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Judgment
Rathnakala, J.—Petitioners/a private Company and its Managing Director are arrayed as accused in the proceedings initiated by the respondent/Housing Co-operative Society (for brevity society) in respect of the offence punishable under Section 138 of Negotiable Instruments Act (for brevity, Act).
The allegation of the complainant is, the society with an object to provide sites to its members in and around Bengaluru City, approached the accused, entered into Memorandum of Understanding (for short, MOU) dated 12.04.2013, to develop the land at Shankripura in Hosakote. But the accused identified the lands on IVC Road, Devanahalli; the parties entered into fresh MOU dated 7.10.2013 to develop said land within six months. The complainant paid Rs. 2 Crores to the accused for the above said purpose by way of two cheques drawn on City Union Bank. The accused gave two cheques of different dates for Rs. 75 lakhs and Rs. 75 lakhs in favour of the complainant and executed the receipt for Rs. 50 Lakhs as security for having received the sum of Rs. 2 Crores from the complainant. But he failed to abide by the terms of the MOU and took excuse that the land identified is in dispute and is pending before the High Court. He sought for 6 to 8 months time to procure the land. The society gave him time vide its Resolution dated 28.06.2014 to procure the land and same was intimated to the accused by way of letter dated 05.07.2014. But the accused expressed inability. Hence, the society issued legal notice dated 01.09.2014 intimating the accused about cancellation of MOU dated 07.10.2013 and also informed him that the cheque issued by him will be deposited for encashment on 13.09.2014, and demanded the accused to keep sufficient balance in their account. When the cheque was presented to the Apex Cooperative Society, Vidhana Soudha Branch, it was dishonoured with an endorsement ''Account Closed'', thereby the accused have committed an offence under Section 138 of the Act. But the accused issued untenable reply to the legal notice issued by the complainant.
Sri. V.V. Gunjal, learned counsel for the petitioners submits that as per MOU dated 07.10.2013 entered between the parties, the respondent was authorized to negotiate with the land owners and also owners of the adjacent lands for purchase of lands. The Society members were informed that there are certain legal contingencies which are yet to be resolved. It was the responsibility of the petitioner to take necessary sale permission, land conversion, layout approvers etc. Tentative rates were fixed at Rs. 1150 sq.ft. and the respondent/complainant paid Rs. 1.5 Crores as initial advance by way of two cheques and had agreed to pay further Rs. 10 Crores within 60 days from the date of MOU. Since the dispute between the owners and their parties persisted, the parties could not proceed further. Undated cheque was given by the Petitioner. In the reply notice to the demand notice of the complainant, causes for impasse was explained that the dispute is arbitrary under the MOU and they will join arbitration proceedings against the Vendors of M.S. Ramaiah Foundation and warned the complainant not to present the cheque, to the Bank since it is contractual obligation giving rise to civil liabilities. Despite the same, undated cheque that was issued towards non- existing legal liability was presented to the Bank only to harass the petitioners.
Learned Counsel further submits that while agreement was in force, the complainant issued notice to the accused dated 22.09.2014 informing about presentation of the cheque on 15.09.2014 and it returned with endorsement account closed. The agreement between the parties is germane to this, but that was not produced along with complaint before the Court while learned Magistrate took cognizance of the offence. On the showing of the complainant itself it was an undated cheque given as security. Time was not the essence of the contract and it takes 6 months to one year to complete all the formalities to develop the lands. But the complainant has hurriedly terminated the MOU dated 01.09.2013. As per terms of the MOU, for any breach either of the parties is entitled for specific performance of the agreement without prejudice to seek damages and/or arbitration under Arbitration and Conciliation Act. The petitioners being second parties to the MOU, under clause 32 was liable to resolve in dispute claims and court cases etc. The Cheque presented as security under the agreement is not outstanding liability to constitute an offence under Section 138 of the Act, as per catena of the judicial pronouncements. Presentation of the cheque was premature to bring undue pressure on the petitioner. Non production of the MOU along with complainant would amount to suppression of the fact. There is no ascertainable due from the petitioners to the complainant. The contract was enforceable and both were due to each other since as per the complaint averments itself, cheque was given as security there is no need to go for trial.
Learned counsel placed reliance on the judgments of the Apex Court in the case of 1) M.S. Narayana Menon @ Mani Vs. State of Kerala and Another, , 2) Indus Airways Pvt. Ltd. and Others Vs. Magnum Aviation Pvt. Ltd. and Another, , 3) judgment of the Bombay High Court, in the case of Joseph Vilangadan Vs. Phenomenal Health Care Services Ltd. and Another, .
Sri. G. Jairaj, learned counsel for the respondent submits that it is true that he has not produced the MOU dated 07.10.2013 along with the complaint. However, he has not suppressed any material from the court. He has mentioned about the same in his complaint averments. As per the MOU, the petitioners had paid Rs. 2 Crores under the agreement. It was not the cheque issued for no liability. Judgment of the Apex Court in the case of HMT Watches Ltd. Vs. M.A. Abida and Others , answers the question when a cheque given as security. Whether it is towards outstanding liability or not is a question of fact which has to be adjudicated by the trial Court and the complaint cannot be thrown only on the ground that the cheque is given towards security. The accused having not disputed the receipt of Rs. 2 Crores and issuing the cheque towards outstanding liability, he can not take shelter of the judgments which have held that dishonor of cheque issued towards security will not amount to the offence under Section 138 of the Act, since the facts of the present case stand distinguished.
In the light of the above rival submissions and also authorities relied by both of them, there is no gain say to the proposition that a cheque issued towards non-existent liability would not amount to an offence under Section 138 of the Act.
It is the petitioners/accused who produced the MOU dated 23.09.2013 and placing reliance on its various covenants to contend that there is arbitration class, contract cannot be cancelled unilaterally and both parties to the agreement are required to perform mutual obligation etc. It is also not in dispute that Rs. 75 Lakhs + 75 Lakhs received by petitioners is shown to be cheque amount. The contention is, only the blank cheque was issued at the instance of the complainant; when he was prepared to return the amount, the complainant refused to receive the same, but insisted for the developed land etc.
In the judgment of M.S. Narayana Menon (Supra), the Apex Court had the benefit of entire evidence recorded during the trial. The stress in the said case was statutory presumption under Section 118 (a) read with Section 139 of the Act. On the appreciation of the evidence, the Apex Court upheld the observation of the appellate Court whereby defence of the accused was accepted as probable on appreciation of evidence led therein. Defence of the accused that nothing was due from him and the cheque was issued by way of security was accepted as probable. It is only in the light of finding of the appellate Court, the Apex Court held that "if the defence is accepted as probable the cheque therefore cannot be held to have been issued in discharge of the debt as, for example, if a cheque is issued for security or for any other purpose the same would not come within the purview of Section 138 of the Act".
In the case of Indus Airways Pvt. Ltd. & Ors. (Supra), on examination of the facts and circumstances of the case and in the light of the explanation appended to Section 138 of the Act, the Apex Court found that there was no debt or liability on the date of delivery of the cheques that would take the case out of the purview of Section 138 of the Act. In that context, it was observed that "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.... if cheque is issued as an advance payment for purchase of the goods and for any reason purchase order is not carried out...the cheque cannot be said to have been drawn for an existing debt or liability".
The present facts have no semblance to the facts in the case of Indus Airways Pvt. Ltd. & Ors. (Supra).
Of course, law declared by the Apex Court is biding upon all the Courts of the country under Article 141 of the Constitution of India. The quarry here is whether the judgments of the Apex Court quoted by both the parties are Authoritative or persuasive. Both the parties would take a stand that the judgment cited by them is binding and judgment quoted by rival party is not.
It is the trites that the principles of binding precedent would apply when the facts are sufficiently similar. It is only the ratio decidendi which is binding, but not the obiter decta made in reference to the case, the court is dealing.
"i) In the case of P.S. Sathappan (Dead) by Lrs. Vs. Andhra Bank Ltd. and Others, , the Apex Court held as follows:
"138. While analyzing different decisions rendered by this Court, an attempt has been made to read the judgments as should be read under the rule of precedents. A decision, it is trite, should not be read as a statute.
"139. A decision is an authority for the questions of law determined by it. While applying the ratio, the court may not pick out a word or a sentence from the judgment divorced from the context in which the said question arose for consideration. A judgment as is well-known, must be read in its entirety and the observations made their in should receive consideration in the light of the questions raised before it. (See Haryana Financial Corporation and Another Vs. Jagdamba Oil Mills and Another, , Union of India (UOI) and Others Vs. Dhanwanti Devi and Others, , Dr. Nalini Mahajan, Ram Lal Mahajan Charitable Trust, Shri Rakesh Mahajan, Pan Foods Ltd. and Others and Mahajan Industries Pvt. Ltd. and Others Vs. Director of Income Tax (Inv.) and Others, , State of U.P. and Another Vs. Synthetics and Chemicals Ltd. and Another, , A -One Granites v. State of UP. and Ors., AIR 2001 SCW 848 and Bhavnagar University Vs. Palitana Sugar Mill Pvt. Ltd. and Others, .
"140. Although decisions are galore on this point, we may refer to a recent one in State of Gujarat and Others Vs. Akhil Gujarat Pravasi V.S. Mahamandal and Others, wherein this Court held:
"...It is trite that nay observation made during the course of reasoning in a judgment should not be read divorced from the context in which they were used."
ii) In Amar Nath Om Prakash and Others Vs. State of Punjab and Others, , the Apex Court has held:
"Judgments of court are not to be construed as statutes. To interpret words, phrases and provisions of statute, it may become necessary for judges to embark into lengthy discussions but the discussion is meant to explain and not to define. Judges interpret statutes, they do not interpret judgments. They interpret words of statutes: their words are not to be interpreted as statutes."
iii) In the case of Commissioner of Income Tax Vs. M/s. Sun Engineering Works (P.) Ltd., the Apex Court held thus:
"It is neither desirable nor permissible to pick out a word or a sentence from the judgment of this Court, divorced from the context of the question under consideration and treat it to be the complete ''law'' declared by the Court. The judgment must be read as a whole and the observations from the judgment have to be considered in the light of the questions which were before the Court. A decision of this Court takes its colour from the questions involved in the case in which it is rendered and while applying the decision a later case, the courts must carefully try to ascertain the true principle laid down by the decision of this Court and not to pick out words or sentences from the judgment, divorced from the context of the questions under consideration by this Court, to support their reasoning."
In that view of the matter, the facts on hand cannot be inserted in any formulae unmindful of the circumstances, since present case on facts stands distinguished from that of the facts involved in the authorities relied by the petitioners. The accused has availed Rs. 1.5 Crores from the complainant and towards security has issued a cheque when called upon to pay back closes the account. At this stage, it is hypothetical to say that the cheque issued as security will not make an offence under Section 138 of NI Act. It is domain of the concerned Magistrate after recording the evidence and consideration of the rival stand to find out whether case is an instance of offence under the Act or not.
No grounds do exist to quash the proceedings at this stage.
Petition is rejected.