TaxTMI 
TaxTMI 
2013 (2) TMI 28
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....ct and the summoning order dated 28.09.2010. Petitioner no.1, a private Company, is stated to be manufacturing garments and supplying the same to M/s Liverpool Retail India Limited. Since the amount involved in the purchase orders is huge, the petitioner has availed domestic factoring facility extended by respondent-M/s Bibby Financial India Pvt. Ltd. Under this facility the respondent Company pays sale amount to the extent of 80% of the sale invoices raised by the petitioner company towards the goods supplied to M/s Liverpool Retail India Limited. For clarification and proper understanding, it may be noticed that in the present transaction, the petitioner No.1 is the borrower, respondent is the 'Factor' and M/s Liverpool Retail In....
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.... security, therefore, no complaint under Section 138 of the Negotiable Instruments Act is maintainable. Reliance was placed on the judgments of Hon'ble the Apex Court rendered in the case titled as M.S. Narayana Menon @ Mai vs. State of Kerala and another passed in Criminal Appeal No.1012 of 1999 and the judgment of Delhi High Court rendered in the case titled as M/s Collage Culture & Ors. vs. Apparel Export Promotion Council & Anr. passed in Crl. M.C. No.3011/2004. (ii) The respondent has already preferred a complaint under Section 138 of the Negotiable Instruments Act against M/s Liverpool Retail India Limited whose invoices were financed by the respondent and who duly acknowledged the domestic factoring facilities and in response ther....
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....ies i.e the seller and the purchaser have defaulted and both are principally liable to the Factor i.e the respondent, until all payments have been made. Learned counsel vehemently opposed the fact that the said cheques were towards security. It was contended that the same were subject to the undertaking and the agreement between the parties. As such, they were in lieu of their liability, in case, the borrower did not make the payment. After hearing learned counsel for the petitioners, the first issue that requires to be decided is as to whether the cheques, in dispute, were towards security or the word used is a misnomer in the undertaking. The Managing Director of the petitioner firm-Shri Bhagwati Apparels India Limited gave an un....
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....resentative/official of the Borrower shall issue stop payment instructions to the banker in respect of the cheque/s issued to you, and affirm that the Executant or anybody else authorized by the Borrower shall not intimate the bankers to stop the payment due on the said cheque/s. The Executant agrees to ensure the availability of adequate funds in the bank account of the Borrower on which these cheques favouring Bibby Financial Services (India) Private Limited are issued, and undertake that the bank account shall not be closed, without prior intimation to you." In fact, the said paragraph further goes on to read that in the event the Borrower defaults in honouring any of the cheque/s, the respondent, herein, shall be at liberty to initia....
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....dent in the event of the purchaser of goods i.e. M/s Liverpool Retail India Limited defaulting in making payment. In view of the above, it cannot be said, at this stage, that the cheques were towards security. The said fact being disputed and debatable, it is a matter to be decided in trial. Thus, the complaint and the summoning order cannot be quashed on the first argument raised by learned counsel for the petitioners that the cheques were towards security. The question, as to whether, the cheques were towards security or towards their liability or otherwise, being a disputed question, the judgments relied on by the learned counsel for the petitioners rendered in the case titled as M.S. Narayana Menon @ Mani and M/s Collage Culture &....
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....d argument raised by learned counsel for the petitioners that as per Clause 2 of the Undertaking, the respondent did not issue a notice of demand before filing the complaint is in itself not sufficient to exercise the jurisdiction under Section 482 Cr.P.C for quashing of the complaint, in as much as, all the ingredients of Section 138 of the Negotiable Instrument Act are satisfied. Para 10 of the complaint specifically states that vide legal notice dated 07.07.2010, the complainant company through their counsel called upon the accused persons to make the payment of the amount covered by the dishonoured cheques. The said notice was sent to the accused persons through Regd. A.D. The postal authorities have delivered the notice sent to the acc....