Amalgiris and Others vs MSPL Limited

P.D. Waingankar, J.—By judgment of conviction and order of sentence dated 23.01.2013 in C.C. No. 252/2011 on the file of Principal Senior Civil Judge and JMFC, Hospet, the accused have been convicted for the offence punishable under Section 138 of N.I. Act and have been sentenced to pay a fine of Rs. 10,000/- each in default to undergo simple imprisonment for a period of three months apart from payment of compensation of Rs. 5,22,00,000/- which has been confirmed in Crl. A. No. 25/2013 by order dated 07.06.2014 on the file of III Addl. District and Sessions Judge, Bellary sitting at Hospet. Questioning the legality and correctness of the order passed by the Magistrate and the Sessions Judge, this revision petition is preferred by the accused under Section 397 r/w Section 401 of Cr.P.C.

The facts which gave rise to this petition are as under:

Petitioner No. 1-M/s. Amalgiris is a partnership firm of which the petitioner Nos. 2 and 3 are the partners. The petitioner firm was engaged in supply of iron ore to the respondent-M/s. MSPL Ltd., Hospet, as per the orders placed by the respondent from time to time. The respondent company used to make advance payment to the petitioner firm towards supply of iron ore from time to time. It is the case of the respondent/complainant that the petitioner firm failed to supply iron ore as per the orders placed by the respondent. As such, the respondent called upon the petitioner to refund the advance amount paid. The petitioner firm failed to pay the advance amount despite the demand made by the respondent. After persistent demand, finally, the petitioner firm issued a cheque No. 463398 dated 19.03.2011 drawn on Corporation Bank, Dr. Atamaram Borkar Road, Panjim, Goa for Rs. 5,22,00,000/- in favour of the respondent/company. The respondent presented the cheque for collection on 19.03.2011 through its banker. It came to be dishonoured for the reason that the petitioner firm stopped the payment. On 28.03.2011, the respondent issued a demand notice to the petitioner firm and its partners informing factum of dishonour of cheque and called upon them to pay the cheque amount within the stipulated period of time. Though the notices were served upon the firm and the partners, the cheque amount was not paid. Instead, they gave untenable reply stating therein that the cheque was not issued towards the discharge of debt or liability, but it was issued as a security in pursuance of the purchase order placed by the respondent. As such, the respondent filed a complaint under Section 200 of Cr.P.C. against petitioner Nos. 1 to 3 the firm and its partners for the offence punishable under Section 138 of N.I. Act before JMFC, Hospet.

The petitioners, who were accused Nos. 1 to 3 appeared before the Magistrate. They having denied the accusation, the respondent complainant to prove its case examined one B. Srivastav as PW. 1 and marked Exs. P1 to P14. On behalf of the accused, the purchase agreement entered into between the parties dated 10.07.2009 and 20.07.2009 were marked as Exs. D1 and D2. The accused did not step into the witness box. After recording the statement of the accused and after hearing the arguments, the learned Magistrate held that the cheque was issued towards the discharge of the liability and not as a security and thereby the learned Magistrate convicted all the accused for the offence punishable under Section 138 of N.I. Act and sentenced them to pay fine of Rs. 10,000/- and ordered to pay compensation to the respondent amounting to Rs. 5,22,00,000/-.

Aggrieved by the judgment of conviction and order of sentence passed by the Magistrate, the accused preferred Crl. A. No. 25/2013 on the file of III Addl. District and Sessions Judge, Bellary. During the pendency of the appeal, the accused filed an application seeking permission to lead further evidence by producing certain documents. Though the application was opposed, the learned Sessions Judge heard the application and permitted them to lead evidence. But the accused did not come forward to lead evidence. Finally, upon merits the appeal came to be dismissed by order dated 07.06.2014 confirming the judgment of conviction and sentence passed by the Magistrate. Therefore, this revision petition challenging the legality and the correctness of the order passed by both the Court below.

Since there was delay of 269 days in filing the revision petition, an application under Section 5 of the Limitation Act was filed for condonation of delay on the ground that the petitioners were facing criminal proceedings in various Courts including the Courts at Bengaluru in a case filed by Lokayuktha. They were also in custody for some time, they are the residents of Chennai and the delay was due to bona fide reasons. The application was opposed by the respondent. Since the amount shown in the cheque in question runs into crores of rupees and having regard to the facts and circumstances of the case the cause shown for the delay seems to be sufficient cause, upon hearing both the learned counsels, the delay was condoned and the arguments were heard on merits at length.

During the course of argument, the learned counsel appearing for the petitioners/accused produced three documents i.e., a) the purchase order No. MSPL/Amalagiris-L-1/GOA/10-11 dated 19.06.2010, b) the copy of the letter dated 31.07.2010 addressed to the accused No. 1-M/s. Amalgiris by the respondent duly signed by the authorised signatory and c) a copy of the final invoice submitted by accused No. 1. At the same time, the learned counsel for the respondent also produced copies of the purchase orders dated 21.06.2010 and 04.01.2013. Since the documents produced by both the parties were relevant documents and that there is no dispute between the parties as to the documents produced by them, they were considered during the final disposal of the revision petition.

The learned counsel appearing for the accused/petitioners has vehemently argued before me that the cheque in question was not issued towards discharge of debt or liability, but was issued in pursuance of the purchase order No. MSPL/Amalgiris-L-1/GOA/10-11 dated 19.06.2010 by the respondent in favour of the petitioner firm as security. He would further submit that Clause 16 of the purchase order speaks about the issuance of cheque No. 463398 for Rs. 5,22,00,000/- drawn on Corporation Bank, Panjim in favour of MSPL Ltd., as security and was to be returned on completion of the vessel and submitting the final invoice, this document i.e., purchase agreement dated 19.06.2010 was not produced before the Magistrate either by the petitioners or by the respondent, the learned Magistrate erroneously held that the cheque was issued towards the discharge of liability though in fact it was issued as a security. The learned counsel has further submitted before me that after completion of the vessel, the respondent issued a letter dated 31.07.2010 under the title ''Debit Note No. 09/10-11 (M.V. NAIAS)'' wherein it is stated that the vessel M.V. NAIAS sailed from Goa on 05.07.2010, meaning thereby the petitioner firm supplied the iron ore under the aforesaid purchase order and vessel after loading the iron ore sailed from Goa on 05.07.2010 and therefore, it was obligatory on the part of the respondent to return the cheque given as security. He would further submit that the petitioner firm has also submitted a final invoice in terms of clause No. 16 dated 18.08.2010. Thus, the petitioner firm had fulfilled all the obligations in pursuance of clause No. 16 of the purchase order dated 19.06.2010, but the respondent instead of returning the cheque has presented the same for collection with ulterior motive. The respondent/complainant suppressed the true facts of the case and thereby petitioners were convicted. For all these reasons, the learned counsel for the petitioners has sought to set aside both the orders passed by the Magistrate and the learned Sessions Judge and to acquit the petitioners of the charge under Section 138 of the N.I. Act.

On the other hand, the learned counsel for respondent-complainant while arguing in support of the judgment of conviction and sentence passed by the Magistrate and confirmed by the Sessions Judge would submit that the cheque in question was issued towards the discharge of legally recoverable debt, it being dishonoured, the accused have been rightly convicted.

At the outset, it is worthwhile to state that the revisional power of the court under section 397/401 Cr.P.C. is not be equated with that of an appeal. The revisional court is not meant to act as an appellate court. The whole purpose of revision is to preserve the power in the court to do justice in accordance with principles of criminal jurisprudence. Revisional power of the High Court cannot be exercised as a second appellate power. In exercise of revisional power, High Court cannot undertake in-depth and minute re-examination of entire evidence and upset concurrent findings of the trial court and first appellate court. With these principles in mind, let me go into the facts of the case on hand.

It is the case of the complainant that the petitioners/accused Nos. 1 to 3 were due to pay a huge sum to the respondent. As a part payment, the accused issued a cheque in question for Rs. 5,22,00,000/-. Whereas it is the case of the accused that the cheque was given to the complainant towards a security in pursuance of agreement entered between the parties during the course of their business and not for the discharge of debt. It is not in dispute that the complainant company used to place orders for the purchase of iron ore from the accused firm and the accused firm in turn used to supply the iron ore from time to time in pursuance of a purchase agreement entered between the parties. It appears from the records that though the accused firm received advance amount from the complainant from time to time, it failed to supply the iron ore as ordered. As a result, the complainant company demanded the repayment of advance amount obtained by the firm. Thereby dispute arose between the parties. Every purchase agreement entered between the parties provides for an arbitration clause for resolution of the disputes which reads as under:

"In the event of any disputes arising out of the purchase order, the parties shall attempt in the first instance to resolve such dispute through negotiations between the parties. If the dispute is not resolved through negotiations within seven business days after commencement of discussions, then either of the parties may by notice in writing to other party refer the dispute for resolution by binding arbitration in accordance with the procedure under the Arbitration and Conciliation Act 1996".

Since the dispute arose between the parties, the matter was referred to arbitration by Justice Keshavanarayan, Judge, (Retd.,) High Court of Karnataka, Bengaluru by the High Court in a petition filed under section 11 of the Arbitration and Conciliation Act, 1996. If it is the case of the complainant that the accused firm is due to pay/refund advance amount taken from the complainant and accused firm denies the same, it is for the arbitrator to resolve the dispute after hearing both the parties.

In the criminal complaint arising out of dishonour of cheque what is to be examined is whether the cheque in question was issued towards the discharge of debt or liability or it was given as security. I am not unmindful of the fact that there is a presumption that the issue of the cheque is for consideration under section 118 and section 139 of the N.I. Act. That presumption is however rebuttable in nature. If we look at the purchase agreement No. MSPL/Amalagiris-L-1/GOA/10-11 dated 19.06.2010 entered between the parties, now produced alongwith revision petition, it is evident from clause 16 of the agreement that the cheque in question was given by the firm to the complainant as security which was to be returned on completion of the vessel and submitting final invoice. Clause No. 16 reads as under:

"16. Operating practices:

a).......

b) Seller has issued one signed post dated cheque as below. Cheque No. 463398 amounting to Rs. 5,22,00,000/- drawn on Corporation Bank Panjim in favour of MSPL Ltd., and as security the cheque will be returned on completion of the vessel and submitting the final invoice.

c) ........"

Accused firm has produced a letter in the form of debit note No. 09/10-11 (M.V. NAIS) issued by the complainant company dated 31.07.2010 addressed to the firm stating therein that the vessel M.V. NAIS sailed from Goa on 05.07.2010. The reference is made in the said letter to the purchase order No. MSPL/Amalagiris-L-1/GOA/10-11 dated 19.06.2010. Therefore, it appears that in pursuance of the said purchase agreement, the firm supplied the iron ore and the consignment sailed from Goa on 05.07.2010. The accused firm has also submitted final invoice dated 18.08.2010 as per the clause No. 16 of the Purchase agreement, which is produced with revision petition. Thus, the accused firm appears to have discharged its obligation under clause 16 of the purchase agreement. In that case, the complainant was under obligation to return the cheque in question. Instead of returning the cheque, the complainant presented the cheque for collection. The complaint averments are totally silent about these facts. The fact remains that petitioners/accused have stopped the payment by writing a letter to the bank. It is only in case the cheque issued towards the discharge of existing liability is dishonoured and despite service of demand notice, if the cheque amount is not paid within the period of fifteen days, then only it constitutes an offence under Section 138 of N.I. Act. In the case on hand, though all the ingredients to constitute an offence under Section 138 of N.I. Act are fulfilled, the accused by production of the documents is trying to probablise his defence that the cheque was issued towards security so as to rebut the presumption under sections 139 and 118 of the N.I. Act. The documents produced by the petitioners were well within the knowledge of the respondent. They were the documents issued by the respondent to the petitioners during the course of business. The respondent deliberately suppressed the documents and the facts relating to the documents now produced by the petitioners. Of-course, the respondent has also produced two documents i.e., purchase agreement dated 10.7.2009 and 20.7.2009 wherein also the very same cheque finds place.

The petitioners have to show the circumstances under which the cheque came to be issued and this could be proved by the petitioners only by way of evidence and not by leading no evidence. Merely pleading not guilty and stating that the cheque was issued as security would not amount to rebutting the presumption raised under section 139 of the N.I. Act. In view of production of the documents by the petitioners, if the impugned judgment is sustained, it would cause grave miscarriage of justice having regard to the amount shown in the cheque. After all, execution of purchase agreement is not in dispute. The petitioners did not appear in the witness box. If the petitioners wanted to prove that the cheque was issued towards security in pursuance of a purchase order, they are suppose to appear in the witness box and testify and get themselves subjected to cross-examination. For all these reasons, I pass the following:-

The Criminal Revision Petition is allowed. The judgment of conviction and order of sentence dated 23.01.2013 in C.C. No. 252/2011 on the file of Principal Senior Civil Judge and JMFC, Hospet which is confirmed by the Sessions Judge in Crl. A. No. 25/2013 by order 07.06.2014 is hereby set aside. The matter is remanded to the Prl. Senior Civil Judge and JMFC, Hospet with a direction to permit the parties to lead further evidence in view of the aforesaid documents produced by both the parties and to dispose of the case afresh expeditiously.

The amount deposited by the petitioners before this Court in compliance with the order passed by the Hon''ble Supreme Court is hereby ordered to be refunded to petitioner No. 2 on proper identification and acknowledgement.