TaxTMI 
TaxTMI 
2025 (12) TMI 214
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....unal Saini, Advocates for R-2. JUDGEMENT NEENA BANSAL KRISHNA, J. 1. Aforesaid twelve Petitions have been filed by the Petitioners under Section 482 Criminal Procedure Code, 1973 (Cr.P.C) seeking quashing of the criminal proceedings and the impugned Summoning orders, dated 31.01.2017, and 01.03.2017, of the Learned Metropolitan Magistrate, for offences under Section 138 read with 142 NI Act. 2. At the core of this dispute are three main entities namely; PTC India Financial Services Ltd. (PFS), the Complainant and lender; NSL Nagapatnam Power & Infratech Ltd. (NNPIL), the borrower; and NSL Energy Ventures Private Limited (NEVPL), the accused group Company linked to NNPIL. 3. Briefly stated, NNPIL got engaged in setting up a 1320 MW Thermal Power Project in Odisha and required immediate capital for the Project. PFS/Complainant stepped in and sanctioned a bridge loan of Rs. 125 Crores on 10.03.2014. This was intended as an advance to be converted into a larger term loan of Rs. 150 Crores once the Project met certain milestones. The initial Agreement dated 10.03.2014 established a clear lender-borrower relationship and a repayment schedule. 4. NNPIL/Borrower found it ....
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....undant," and proceedings related thereto were being withdrawn. PFS/Complainant contended that this referred only to Notices for defaults given before 31.08.2016. However, the Petitioners asserted that it is an admission that the payment made on 23.09.2016, which fundamentally altered the Agreement, rendering the entire basis for the old claims obsolete. 12. PFS/Complainant also initiated parallel proceedings for the recovery of the same loan under the SARFAESI Act, 2002, against the NNPIL/Borrower. 13. The Petitioners have challenged the Complaints on the grounds that the Criminal Complaints under Section 138 NI Act, are maintainable if there is an existence of a legally enforceable debt, which is absent in this case. 14. The correspondence in August, 2016 created a new, binding Agreement. PFS's letter dated 30.08.2016, was an unequivocal conditional offer stating that if NNIPL clears the outstanding dues as of 31.08.2016, then the conversion of the Bridge Loan to a Term Loan, would be considered. In fact, the Complainant's own Letter dated 13.02.2017 contains a critical admission and it acknowledged the payment made on 23.09.2016 and stated that as a consequence, all prev....
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....ere "in charge of and responsible for the day-to-day affairs" of the Company. The law requires specific averments detailing the role of each Director in the alleged offense. In the absence of specific allegations, Director cannot be held vicariously liable merely by virtue of their designation. The Complaints, therefore, are legally insufficient to proceed against the individual Directors. 22. Thus, it is prayed that the Criminal Complaints be quashed. 23. Learned Counsel for the Respondent No. 2/PFS/Complainant, has vehemently opposed the Petitions. 24. It is submitted that the Petitioners' entire case is built on a misinterpretation of preliminary negotiations, while ignoring the binding terms of the executed Contracts. The liability of the Petitioners arises directly from the "Bridge Loan Agreement" dated 10.03.2014, and more pertinently, the "Amendment Agreement" dated 28.02.2015. These documents were duly executed by the parties and provided a clear repayment schedule and the mechanism for providing security cheques. 25. At the time the dishonoured cheques were presented, the loan had not been repaid. The instalments for which the cheques were issued (Cheque Nos. 0....
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....or' to the payment made on 23.09.2016. Since those arrears were cleared, the Notices for those specific defaults became redundant. This admission in no way implies that the entire Loan Agreement was cancelled or that PFS had waived its right to recover future instalments. It did not extinguish the underlying debt or invalidate the security cheques furnished for subsequent payments. 32. In regards to proceedings initiated under the SARFAESI Act, it is asserted that there is no legal bar to the simultaneous initiation of civil and criminal proceedings for the recovery of a loan and the dishonour of a cheque, respectively. The SARFAESI Act provides a mechanism for the recovery of debt by enforcing security interests, whereas Section 138 of the N.I. Act provides a penal remedy for the statutory offense of issuing a cheque that is dishonoured. The two proceedings operate in distinct legal spheres, and one does not preclude the other. The remedies are not mutually exclusive. 33. In answer to the challenge under Section 141 of the N.I. Act, the Respondent maintains that the Complaints contain sufficient averments to proceed against the Directors. The Complaints state that the accuse....
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....ted 10.03.2014 which got amended on 28.12.2015 and cheques for securing the Payments and the interest, were issued. The parties were governed by the amended Bridge Loan Agreement dated 28.12.2015. 40. However, events took a turn in August, 2016. Even though the Complaints were filed in December, 2016 and January, 2017 but the reference to Letter dated 13.02.2017, written by the Complainant to the borrower/NNPIL, is relevant. In this Letter, the Complainant has given the details of all the transactions which had taken place between the parties since 2012 and it was further stated that in terms of the Bridge Loan, 16 post-dated cheques were issued by the NSL Energy Ventures Private Limited (NEVPL) i.e. the Petitioners/Guarantors, towards quarterly principal repayment obligations and the balance 12 cheques, towards one year interest payment obligations. On the request and on the basis of undertaking relating to deposit of PDCs vide Letter dated 06.11.2015, PFS/Complainant rescheduled the repayment period by pushing the date of first quarterly repayment from 01.07.2015 to 01.10.2016 along with the shift in the targeted commercial operation date of the project from July, 2016 to Marc....
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....urthermore, PFS for the purpose for considering the proposal of conversion had requested the borrower to pay the entire amount due till 31.08.2016, towards the interest over due and other charges under the Bridge Loan Agreement excluding principal amount to the Complainant. 45. From the bare perusal of this Letter, it is evident that it is a mere expression of willingness to evaluate the proposal, and was not a conditional offer to enter into the Term Loan on payment of outstanding dues. 46. The Petitioners acted upon this negotiation between PFS and NNPIL and paid a substantial sum of Rs. 11,53,93,648/- via RTGS on 23.9.2016, which was towards the outstanding dues till the said date. This act of payment of the amount was only a pre-curser for the PFS/Complainant, to consider the conversation of Bridge Loan into a Term Loan. This is further evident from the Letter dated 17.02.2017, written by PFS to the borrower wherein the entire details of the transactions and the Agreements entered between the parties till then, have been elaborated. 47. Once, those payments got made, the PFS withdrew its Loan Recall Notice w.e.f. 23.09.2016 vide its Letter dated 28.10.2016. Furthermore....
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....to a Term Loan and there was no final concluded Agreement. NNPIL cleared the past dues as part of its ongoing obligations, but PFS did not commit to any conversion of the Bridge loan into a Term Loan, beyond mere consideration. 52. Thus, the contention of the Petitioners that there was novation of the contract is clearly not made out from the communication exchanged through various letters and from the circumstances as narrated herein. 53. This sequence of events does not bring the matter within the ambit of Section 62 of the ICA, which deals with novation. Section 62 reads as under: "62. Effect of novation, rescission, and alteration of contract If the parties to a contract agree to substitute a new contract for it, or to rescind or alter it, the original contract, need not be performed. Illustrations: (a) A owes money to B under a contract. It is agreed between A, B and C, that B shall thenceforth accept C as his debtor, instead of A. The old debt of A to B is at an end, and a new debt from C to B has been contracted. (b) A owes B 10,000 rupees. A enters into an arrangement with B, and gives B a mortgage of his (A's) estate for 5,000 rupees in pla....
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....ditions. This was not a clear offer or counteroffer. It implicitly communicated that we may evaluate your request if you pay the outstanding dues, but no commitment is made. 62. On 23.09.2016, NNPIL paid the entire sum of Rs. 11,53,93,648 via RTGS. This act was not an acceptance of any offer, as no offer existed. It was a partial payment against the total loan under the existing Bridge Loan Agreement, fulfilling overdue obligations but not creating novation. 63. There was no consideration for a purported new agreement, as the payment was merely the discharge of existing arrears. For NNPIL, there was no binding promise from PFS to "extinguish" the Bridge Loan, as stated in their original proposal, since PFS only expressed conditional willingness to consider. 64. Therefore, this argument of the Petitioners that a new contract was formed is untenable. No agreement was concluded, as there was no offer at all - neither from NNPIL's proposal, which was a mere request, nor from PFS's response, which was non-committal. There was no offer and acceptance. 65. Once no novation took place, the original amended Bridge Loan Agreement, and its corresponding repayment schedule, remaine....
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.... the company for the conduct of its business. 74. Section 141(2) is a deeming provision that holds other officers, such as directors, liable if it is proved that the offense was committed with their consent, connivance, or is attributable to any neglect on their part. 75. For a prosecution to be sustained under Section 141(1), the Complaint must contain specific averments that the accused Director was, in fact, responsible for the company's day-to-day affairs. A mere statement that a person is a Director is insufficient. The Complainant must plead how and in what manner the director was responsible for the conduct of the business. 76. The averment for fastening vicarious liability is identical in all cases (Complaint Case No. 3474/17, 1659/17, and 1660/17), which are as under: "That the above named Accused Nos. 2 to 9 are the Directors of the Accused No. 1 Company and all of them are responsible for the day-to-day affairs of the Accused No. 1 Company. ... The above named Accused Nos. 2, 3 and 7 are also the Directors of the Accused No. 10 Company and all of them are responsible for the day-to-day affairs of the Accused No. 10 Company." 77.....