M/S Alliance Infrastructure ... vs Vinay Mittal
2010 Latest Caselaw 227 Del

*     IN THE HIGH COURT OF DELHI AT NEW DELHI
+                        Crl.M.C.No.2224/2009
%                        Reserved on:      12th January, 2010
                         Date of Decision: 18th January, 2010

#     M/s Alliance Infrastructure Project Pvt. Ltd. and Ors.
                                                   ..... Appellant
!                          Through: Ms. Rebecca M. John and
                           Mr. Shivam Sharma, Adv.
                      versus
$     Vinay Mittal                           ..... Respondent
^                          Through: Mr. H. Hariharan, Adv.

+                        Crl.M.C.No.2225/2009

#     M/s Alliance Infrastructure Project Pvt. Ltd. and Anr.
                                                   ..... Appellant
!                          Through: Ms. Rebecca M. John and
                           Mr. Shivam Sharma, Adv.
                      versus
$     Sanjeev Kapur                            ..... Respondent
^                          Through: Mr. H. Hariharan, Adv.
*     CORAM:
       HON'BLE MR. JUSTICE V.K. JAIN

      1.    Whether the Reporters of local papers
            may be allowed to see the judgment?               Yes

      2.    To be referred to the Reporter or not?            Yes

      3.    Whether the judgment should be
            reported in the Digest?                           Yes


: V.K. JAIN, J.

1. This order will dispose of the above referred petitions.

Petitioner No.1 Alliance Infrastructure Project Private Ltd.,

issued a cheque dated 2nd May, 2008 for a sum of

Rs.30,86,000/- and another cheque of the same date for

Rs.12 lakhs in favour of the complainant/respondent. The

cheques, when presented for encashment, were returned

unpaid with the remarks "signature different". When the

complainant/respondent approached the petitioners in this

regard, they issued three other cheques, one for Rs.12 lakhs,

second for Rs.3,29,000/- and the third for Rs.31,91,650/- in

lieu of the previously dishonoured cheques. The cheques for

Rs.12 lakhs and Rs.3,29,000/- were encashed when

presented to the bank, but the cheque for Rs.31,91,650/-

was returned unpaid with the remarks "stop payment by the

drawer". A legal notice dated 23rd January, 2009 was sent to

the petitioners calling upon them to make payment within 15

days from the receipt of notice. The petitioners, however, did

not make the payment whereupon a complaint under Section

138/141 of Negotiable Instruments Act read with 141 thereof

and also under Section 420 of IPC was filed against them.

The petitioners, however, have been summoned only under

the provisions of Negotiable Instruments Act. Being

aggrieved, the petitioners have filed Criminal Misc. Case

2225/2009 assailing the summoning order.

2. Petitioner No. 1 had also issued two other cheques both

dated 5th May, 2008; one of Rs.47,84,000/- and the other for

Rs.18,60,000/- to the respondent. The cheque for

Rs.18,60,000/- was honoured, but the cheque for

Rs.47,84,000/-was returned unpaid. When the

complainant/respondent approached the petitioners in this

regard, they promised to pay the cheque amount within two-

three days and thereafter issued another cheque for

Rs.49,47,600/- in lieu of the previous cheques. The cheque

of Rs.49,47,600/-, when presented to the bank, was returned

with remarks "funds insufficient". Consequently, the

complaint subject matter of criminal case No. 2224/2009 was

filed by the respondent against the petitioners, who were

summoned under the provisions of Negotiable Instruments

Act.

3. It is an admitted case that after issue but before

presentation of cheque of Rs.49,47,600/-, petitioner No.1

paid a sum of Rs.16,50,000/- to the complainant/respondent

on 7th of October, 2008 by way of RTGS transfer. Though the

receipt of the aforesaid amount of Rs.16,50,000/- has not

been acknowledged in the legal notice dated 19.12.2008

issued by the respondent through his counsel Mr.Vijay

Kumar, when the complainant came in the witness box before

the trial court on 11th of September, 2009, he admitted

receipt of this payment and also stated that after the receipt

of the aforesaid amount on 7th of October, 2008 a sum of

Rs.32,97,600/- remained due to him. Admittedly, cheque of

Rs.49,47,600/- was presented to the bank much after the

receipt of the aforesaid sum of Rs.16,50,000/-, the cheque

having been returned vide memo dated 22.12.2008. As is

evident from the legal notice itself, the complainant required

the petitioner to make payment of Rs.49,47,600/-, though

the amount due to him on that date, as per his own showing,

was only Rs.32,97,600/-. Thus, not only the complainant

presented the cheque of Rs.49,47,600/- for encashment but

he also made a demand for the said amount despite the fact

that the amount payable to him even on the date of

presentation of the cheque was only Rs.32,97,600/-.

4. As regards the cheque of Rs.31,91,650/- which is the

subject matter of Crl.M.C.2225/09, admittedly, after this

cheque was returned, for the first time, vide memo dated

4.10.2008, the petitioner made a payment of Rs.10,50,000/-

to the complainant/respondent on 20th of October, 2008. The

receipt of this payment has been acknowledged in para 7 of

the legal notice dated 23.1.2009 sent by the

complainant/respondent to the petitioner. After receipt of

aforesaid payment of Rs.10,50,000/-, admittedly, the

complainant/respondent again presented the cheque of

Rs.3191,650/- to the bank for encashment though the

amount due to him on that date was only Rs.21,41,650/-

However, in the legal notice the complainant demanded only

the sum of Rs.21,41,650/- which was the amount due to

him, after giving credit for the payment of Rs.10,50,000/-,

received by him on 20th of October, 2008.

5. The first contention raised by the learned counsel for

the petitioners is that since the amount due and payable to

the complainant was much less than the amount represented

by the cheque, on the date these cheques were presented for

encashment, the petitioners were not legally required to

honour these cheques and, consequently, no offence under

Section 138 of the Negotiable Instruments Act is made out

against them. It has been further contended by the learned

counsel for the petitioners that in the criminal complaint

which is subject matter of Crl.M.C.2225/09 and even in the

legal notice dated 19.12.2008, the complainant called upon

the petitioners to pay a sum of Rs.49,47,000/- despite the

fact that the amount due on that date was only

Rs.32,97,600/- and the notice calling upon the petitioners to

pay more than the amount due from them being illegal and

invalid, no offence under Section 138 of the Negotiable

Instruments Act is made out against them.

6. Section 138 of Negotiable Instruments Act reads as

under:-

"138. Dishonour of cheque for insufficiency, etc., of funds in the accounts

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

provisions of this Act, be punished with imprisonment for [a term which may extend 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 induce 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 cheques 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.

7. The following are the components of the offence

punishable under Section 138 of Negotiable Instrument Act:-

(1) drawing of the cheque by a person on an account maintained by him with a banker, for payment to another person from out of that account for discharge in whole/part any debt or liability, (2) presentation of the cheque by the payee

or the holder in due course to the bank, (3) returning the cheque unpaid by the drawee bank for want of sufficient funds to the credit of the drawer or any arrangement with the banker to pay the sum covered by the cheque, (4) giving notice in writing to the drawer of the cheque within 15 days of the receipt of information by the payee from the bank regarding the return of the cheque as unpaid demanding payment of the cheque amount, (5) failure of the drawer to make payment to the payee or the holder in due course of the cheque, of the amount covered by the cheque within 15 days of the receipt of the notice.

8. The question which comes up for consideration is as to

what the expression „amount of money‟ means in a case

where the admitted liability of the drawer of the cheque gets

reduced, on account of part payment made by him, after

issuing but before presentation of cheque in question. No

doubt, the expression „amount of money‟ would mean the

amount of the cheque alone in case the amount payable by

the drawer, on the date of presentation of the cheque, is more

than the amount of the cheque. But, can it be said the

expression „amount of money‟ would always mean the

amount of the cheque, even if the actual liability of the

drawer of the cheque has got reduced on account of some

payment made by him towards discharge of the debt or

liability in consideration of which cheque in question was

issued. If it is held that the expression „amount of money‟

would necessarily mean the amount of cheque in every case,

the drawer of the cheque would be required to make

arrangement for more than the admitted amount payable by

him to the payee of the cheque. In case he is not able to

make arrangement for the whole of the amount of the cheque,

he would be guilty of the offence punishable under Section

138 of Negotiable Instruments Act. Obviously this could not

have been the intention of the legislature to make a person

liable to punishment even if he has made arrangements

necessary for payment of the amount which is actually

payable by him. If the drawer of the cheque is made to pay

more than the amount actually payable by him, the inevitable

result would be that he will have to chase the payee of the

cheque to recover the excess amount paid by him. Therefore,

I find it difficult to take the view that even if the admitted

liability of the drawer of the cheque has got reduced, on

account of certain payments made after issue of cheque, the

payee would nevertheless be entitled to present the cheque

for the whole of the amount, to the banker of the drawer, for

encashment and in case such a cheque is dishonoured for

wants of funds, he will be guilty of offence punishable under

Section 138 of Negotiable Instrument Act.

9. I am conscious of the implication that the drawer of a

cheque may make payment of a part of the amount of the

cheque only with a view to circumvent and get out of his

liability under Section 138 of Negotiable Instrument Act. But,

this can easily be avoided, by payee of the cheque, either by

taking the cheque of the reduced amount from the drawer or

by making an endorsement on the cheque acknowledging the

part payment received by him and then presenting the

cheque for encashment of only the balance amount due and

payable to him. In fact, Section 56 of Negotiable Instrument

Act specifically provides for an endorsement on a Negotiable

Instrument, in case of part-payment and the instrument can

thereafter be negotiated for the balance amount. It would,

therefore, be open to the payee of the cheque to present the

cheque for payment of only that much amount which is due

to him after giving credit for the part-payment made after

issuance of cheque. The view being taken by me was also

taken by a Division Bench of Kerala High Court in Joseph

Sartho vs. Gopinathan Nair, 2009 (2) Crimes 463 (Kerala).

As noted by the Hon‟ble Supreme Court in Rahul Builders vs.

Arihant Fertilizers & Chemicals And Another, (2008) 2 SCC

321, Negotiable Instruments Act envisages application of the

penal provisions which needs to be construed strictly.

Therefore, even if two views in the matter are possible, the

Court should lean in favour of the view which is beneficial to

the accused. This is more so, when such a view will also

advance the legislative intent, behind enactment of this

criminal liability.

10. The learned counsel for the respondent has referred to

the decision of Satya Narain Singh vs. Janardan, AIR 1980

Patna 277, where it was held that the consideration for a

Negotiable Instrument need not necessarily be consideration

mentioned in the instrument and it is permissible to prove

existence of another consideration. This judgment has no

application to the matter in controversy and this is not the

case of the respondent that the petitioner was liable to pay

some other debt to him on account of which its liability

towards him was equal to or more than the amount of the

cheques, on the date these cheques were presented for

encashment. It is an admitted case that on the date cheques

in question were presented by the respondent for encashment

the amount due to him was much less than the amount

represented by these cheques.

11. The learned counsel for the respondent has referred to

the decision of a Single Judge of Kerala High Court in

Kochayippa vs. Suprasidhan, 2002(2)ALT (Crl.) 251. In

that case, the transaction between the parties took place on

15.1.1995 when a sum of Rs.80,000/- was given to the

accused. However, the amount of the cheque was a post-

dated cheque dated 15.1.1997 was Rs.1 lakh. The cheque,

when presented, was dishonoured for want of funds. The

case of the complainant was that the post-dated cheque was

issued to cover the liability arising from the transaction

inclusive of interest for two years and, therefore, the balance

amount of Rs.20,000/- forming part of the cheque

represented the interest on the principal amount of

Rs.80,000/- for two years. It was observed by the High Court

that viewed from this perspective the debt due to the

complainant had become Rs.1 lakh on the date of the cheque

and, therefore, the principal debt being different from the

cheque amount was not of any consequence and the accused

was not entitled to acquittal on account of difference between

the amount of the cheque and the actual amount received by

him from the creditor. In the present case, this is not the

case of the complainant that on account of liability towards

interest or some other liability, the petitioner was liable to

pay the whole of the amount of the cheques on the date they

were presented for encashment. Therefore, this judgment is

of no help to the respondent/complainant.

12. In respect of the cheque, subject matter of

Crl.M.C.2225/2009, the amount of the cheque was

Rs.31,91,650/- and the respondent, after giving credit for the

amount of Rs.10,50,000/- paid to him on 20.10.2008

demanded only a sum of Rs.21,41,650/- vide notice dated

23.1.2009. Therefore, as far as the notice of demand issued

in this case is concerned, it was legal and valid as the

amount demanded was the actual amount payable by the

petitioner to the respondent. But, in respect of the cheque,

subject matter of Crl.M.C.2224/2009, the amount demanded

in the notice of demand dated 19.12.2008 was

Rs.49,47,600/-, though admittedly the amount due to the

respondent at that time was only Rs.32,97,600/-, after giving

credit of Rs.10,50,000/- received by him by RTGS on

7.10.2008. Thus, the respondent called upon the petitioner

to pay much more than the amount actually due and payable

by it. In order to comply with the demand made in the

notice, the petitioner would have been required to pay the

whole of the amount of Rs.49,47,600/- to the

complainant/respondent. A perusal of the notice would show

that the complainant did not at all refer to the payment of

Rs.16,50,000/- received through RTGS, while issuing the

notice of demand dated 19.12.2008. This is not as if the

complainant/respondent acknowledged the payment of

Rs.16,50,000/- and despite that asked the petitioner to make

payment of the whole of the amount of the cheque. The

complainant/respondent did not even refer to the substantial

payment which he had received by way of RTGS. To ask the

drawer of the cheque to make payment of Rs.49,47,600/-

despite having earlier received a sum of Rs.16,50,000/-

against that very cheque is nothing but a dishonest conduct.

Had the petitioner complied with the demands made in this

notice, it would have been compelled to later on chase the

complainant for recovery of the excess amount paid by it and

had the complainant not paid the excess amount received by

him, the petitioner would also have been compelled to initiate

legal proceedings against him. Therefore, a notice of demand

which requires the drawer of the cheque to make payment of

the whole of the cheque amount, despite receiving a

substantial amount against that very cheque, much before

issue of notice, cannot be said to be a legal and valid notice

envisaged in Section 138(b) of Negotiable Instrument Act.

The expression „amount of money‟ used in Section 138(b) of

Negotiable Instrument Act, to my mind, in a case of this

nature would mean the amount actually payable by the

drawer of the cheque to the payee of the cheque. Of course, if

the payee of the cheque makes some demands on account of

interest, compensation, incidental expenses etc, that would

not invalidate the notice so long as the principal amount

demanded by the payee of the cheque is correct and is clearly

identified in the notice. When the principal amount claimed

in the notice of demand is more than the principal amount

actually payable to the payee of the cheque and the notice

also does not indicate the basis for demanding the excess

amount, such a notice cannot be said to be a legal and valid

notice envisaged in Section 138(b) of Negotiable Instrument

Act. In such a case, it is not open to the complainant to take

the plea that the drawer of the cheque could have escaped

liability by paying the actual amount due from him to the

payee of the cheque. In order to make the notice legal and

valid, it must necessarily specify the principal amount

payable to the payee of the cheque and the principal amount

demanded from the drawer of the cheque should not be more

than the actual amount payable by him though addition of

some other demands in the notice by itself would not render

such a notice illegal or invalid.

13. In Central Bank of India & Another vs. Saxons Farms

& Others 1999(8) SCC 221, the Hon‟ble Supreme Court

observed that the object of the notice under Section 138(b) of

Negotiable Instrument Act is to give a chance to the drawer of

the cheque to rectify his omission and also to protect the

honest drawer. If the drawer of the cheque is asked to pay

more than the principal amount due from him and that

amount is demanded as the principal sum payable by him, it

is not possible for an honest drawer of the cheque to meet

such a requirement.

14. In Suman Sethi vs. Ajay K. Churiwala, 2000 (2) SCC

380, the Hon‟ble Supreme Court held that where the notice

also contains a claim by way of cost, interest etc. and gives

breakup of the claim of the cheque amount, interest,

damages etc., which are separately specified, the claim for

interest, cost etc. would be superfluous and these additional

claims being severable would not invalidate the notice. It was

further held that if an ominous demand is made in a notice

as to what was due against a dishonoured cheque, the notice

might fail to meet the legal requirement and may be regarded

as bad. The same consequence, in my view, would follow

where the principal sum demanded in the notice is more than

the actual amount payable to the payee of the cheque as

principal sum. In the present case, while demanding

Rs.49,47,600/- vide notice dated 19.12.2008, the

complainant did not even indicate that the actual amount

due to him was only Rs.32,97,600/- and he called upon the

complainant to pay the whole of the amount of the cheque

without even trying to justify the demand made by him.

15. In K.R.Indira vs. Dr.G.Adinarayana, 2003 (3) JCC(NI)

273, a consolidated notice was sent in respect of four

cheques. Two of which were issued to him in the name of the

husband and the two were in the name of the wife. It was

noted by the Hon‟ble Supreme Court that the cheque

amounts were different from the alleged loan and the

demand made was not of the cheque amount but was of the

loan amount. It was held that the complainant was required

to make demand for the amount recovered by the cheque

which was conspicuously absent in the notice and, therefore,

the notice was imperfect. The same would be the legal effect

when a part-payment against a cheque is made, after its

issue. The amount covered by the cheque would necessarily

mean the principal amount due to the payee after giving

credit for the par-payment received by him and, therefore, if

the notice does not specifically demand that particular

amount, it would not be a valid notice and would not fasten

criminal liability on account of its non-compliance.

16. In Rahul Builders (supra), the outstanding amount

due to the appellant from respondent No.1 was Rs.8,72,409/.

Respondent No.1 issued a cheque of Rs.1 lakh in favour of

the appellant, which, on presentation was dishonoured. A

notice was thereafter sent by the appellant to respondent

No.1 informing him about dishonour of the cheque and

asking him to remit the amount of Rs.8,72,409/-. It was

noted that the amount which respondent No.1 was called

upon to pay was the outstanding amount of the bills, i.e.

Rs.8,72,409/- and the noticee was to respond that demand

by offering the entire sum of Rs.8,72,409/-. It was further

noted that there was no demand to pay the sum of Rs.1 lakh

which was the amount of the cheque and what was

demanded was the entire sum of Rs.8,72,409/- and not a

part of it. In these circumstances, it was held that there was

no demand for payment of the cheque amount. The decision

of the High Court holding that the notice was invalid, was

upheld by the Hon‟ble Supreme Court.

17. For the reasons given in the preceding paragraphs, I

hold that the complaint, subject matter of

Crl.M.C.No.2225/2009 is liable to be quashed because the

complainant presented the cheque for encashment of the

whole amount of Rs.49,47,600/- though the amount due to

him on the date of the presentation of the cheque was

Rs.32,9600/- and he also demanded the whole of the amount

of Rs.49,47,600/- as principal sum without even indicating

the principal amount due to him under the cheque was

Rs.32,97,600/- and without even referring to the part-

payment of Rs.16,50,000/- which he had received by RTGS

on 7.10.2008. The criminal complaint, subject matter of

Crl.M.C.2224/2009 is liable to be quashed as the

complainant presented the cheque for encashment of whole of

its amount of Rs.31,91,650/- though he had already received

a sum of Rs.10,50,000/- before presentation of the cheque

and the principal amount due to him on the date of

presentation of the cheque was only Rs.21,41,650/-.

Ordered accordingly.

(V.K.JAIN) JUDGE JANUARY 18, 2010 bg/sn