Embee Textiles Limited and Another vs Sadhu Ram and Co.

H.K. Sandhu, J.—M/s Embee Textiles Ltd. Karur Road, Tamil Nadu and its Managing Director K.V. Kupu Swamy filed the present petition u/s 482 of the Code of Criminal Procedure for quashing the complaint dated 28.11.1991 (Annexure p/6) and further proceedings in pursuance thereof, pending in the Court of Chief Judicial Magistrate, Bhatinda.

Complaint Annexure P/6 u/s 138 read with Section 142 of the Negotiable Instruments Act (the Act for brevity) was filed by Sadhu Ram and Company against the present Petitioners on the allegations that M/s Embee Textiles Limited had been transacting business of purchase of cotton through the complainant firm and owed huge amounts running into many lacs of rupees to the firm. In payment of part of its debts Managing Director of M/s Embee Textiles Limited issued three cheques No. OSM 415151 dated 10.4.1991 for Rs 1,02,219,17; OSM 415152 Dated 19.4.1991 for Rs. 1,03.156.16 and OSM-415153 dated 29.4.1991 for Rs. 1,03,106,84 to be drawn on Punjab National Bank, Coimbatore. These cheques were presented for collection of amount through Punjab National Bank, Arya Samaj Chowk, Bhatinda Branch, but were returned by the bankers Petitioner N6.1 with the remarks that "payment stopped by the drawer". Intimation relating to the dishonour of the cheques was received by the complainant on 15.10.1991. Within a period of 15 days of the receipt of the information relating to the return of the cheques as unpaid, a registered notice was sent to the Petitioners bringing to their knowledge that the cheques had been dishonoured and they were asked to make payment within 30 days of the receipt of the notice but no payment was made.

The Petitioners pleaded that Petitioner No. 1 had been purchasing cotton from the Respondent for about a year and issued 56 cheques in that connection out of which 9 cheques were encashed, 26 cheques were returned to M/s Embee Textiles while 21 cheques were retained by the Respondent which included the three cheques in question. The Respondent filed eight complaints against the Petitioners in the Court of Chief Judicial Magistrate, Bhatinda between 17.1.1991 to 13.6.1991 on the ground that 21 cheques had been dishonoured. Thereafter the amount due to the Respondent was calculated and was found to be Rs. 29,92,920.75 including interest upto 15.8.1991. Some amount was also found due to Asian Engineers and Indian Card clothing Company bringing the total to Rs. 33,58,553.54 On 3.9.1991 a draft of Rs. 30 lac was given to the Respondent vide letter dated 27.8.1991 and in response thereof all 8 pending cases pertaining to 21 cheques were withdrawn. The Respondent acknowledged the receipt of Rs. 30 lacs and agreed to return 21 cheques as per letter dated 3.9.1991 including the cheques in question. The three cheques mentioned in the complaint by the Respondent were issued on 24.12.1990 and were dated 10.4.1991 and were part of the amount covered by payment of Rs. 30 lacs and no amount remained due to the Respondent after payment of Rs. 30 lacs.

The Petitioners instructed their bankers not to make payment against 21 cheques that were with the Respondent, but with malafide intention the Respondent presented three cheques event though the Respondent was well aware of the fact that these cheques were to be returned to the Petitioners in accordance with the agreement. In these circumstances the complaint was filed with a view to extract payment not legally due from the Petitioners by offering threat and abuse of process of Court. Moreover, the cheques were not dishonoured due to any of the grounds stated in Section 138 of the Act i.e. insufficiency of funds or due to the amount exceeding the amount arranged to be paid from the account and no grounds for an offence were made out.

In the return filed by the Respondent. It was contended that the cheques were issued as part payment by the Petitioners and payment of the cheques was stopped with malafide intention. In fact the amount due to the Respondent was more than Rs. 33 lacs.

I have heard Mr. J.K. Sibal, Senior Advocate, assisted by Miss Swaranjit Kohli, Advocate, counsel the Petitioners and Mr. H.S. Awasthi, Advocate, counsel for the Respondent.

The learned Counsel for the Petitioners contended that M/s Embee Textiles Ltd. purchased cotton through the Respondent firm and issued various cheques in favour of the Respondents. Out of those cheques 21 could not be encashed and the Respondent thereafter filed eight complaints against the Petitioners in the Court of Chief Judicial Magistrate, Bhatinda; The accounts were then settled and a draft for Rs. 30 lacs was sent to the Respondent through Shri Bahrodiaji, who was the commission agent, vide Annexure P/1 dated 27.8.91. Vide this letter the commission agent was asked to deliver the draft of Rs. 30 lacs to M/s Sadhu Ram and Company and hand over 21 cheques lying with him. On 3.9.1991 after receipt of the draft of Rs. 30 lacs Shri Rajiv Gupta, Advocate, counsel for the Respondent withdrew all the complaints and gave intimation regarding the same as per Annexure P/2. On the same day letter, copy of which is Annexure P/3, was sent by the Respondent to Petitioner No. 2 whereby receipt of bank draft of Rs. 30 lacs was acknowledged and the Petitioner were informed that 21 cheques lying in the Court will be returned to him as soon as the same were received back. It was contended that after the Respondent had received the amount of Rs. 30 lacs and had withdrawn the complaints earlier instituted on the basis of 21 cheques, it should not have presented three cheques out of these 21 cheques again to the bank for payment, when it was agreed that balance will be settled amicably. The Petitioners were within their rights to stop payment and they had not committed any offence.

The contention of the learned Counsel appears to be well- merited as it is evident that the allegations made in the complaint did not constitute the offence for which the proceedings are sought to be taken against the Petitioners. Section 138 of the Act provides:

Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provision of this Act, be punished with imprisonment for a term which may extend to one year, or with fine which may extend to twice the amount of the cheque, or with both:

Provided that nothing contained in this section shall apply unless:

(a). the cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier;

(b). the payee or the holder in due course of the cheque, as the case may be makes a demand for the payment of the said amount of money by giving a notice in writing, to the drawer of the cheque, within 15 days of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and

(c). the drawer of such cheque fails to make the payment of the said amount of money to the payee or as the case may be, to the holder, in due course of the cheque within 15 days of the receipt of the said notice.

A perusal of the above section shows that cognizance of the offence can be taken by the court only if the cheque should have been dishonoured due to either indadequacy of funds or due to the amount exceeding the limit against the account. In the present case this fact is admitted that the cheques were returned with the remarks ''payment stopped by drawer'' and the cheques were not dishonoured due to any of the grounds stated in Section 138 of the Act. There were no averments in the complaint that the cheques were dishonoured due to insufficiency of funds or due to the amount exceeding the limit against the account. Before filing the complaint the Respondent did not try to ascertain whether there were sufficient funds in the account of the drawer or whether the payment was stopped with malafide intention as the drawer was aware that the cheques were to be dishonoured on account of inadequancy of funds. It is not a case where the Petitioners admitted that they owed any amount. Rather their contention is that a sum of Rs. 30 lacs had been paid to the Respondent by means of a draft and the rest of the amount if any was to be settled amicably.

From the various documents placed on record it is very well made out that on the basis of 21 cheques which had been dishonoured the Respondent had filed eight complaints against the Petitioners. When draft was handed over to the Respondent by Shri Bahrodiaji, the agent of the Respondent, the Respondent vide letter copy of which is Annexure P/3 agreed to return all the 21 cheques lying in the Court after obtaining the same from there. Thereafter the parties were to settle the balance amount, if any, amicably. But, instead of returning the cheques, as agreed, the Respondent presented the same in the Bank for payment and this act of the Respondent clearly indicated his malafide intention and amounted an abuse of the process of the Court.

Section 138 of the Act stipulates that holder of the cheque will make a demand for payment of the amount by giving a notice in writing to the drawer who will make payment of amount within 15 days, but in the present case vide notice Annexure P/4 the Petitioners were asked to make payment of the amount within 30 days so notice did not conform to the specifications of statute. In interpreting a penal provision it will not be appropriate to give an extending meaning to the plain words of the section. The Petitioners in this case countermanded the payment by a stop memo in pursuance of the agreement arrived at with the Respondent and in view of the circumstances explained by the Petitioners there was no prima-facie case covered under the penal provisions. The complaint amounted to an abuse of the process of the Court as the cheques were presented to the bank after it was agreed that the same will be returned to the Petitioners.

In view of the above discussion I accept this petition and quash/the complaint annexure P/6 and all further proceedings in pursuance there of pending in the court of Chief Judicial Magistrate, Bhatinda.