TaxTMI 
TaxTMI 
2022 (8) TMI 222
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....ard Pier, Mumbai, in Criminal Complaint Nos.8222/SS/2015 and 8223/SS/2015, of issue of process against the accused-petitioners herein for the offence punishable under Sections 138 read with 141 Negotiable Instruments Act, 1881 ("the N. I. Act"). 4. Shorn of unnecessary details, the background facts relevant for determination of these petitions can be summarized as under- (a) The respondent No.1 - complainant is a Company registered under the Companies Act, 1956. The complainant is engaged in trade of various commodities such as sugar, molasses, alcohol and chemicals. Petitioner No.1 is a Cooperative Society, registered under the Maharashtra Co-operative Societies Act, 1960. The petitioner No.2 is the Chairman of petitioner No.1. The petitioner No.3 is its Vice-Chairman and petitioner No.4 is the Managing Director. (b) The petitioners - accused run a sugar factory. On 21st October,2014, the accused had entered into an agreement with the complainant to supply and sale 'A' grade molasses having TRS 50% and above for industrial/export/liquor purpose. The respondent No.1 agreed to pay an advance amount of Rs.3,49,65,000/- to accused. Under the terms of the agreement....
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....calling upon the accused to pay the amount covered by the dishonoured cheques as well as the entire due amount, agreed to be paid in accordance with the terms of the settlement. Despite the service of notices, the accused committed default in payment. Hence, the complaints. 5. By an order dated 4th January, 2016, the learned Metropolitan Magistrate issued process against the accused for the offence punishable under Section 138 read with Section 141 of the N.I. Act, 1881. The petitioners-accused carried the matter in revision before the learned Sessions Judge. The principal ground urged before the learned Sessions Judge was that by 17th February, 2016, the entire amount payable under the dishonoured cheques was cleared. Thus, there was no justifiable reason to proceed with the trial. 6. The learned Additional Sessions Judge was not inclined to accede to the submission as, in the letter of settlement, it was, inter alia, recorded that in the event of default, the complainant would be entitled to recover the entire due amount. Thus, the question of liability was a matter for trial. Moreover, since the plea of the accused was already recorded, there was no reason to interf....
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.... process, the accused paid the amount covered by the dishonoured cheques is of no consequence. A two-pronged submission was canvassed by Mr. Gheewala. First, there was no appropriation of payments made by the accused No. 1. Two, in the letter of settlement, the accused had acknowledged in unequivocal terms that in the event of default in payment, the entire amount as claimed by the complainant in the letter dated 8th April, 2015 read with the notice issued on 20th April, 2015 along with interest, would become due and payable and the complainant would be entitled to take appropriate legal action. Thus, the accused on account of default in payment, in accordance with the terms of the settlement, incurred the liability to pay a sum of Rs.2,62,79,654/-. Resultantly, the subject cheques can be said to have been drawn towards the discharge of the said liability. 10. The first challenge revolving around invocation of Section 141 of the N. I. Act, 1881 appears to be primarily premised on the fact that the accused No. 2 is not the signatory to the cheuqe. Nor the accused No. 2 had executed the letter of settlement dated 4th June, 2015 under which the subject cheques were delivered. Howev....
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....est at the rate of 18% per annum. 15. The challenge to the validity of demand notices is required to be appreciated in the light of the fact that in accordance with the terms of the settlement, the accused had apparently acknowledged the liability to pay the entire amount, as claimed by the complainant in its letter dated 8th April, 2015 read with notice issued on 20th April, 2015, in the event of default in payment of any of the installments. The fact that the demand notice contains demand for an amount in addition to the amount covered by the dishonoured cheques, therefore, does not erode the validity of the demand notice. There was a clear and unequivocal demand of the amounts covered by the subject cheques. 16. In the case of Sunil Sethi Vs. Ajay K. Churiwal and another (2000) 2 SCC 380., this aspect was instructively expounded. The observations in paragraph No. 8 make the position clear. "8. It is a well-settled principle of law that the notice has to be read as a whole. In the notice, demand has to be made for the "said amount" i.e. the cheque amount. If no such demand is made the notice no doubt would fall short of its legal requirement. Where in addition to t....
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....nd large, consensus on the point as regards the payment made by the accused No.1. Against the first cheque drawn for a sum of Rs.50,00,000/- payable on 20th June, 2015, the accused paid a sum of Rs.50,00,000/- on 17th June, 2015. As against the second cheque drawn for Rs.42,75,607/-, payable on 10th July, 2015, a sum of Rs. 10,00,000/- was credited on 16th July, 2015, another sum of Rs.10,00,000/- on 20th July, 2015 and a further sum of Rs.3,00,000/- on 24th July, 2015, followed by a payment of Rs.20,00,000/- on 28th August, 2015. 20. It would be contextually relevant to note that the cheque drawn for a sum of Rs.42,75,607/- was presented for encashment on 27th July, 2015 and returned unencahsed on account of insufficiency of funds. Thus, by the date of presentment of the cheque a sum of Rs.23,00,000/- was paid against the cheque, drawn for Rs.42,75,607/-. 21. The cheque drawn for Rs.65,00,000/- was presented for encashment on 11th August, 2015 and was returned unencashed along with Cheque Return Memo on 12th August, 2015 for insufficiency of funds. As against the third cheque drawn for Rs.65,00,000/-, payable on 31st July, 2015, the accused claimed to have paid a sum of Rs.1....
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.... acknowledged the liability to pay the entire amount, as claimed by the complainant in letter dated 8th April, 2015 and notice 20th April, 2015, and the acceptance of payment of a sum of Rs.1,57,75,607/- by way of full and final settlement was conditioned upon the timely payment of all the installments mentioned therein. Thus, it was specifically provided that, in the event of default in payment of any of the installments, the entire amount, as claimed by the complainant, would become due. 26. Mr. Gheewala laid particular emphasis on the following admissions in the said letter dated 4th June, 2015. "1. We refer to your letter dated 8th April, 2015 and notice dated 20th April, 2015. 2. We hereby acknowledge our debt to you of the entire amount claimed by you under the said notice and further acknowledged that we are in default of the captioned Agreement. We further undertake and confirm to not make any claim contrary thereto in any suit or proceeding whether civil or criminal. We hereby agree and undertake to be bound by this letter in respect of the matters contained herein and to fully comply with our obligations as set out hereinafter. ....... ....
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.... of the demand notices and the statutory grace period for payment of the amounts covered by the dishonoured cheques. Cheque No. Amount (in Rs.) Payable on Amount paid & Date of receipt (in Rs.) Cheque dishonoured on Demand Notice Served on Statutory time to make payment expired on 519921 50,00,000/- 20/6/2015 50,00,000/- 17/06/2015 519922 42,75,607/- 10/7/2015 10,00,000/- 16/7/2015 27/7/2015 12/8/2015 27/8/2015 10,00,000/- 20/7/2015 3,00,000/- 24/7/2015 20,00,000/- 20/8/2015 519923 65,00,000/- 31/7/2015 10,00,000/- 24/9/2015 11/8/2015 24/8/2015 9/9/2015 24,99,944/- 3/12/2015 5,00,000/- 12/1/2016 24,75,607/- 17/1/2-16 30. The situation which thus obtains is that as regards the first cheque, drawn for Rs.50,00,000/-, the accused made the payment of the amount covered by the said cheque much before the said cheque became payable. As regards the second cheque payable on 10th July, 2015, part payments were made on 15th July, 2015, 20th July, 2015 and 24th July, 2015, before the second cheque was presented for encashment. It is ....
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....n and Others Vs. Union of India and Others 2014 (5) SCC 590., culled out the propositions, inter alia, as under: "18. From the above discussion the following aspects emerge: 18.1. Offence under Section 138 of the Act is primarily a civil wrong. Burden of proof is on the accused in view of presumption under Section 139 but the standard of such proof is "preponderance of probabilities". The same has to be normally tried summarily as per provisions of summary trial under Cr.PC but with such variation as may be appropriate to proceedings under Chapter XVII of the Act. Thus read, principle of Section 258 CrPC will apply and the court can close the proceedings and discharge the accused on satisfaction that the cheque amount with assessed costs and interest is paid and if there is no reason to proceed with the punitive aspect. 18.2. The object of the provision being primarily compensatory, punitive element being mainly with the object of enforcing the compensatory element, compounding at the initial stage has to be encouraged but is not debarred at later stage subject to appropriate compensation as may be found acceptable to the parties or the court. 18....
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.... cheques and instill a sense of confidence in commercial transactions entered on the faith of the cheque, the penal consequences, with certain safeguards, were introduced. Even where an accused either makes the payment or offers to make the payment of the amount covered by the cheque along with interest and costs of litigation, should he be prosecuted was the moot question which the Supreme Court considered and answered in the aforesaid decision. 37. It is imperative to note that in the case of Makwana Mangaldas Tulsidas Vs. State of Gujrath and Another (2020) 4 Supreme Court Cases 695., while issuing further directions, the Supreme Court adverted to the pronouncement in Meters and Instruments Private Ltd (supra) and observed inter alia as under. "18. In Meters & Instruments (P) Ltd., this Court had also observed that the nature of offence under Section 138 primarily relates to a civil wrong. While criminalizing of dishonour of cheques took place in the year 1988 taking into account the magnitude of economic transactions today, decriminalization of dishonour of cheque of a small amount may also be considered, leaving it to be dealt with under civil jurisdiction." ....
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....e Supreme Court in the case of Meters And Instruments Pvt. Ltd. (supra) seem to govern the facts of the case. 40. This propels me to submission on behalf of the complainant, forcefully canvassed by Mr. Gheewala, that with the default in payment of the installments, the entire amount, as claimed by the complainant, became due and the payments made by the accused could be legitimately attributed towards the said dues and not necessarily towards the amount covered by the cheques. In the backdrop of the clauses of the letter of settlement extracted above, the submission that the entire amount became due and payable, as per the agreement between the parties, cannot said to be without substance. The complainant may well be justified in seeking enforcement of the terms of the letter of settlement and the liability incurred thereunder. The complainant could also legitimately institute appropriate proceedings to enforce the said liability. However, this does not necessarily imply that to urge that the liability covered by the subject cheques is discharged, the accused must first pay the entire due amount. To put in other words, qua the complaints in question the barometer would be whethe....