Bombay High Court
M/S Cpec Engineering Ltd vs The Bombay Mercantile ... on 17 December, 2013
Bench: A.R. Joshi
1
judgment in criminal writ petition no. 3542-12.doc
LADDA
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CRIMINAL APPELLATE JURISDICTION
CRIMINAL WRIT PETITION No. 3542 of 2012.
1) M/s CPEC Engineering Ltd
(a Public Ltd Company)
Registered under the Companies Act,
and having its office at :-
Plot No.D/207,
TTC Industrial Area, H.P. Road,
Turbhe, MIDC,
Navi Mumbai - 400 705,
Through its Director
Ramchandrappa Shankar Koli ..Petitioner No.1.
2) Mr Ramchandra Shankar Koli
Adult, Hindu, Indian Inhabitant,
Age 32 years,
Neel Siddhi Tower B-102,
Sector 12, Vashi,
Navi Mumbai 400 703. ..Petitioner No.2.
3) Mrs Sangeeta R. Koli,
Adult, Hindu, Indian Inhabitant,
Age 30 years,
Neel Siddhi Tower B-102,
Sector 12, Vashi,
Navi Mumbai 400 703. ..Petitioner No.3.
4) Mr Shyam S. Koli,
Adult Hindu, Indian Inhabitant,
Aged 31 years,
2/C/B, Tolaram Nagar,
Chembur Camp,
Mumbai 400 074. ..Petitioner No.4.
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judgment in criminal writ petition no. 3542-12.doc
5) Mrs Mahadevi S. Koli
Adult Hindu, Indian Inhabitant,
Aged 65 years
Neel Siddhi Tower B-102,
Sector 12, Vashi,
Navi Mumbai 400 703. ..Petitioner No.5.
6) Mr Deepak D. Deshpande,
Adult Hindu, Indian Inhabitant,
Aged 55 years
Flat No.1604, 16th Floor,
A-wing, Hawa Mahal Rajvilas Chitalsar,
Manpada, Thane (West) 400 610. ..Petitioner No.6.
Versus
1. The Bombay Mercantile Co-operative
Bank Ltd.
(a Scheduled Bank) having its
Registered office at Zain G. Rangoonwala
Building, 78, Mohammad Ali Road,
Mumbai 400 003 and having its
Branch office, at Vardhman Chambers
Premises, Co-operative Society Ltd.
Shop No.5 to 7 and 11, Plot No.84
Sector 17, Vashi,
Navi Mumbai 400 705.
Through its branch Manager Mr C.M. Patekar
..Respondent No.1.
2. The State of Maharashtra ..Respondent No.2.
Mr Dharmendra Rohra a/with Ashok Shahani and Hardik B.
Vyas for the petitioners.
Mr Subhash Jha i/by Prakash Mahadik for Respondent No.1.
Ms G.P. Mulekar, APP for the Respondent No.2.
judgment in criminal writ petition no. 3542-12.doc
CORAM :- A.R. JOSHI, J
Reserved on : 4.12.2013.
Pronounced on : 17 th December,2013
JUDGMENT :-
(1) Rule. Rule returnable forthwith.
With the consent of learned counsel for the parties,
the petition is heard finally at the stage of admission.
The learned counsel for respondent Nos. 1 and 2 waive
service.
(3) The present writ petition is filed by the
petitioners- the original accused persons in the matter
of complaint lodged against them by the present
respondent No.1, the Bombay Mercantile Co-operative
Bank Ltd. for taking action under section 138 of
Negotiable Instruments Act, 1881 (26 of 1881) read
with section 141 of the said Act. The present petition is
filed for quashing the said criminal proceedings being
Court Case No. 1452 of 2012 pending before the JMFC
judgment in criminal writ petition no. 3542-12.doc
Vashi at CBD Belapur, Navi Mumbai, District Thane. The
present petition is filed under Article 227 of the
Constitution of India and as per the provisions of section
482 of the Code of Criminal Procedure.
(4) Prior to discussing the rival arguments, certain
factual position leading to the filing of the complaint
under section 138 of the Negotiable Instruments Act, is
narrated hereunder;
(5) The petitioner No.1 is M/s CPEC Engineering Ltd, a
Public Limited Company, hereinafter referred to as the
petitioner company. Petitioner Nos.2 to 6 are the
Directors of the said petitioner no.1 company. Petitioner
company was granted a loan to the tune of Rs.3 crores
by the present respondent the Bombay Mercantile Bank
Ltd some time on 25 th June, 2010. The said loan account
was not performed in the satisfactory manner and it
became non performing asset ( for short NPA). As such
respondent no.1 bank issued recall notice to the
petitioner company sometime on 13 th December,2011.
On 4th January,2012 the petitioner company deposited
judgment in criminal writ petition no. 3542-12.doc
self drawn cheque for Rs. 3 crores for transfer of funds
from the petitioner company's another bank account
with ICICI Bank Ltd. According to the petitioner
company, said amount of Rs. 3 crores was to be
deposited in the current account of the petitioner
company maintained at the respondent No.1 bank. Said
cheque was dishonoured and as such respondent No.1
bank sent a statutory notice contemplated by section
138 of the NI Act mentioning dishonour of the cheque
and calling upon the petitioner company to repay the
amount mentioned in the cheque. On receipt of said
demand notice petitioner company replied repudiating
the demand raised by respondent no.1 company.
Consequently, on non-payment of the amount under
the dishonoured cheque respondent No.1 company filed
a complaint under section 138 of the N.I.Act read with
section 141 of the same Act. It was filed on 2.3.2012
being case No.1452/2012.
6) Process was issued on the same day of lodging of
the complaint by JMFC Vashi at CBD Belapur mentioning
judgment in criminal writ petition no. 3542-12.doc
that complainant had made out a prima face case
against all the accused. Being aggrieved by the said
order present writ petition came to be filed.
7) The contention of the petitioner company is that
the respondent No.1 bank is neither payee nor holder of
the cheque in due course which is dishonoured and as
such there is no cause of action arisen for respondent
No.1 bank to file a criminal complaint under the
provisions of Section 138 of NI Act. Secondly, according
to the petitioner company, the said cheque for Rs.3
crores was given as a simplicitor transfer of funds from
the account of the petitioner company maintained with
the ICICI Bank to the current account of the Company
maintained with respondent No.1 bank and that the
cheque was not given to respondent No.1 bank towards
the satisfaction of the loan amount outstanding in the
loan account of the petitioner company.
8) In order to appreciate the above arguments the
provisions of Section 138 of NI Act are required to be
judgment in criminal writ petition no. 3542-12.doc
narrated thus;
Section 138.
Dishonour of cheque for insufficiency,
etc. of funds in the account.--
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 be extended to two
years], or with fine which may extend to
twice the amount of the cheque, or with
both:
judgment in criminal writ petition no. 3542-12.doc
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 thirty 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 fifteen days of the receipt of
the said notice.
Explanation: For the purposes of this
section, "debt or other liability" means a
legally enforceable debt or other liability.
judgment in criminal writ petition no. 3542-12.doc
9) By above provisions in order to lodge a complaint
under Section 138 of NI Act, the complainant must
prove that he is payee or holder in due course of the
cheque. At this juncture, definitions of 'payee' and
'holder in due course' so also the definition of the
'holder' as appearing in the Negotiable Instruments Act
are reproduced hereunder;
"Payee":- The person named in the instrument, to
whom or to whose order the money is by the instrument
directed to be paid, is called the "payee".
"Holder" :- The "holder" of a promissory note, bill
of exchange or cheque means any person entitled in his
own name to the possession thereof and to receive or
recover the amount due thereon from the parties
thereto.
Where the note, bill or cheque is lost or destroyed,
its holder is the person so entitled at the time of such
loss or destruction.
"Holder in due course":- "Holder in due course"
judgment in criminal writ petition no. 3542-12.doc
means any person who for consideration became the
possessor of a promissory note, bill of exchange or
cheque if payable to bearer, or the payee or indorsee
thereof, if [payable to order,] before the amount
mentioned in it became payable, and without having
sufficient cause to believe that any defect existed in the
title of the person from whom he derived his title.
10) Definitely the cheque of Rs.3 crores was
drawn on CPEC Engineering Ltd and it was account
payee cheque and not bearer cheque. This aspect is
significant enough as to the cheque not the bearer
cheque as it is submitted on behalf of the respondent
No.1 bank that it was meant for the respondent No.1-
bank towards the satisfaction of the out-standings in
the loan account of the petitioner company maintained
by the said bank. Moreover, by considering the
definition of holder and holder in due course again it
cannot be said that the respondent no.1-Bank was
entitled in its own name to the possession of said
judgment in criminal writ petition no. 3542-12.doc
cheque and to receive or recover the amount due
thereon. Moreover, respondent no.1 bank also cannot
be termed as holder in due course, inasmuch as
respondent no.1 bank was not the party who for
consideration became the possessor of the cheque if
payable to the bearer. Moreover, the respondent No.1
bank was also not the payee as mentioned above or
endorsee thereof when the said cheque was payable to
the order.
11) Counter to the arguments advanced on behalf
of the petitioner company, learned counsel for
respondent No.1 bank took shelter of the sanction letter
vide which working capital term loan of Rs. 3 corres was
sanctioned against hypothecation of the machineries,
stock and book debts. It is further submitted that the
said credit facility was secured by mortgaging
residential flat, Deed of further charge on the industrial
plot, mortgage of the property etc. Various clauses in
the said sanction letter were brought to the notice of
this Court. However, no where it is specifically averred
judgment in criminal writ petition no. 3542-12.doc
that the standing authority has been given by the
petitioner company to respondent no.1 bank to transfer
the amounts lying in the credit of the current account of
the Company to the loan account towards satisfaction
of the outstanding dues in the loan account. Moreover,
nothing is brought before the court by any document or
any understanding between the parties that a specific
mandate has been given to the respondent no.1 bank to
use each and every cheque deposited in the current
account of the petitioner bank for satisfaction of the
outstanding dues in the loan account.
12) Apart from the above, attention of this Court is
also drawn towards the correspondence between the
parties by way of letters dated 26.9.2011 and
29.11.2011 addressed by the petitioner company to
respondent no.1 bank. By the first letter apparently it
was informed by the petitioner company to the
respondent bank that company wishes to close both the
loan accounts with the respondent no.1 bank i.e. the
account of the CPEC Engineering Ltd and account of
judgment in criminal writ petition no. 3542-12.doc
new Marine Transport. In the said letters, it was also
intimated that the petitioner company had received
certain loan facility from other institution to the extent
of Rs.5.25 crores as on 15.10.2011. By the second letter
it is apparently mentioned by the petitioner that both
the loan accounts as mentioned in the first letter would
be closed by 10th December,2011. By pointing out these
contents of the letters, it is strongly submitted on behalf
of the respondent-bank that it was the desire of the
petitioner company to close the loan accounts including
the loan account in the name of petitioner company by
end of December, 2011 and as such towards the
repayment of the outstanding dues in the loan account
the concerned cheque for Rs. 3 crores was handed over
to the bank. As such this conduct on the part of the
petitioner company goes to show that the amount
under the said cheque was meant for satisfaction of the
outstandings in the loan account and as the said
cheque was dishonoured, a cause of action arose for
the respondent no.1 bank being 'holder in due course'
judgment in criminal writ petition no. 3542-12.doc
of the said cheque, though not 'payee'. At this juncture,
on asking by the court as to how much amount was due
and payable as on the date of the cheque of Rs. 3
crores, it was specifically mentioned that it was
definitely more than Rs.3 crores and not exactly 3
crores. As such without there being any specific
mandate given in favour of the respondent no.1 bank to
utilize the said cheque towards satisfaction of the entire
outstandings of the loan account so as to close that
account, it cannot be accepted that the said cheque
was given for clearing the outstanding amount in the
loan account. On plain viewing of the transaction it was
apparently the cheque simplicitor given, being account
payee cheque by the petitioner company drawn on the
ICICI Bank payable to the same company in its current
account.
13) During the arguments much is argued on
behalf of the respondent No.1 bank that the said
cheque for Rs. 3 crores was handed over to respondent
no.1 bank and as such it was towards satisfaction of the
judgment in criminal writ petition no. 3542-12.doc
loan account. This submission was strongly repudiated
by learned counsel on behalf of the petitioner company
by pointing towards the letter dated 13 th
September,2011 addressed by respondent no.1 bank to
the petitioner company. This is the notice titled
"Advances Recall Notice" for working capital term loan
(WCTL) of Rs.3 crores. In the said notice, instances of
not satisfactorily conducting the said loan account are
mentioned and it is ultimately mentioned as follows;
14) Due to non payment of loan instalments and
interest over the dues accumulated and/or WCTL
Account 3001/08 has already been classified as 'Non
performing Asset' (NPA). In another paragraph it is
mentioned as ;
Recently you had deposited self
drawn false cheque of huge amount of
Rs. 300.00 lacs in their current account
without balance and wrong signature
for the reasons which the same was
returned unpaid by the drawee bank.
judgment in criminal writ petition no. 3542-12.doc
15) A reference to the cheque in the above
paragraph is with respect of the same cheque for which
the complaint under section 138 was lodged. As such it
was the contention of the respondent No.1 bank that
the petitioner company had deposited the self drawn
cheque in the current account and as such now it
cannot be accepted that it was the cheque handed over
to the respondent
igno.1 bank for clearing the
outstandings in the loan account. Even in the said letter
dated 13th September, 2011, it is specifically mentioned
as under:
16) In view of the above, bank has no option left
but to call back the entire advances and follow the legal
course for its recovery of dues. Accordingly we call upon
you to pay total advances as shown below with further
interest and penal interest till full payment is made.
Principal oustandings Rs.3,00,00,000.00
Interest up to Rs.29,84,674.00
11.12.2011
Rs.3,29,84,674.--
As such, from the above it is certain that when the
judgment in criminal writ petition no. 3542-12.doc
concerned cheque for Rs 3 crores was issued by the
petitioner company, the total outstanding dues in their
loan account were to the tune of Rs.3,29,84,674/-.
17) During the arguments, learned counsel for
respondent No.1 bank placed reliance on the following
authority.
CDJ 1012 BHC 2575
Sada Vijaykumar Vs. State of Maharashtra and Anr
18) In that matter before the Single Judge of this
Court the cheque was given in the name of 'HDFC Bank
A/c M/s K. Sada Vijay Kumar Beedi Leaves Merchant
against Account No. 3752790000051'. As such the
name of the HDFC bank was mentioned as payee or
"holder in due course" and as such the criminal
complaint lodged by HDFC Bank against the drawer of
the cheque was held as maintainable. However, in the
present matter, admittedly, the concerned cheque for
Rs. 3 crores was account payee cheque in the name of
petitioner company itself without there being any name
judgment in criminal writ petition no. 3542-12.doc
of respondent No.1 bank in the column "PAY". As such
the ratio of the said authority cannot be taken in favour
of the present respondent No.1 bank, original
complainant. Another Authority is cited on behalf of
respondent No.1, reported in 2001 7 SCC 721,
Punjab and Sind Bank, Vinkar Sahakari Bank Ltd
and others.
19)
Again, in that matter the pay order was drawn
with inscription "Payees account only" to pay the
Punjab and Sin Bank - M/s Poise Leasing and Finance
Co. Ltd or order". Again this is not a case in the present
matter at hand. By referring to this decision in Punjab
and Sind Bank Vs. Vinkar Sahakari Ltd (Supra), It is
argued that provisions of Section 118 of N.I.Act are
required to be construed and a presumption is required
to be accepted so far as holder of the negotiable
instrument being a holder in due course. In this context,
if the definition of holder as reproduced above in the
earlier paragraphs and mentioned in Section 8 of the
Negotiable Instruments Act is considered, then the
judgment in criminal writ petition no. 3542-12.doc
holder must be a person entitled in his own name to the
possession of the said negotiable instrument. However,
for the absence of name of respondent No.1 bank in the
cheque and in the absence of any mandate in favour of
respondent No.1 bank to credit the amount of said
cheque, for clearing the outstandings in the loan
account of the petitioner company, the presumption
envisaged under section 118 (9) of the N.I. Act cannot
be taken in favour of the respondent bank.
20) Considering the rival submissions and
considering the definitions of "payee", "holder" and
"holder in due course" and considering the provisions of
Sections 138 and 142 of NI Act, it must be said that the
respondent No.1 was not holder in due course in the
strict sense of the meaning so far as the dishonoured
cheque is concerned. In the result, the present writ
petition must succeed and accordingly it is disposed of
with the following order:-
judgment in criminal writ petition no. 3542-12.doc
ORDER.
(a) The writ petition is allowed.
(b) Process issued against the petitioners in Court
Case No. 1452 of 2012 pending on the board of JMFC,
Vashi, CBD Belapur is quashed and set aside and
consequently said case is also quashed and set aside.
(c) Rule is made absolute in above terms. No
order as to costs.
(A.R. JOSHI, J)
Ladda R.S.
