Delhi High Court
M/S Surya Vinayaka Industries ... vs Cvcigp Ii Client Rose Hill Ltd. & ... on 15 February, 2013
Author: S. P. Garg
* IN THE HIGH COURT OF DELHI AT NEW DELHI
RESERVED ON : 10th January, 2013
DECIDED ON : 15th February, 2013
+ CRL.M.C. 1191/2012 & Crl.M.A.Nos. 4258/12, 17651-52/12
M/S SURYA VINAYAKA INDUSTRIES LTD. & ORS.
..... Petitioners
VERSUS
CVCIGP II CLIENT ROSE HILL LTD. & ANR. .... Respondents
+ CRL.M.C. 1190/2012 & Crl.M.A.Nos.4256/12, 17660-61/12
M/S SURYA VINAYAKA INDUSTRIES LTD. & ORS.
.... Petitioners
VERSUS
CVCIGP II EMPLOYEES ROSE HILL LTD. & ANR.
.... Respondents
+ CRL.M.C. 1543/2012 & Crl.M.A.Nos.5461/12, 17656-57/12
M/S SURYA VINAYAKA INDUSTRIES LTD. & ORS.
...... Petitioners
VERSUS
CVCIGP II CLIENT ROSE HILL LTD. & ANR. .... Respondents
+ CRL.M.C. 1544/2012 & Crl.M.A.Nos.5463/12, 17658-59/12
M/S SURYA VINAYAKA INDUSTRIES LTD. & ORS.
..... Petitioners
VERSUS
Crl.M.C. Nos.1191/12 & connected petitions Page 1 of 19
CVCIGP II CLIENT ROSE HILL LTD. & ANR. .... Respondents
+ CRL.M.C. 1545/2012 & Crl.M.A.Nos. 5465/12, 17654-55/12
M/S SURYA VINAYAKA INDUSTRIES LTD. & ORS.
..... Petitioners
VERSUS
CVCIGP II EMPLOYEE ROSE HILL LTD. & ANR.
.... Respondents
+ CRL.M.C. 1546/2012 & Crl.M.A.Nos. 5467/12, 17662-63/12
M/S SURYA VINAYAKA INDUSTRIES LTD. & ORS.
..... Petitioners
VERSUS
CVCIGP II EMPLOYEES ROSE HILL LTD. & ANR.
.... Respondents
+ CRL.M.C. 4215/2012 & Crl.M.A.No19781/12
SANJAY JAIN & ORS. ..... Petitioners
VERSUS
CVCIGP II EMPLOYEES ROSE HILL LTD. & ANR.
.... Respondents
+ CRL.M.C. 4216/2012 & Crl.M.A.No19783/12
SANJAY JAIN & ANR. ..... Petitioners
VERSUS
CVCIGP II EMPLOYEES ROSE HILL LTD. & ANR.
.... Respondents
Crl.M.C. Nos.1191/12 & connected petitions Page 2 of 19
+ CRL.M.C. 4217/2012 & Crl.M.A.No19786/12
SANJAY JAIN & ORS. ..... Petitioners
VERSUS
CVCIGP II CLIENT ROSE HILL LTD. &ANR. .... Respondents
+ CRL.M.C. 4218/2012 & Crl.M.A.No19788/12
SANJAY JAIN & ORS. ..... Petitioners
VERSUS
CVCIGP II EMPLOYEES ROSE HILL LTD.&ANR.
.... Respondents
+ CRL.M.C. 4219/2012 & Crl.M.A.No19790/12
SANJAY JAIN & ORS. ..... Petitioners
VERSUS
CVCIGP II CLIENT ROSE HILL LTD. & ANR. .... Respondents
+ CRL.M.C. 4220/2012 & Crl.M.A.No19793/12
SANJAY JAIN & ANR. ..... Petitioners
versus
CVCIGP II CLIENT ROSE HILL LTD. & ANR. ..... Respondents
+ CRL.M.C. 4356/2012 Crl.M.A.Nos.20268-20269/12
SATEESH JAIN ..... Petitioner
VERSUS
CVCIGP II EMPLOYEES ROSE HILL LTD. ..... Respondent
Appearance : Mr.Shaad Anwar with Mr.Manoj
Agarwal, Advocates for the petitioners
Crl.M.C. Nos.1191/12 & connected petitions Page 3 of 19
in Crl.M.C.No.4356/2012.
Mr.U.U.Lalit, Sr.Advocate with
Mr.vineet Malhotra, Mr.Vikas Arora
and Mr.Aman Khan, Advocates for
the petitioners in
Crl.M.C.Nos.1190/12, 1191/12,
1543/12, 1544/12, 1545/12,
1546/12, 4215/12, 4216/12, 4217/12,
4218/12, 4219/12 & 4220/12
Mr.Sandeep Sethi, Sr.Advocate with
Mr.Neeraj Sharma, Ms.Roopali Singh
and Ms.Anjali Aggarwala, Advocates
for the respondents.
CORAM:
MR. JUSTICE S.P.GARG
S.P.GARG, J.
1. The petitioners have preferred the above mentioned petitions
under Section 482 Cr.P.C. for quashing of the orders passed by the
learned Metropolitan Magistrate in complaint cases filed by the
complainants/respondents under Section 138 of Negotiable Instruments
Act by which they were summoned to face trial. The complainants
alleged that the petitioners executed Restated Share Purchase Agreement
(Restated SPA in short) dated 11.03.2011 with them whereby terms of
agreement dated November, 12, 2010 were amended and modified and the
petitioners agreed to buy shares of M/s SVIL Mines Ltd. for a total
amount of `149,39,46,574.22. The agreement provided sale consideration
to be paid in five tranche as under:-
Tranche Date Total Tranche Total Consideration
No. shares (INR)
1. March 12, 2011 55,216 12,44,95,925.31
2. March 22, 2011 55,216 12,44,95,925.31
3. April 30, 2011 110,434 24,89,89,586.60
4. May 30, 2011 198,780 448,184,425.00
5. June 30, 2011 242,954 547,780,712.00
Total 662,600 1,493,946,574.22
2. The said agreement clearly provided and stated that the
payment towards first and second tranche was to be made by post-dated
cheques. The petitioners issued post-dated cheques. The accused Nos. 1,
2 and 3 requested the complainants to extend the time for payment and not
to deposit the post-dated cheques for encashment. Thereafter, after
considerable delay, the accused paid the part purchase consideration for
tranche Nos. 1 & 2 for the aggregate amount of `2,48,991,851.31/- by
RTGS payment. This payment was made in partial discharge of their
obligations under Restated SPA. It was further alleged that the accused in
order to meet the remaining payment obligations issued following
cheques to the complainants for the balance purchase consideration of
`1,244,947,936/- :-
Cheque No. Name of Cheque date Consideration
complainant
184465 Complainant June 27, 2011 159,603,079
184466 CVCIGP II June 27, 2011 89,386,508
Employee
Roshchill
Limited
184468 Complainant July 7, 2011 39,900,770
184469 CVCIGP II July 7, 2011 22,346,627
Employee
Rosehill Limited
184470 Complainant July 27, 2011 159,603,079
184471 CVCUGP II July 27, 2011 89,386,508
Employee
Roshcill Limited
184472 Complainant August 7, 2011 39,900,700
184473 CVCIGP II August 7, 2011 22,346,627
Employee
Rosehill Limited
184474 Complainant August 27, 2011 159,603,079
184475 CVCIGP II August 27, 2011 89,386,508
Employee
Rosehill Limited
184476 Complainant September 7, 39,900,770
184477 CVCIGP II September 7, 22,346,627
Employee 2011
Rosehill Limited
184478 Complainant September 27, 159,603,079
184479 CVCIGP II September 27, 89,386,508
Employee 2011
Rosehill Limited
184480 Complainant October 7, 2011 39,900,770
184481 CVCIGP II October, 7, 2011 22,346,627
Employee
Rosehill Limited
3. The said cheques were drawn on State Bank of Patiala, Kasturba
Gandhi Marg, New Delhi by accused No.1 with the consent, connivance
and knowledge of other accused persons. On December 21, 2011 the
complainants presented the post-dated cheques dated June 27 and July 07,
2011 for the aggregate amount of `19,95,03,849/- issued towards part
payment and in discharge of its liability of the purchase consideration.
However, the said cheques when presented were returned unpaid for the
reasons 'funds insufficient'. Similarly, other post-dated cheques were
presented and dishonoured on account of 'insufficient funds' or 'payment
stopped by drawer'. The complainants issued a notice dated 28.12.2011
(demand notice) and similar other notice to accused Nos.1 to 9 calling
them to pay the amount of dishonoured cheques within 15 days from the
date of receipt of the notice. The demand notice was duly served to them.
Despite receiving the demand notice, they neither paid the amount of
dishonoured cheques as demanded nor replied the letter.
4. The complainants further alleged that the cheques were issued by the
accused No.1 in consideration of and in discharge of existing liability and
were dishonoured. On account of the failure of the accused to make the
payment of the dishonoured cheques as demanded through demand notice
within a stipulated period, the accused persons were liable for committing
offences punishable under Sections 138 and 141 of the Negotiable
Instruments Act.
5. Pre-summoning evidence was tendered by the complainants. On
perusal of the evidence the Trial Court was of the opinion that prima facie
there was enough evidence to summon the accused for the offence under
Section 138 of the Negotiable Instruments Act. Accordingly, vide order
dated 16.02.2012 and 13.03.2012 the accused were summoned to appear
for 13.04.2012 and 17.05.2012. Being aggrieved, the petitioners have
preferred the petitions under Section 482 Cr.P.C. for quashing of the
summoning orders.
6. I have heard the learned senior counsel for the petitioners and the
respondents and have examined the record. Counsel for the petitioners
vehemently urged that the summoning orders dated 16.02.2012 and
13.03.2012 cannot be sustained as cheques in question were not issued in
the discharge of any debt or liability. As per the SPA, it was clearly
provided that the payment for tranches Nos. 3, 4 and 5 was to be made
before particular dates by way of wire transfer/demand draft. It did not
provide any payment by way of post-dated cheques. Every transaction in
respect of each tranche was an independent one. Specific dates were
mentioned when each tranche shall be implemented. No payment/cheque
was required to be issued before the date when the payments of the third
and fourth tranche became payable under the agreement. It was
absolutely clear that no sale of share took place for these three tranches.
The petitioner thus had no debt or liability to make payment to the
complainants. As per the agreement, the petitioners had an option to buy
the shares at any time before 30th June, 2011 against payment whereas
there was no clause which permitted or authorized any sale of shares after
the said date. The agreement was determinable in nature and the
petitioner expressed its desire and intention not to buy the shares. The
complainants in terms of clause 9.3 were free to deal with the shares in
such manner as they deemed fit in their absolute discretion. The
agreement provided consequence of termination of the agreement where
clause 9.3 prescribed that no party would have any claim against any other
party upon the termination of the agreement. No criminal liability was
attracted due to termination of the agreement. If there was any damages
to the complainants, they could have initiated civil proceedings. Learned
senior counsel further urged that the petitioners had no obligation to issue
post- dated cheques without consideration of any sale of shares. The post-
dated cheques were issued only as security and were not towards payment
in discharge of any existing debt or other liability. The payment was to
be made to the complainant only on transfer of shares which never took
place. Counsel referred to various clauses of the agreement to interpret
that the post-dated cheques were not issued in consideration of any debt or
other liability. It is further argued that the arbitration proceedings have
already been resorted to by the complainants. Since no consideration
exchanged and the post-dated cheques were issued without consideration,
Section 138 of the Negotiable Instrument Act was not attracted to raise
presumption under Section 139 of the Negotiable Instruments Act. It was
contended that it was a fit case to exercise extraordinary jurisdiction under
Section 482 Cr.P.C. Even if averments in the complaint case are taken on
its face value and believed, no offence under Section 138 Negotiable
Instruments Act was made out. Explanation to 138 Negotiable
Instruments Act makes it clear that the debt or other liability has to be a
legally enforceable debt or liability to raise presumption under Section
139 of the Negotiable Instruments Act. Reliance has been placed on M/s
Collage Culture & Ors. Vs.Apparel Export Promotion Council & Anr.
2007 (4) JCC (NI) 388; Shanku Concretes Pvt. Ltd & Ors. Vs.State of
Gujrat & Ors. 2000 (3) Crimes 602; Swastik Coaters (P) Ltd. Vs.Deepak
Brothers 1997 Crl.J.1942; Kumar Exports Vs.Sharma Carpets 2009 (1)
SCC (Crl.) 823; M.S.Narayana Menon @ Mani Vs.State of Kerela & Anr.
2006 JCC (NI) 198; Balaji Seafoods Exports (India) Ltd. & Anr. Vs.Mae
Industries Ltd. II (1999) CCR 424; Jyoti Build-Tech Pvt.Ltd. & Ors.
Vs.Mideast Pipeline Products 2011 (8) LRC 303 (DEL)
7. Learned senior counsel for the respondents strenuously urged that
the petitions under Section 482 Cr.P.C. for quashing of the summoning
order are not maintainable. Post-dated cheques were issued in the
discharge of debt/liability for the purchase of shares in accordance with
the terms and conditions of the agreement. On presentation, the cheques
were dishonoured. Under Section 118 and 139 of Negotiable Instruments
Act a legal presumption arises that the holder of a cheque received the
cheque for discharge in whole or in part of a debt or a liability unless
contrary is proved. The complaint avers that the dishonoured cheques
were issued in partial discharge of the debt under the agreement. Contents
of the complaint prima facie disclose commission of offence under
Section 138 of the Negotiable Instrument Act. Counsel referred to various
clauses of the agreement to emphasise that the post-dated cheques were
issued in consideration of purchase of shares. Scope of Section 482
Cr.P.C. is limited and defence of the petitioners cannot be looked into. At
this stage, the court cannot go behind the cheque in view of presumption
under Section 139 of Negotiable Instruments Act. Reliance has been
placed on Magnum Aviation (Pvt) Ltd. Vs.State & Ors.
MANU/DE/2127/2010, M.M.T.C. Ltd. and Anr. Vs. MEDCHL Chemical
and Pharma (P) Ltd. and Anr. (2002) 1 SCC 234, Hiten P.Dalal
Vs.Bratindranath Banerjee (2001) 6 SCC 16, John Thomas
Vs.Dr.K.Jagadeesan (2001) 6 SCC 30. Rajesh Agarwal Vs.State & Anr.
Sachin Sangal Vs.Pieco Call Tech Pvt. Ltd, Sardar Manjeet Singh Kohli
Vs.State of NCT of Delhi and Anr. and Shri Pradeep Aggarwal & Ors.
Vs.Shri Y.K.Goel 171 (2010) DLT51.
8. Admitted position is that Restated SPA dated 11.03.2011 was
executed between the parties by which the petitioners were to purchase
659,926 equity shares for a consideration of 149,39,46,574.23/- as per the
terms and conditions incorporated therein in five tranches. It is not
disputed that post-dated cheques were issued towards payment for first
and second tranche. On presentation, the said cheques were honoured and
no controversy arose between the parties. It is alleged that for purchase of
shares in respect of 3, 4 and 5 tranches, post-dated cheques were issued by
the petitioners which on presentation were dishonoured. The petitioners
have not denied issuance of the post-dated cheques to the complainants. It
is also not in controversy that the said post-dated cheques were
dishonoured on the grounds of 'insufficient funds' and 'payment stopped
by drawer'. The petitioners did not deny receipt of demand notice by the
complainants. Admittedly, no payment was made to the complainants
pursuant to the issuance of the demand notice. Demand notice clearly
mentions that the post-dated cheques were issued by the petitioners under
the SPA towards partial discharge of the debt. In the complaint case
under Section 138 of Negotiable Instruments Act, there is specific
averment that the post-dated cheques were paid in partial discharge of
their obligations under Restated SPA. Para (6) of the complaint mentions
that in order to meet the remaining payment obligations under the
Restated SPA, the accused issued the cheques for the balance purchase
consideration of `1,244,947,936. Again in Para No.(7), it is stated that on
December, 21, 2011 the complainant presented post-dated cheques issued
by the accused amounting to 19,95,03,849/- towards part-payment in
discharge of its liability of the purchase consideration. Para (11) is again
specific that cheques were issued by accused No.1 with the consent,
connivance and knowledge of other accused persons in consideration and
in discharge of the existing liability.
9. Averments in the complaint case and demand notice prima facie
incorporate the necessary ingredients of Section 138 Negotiable
Instrument Act. Under Section 139 of the Negotiable Instruments Act, the
Court has to draw a presumption that the holder of the cheque received the
cheque for discharge of a debt or liability unless the contrary is proved. At
this initial stage of proceedings, the plea, that there was no debt or
liability cannot be entertained and accepted. In M.M.T.C.Ltd. and Anr.
Vs. Medchl Chemicals and Pharma (P) Ltd. (2002) 1 SCC 234 the
Supreme Court went to the extent of saying that there was no requirement
that the complainant must specifically allege in the complaint that there
was a subsisting liability. The burden of proving that there was no
existing debt or liability was on the respondents. This they have to
discharge in the trial. At this stage, merely on the basis of averments in the
petitions filed by them, the High Court could not have concluded that
there was no existing debt or liability.
10. In Hiten P.Dalal Vs.Bratindranath Banerjee (2001) 6 SCC 16 the
Supreme Court held :-
"That the four cheques were executed by the appellant in favour of
the Standard Chartered Bank (hereafter referred to as the Bank),
has not been denied nor was it in dispute that the cheques were
dishonoured because of insufficient funds in the Appellants'
account with the drawee, viz. Andhra Bank. Because of the
admitted execution of the four cheques by the appellant, the Bank
was entitled to and did in fact rely upon three presumptions in
support of its case, namely, under Section 118 138 and 139 of the
Negotiable Instruments Act. Section 118 provides, inter-alia, that
until the contrary is proved it shall be presumed that every
negotiable instrument was made or drawn for consideration, and
that every such instrument when it has been accepted, indorsed,
negotiated or transferred, was accepted, indorsed, negotiated or
transferred for consideration. The presumption which arises under
Section 138 provides more specifically that where any cheque
drawn by a person on an account for payment of any amount of
money for the discharge in whole or in part of any debt or other
liability, is returned by the drawee bank unpaid, either because of
the amount of money standing to the credit of that account is
insufficient to honour the cheque, such persons shall be deemed to
have committed an offence and shall be punished with
imprisonment for a term which may extend to twice the amount of
the cheque, or with both. The nature of the presumption under
Section 138 is subject to the three conditions specified relating to
presentation, giving of the notice and the non payment after receipt
of notice by the drawer of the cheque. All three conditions have not
been denied in this case.
21. The appellant's submission that the cheques were not drawn for
the 'discharge in whole or in part of any debt or other liability' is
answered by the third presumption available to the Bank under
Section 139 of the Negotiable Instruments Act. This section
provides that "it shall be presumed, unless the contrary is proved,
that the holder of a cheque received the cheque, of the nature
referred to in Section 138 for the discharge, in whole or in part, of
any debt or other liability". The effect of these presumptions is to
place the evidential burden on the appellant of proving that the
cheque was not received by the Bank towards the discharge of any
liability.
22. Because both Sections 138 and 139 require that the Court
"shall presume" the liability of the drawer of the cheques for the
amounts for which the cheques are drawn, as noted in State of
Madras vs. A. Vaidvanatha Iyer AIR 1958 SC 61 , it is obligatory
on the Court to raise this presumption in every case where the
factual basis for the raising of the presumption had been
established. "It introduces an exception to the general rule as to the
burden of proof in criminal cases and shifts the onus on to the
accused" (ibid). Such a presumption is a presumption of law, as
distinguished from a presumption of fact which describes
provisions by which the court "may presume" a certain state of
affairs. Presumptions are rules of evidence and do not conflict with
the presumption of innocence, because by the latter all that is
meant is that the prosecution is obliged to prove the case against
the accused beyond reasonable doubt. The obligation on the
prosecution may be discharged with the help of presumptions of
law or fact unless the accused adduces evidence showing the
reasonable possibility of the non-existence of the presumed fact.
23. In other words, provided the facts required to form the basis of
a presumption of law exists, no discretion is left with the Court but
to draw the statutory conclusion, but this does not preclude the
person against whom the presumption is drawn from rebutting it
and proving the contrary. A fact is said to be proved when, "after
considering the matters before it, the Court either believes it to
exist, or considers its existence so probable that a prudent man
ought, under the circumstances of the particular case, to act upon
the supposition that it exists". therefore, the rebuttal does not have
to be conclusively established but such evidence must be adduced
before the Court in support of the defence that the Court must
either believe the defence to exist or consider its existence to be
reasonably probable, the standard of reasonability being that of the
'prudent man'."
11. In the present case, an exhaustive Restated SPA was executed
between the parties. It was partly implemented and executed. Post-dated
cheques issued by the purchasers for first and second tranche were
honoured. However, post-dated cheques issued for 3rd, 4th and 5th tranche
were dishonoured. Specific question was put to the learned counsel for
the petitioners as to why the post-dated cheques issued were got
dishonored. The petitioners had no answer. Without any apparent cause,
the petitioners by their unilateral act had no authority under the agreement
to terminate the transaction and to say that the complainants were at
liberty to deal with the shares. It cannot be the proper and justifiable
answer. Sanctity has been attached under Section 118 and 139 of the
Negotiable Instruments Act where unless the contrary is proved, it is to be
presumed that every negotiable instrument including a cheque was made
or drawn for consideration. Under Section 139, the courts are to presume,
unless the contrary was proved, that the holder of the cheque received the
cheque for discharge, in whole or in part of any debt or liability. This
presumption is rebuttable. The presumption can be rebutted by adducing
evidence and the burden of prove is on the person who wants to rebut it
and that can only be done in the course of trial. In the proceedings under
Section 482 Cr.P.C. these complicated questions interpreting the clauses
of the Restated SPA in one way or the other as per one's convenience
cannot be undertaken. Prima facie, it reveals that the post-dated cheques
were issued in consideration of the purchase price of the shares under the
Agreement. Clause 3.3 specifically mentions that any dishonour of the
post-dated cheques shall constitute breach of the agreement without
prejudice to the other rights of the venders and notwithstanding that the
venders shall not have any obligation to deliver any of the shares to the
purchasers in the event of such dishonour.
12. It is well settled that the power of quashing criminal proceedings
should be exercised very stringently and without circumspection. It is
settled law that at this stage the court is not justifiable in embarking upon
an inquiry as to the reliability or genuineness or otherwise of the
allegations made in the complaint. The inherent powers do not confer an
arbitrary jurisdiction on the court to act according to its whim or caprice.
At this stage, the court could not have gone into the merits and/or come to
the conclusion that there was no existing debt or liability M.M.T.C.Ltd.
and Anr. Vs. Medchl Chemicals and Pharma (P) Ltd, (supra).
13. In the light of the above discussion, I find no illegality or irregularity
in the impugned orders. The petitions filed by the petitioners are
dismissed. All pending applications also stand disposed of. It is,
however, made clear that observations in the order are not on the merit of
the case. The parties are directed to appear before the Trial Court on the
date fixed i.e. on 21st March, 2013. Non bailable warrants (if any) issued
against the petitioner(s) would not be executed.
(S.P.GARG)
February 15, 2013/sa JUDGE
