Rajesh Jain And Anr. vs Dcm Shriram Leasing And Finance ...
2005 Latest Caselaw 132 Del

JUDGMENT

Manju Goel, J.

1. These are four criminal revision petitions arising out of similar orders passed in four cases u/s 138 of Negotiable Instruments Act (NI Act). Vide the impugned order, the learned Additional Sessions Judge dismissed the application of the petitioners for discharge from the case u/s 138 of Negotiable Instruments Act (NI Act). Petitioners Rajesh Jain and Rajan Bhardwaj are the Chairman and Managing Director of the company known as Vinayak Industries Ltd.. They were under debt of Rajasthan State Industrial Development & Investment Corporation Ltd. (RIICO). Petitioners sought discharge on the ground that vide order 13th February, 1996 u/s 29 of the State Financial Corporation Act RIICO had taken over the possession of the fixed assets of the company and therefore the petitioners ceased to be the persons responsible for the affairs of the company and hence not liable u/s 138 of the Negotiable Instruments Act (NI Act). The order is an under :-

"RAJASTHAN STATE INDUSTRIAL DEVELOPMENT & INVESTMENT CORPORATION LTD, UDYOG BHAWAN, TILAK MARG, JAIPUR -5.

NO: F&R/R-641/967936

Dt: 13th /15th February, 1996.

OFFICE ORDER

Shri G.S. Shekhawat, Sr. Regional Manager, Bhiwadi (in his absence Shri Rajiv Gupta, Regional Manager, Bhiwadi) of the Corporation is hereby authorised to takeover the possession of the fixed assets of M/s. Vinayak Industries Ltd. situated at G-282, 283, RIICO Industrial Area, Bhiwadi, Distt. Alwar on 20th February, 1996 and to do all necessary acts and things for that purpose for and on behalf of the Corporation in pursuance of the powers conferred on the Corporation under Section 29 of the State Financial Corporation Act, 1951.

Sd.

(M.L.BHARGAVA)

CHIEF GENERAL MANAGER"

2. I will first take up the case of Crl. Rev. 602/2000 in which the complainant is M/s DCM Shriram Leasing and Finance Ltd. M/s Vinayak Industries Ltd. approached the complainant for the purpose of taking on lease certain equipments known as shoe lasts required for manufacturing shoes of value of Rs. 22,16,250.00. A leasing agreement was entered into between the company and the complainant on 14.3.95 and the complainant financed the accused No.1 M/s Vinayak Industries with Rs. 20 lakhs for the same equipment. The repayment was to be made in 36 monthly Installments of Rs. 78,577/-, the accused No.2 namely Rajesh Jain, i.e. the petitioner No.1 being duly authorised executed a Demand Promissory Note for a sum of Rs. 27,20,000/- which included the interest on the loan. He also executed a personal guarantee for that amount. The accused company paid the first few Installments but subsequently three cheques bearing No. 549480 dated 15.7.96, 549481 dated 15.8.96, 549483 dated 15.10.96 issued towards the monthly Installments falling due on 15.7.96, 15.8.96 and 15.10.96 issued by the accused No.2/petitioner No.1 for and on behalf of the accused No.1 were dishonoured with the remarks "Funds insufficeint" Vide returning memo dated 3.1.97. The complainant M/s DCM Shriram Leasing & Finance company after going through the procedure of issuing notice for payment of the cheques filed a complaint u/s 138 of Negotiable Instruments Act seeking prosecution, compensation and punishment. A notice u/s 251 was framed by the learned MM against accused No.1 Vinayak Industries Ltd., accused No.2 Rajesh Jain Chairman of the Vinayak Industries Ltd. and accused No.3 Rajan Bhardwaj the Managing Director of the company. Before the learned ASJ, who heard the revision. The petitioners took the plea that on account of the order dated 13th February, 1996 u/s 29 of the State Financial Corporation Act 1951 which was passed prior to the dates of the aforesaid three cheques, the petitioners had ceased to be the persons responsible to the company for the conduct of its business and therefore not liable to be tried for the offence u/s 138 of the Negotiable Instruments Act.

3. In Criminal Revision Petition No. 259/2004, the petitioner is the same namely Rajesh Jain of M/s Vinayak Industries Ltd. the respondent in this case is Modi Corp. Ltd. who filed the complaint u/s 138 of the Negotiable Instruments Act alleging that the complainant had provided lease of equipment known as PVC Cast Mould (FARMA) against an agreement dated 1st March, 1994 under which the accused namely Vinayak Industries Ltd. and its Directors had to pay 12 quarterly Installments towards the lease money and that in accordance with the sale agreement, the accused issued cheques but the 7th of these cheques and the subsequent ones were dishonoured. The complaint in question related to two cheques dated 30th December 1995 and 30th March 1996. Both of these cheques were dishonoured on the ground of insufficiency of funds. The petitioner being the Chairman of the company took the same pleas as taken in the case of Criminal Revision Petition No. 602/2000 M/s DCM Shriman Leasing Finance Ltd.

4. The Criminal Revision Petition No. 883/2002 are on similar facts where respondents are Essar Universal Pvt. Ltd. had a leasing agreement and as per the terms of this agreement Vinayak Industries Ltd. had issued cheques which were eventually dishonoured on account of insufficiency of funds. The cheques in question were dated 24.12.97 favoring Essar Electrical Control (P) Ltd. for Rs. 1,12,840 and another dated 24.12.97 favoring Rustagi Engineering Udyog (P) Ltd. for Rs. 2,16,478/-.

5. The fourth case i.e. Criminal Revision Petition No. 604/2000 is also by M/s DCM Shrimam Leasing and Finance Ltd. and to relate two cheques dated 15.11.96 and 15.12.96 each for the sum of Rs. 78,577/- drawn on the Bank of Maharashtra, East Patel, Nagar, Delhi which were also dishonoured on account of insufficiency of funds.

6. Before proceeding further, it will be appropriate to have a glance at Section 138 NI Act & Section 29(1) of the State Financial Corporations Act so that it can be examined to what extent an order Section 29 can exempt the petitioners of the liability u/s 138 of the Negotiable Instruments Act:

"State Financial Corporation Act: Section 29. Rights of Financial Corporation in case of default.(1) Where any industrial concern, which is under a liability to the Financial Corporation under an agreement, makes any default in repayment of any loan or advance, or any Installment thereof (or in meeting its obligations in relation to any guarantee given by the Corporation) or otherwise to fails to comply with the terms of its agreement with the Financial Corporation, the Financial Corporation shall have the (right to take over the management or possession or both of the industrial concerns), as well as the (right to transfer by way of lease or sale) and realise the property pledged, mortgaged, hypothecated or assigned to the Financial Corporation."

"Negotiable Instruments Act: 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:

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."

7. A proper reading of Section 29 shows that the State Financial Corporation, which in the present case is RIICO, can take over the management or possession of the industrial concern as well as right to transfer by way of lease or sale and realise the property pledged, mortgaged, leased or assigned to the financial corporation. The financial corporation has to decide whether it wants to take over the management or the possession of the industrial concern or both management and possession of the industrial concern. It can also take over the right to transfer the industrial concerned by way of lease or sale and realise the property pledged, mortgaged or hypothecated or assigned to the financial corporation. In the present case, the RIICO has taken over the possession of the fixed assets of Vinayak Industries Ltd. situated at G- 282, 283 RIICO Industrial area Bhiwadi, District Alwar. The assets other than fixed assets at the address mentioned above have not been taken over by the RIICO. Further, the management of M/S Vinayak Industries Ltd. has also not taken over by the RIICO. Vinayak Industries Ltd. exists and has not gone into liquidation. The company may still have its business and assets other than those mentioned in the order dated 13th February, 1996. It cannot be said that nothing remains to manage M/s Vinayak Industries and there can be nobody responsible for the affairs of the company.

8. The learned counsel for the petitioners would have this court believe that with the fixed assets having been taken over nothing remains in the company known as Vinayak Industries Ltd. and no affair of Vinayak Industries Ltd. could survive and the petitioners could not be said to be responsible for such affairs. Reliance for this purpose is placed on the judgment of this court in Shivalik Agro Poly Products Limited v. Disco Electronics Limited (In Liquidation) (DB). In this case, the Delhi Financial Corporation (DFC) had taken over the possession of the industrial concern, M/s Disco Electronics Ltd. (DISCO) and had taken over the same to the appellant company and had sold to the same to the appellant. There was no taking over of the management. The Court observed that the concern Disco was not even a running concern at the time the possession was taken over by the DFC and handed over to the appellant and so " there could be no question of taking over of the management of the company". It further observed that "expression management and possession would be synonymous at least for the purpose of the present case in as much as Disco was not a running concern at the relevant date".

9. This judgment is on facts different from the facts in the present case, there is no allegation that Vinayak Industries Ltd. is not a running concern. Nor is the same in liquidation as DISCO was at that time. There is no allegation anywhere that nothing other than fixed assets taken over by the RIICO was available with the Vinayak Industries Ltd. In the present case, therefore it could not be said that taking over the possession was synonymous with taking over of the management. As explained earlier, the act specifically uses the two words the management and possession and a reading of the Section 29 shows that they were not meant to be synonymous except in situations where they may become so.

10. The learned counsel for the petitioner also relies upon the judgment in M/s Kusum Ingots Alloys Ltd. v. Pennar Peterson Securities Ltd. and others reported as (2000) 2 RCR (Criminal) 275 in which the interface of Negotiable Instruments Act and Sick Industrial Companies Act (SICA) was examined. In that case BIFR had made an order declaring the company to be sick and there was an embargo u/s 22 SICA against the company and his directors against disposal of the assets of the company for recovery of debts. It is not necessary to discuss the details of the Supreme Court judgments in that case because in the present case though the fixed assets at a particular place have been taken over by the RIICO, there is no order that M/s Vinayak Industries Ltd. cannot dispose of other properties or pay the debts of its creditors.

11. There is no embargo of any kind under any law preventing the appellants from paying the amount under the cheques in question. In this situation the prayer of the petitioner for setting aside the judgment dated 27.9.2002 dismissing an application for recalling the summons is hereby dismissed.