World Tex Limited & Ors. vs K.C.Fibers Limtied & Ors.
2008 Latest Caselaw 2174 Del

                                             7#
*             HIGH COURT OF DELHI AT NEW DELHI

+                  Crl.M.C. No. 2814/2007

                                 Date of decision: 5.12.2008

#     WORLD TEX LIMITED & ORS      ..... PETITIONERS
!             Through : Mr. Rajnish Kumar Gaind, Adv.

                            Versus

$     K.C.FIBRES LIMITED & ORS.        .......RESPONDENTS
^                  Through : Mr. Viney Sharma, Adv.
                             Mr. O.P. Saxena, APP

%
      CORAM:
      HON'BLE MS. JUSTICE ARUNA SURESH

     (1) Whether reporters of local paper may be
         allowed to see the judgment?

     (2) To be referred to the reporter or not?

     (3) Whether the judgment should be reported
         in the Digest ?

ARUNA SURESH, J. (Oral)

1. This petition under Section 482 Cr.P.C. has been

filed by the petitioners seeking quashing of

complaint case No. 1321/01 dated 6.7.2002 titled

as M/s K.C. Fibres Limited v. M/s World Tex

Limited filed by the respondents under Sections

138/141 of Negotiable Instruments Act (hereinafter

referred to as NI Act) which is pending

adjudication in the court of learned MM, Rohini.

2. There have been business dealings between the

complainant/respondents and the petitioners/

accused persons, petitioners had been purchasing

yarn from the respondent company on credit as

well as on cash basis. A running account was

maintained by the respondent company regarding

the sale of yarn to the petitioners and also the

payments received from the petitioners against the

said supply from time to time. As per the

statement of accounts a sum of Rs. 63,67,527.20p.

was found due and payable by the petitioners to

the respondent company. Petitioners accordingly

issued three post-dated cheques bearing Nos.

301559 dated 9.5.2002 for an amount of Rs.

5,12,165/-, 301560 dated 9.5.2002 for an amount of

Rs. 5,45,574.60p and 301561 dated 9.5.2002 all

drawn on Global Trust Bank for an amount of Rs.

2,58,792/- in favour of the respondent company

towards payment of the due amount. However, all

the three cheques on presentation were

dishonoured with the remarks 'insufficient funds'

vide banker's memo dated 10.5.2002. A legal

notice for demand dated 22.5.2002 was served

upon the petitioners but no payment was made

despite receipt of the notice. This resulted into

filing of a complaint under Sections 138/141 NI Act

being Criminal complaint No. 212/2002.

3. Petitioners suffered reverses in its working due to

external circumstances which were specific and

they led to complete erosion of its net worth.

Consequently petitioners filed a reference before

the BIFR on 4.10.1999 and the BIFR declared the

petitioner company sick in terms of Section 3(1)(o)

of the Sick Industrial Companies Act vide order

dated 31.3.2000. On recommendations of the

BIFR, the petitioner company was wound up as no

viable revival/rehabilitation proposal could be

advanced.

4. During the pendency of the complaint, since the

petitioner company was declared a sick company

parties entered into a settlement after having

resolved their disputes and differences on

14.10.2002 pertaining to the subject matter of the

impugned complaint. It was mutually agreed

between the parties that petitioner No. 1 would pay

a sum of Rs. 18 lacs to respondent company

towards full and final satisfaction of all its

dues/claims till date including interest, cost and

expenses etc. This amount of Rs. 18 lacs was

agreed to be paid in monthly installments of banks'

commencing from October 2002 as follows:

(a) Rs. 2 lakhs on 14th October, 2002;

(b) Rs. 2 lakhs by 7th December, 2002;

(c) Rs. 2 lakhs by 7th January, 2003;

(d) Rs. 2 lakhs by 7th February, 2003;

(e) Rs. 2 lakhs by 7th March, 2003;

(f) Rs. 2 lakhs by 7th April, 2003;

(g) Rs. 2 lakhs by 7th May, 2003;

(h) Rs. 2 lakhs by 7th June, 2003; and

(i) Rs. 2 lakhs by 7th July, 2003.

5. It was also agreed that any delay beyond seven

days in payment of any of the said installments

would make the agreement null and void and

respondent company would be free to take legal

action, as it might deem fit, to claim the original

outstanding amount. Respondent company also

agreed that in case Rs 18 lacs as detailed above

were received, it would not be entitled to enforce

any dues/claims/charges against petitioner

company or its directors, officers, officials and the

liability of the petitioner company towards

respondent company would stand fully discharged.

6. In consonance with this agreement, issued nine

cheques. Undisputedly, petitioner company issued

nine cheques in terms of the settlement in favour of

the respondent company and the payment against

the said cheques was duly received by the

respondent company. Consequently, respondent

company withdrew four complaints in between

22.1.2003 and 3.2.2003. However, respondents did

not withdraw complaint being C.C. No. 212/2002

(which on transfer to Rohini Court has been

renumbered as C.C. No. 1321/1). Resultantly,

petitioner moved an application under Section 294

Cr.P.C. seeking admission/denial of the settlement

agreement dated 14.10.2002 by the respondents,

which was dismissed by the trial court vide its

order dated 13.12.2006 with the observations that

as per the statement of the authorized

representative of the complainant that the

compromise had not been arrived at in true spirit

and all the terms and conditions had not been

fulfilled and that the compromise was not arrived

at towards full and final settlement.

7. Learned counsel for the petitioners has submitted

that under the circumstances of the case, the

complaint filed by the respondents is liable to be

quashed as no debt is due to be paid to the

respondents against the impugned cheques in the

said complaint.

8. Learned counsel for respondent No. 1 has

submitted that since now petitioner company is in a

position to pay the balance due liability/amount,

complaint is maintainable and complainant is

within its rights to pursue the complaint. However,

he does not dispute the correctness or genuineness

of the settlement agreement executed inter se the

parties on 14.10.2002 after the petitioner company

was declared a sick unit by BIFR.

9. After having received the payment as per the said

settlement agreement, the respondents/

complainant cannot be allowed to reagitate its

claim which was settled with the sick industry

simply because petitioner company has revived its

business. After receipt of the payment of the

impugned cheques, it cannot be said that the said

cheques were for part payment of the debt. Once

the respondents by way of an agreement between

the parties had accepted nine cheques during the

subsistence of the complaint against the due

amount of Rs. 63 lacs, as per the statement of

accounts, it amounted to compounding the offence

which has to result in acquittal on account of

compounding of the offence, specially when the

cheques issued subsequently in lieu of the liability

of the impugned cheques giving rise to the original

complaint had provided fresh cause of action.

10. Similar facts and circumstances were under

consideration in Venkatesh Dutt v. M.S. Shoes

East Limited - 2004 (72) DRJ 521. It was

observed by this Court that the very fact that a

party entered into a compromise during the

pendency of the complaint filed under Section 138

of the NI Act, showing the cause of action

pertaining to the initial cheque, ceased to be

available to the complainant as fresh cause of

action would be available in respect of the cheques

issued pursuant to the agreement between the

parties in case those cheques or anyone of them

was dishonoured on presentation.

11. Under no circumstance, complaint under Section

138 NI Act relating to several cheques given by a

party to the complainant on account of the

agreement between the parties towards liability

against initial cheques leading to the filing of

original complaint can be allowed to go

simultaneously for the simple reason that Section

138 of the NI Act specifically refers only to that

dishonoured cheque which is issued by a person

towards the liability drawn on an account

maintained by him with a banker for payment of

money and no other cheque.

12. Once the parties settled their disputes by way of an

agreement during the pendency of a complaint

under Section 138 of the NI Act or proceedings and

complainant accepts the cheques given by the

accused in lieu of the subject matter of the original

complaint, every such new cheque gives rise to a

fresh cause of action, if dishonoured on

presentation, as in that case the original complaint

becomes extinct. Two parallel proceedings under

the circumstances cannot be allowed to continue,

one emanating from the original cheque and other

emanating from the terms and conditions of the

agreement between the parties.

13. Since offence under Section 138 of the NI Act is

compoundable, when the parties in this case had

decided to settle and compound their disputes by

way of settlement agreement and once the

complainant accepted the cheques issued in

pursuance of the agreement towards the liability of

the petitioners during the pendency of the

complaint and got them encashed, which amounted

to compounding of the offence, it should result into

acquittal as complainant had entered into an

agreement and accepted the cheques with open

eyes and also keeping in mind the consequences of

such agreement.

14. In view of the reasons discussed above, the petition

is allowed. Complaint Case No. 1321/1 titled as

M/s K.C. Fibres Limited v. M/s World Tex Limited

filed by respondents under Section 138 of the NI

Act against the petitioners for the cheques detailed

therein and the proceedings arisen therefrom are

hereby quashed. Petitioners are acquitted of the

offences charged with.

15. Attested copy of the order be sent to the trial court.

(ARUNA SURESH) JUDGE December 05, 2008 jk