Delhi High Court

Pushpa Devi vs Sachmi Creation on 17 September, 2008

Author: Aruna Suresh

                  Reportable
*     HIGH COURT OF DELHI AT NEW DELHI

+            Crl. M. C. No. 2845/2007 & Crl.
             M.A. No. 10113/2007


                     Date of decision : 17th September, 2008

#     PUSHPA DEVI                  ...... Petitioner
!                   Through : Mr. Amit Vohra, Adv.


                            Versus


$     SACHMI CREATION
                                         ..... Respondents
^                   Through : Mr. Anil Aggarwal, Adv.
                              Mr. Sanjay Mishra, Adv.

%
      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?           Yes

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

                          JUDGMENT

ARUNA SURESH, J. (Oral)

1. Petitioner had entered into an agreement dated

29.9.2006 with the respondent firm for carrying on

business of readymade garments. At the time of

agreement she had executed ten undated cheques for

Rs. 1 lac each amounting to Rs. 10 lacs duly signed by

her as security which were to be returned back to the

petitioner on the expiry of the agreement. The

respondent did not return back the said cheques to

the petitioner. Instead, deposited the same with its

banker after filling in 2.1.2007 as the date of issuance

of the cheques, for encashment. The said cheques

were dishonoured by her banker with the remarks

"Stopped Payment".

2. On dishonourment of the cheques respondent served

a legal notice dated 27.1.2007 upon the petitioner

which was duly replied by her. As per this notice, the

liability of the petitioner was shown to be of Rs. 22

lacs. Since petitioner did not make any payment as

claimed in the notice, respondent filed a complaint

under Section 138 of the Negotiable Instruments Act

(hereinafter referred to as NI Act) on the basis of the

impugned dishonoured cheques.

3. In the complaint respondent showed the liability of

the petitioner as Rs. 15 lacs. Learned Metropolitan

Magistrate took cognizance of the offence and

summoned the petitioner for 24.10.2007. Aggrieved

by the impugned order of the learned trial court, the

present petition has been filed seeking quashing of

the complaint filed by the respondent.

4. Learned counsel for the petitioner has submitted that

the undated cheques were issued by the petitioner as

security and therefore, the cheques being without any

consideration could not have been presented by the

respondent for encashment nor any liability under

Section 138 of the NI Act is made out against the

petitioner and therefore, the complaint as filed under

Section 138 of the NI Act is not maintainable and is

liable to be quashed.

5. Learned counsel for the respondent has argued that

the cheques were issued by the petitioner as security

but since she failed to make the payment of the due

amount as per the agreement, respondent was within

its right to present the cheques for encashment to

clear off the liability of the petitioner to the extent of

the amount of the said cheques and therefore, on

dishonourment of the cheques, according to him, the

respondent had rightly filed complaint under Section

138 of the NI Act and Court had rightly taken

cognizance of the offence and summoned the

petitioner. He has further submitted that there is a

presumption under Section 139 of the NI Act that the

impugned cheques were issued for consideration

and it was for the petitioner to prove in evidence that

the cheques were without consideration and

therefore, the complaint cannot be quashed as

prayed.

6. In the complaint the respondent averred that on

29.9.2006 the complainant and the accused had

entered into an agreement whereby an agency was

created in favour of the accused/petitioner to sell the

products of the complainant as an agent in premises

No. 2737, Main Ajmal Khan Road, Karol Bagh, New

Delhi, measuring about 1200 square feet on the

ground floor which were in occupation and possession

of the accused i.e. the petitioner. In pursuance to this

agreement, petitioner herein issued ten cheques for

Rs. 1 lac each totalling to Rs. 10 lacs as security to

ensure the value of the goods received by the

accused/petitioner from the complainant company.

According to the complainant, it supplied goods to the

petitioner as and when requisition was made by her.

7. As per the allegations in the complaint, the petitioner

failed to tender the accounts and pay the sale

proceeds to the complainant with an assurance to pay

the same in due course and the accused deferred the

payment of the due amount on one pretext or the

other. According to the complainant, accused was in

possession of goods worth more than Rs. 15 lacs

besides Rs. 7 lacs which were due from her as

outstanding sale proceeds which the accused had

failed to return back or pay the amount.

8. As per the admission of the complainant itself, the

said undated cheques which were already handed

over by the petitioner to the complainant were dated

by the complainant and were presented to the

bankers for encashment which on presentation were

dishonoured with the remarks "Stopped Payment".

The complainant claims that this amount of Rs. 10

lacs was to be adjusted towards the discharge of

liability against the value of the goods at the expiry of

the agreement.

9. The demand notice issued by the complainant did not

confine to the impugned cheques only. It pertained to

the entire claim made by the complainant against the

petitioner for the entire business transaction. This

legal notice was duly replied by the petitioner which

fact is also not disputed. In para 3 of the reply,

petitioner took a stand that the entire amount due

from her as value of the goods was paid by her to the

complainant through cheques and the dispute arose

when complainant refused to pay her Rs. 4,000/- per

day as commission for selling the goods of the

complainant, as per the agreement.

10. Thus, it is clear that dispute inter se the parties

pertains to enforcement of terms and conditions

contained in the agency agreement executed between

them on 29.9.2006. The undated cheques were issued

by the petitioner in favour of the complainant without

any consideration at the time when they were

executed as they were issued as security against the

goods which were to be supplied by the complainant

to the petitioner in due course of business. These

undated cheques were subsequently dated by the

complainant without the permission of the petitioner

and he also presented them for encashment. Under

these circumstances, it cannot be said that prima

facie an offence under Section 138 of the NI Act was

committed by the petitioner simply because the

cheques were dishonoured on presentation. Even the

presumption of consideration cannot be raised against

the petitioner under the facts and circumstances of

this case.

11. It is clear that the blank cheques were given as a

security under the marketing agreement between the

petitioner and the complainant. The case made out in

the complaint is that accounts were to be rendered

and certain dues were payable by the petitioner to the

complainant which was deferred by the petitioner. It

was only against the said liability, the cheques in

question were presented for encashment as is clear

from the following averments made in para 6 of the

complaint, which reads as under:

"...the said cheques bearing No. 134576 to 134585 i.e. totalling to 10 cheques in number of Rs. 1 lac each that amounts to a total sum of Rs. 10 lacs were given by the accused to the complainant in discharge of the liability against the value of the goods at the time of signing of the agreement and since there was huge liability of more than Rs. 22 lacs which the accused was liable to pay the complainant to the accused, the complainant presented the same through the accused Banker on 4th January 2007 and the said cheques were returned dishonoured on presentation by the ICICI Bank, Karol Bagh Branch with returned memos dt. 6.1.2007."

12. In M/s. Balaji Seafodds Exports (India) Ltd. v.

Mac Industries - 1999 JCC (2) HC 68 in similar

circumstances, it was observed that an undated

cheque having been given only as a security would

not attract provisions of Section 138 of the NI Act and

the complaint against the petitioner under Section

138 of the NI Act was not maintainable.

13. In the present case, since petitioner had executed

undated cheques only as a security in favour of the

complainant, provisions of Section 138 of the NI Act

are not attracted and therefore, the complaint No.

624/1/2007 as filed by the complainant against the