Lok Housing & Constructions Ltd. vs Dcm Daewoo Motors Ltd. And Anr.
2002 Latest Caselaw 1038 Del

JUDGMENT

S.K. Agarwal, J.

1. By this petition under Section 482 of the Code of Criminal Procedure, 1973 (for short "C.P.C."), petitioners are seeking quashing of the complaint under Sections 138, 141 and 142 of the Negotiable Instruments Act (for short "NI Act") filed by DCM Daewoo Motors Ltd. (respondent No. 1).

2. The facts in brief, necessary for disposal of this petition, are that respondent No. 1 filed complaint under Sections 138, 141 and 142 of NI Act, against petitioners, alleging that a sum of Rs. 1,00,00,000/- (Rupees one crore only) was advanced by them to petitioner No. 1, as an inter-corporate deposit on 2.11.1995, which was repayable on 29.2.96, along with interest (hereinafter, "ICD"). Petitioners executed receipt, promissory notes etc. Petitioners failed to return the ICD amount and finally issued four cheques of Rs. 25,00,000/- dated 18.6.96; Rs. 2,61,301/- dated 18.6.96; Rs. 50,00,000/- dated 2.7.96; and Rs. 5,89,726/- dated 2.7.96, totalling Rs. 83,51,027/- drawn on Bank of India, SSI Branch, Andheri East, Mumbai (hereinafter, referred to as "the cheques"). The cheques were sent for encashment by the complainant through ANZ Grindlays Bank, Connaught Circus, New Delhi and the same were returned unpaid with the remark "insufficient fund" vide memo dated 24.9.1996. The complainant sent a written demand notice dated 5.10.1996 asking payment of the said amount of Rs. 83,51,027/-. Petitioners failed to pay the amount within the statutory period of 15 days, despite service of notice and did not care to send any reply. Accused Nos. 2-8 were stated to be responsible for conduct of the business of accused No. 1 (company). Copies of the documents executed by the petitioners and also copy of notice dated 5.10.1996 was filed along with the complaint. It may be mentioned here, that in the notice dated 5.10.1996, it was stated that on the dishonouring of the cheque at the first presentation on 12.8.96, petitioners were informed about dishonouring, and on their assurance the cheques were re-presented on 24.9.1996. The complainant in support of its case examined two witnesses, to prima facie, prove the averments. On the basis of material produced, petitioners were summoned, on the above complaint.

3. On 6.10.97, petitioners moved an application before the trial court for recalling the order of summoning inter alia on the grounds that (a) there is no existing debt or liability against them as it was an ICD of Rs. 1.0 crore along with the interest @ 22% (b) the courts at Delhi have no territorial jurisdiction to entertain the complaint, as the cheques were issued and presented at Mumbai, and the entire transaction entered at Mumbai; (c) the accused persons had made part payment in pursuance of the notice under Section 138 of NI Act, however, the demand could not be fully met, therefore cause of action did not survive; (d) notice under Section 138 of the NT Act on all the accused persons was not served; and (e) that Section 138 of the NI Act is not attracted, as on 22.4.1997, they had sent a cheque of Rs. 5,00,000/- to complainant with a time-bound scheme for repayment. The cheque was encashed, which amounts to compliance of the notice dated 5.10.1996 and that earlier two cheques of Rs. 5.0 lacs each were also accepted. Learned trial court vide order dated 10.12.97 rejected these contentions. This order is under challenge.

4. I have heard learned counsel for the parties and have been taken through the record.

5. Learned counsel for petitioners argued that the cheques were initially presented on 12.8.96 and were returned unpaid on 28.8.1996; on 6.9.1996 a legal notice demanding the payment was served upon them with a request to make the payment within 15 days. On 7.9.1996 petitioners made a part payment of Rs. 5,00,000/- with a request for some time to enable them to arrange the funds to make the balance payment. Petitioners failed to make the balance payment by 20.9.1996. The criminal complaint under Section 138 of the NI Act against the petitioners could be filed within one month commencing from 21.9.1996 i.e. up to 20.10.1996, as per the limitation prescribed under Section 142 of NI Act. However, the respondent again presented the cheque on 21.9.96 which was dishonoured on 24.9.1996; thereafter, a second notice dated 5.10.1996 was sent while the previous cause of action was surviving but no complaint was instituted till 20.10.96. The complaint was filed on 18.11.1996, based on the second notice, dated 5.10.1996. Learned counsel argued that the cause of action cannot be extended even by any acts of both the parties, until and unless a fresh cheque of the balance amount is issued. The part payment against the first notice can give rise to acknowledgement, as far as the civil liability is concerned but it cannot extend the cause of action which has already arisen with the service of the first notice on 6.9.1996. He further argued that neither the part payment nor any other act of the parties could extend the period of limitation. Reliance was placed on Supreme Court decision in Sadanandan Bhadran v. Madhavan Sunil Kumar wherein it was held:-

"7. In a generic and wide sense (as in Section 20 of the Civil Procedure Code, 1908) "cause of action" means every fact which it is necessary to establish to support a right or obtain a judgment. Viewed in that context, the following acts are required to be proved to successfully prosecute the drawer for an offence under Section 138 of the Act:

(a) that the cheque was drawn for payment of an amount of money for discharge of a debt/liability and the cheque was dishonoured;

(b) that the cheque was presented within the prescribed period;

(c) that the payee made a demand for payment of the money by giving a notice in writing to the drawer within the stipulated period; and

(d) that the drawer failed to make the payment within 15 days of the receipt of the notice.

If we were to proceed on the basis of the generic meaning of the term "cause of action" certainly each of the above facts would constitute a part of the cause of action but then it is significant to note that Clause (b) of Section 142 gives it a restrictive meaning, in that, it refers to only one fact which will give rise to the cause of action and that is the failure to make the payment within 15 days from the date of the receipt of the notice. The reason behind giving such a restrictive meaning is not far to seek. Consequent upon the failure of the drawer to pay the money within the period of 15 days as envisaged under Clause (c) of the proviso to Section 138, the liability of the drawer for being prosecuted for the offence he has committed arises, and the period of one month for filing the complaint under Section 142 is to be reckoned accordingly. The combined reading of the above two sections of the Act leaves no room for doubt that cause of action within the meaning of Section 142(c) arises--and can arise--only once."

(emphasis supplied)

6. There can be no dispute about the proposition of law laid down by the Supreme Court, as to what facts constitute a "cause of action", for the offence under Section 138 of NI Act and that the cause of action can arise only once. However, in this case, there are other hurdles to the argument raised by the learned counsel. The argument is based on the assumption that after first dishonouring of the cheque on 28.8.1996, a legal notice under Section 138 of the NI Act was served upon the petitioners on 6.9.1996 with the request to make payment within 15 days. This fact is not stated either in the complaint or in the notice dated 5.10.1996 or in any of the documents filed before the trial court. Learned counsel for petitioners argued that the fact that first notice was issued demanding payment is admitted in the second notice (Ex. CW1/17) itself. Reference was made to the following paragraph:-

"The above said cheques were deposited by us in our bank on 12th August, 1996, but they were dishonoured and returned unpaid to us. We, immediately through our notice informed you about the dishonouring of the said cheques. Thereafter you had requested us to present the cheques again as you had arranged for the funds and had assured us that the cheques would be honoured on presentation."

7. I am unable to agree. What is stated in the above notice is that the fact of dishonouring of the cheques was brought to the notice of the petitioners. It does not indicate whether there was any statutory notice under Section 138 of the NI Act, making demand for payment. It has to be a notice accompanied by a demand. It has to be a notice accompanied by a demand. Only after the expiry of 15 days of the receipt of such notice, cause of action could arise. In addition, even the petitioners did not specifically raise this issue in their application moved before the trial court for re-calling the order of summoning or in the revision. This would have to be established by evidence during the trial and its effect would be effected thereafter.

8. Learned counsel for the petitioners then argued that it is pure question of law and can be raised at any stage that their case is fully covered by Sadanandan Bhadran"s case (Supra). Learned counsel for the respondents argued that assuming that there was an earlier notice of demand under Section 138 of NI Act even, then in the facts and circumstances of this case, complaint based on the second notice is maintainable. In view of the stand taken by the parties, I proceed to examine this question assuming that there was a valid legal notice after the first dishonouring of the cheques. To re-call the facts, the case of the petitioners is that the cheques were initially presented on 12.8.1996 and were returned unpaid on 28.8.1996 and on 6.9.1996 the complainant served a legal notice under Section 138 of NI Act demanding payment. On 7.9.1996, petitioners made a part-payment of Rs. 5.0 lacs and requested for further time to enable them to arrange funds and to make the balance payment. Petitioners failed to make the balance payment as proposed by them. The complainant, instead of filing the complaint on the basis of the first notice, re-presented the cheques on 21.9.1996 which was dishonoured on 24.9.1996. They served another notice on 25.9.1996 and instituted the complaint on 18.11.1996 on the basis of second notice. He argued that the complaint could be filed only up to 20.10.1996, therefore, the same is barred by limitation.

9. The contention looks attractive but it does not withstand deeper scrutiny. Admittedly, in this case, after first dishonouring of the cheques on 28.8.1996, complainant served a legal notice under Section 138 of NI Act on 6.9.1996; the cause of action to file the complaint on the basis of this notice could have arisen after the expiry of period of 15 days, i.e., on 21.9.1996 and not earlier. However, before cause of action could arise or the offence could be committed, petitioners asked the complainant for more time to arrange funds and in order to show their bona fide they sent a cheque of Rs. 5.0 lacs, against the cheques for Rs. 83,51,027/-. In such a situation, the complainant had two options either to file the complaint on the expiry of fifteen days of the service of this notice or to give some more time to the petitioners. The complainant chose to wait and give some time to the petitioners. A question then would arise, whether this would be implied waiver of notice and whether the doctrine of estoppel would apply against the petitioners? The plea of estoppel is closely linked with the plea of waiver, the object of both being to ensure bona fides in day to day transaction . The Black's Law Dictionary (Sixth Edition) defines the implied Waiver as under:-

"Implied Waiver:- a waiver is implied where one party has pursued such a course of conduct with reference to the other party as to evidence an intention to waive his rights or the advantage which he may be entitled-----"

10. The Supreme Court in Dalmia Cement (Bharat) Ltd. v. Galaxy Traders and Agencies Ltd. and Ors. considered the case of Sadanandan Bhadran (Supra) and upheld the complaint on the basis of second notice. In that case in reply to the first notice, the accused claimed that he had received the letter containing only blank papers. The complainant, thereafter, again presented the cheque and on the basis of the second notice filed the complaint. It was held as under:-

"It is not the giving of the notice but its receipt that gives rise to cause of action. Section 27 of the General Clauses Act deals with the presumption of service of a letter sent by post. The dispatcher of a notice has, therefore, a right to insist upon and claim the benefit of such a presumption. But as the presumption is rebuttable one, he has two options before him. One is to concede to the stand of the sendee that as a matter of fact he did not receive the notice, and the other is to contest the sendee's stand and take the risk for proving that he has in fact received the notice. The complainant in the instant case had exercised the option to accept the averments made by the accused in their letter conveying that contents were not received and had issued a fresh notice after again presenting the cheque. The accused have not denied the issuance of their letter. The receipt of second notice is also not denied by the accused. In such a situation by approaching the Court for quashment of the complaint as time barred. The complainant tried to blow hot and cold in the same breath, stating on the one hand that the first notice of dishonour has not been received by them and on the other praying for dismissal of the complaint on the plea that the complaint was barred by time in view of the first notice served by the appellant which they had not received. The plea of the accused was not only contradictory, and after thought but apparently caved out to resist the claim of the complainant and thereby frustrate the provisions of law such plea therefore could not be accepted."

(emphasis supplied)

11. Learned counsel for the petitioners also argued that in such like cases, the plea of waiver cannot be availed of by the complainant. In support of his submission, he placed reliance on the following observations made by the Supreme Court in Sadanandan Bhadran's case (supra):-

"At that stage, it will not be a question of waiver of the right of the payee to prosecute the drawer but of absolution of the drawer of an offence, which stands already committed by him and which cannot be committed by him again."

(emphasis supplied)

12. In my consideration view, the above observations are not applicable to the facts of this case. In Sadanandan Bhadran's case (supra), the appellant had sent lawyer's notice to the respondent on 15.1.1991 calling upon him to pay the amount. On receipt of the notice respondent approached the appellant and requested for time to pay the amount and in view of the assurance given, the appellant did not initiate further proceedings. As the respondent did not keep the promise, thereafter the cheque was presented on 4.5.1991. In this case, however, at the risk of repetition, as noticed above, the period of 15 days" after the service of notice, had not yet expired and the offence was not committed. Therefore, the question of "absolution of the drawer of an offence" did not arise. The notice was served on 6.9.1996 and on 7.9.1996, the petitioners approached the complainant and sought more time and in order to show their bona fide they sent a cheque of Rs. 5.0 lacs. The complainant accepted the representation of petitioners and opted to wait for two weeks more. In this view of the matter, it would amount to an implied waiver of notice, before the cause of action had arisen and the petitioners are estopped from pleading otherwise. The situation wold have been different, if the statutory period of 15 days had expired after the receipt of notice, the cause of action had arisen and the offence under Section 138 of N.I. Act was committed. It was so in Sadanandan Bhadran's case (supra). This view is in consonance with the observations made in that case, which are as under:-

"Needless to say, the primary interest of the payee is to get his money and not prosecution of the drawer, recourse to which, normally is taken out of compulsion and not choice. For this reason it must be held that the cheque can be presented any number of times during the period of its validity."

13. For the above reasons, the contention is without merit and the same is rejected.

14. Learned counsel for the petitioners next argued that all the transaction had taken place at Mumbai; the cheque was drawn on "the bank" at Mumbai; it was to be encashed at Mumbai and the cheque was dishonoured at Mumbai, therefore, courts in Delhi have no territorial jurisdiction to entertain the complaint; and that the complaint was instituted at Delhi with an intent to harass them. The strength to support this argument was sought to be drawn from the observations made by the Supreme Court in Shri Ishar Alloy Steels Ltd. v. Jayaswals Neco Ltd. 2001 CRI.L.J. 1250. The complainant's case is that one of its office is in Delhi; the cheque in question was deposited by them with their bank at Delhi; the complainant came to know o the dishonouring of the cheque at Delhi; notice was issued from Delhi, therefore, part of cause action had arisen in Delhi.

15. Law in this regard is settled by the Supreme Court in K. Bhaskaran v. Sankaran Vaidhyan Balan and Anr. 1999 (6) Scale 272. The Supreme Court has observed that the offence under Section 138 of N.I. Act is complete only on the concatenation of five acts which are components of the offence. These are drawing of cheque, presentation of cheque, returning of the cheque un-paid by the drawee bank, giving notice in writing to the drawer demanding payment of the cheque and failure of the drawer to make payment within 15 days of the receipt of the notice. It was further observed that it is not necessary that all five acts should happen in the same locality; and it is possible that all five acts may have been done at five different localities. It was held that under Sub-clause (d) of Section 178 of Cr.P.C. which provides that where the offence consists of several acts, done in different local areas, it may be inquired into or tried by a court having jurisdiction over any such local area. It was held:

"14. The offence under Section 138 of the Act can be completed only with the concatenation of a number of acts.

Following are the acts which are components of the said offence : (1) Drawing of the cheque, (2) Presentation of the cheque to the bank, (3) Returning the cheque unpaid by the drawee bank, (4) Giving notice in writing to the drawer of the cheque demanding payment of the cheque amount, (5) failure of the drawer to make payment within 15 days of the receipt of the notice.

15. It is not necessary that all the above five acts should have been perpetrated at the same locality. It is possible that each of those five acts could be done at 5 different localities. But concatenation of all the above five is a sine qua non for the completion of the offence under Section 138 of the Code. In this context a reference to Section 178(d) of the Code is useful. It is extracted below:

"Where the offence consists of several acts done in different local areas, it may be inquired into or tried by a court having jurisdiction over any such local areas."

16. Thus it is clear, if the five different acts were done in five different localities any one of the courts exercising jurisdiction in one of the five local areas can become the place of trial for the offence under Section 138 of the Act. In other words, the complainant can choose any one of those courts having jurisdiction over any one of the local areas within the territorial limits of which any one of those five acts was done. As the amplitude stands so widened and so expansive it is an idle zexercise to raise jurisdictional question regarding the offence under Section 138 of the Act."

16. In this case, as noticed above, Branch office of the complainant company is in Delhi; the cheque in question was presented to the bank in Delhi and it was returned un-paid in Delhi; the notice to the petitioners was given from delhi; and the failure of the petitioners to pay the amount was in Delhi. Therefore, I have no hesitation in holding that part of the cause of action had arisen at Delhi, and the courts in Delhi have jurisdiction to try the complaint.

17. Learned counsel in support of the proposition that the courts in Delhi have no jurisdiction had also placed reliance on the decisions, in R.K. Jain v. State and Ors. 1998(1) Crimes 514, Canbank Finance Services Ltd. v. Gitanjali Motors Ltd. 1995 CRI LJ 1222 and some decisions of the other High Courts. After authoritative pronouncement by the Supreme Court in K. Bhaskaran (supra) reference to other decisions cited by learned counsel for petitioner is not necessary. Learned counsel heavily relied upon the observations made by Supreme Court in Shri Ishar Alloy Steels Ltd. (supra). In my view, the observations made therein, do not answer the question involved here. In that case, Supreme Court was considering the question of presentation of the cheque within six months from the date on which it was drawn on "the drawee bank" either directly or otherwise. It was in that context that the Supreme Court considered the use of direct article "The" in words "The bank". It was held that the cheque must reach "The bank" (the drawee bank) within six months. The emphasis laid by the learned counsel on the words 'a bank' and 'the bank' used in Section 138 of the NI Act, does not help the contention. Learned counsel even argued that there is a typing error in the Supreme Court judgment. There is no merit in this contention and the same is rejected.

18. Learned counsel for the petitioners next argued that there was no existing or subsisting debt or liability against which the cheque was issued. This cannot be examined at this stage. The court cannot go into the merits and come to the conclusion that there was no existing debt or liability. There is no requirement that the complainant must specifically allege in the compliant that there was a subsisting liability. The burden of proving that there was no existing debt or liability would be on the petitioners during the trial. Reference in this regard can be made to the Supreme Court decision in MMTC Ltd. v. Medchl Chemicals and Pharma (P) Ltd., 2002 SCC

234.

19. For the foregoing reasons I find mo merit in the petition and the same is dismissed. Any observation made herein shall not prejudice the trial.

20. Trial court record be sent back. Trial court is directed to expedite the trial.