be presumed to have received the cheque of the nature referred to in
Section 138 of the NI Act, for the discharge of a debt or other liability. Hence, unless the contrary is proved, the presumption shall be made that the holder of a negotiable instrument is holder in due course.”
15. Recently in Indus Airways P. Ltd. v. Magnum Aviation P. Ltd. 2014 (4) SCALE 645, the Supreme Court held that there is a fine distinction between the civil liability and criminal liability under
Section 138 NI Act. It was observed as under:
“If at the time of entering into a contract, it is one of the conditions of the contract that the purchaser has to pay the amount in advance and there is breach of such condition then purchaser may have to make good the loss that might have occasioned to the seller but that does not create a criminal liability under Section 138. For a criminal liability to be made out under
Section 138, there should be legally enforceable debt or other liability subsisting on the date of drawal of the cheque.”
16. In terms of the law explained in the above decision, it is clear that even in a case of dishonour of cheque on account of stop payment instructions, the presumption under Section 139 of NI Act is attracted. However, it is rebuttable. The drawer of the cheque can seek to rebut the presumptions by showing on a preponderance of probabilities i.e., that the stop payment instructions issued were bona fide.
17. In the present case, the depositions of CW-1 and CW-4 reveal that IBPL was aware even on the date of the agreement dated 24 th February 2007 between it and ADPL that the properties in question were the subject matter of litigation. As spoken to by DW-2, there was a restraint order passed by the SDM on 16th January 2007 restraining the villagers from creating any third party interest. By the time the cheques were presented for payment for the third time, a restraint order was also passed by this Court on 5th March 2007 in CS (OS) No. 416 of 2007.
18. It is submitted by Mr. Jain that on the date the cheques were issued, i.e., 24th February 2007, there was a legally enforceable liability. On the facts of the present case, however, it is seen that on the date when the cheques in question were issued, it was not possible for IBPL to convey to ADPL a valid transferable right in the properties in question under the three agreements for payment of consideration. Even on the date of the three agreements, IBPL‟s rights were inchoate. IBPL‟s rights to the land in question were contingent upon both the parties to the three agreements performing their respective obligations. With the NOC having not been obtained by the villagers, it cannot be said that rights had accrued to IBPL in the properties in question. Even on the date of issuance of the cheques, i.e., 24th February 2007, the position was no different.
19. In the above circumstances, if on coming to know of the above difficulties, the Respondents had issued stop payment instructions, it cannot be said to lack in bona fides.
20. For the aforesaid reasons, the Court finds that the conclusion reached by the trial Court that the Respondents could not be held guilty for the offence under Section 138 NI Act does not suffer from any legal infirmity.
21. No grounds have been made out for grant of leave to appeal against the impugned judgment of the trial Court.
22. The petitions are dismissed.
23. The trial Court records be sent back forthwith.
S. MURALIDHAR, J.
APRIL 23, 2014 dn/Rk