Delhi High Court
R N Malhotra vs Bhupesh Kumar Jain & Ors. on 21 February, 2013
Author: G.P. Mittal
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Reserved on: 13th February, 2013
Pronounced on: 21st February, 2013
+ CRL.M.C. 2782/2010
R N MALHOTRA ..... Petitioner
Through: Mr.Praveen Kumar, Advocate
versus
BHUPESH KUMAR JAIN & ORS. ..... Respondents
Through: Mr. Surender Chauhan, Advocate for R-1
Mr. S.K.Kalia, Advocate for R-3
+ CRL.M.C. 2783/2010
R N MALHOTRA ..... Petitioner
Through: Mr.Praveen Kumar, Advocate
versus
SURENDER KUMAR JAIN & ORS. ..... Respondent
Through: Mr.Surender Chauhan, Advocate for R-1
Mr.S.K.Kalia, Advocate for R-3
+ CRL.M.C. 2785/2010
R N MALHOTRA ..... Petitioner
Through: Mr.Praveen Kumar, Advocate
versus
SURENDER KUMAR JAIN & ORS. ..... Respondent
Through: Mr.Surender Chauhan, Advocate for R-1
Mr.S.K.Kalia, Advocate for R-3
+ CRL.M.C. 2786/2010
R N MALHOTRA ..... Petitioner
Through: Mr.Praveen Kumar, Advocate
Crl.MC 2782/2010 Etc. Page 1 of 15
versus
BHUPESH KUMAR JAIN & ORS. ..... Respondent
Through: Mr. Surender Chauhan, Advocate for R-1
Mr. S.K.Kalia, Advocate for R-3
+ CRL.M.C. 2787/2010
R N MALHOTRA ..... Petitioner
Through: Mr.Praveen Kumar, Advocate
versus
DHANESH KUMAR JAIN & ORS. ..... Respondent
Through: Mr. Surender Chauhan, Advocate for R-1
Mr. S.K.Kalia, Advocate for R-3
+ CRL.M.C. 2788/2010
R N MALHOTRA ..... Petitioner
Through: Mr. Praveen Kumar, Advocate
versus
DHANESH KUMAR JAIN & ORS. ..... Respondent
Through: Mr.Surender Chauhan, Advocate for R-1
Mr.S.K.Kalia, Advocate for R-3
+ CRL.M.C. 2789/2010
R N MALHOTRA ..... Petitioner
Through: Mr.Praveen Kumar, Advocate
versus
DHANESH KUMAR JAIN & ORS. ..... Respondent
Through: Mr. Surender Chauhan, Advocate for R-1
Mr. S.K.Kalia, Advocate for R-3
Crl.MC 2782/2010 Etc. Page 2 of 15
CORAM:
HON'BLE MR. JUSTICE G.P.MITTAL
JUDGMENT
G. P. MITTAL, J.
1. By virtue of these seven Petitions, Petitioner R.N Malhotra seeks
quashing of the seven complaints filed by Respondent No.1 for an
offence under Section 138 of the Negotiable Instruments Act, 1881 (the
Act).
2. Quashment of the complaints is sought on two grounds. First, the
Petitioner was incapacitated to honour the cheques by virtue of a judicial
order dated 07.01.2008 passed by the Company Law Board (CLB)
whereby Respondent No.2 M/s. Pearl India Publishing House Pvt. Ltd.
was restrained from honouring any cheque already issued by the
Company; and secondly, during pendency of the Complaints under
Section 138 of the Act, the company went into liquidation and winding
up proceedings were initiated by the Company Court and thus, the
proceedings before the Court of learned Additional Chief Metropolitan
Magistrate (ACMM) cannot continue for want of permission from the
Company Court.
3. It is not in dispute that around 45 post dated cheques were issued on
different dates by M/s. Pearl India Publishing House Pvt. Ltd. for various
invoices in respect of seven complaints with the dates between
28.09.2007 to 16.03.2008. According to the Petitioner, there were three
Directors in the company (M/s. Pearl India Publishing House Pvt. Ltd.),
namely, R.N. Malhotra, (Petitioner herein), S.K. Malhotra and Y.N.
Malhotra (Respondent No.3 herein). In the year 2005 S.K. Malhotra, one
of the Directors of Respondent No.2 company passed away and Mrs.
Nirmal Malhotra his widow became Director in his place. Some disputes
arose between the Directors of Respondent No.2 Company as a
consequence thereof, a Company Petition No.100/2006 title Nirmal
Malhotra & Ors. v. Suman Prakashan Pvt. Ltd. filed in the CLB.
Respondent No.2 Company was arrayed as Respondent No.2 in the said
Company Petition. It is the case of the Petitioner that on 07.01.2008 an
order was passed by the CLB whereby all the cheques issued by
Respondent No.2 were ordered to be cancelled and Respondent No.2 was
directed to issue fresh cheques signed by all the three Directors. On
10.01.2008, the Petitioner wrote a letter to Respondent No.1 requesting
him to return the cheques issued by Respondent No.2 as the same stood
cancelled. It is alleged that Respondent No.1 instead of complying with
the order dated 07.01.2008 presented all the cheques and after service of
the demand notice filed seven complaints. The Petitioner also raised a
plea of goods being defective and substandard. The same, however,
would not be relevant for the purpose of decision of the instant Petitions.
The said contention, therefore, has not been raised on behalf of the
Petitioner.
4. To appreciate the contention raised on behalf of the Petitioner, it would
be apposite to extract the order dated 07.01.2008 purported to be passed
by the CLB. It reads as under:-
"Parties have agreed that an ........(illegible) and it be carried out
by an independent ........(illegible) from 1/4/04 only will be done.
In so far as operations of books of accounts is concerned it has
been agreed that they will be jointly operated by P1, R3 and R6 in
respect of both the companies. Accordingly so ordered and the
Banks was to be abided of the same.
The cheques now with the company/parties shall be returned and
the company will issue the fresh cheques and use only the fresh
cheques.
All the cheques already issued and which have not yet been
encashed will be cancelled and fresh cheques signed by all the
directors would be issued after satisfaction........"
5. In pursuance of the earlier said order, the Petitioner wrote a letter dated
10.01.2008 requesting Respondent No.1 to return the cheques. The letter
reads as under:-
"M/s. Dhanesh Paper Mart
2358/7, Chatta Shahji
Chawri Bazar
Delhi-110 006.
Dear Mr. Jain,
This is with reference to the Order dated 7-01-2008 issued by the
Hon'ble Company Law Board in CP No.100 of 2006 titled Mrs.
Nirmal Malhotra Vs. Suman Prakashan Pvt. Ltd. & Others.
As per the orders of the Hon'ble Company Law Board, all the
cheques already issued which have not yet been encashed will be
cancelled and fresh cheques signed by all the directors shall be
issued.
To implement this order, please return all cheques in your
possession that have been issued by us to enable us to issue fresh
cheques.
Thanking you,
Yours faithfully,
For Pearl (India) Publishing House Pvt. Ltd.
Sd/-
(R.N. Malhotra)
Director"
6. Respondent No.1 responded to the letter dated 10.01.2008 stating that
Respondent No.1 was not aware of any order passed by the CLB.
Respondent No.1 at the same time requested the Petitioner as also
Respondent No.2 company along with other directors to transmit him
copy of the order dated 07.01.2008 passed by CLB and also to replace the
cheques issued to Respondent No.1. The reply to the letter written by the
Petitioner is extracted hereunder:-
"......Our client Shri Surender Kumar Jain s/o Late Sh. Daroga
Mal Jain, sole proprietor of M/s. Dhanesh Paper Mart, 2358/7,
Chatta Shah Ji, Chawri Bazar, Delhi-110 006, have placed your
letter dated 10.01.2008 in our hands with the instructions to reply
the same as follows:-
1. That in discharge of your liability to clear the pending
bills/invoices you had issued post dated cheques in favour of
Our client the details of the same is provided to you and is
again reproduced herein below for your reference.
Sl. Bill Date Amount Cheque No. Date
No No.
1. 1086 16.1.2007 2,15,764=00 035335 15.11.2007
2. 1119 29.01.2007 1,40,120=00 035687 30.11.2007
3. 1140 08.02.2007 2,80,576=00 035688 23.01.2008
4. 1159 15.02.2007 18,244=00 035735 14.12.2007
5. 1175 23.02.2007 2,62,365=00 035901 22.12.2007
6. 1198 07.03.2007 1,48,097=00 035902 15.03.2008
7. 1598 23.10.2007 46,138=00 Cheuqe not
received
2. That as on date an amount of `11,11,304/- is due to be paid by
you the above named addressee and you on one pretext or the
other delaying the payment of the cheques already issued by
you by not allowing Our Client to present the cheques despite
of their due dates. As and when Our Client requested you for
the presentation of cheques upon their due dates you gave one
story or the other and now you have issued the letter under
reply with sole intention to delay the payment of the cheques
which are already outstanding.
3. Take notice that firstly the order referred by you in your letter
under reply is not binding on Our Client, as Our Client was
neither a party to the said proceedings and nor have
participates in the said mater at any point of time. Still you are
called upon to provide the certified copies of complete
proceedings along with order sheets of the case titled Mrs.
Nirmal Malhotra Vs. Suman Prakshan Pvt. Ltd. & Others in CP
No.100 of 2006. Our Client reserves his legal rights to
challenge the same if any order is passed against Our Client
only after reading the complete case file. As such as on date
Our Client has not received any such orders as referred by you.
4. Without prejudice to the rights and remedies available to Our
Client and by not going in to the details of the said case, as
desired by you through your letter under reply you are called
upon to issue fresh cheques of current dates as against all the
cheques for which the due dates are already over within 10
days from the date mentioned herein above or from the date of
receipt of this reply whichever is earlier. Our Client after
receiving the fresh cheque of current dates as per respective
Bills/invoices payable at Delhi will return the cheque in lieu of
the fresh cheques. Take further notice that for post dated
cheques, the dates of which is yet to fell due, fresh cheques of
the same dates may also be issued. In addition t this you are
also liable to issue a cheque of `46,138/- as per Our
Bill/invoice as is mentioned in Para 1 at serial no.7 against
which you have already received paper/paper boards.
5. Take further notice that if you fail to issue the fresh cheques in
lieu of the cheques already issued as per the invoices / bills and
would further try to delay the payments, Our Client will be at
liberty to present the cheque already received for its onward
clearance with their bankers entirely at your risk, consequences
and cost thereof.
We therefore call upon you, which we hereby do, to supply the
complete set of certified copies of the proceedings of CP No.100 of
2006 titled Nirmal Malhotra Vs. Suman Prakashan Pvt. Ltd. &
Others and also issue fresh cheques of the current dates in lieu of
the cheques of which the dates are already over and fresh PDC
against the cheuqes /debit not in lieu of the cheques / debit note of
which the date is yet to fell due, within 10 days time from the date
of this reply or from the date of receipt of this reply whichever is
earlier, failing which Our Client will present all the cheuqes with
their bankers for its onwards clearance entirely at your risk,
consequences and cost thereof......"
7. The learned counsel for the Petitioner urges that after passing of the order
dated 07.01.2008, the Petitioner or for that matter Respondent no.2 was
incapacitated to honour the cheques already issued in favour of
Respondent No.1. In view of the judicial order passed by the CLB the
cheques stood cancelled and since the cheques lost its validity, the
necessary ingredients of Section 138 of the Act were not fulfilled and the
Petitioner cannot said to have committed the offence under Section 138
of the Act.
8. The learned counsel for the Petitioner places reliance on the judgment of
the Supreme Court in Jugesh Sehgal v. Shamsher Singh Gogi (2009) 14
SCC 683; and Raj Kumar Khurana v. State of (NCT of Delhi) & Anr.
2009 (7) SCALE 55 to contend that the third ingredient of the offence
under Section 138 of the Act is culled out by the Supreme Court in
Jugesh Sehgal was missing. Para 13 of the report in Jugesh Sehgal relied
upon by the learned counsel for the Petitioner is extracted hereunder:-
"13. It is manifest that to constitute an offence under Section 138
of the Act, the following ingredients are required to be fulfilled:
(i) a person must have drawn a cheque on an account maintained
by him in a bank for payment of a certain amount of money to
another person from out of that account;
(ii) the cheque should have been issued for the discharge, in whole
or in part, of any debt or other liability;
(iii) that 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;
(iv) that cheque is returned by the bank unpaid, either because of
the amount of money standing to the credit of the 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
the bank;
(v) the payee or the holder in due course of the cheque 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 15 days of the
receipt of information by him from the bank regarding the return
of the cheque as unpaid;
(vi) the drawer of such cheque fails to make payment of the said
amount of money to the payee or the holder in due course of the
cheque within 15 days of the receipt of the said notice.
Being cumulative, it is only when all the aforementioned
ingredients are satisfied that the person who had drawn the cheque
can be deemed to have committed an offence under Section 138 of
the Act."
9. At this juncture, I would again refer to the order dated 07.01.2008
purported to have been passed by the CLB. Admittedly, Respondent
No.1 was not a party to the proceedings before the CLB wherein order
dated 07.01.2008 was passed. Moreover, the order of cancellation of all
the cheques was passed on the consent of the parties to the proceedings
before the CLB. All the parties agreed that fresh cheques signed by all
the Directors would be issued after satisfaction. In reply to the letter
dated 10.01.2008 written by the Petitioner, Respondent No.1 (the
Complainant) required the Petitioner as also Respondent No.2 Company
and another Director to issue fresh cheques in lieu of the cheques already
issued apart from sending him a copy of the order passed by the CLB.
The Petitioner or for that matter the other Directors chose not to respond
to the reply dated 21.02.2008. The CLB never prohibited the Petitioner
or Respondent No.2 Company from issuing fresh cheques. If the
Petitioner, Respondent No.2 company and other Directors wanted to
avoid their liability under Section 138 of the Act they could have
discharged their liability either by issuing fresh cheques or even by
transmitting pay orders for the cheque amount. The Petitioner or for that
matter the other Directors were not entitled to withhold the payment
simply on the pretext of the order dated 07.01.2008 passed by the CLB.
10. Moreover, on receipt of the demand notice under Section 138 again the
Petitioner as well as Respondent No.2 Company could have come
forward to make the payment to avoid their liability under the Act that
was also not done.
11. Learned counsel for the Petitioner relies on Kusum Ingots & Alloys Ltd. v.
Pennar Peterson Securities Ltd. (2000) 2 SCC 745 to urge that in view of
the order passed by the CLB for cancellation of the cheques already
issued it became impossible for the Petitioner and Respondent No.2 to
issue the cheuqes. Learned counsel for the Petitioner presses into service
Para 19 of the report which is extracted hereunder:-
"19. ..........In a case in which BIFR has submitted its report
declaring a company as "sick" and has also issued a direction
under Section 22-A restraining the company or its directors not to
dispose of any of it assets except with consent of the Board then the
contention raised on behalf of the appellants that a criminal case
for the alleged offence under Section 138 NI Act cannot be
instituted during the period in which the restraint order passed by
BIFR remains operative cannot be rejected outright. Whether the
contention can be accepted or not will depend on the facts and
circumstances of the case. Take for instance, before the date on
which the cheque was drawn or before expiry of the statutory
period of 15 days after notice, a restraint order of BIFR under
Section 22-A was passed against the Company then it cannot be
said that the offence under Section 138 NI Act was completed. In
such a case it may reasonably be said that the dishonouring of the
cheque by the bank and failure to make payment of the amount by
the Company and/or its Directors is for reasons beyond the control
of the accused. It may also be contended that the amount claimed
by the complainant is not recoverable from the assets of the
Company in view of the ban order passed by BIFR. In such
circumstances it would be unjust and unfair and against the intent
and purpose of the statute to hold that the Directors should be
compelled to face trial in a criminal case."
12. Kusum Ingots & Alloys Ltd. is not attracted to the facts of the present case
and is clearly distinguishable. The proceedings before the Board of
Industrial & Financial Reconstruction (BIFR) constituted under Sick
Industrial Companies (Special Provisions) Act, 1985 (Act of 1985) are
taken at the behest of the creditors and in view of Section 22A of the Act
of 1985 the Company and its Directors were directed not to dispose of the
Companies assets, except with the consent of the Board.
13. In the instant case, the Directors of the Company themselves suffered a
consent order of cancellation of the cheques. The company and its
Directors were under obligation to honour their commitment to the third
party or else to face consequences flowing from non compliance. The
order passed by the CLB did not incapacitate the Petitioner from
honouring the commitment to make the payment either by replacing the
cheques or by issuing demand draft or even making the payment after
receipt of the demand notice.
14. I have perused Jugesh Sehgal v. Shamsher Singh Gogi (2009) 14 SCC
683 and Raj Kumar Khurana v. State of (NCT of Delhi) & Anr. 2009 (7)
SCALE 55. It is true that the cheques have to be presented to the Bank
within a period of six months or from the date on which it is drawn or
within the period of its validity, whichever is earlier. This ingredient does
not envisage a contingency as is sought to be propounded on behalf of the
Petitioner. Otherwise also, it would be very easy to obtain such a consent
order by the Directors of a Company or by the Partners of a Partnership
firm and to plead their inability to honour the cheque because of such a
consent order. Thus, the first contention raised on behalf of the Petitioner
has to be rejected being devoid of any merit.
15. Coming to the second contention it may be mentioned that the dishonor
of the various cheques took place in or about March, 2008 and the legal
notice dated 04.04.2008 was issued by the Respondent No.1 in April,
2008. The proceedings before the Company Court were started thereafter
and the Provisional Liquidator was appointed only on 18.01.2010. It is
urged by the learned counsel for the Petitioner that even if the offence
was completed before initiation of the proceedings before the Company
Court or before appointment of the provisional liquidator, yet the
appointment of the official liquidator will be a bar to continue of any
proceedings including the criminal proceedings against the Company.
Since primarily it was the liability of the Company to make the payment
in respect of the cheques the proceedings against the Petitioner also
cannot continue. Learned counsel for the Petitioner vehemently argues
that the proceedings envisaged under Section 446 of the Companies Act
will include the criminal proceedings. The learned counsel for the
Petitioner places reliance on a judgment of coordinate Bench of this
Court in The Official Liquidator of M/s. R.C. Abrol & Company (P) Ltd.
(in Liquidation) v. Shri R.C. Abrol & Ors., 1976 (2) ILR 283 wherein it
was held that even criminal proceedings pending before a Magistrate
could be transferred to the Company Court under Section 446 (3) of the
Companies Act, 1956 (as it was in force at that time and since deleted).
16. The view taken in The Official Liquidator of M/s. R.C. Abrol & Company
(P) Ltd. was not approved in D.K.Kapur v. Reserve Bank of India & Ors.
2001 (58) DRJ 424 (DB) where a Division Bench of this Court observed
that "other legal proceedings" envisaged under Section 446 (1) of the
Companies Act cannot include criminal proceedings. The Division
Bench held that "other legal proceedings" must be read in Ejusdem
Generis to the expression suit in Section 446 of the Act. Thus, the
Division Bench took the view that no permission of the Company Court
was required for filing a criminal complaint either against the Company
or against its Directors which is binding.
17. In Pankaj Mehra & Anr. v. State of Maharashtra & Ors. (2000) 2 SCC
756 relied upon by the learned counsel for the Respondent, the Supreme
Court interpreted the provision of Section 536 (2) of the Companies Act
and held that dispositions of the property made by the Company during
the interregnum between presentation of Petition for winding up and the
passing of the order of winding up would not be void. It was held that
even if any disposition of the property made by a Company after
commencing of winding up proceedings is held to be null and void, it
would not be a ground to escape the offence under Section 138 of the
Act. Paras 20 & 26 to 29 of the report in Pankaj Mehra & Anr are
extracted hereunder:-
"20. It is difficult to lay down that all dispositions of property
made by a company during the interregnum between the
presentation of a petition for winding up and the passing of the
order for winding up would be null and void. If such a view is
taken the business of the company would be paralysed, for the
company may have to deal with very many day-to-day
transactions, make payments of salary to the staff and other
employees and meet urgent contingencies. An interpretation which
could lead to such a catastrophic situation should be averted. That
apart, if any such view is adopted, a fraudulent company can
deceive any bona fide person transacting business with the
company by stage-managing a petition to be presented for winding
up in order to defeat such bona fide customers. This consequence
has been correctly voiced by the Division Bench in the impugned
judgment.
x x x x x x x x x x
26. There is no provision in the Companies Act which prohibits
enforcement of the debt due from a company. When a company
goes into liquidation, enforcement of debt due from the company is
only made subject to the conditions prescribed therein. But that
does not mean that the debt has become unenforceable altogether.
Perhaps due to want of sufficient assets of the company the
realisation of a debt would be difficult. But that is no premise to
hold that the debt is legally unenforceable. Enforceability of a debt
is not to be tested on the touchstone of the modality or the
procedure provided for its realisation or recovery. Hence the
contention that the special provision incorporated in the
Companies Act regarding the debts and liabilities due from the
company will render the debt unenforceable, cannot be accepted.
27. The alternative approach is this: even assuming that any
disposition of the property made by a company after
commencement of the winding-up proceedings is null and void,
how is that an escape ground from the offence under Section 138
of the NI Act? That section created a statutory offence which on
the confluence of the various factors enumerated therein,
commencing with the drawing of the cheque and ending with the
failure of the drawer of the cheque to pay the amount covered by it
within the time stipulated, ripens into a penal liability.
28. The last factor for constituting the offence under Section 138 of
the NI Act is formulated in clause (c) of the proviso to the section
which reads thus:
"(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."
29. The words "the drawer of such cheque fails to made the
payment" are ostensibly different from saying "the drawer refuses
to make payment". Failure to make payment can be due to the
reasons beyond the control of the drawer. An illustrative case is, if
the drawer is not a company but an individual who has become so
pauperised or so sick as he cannot raise the money to pay the
demanded sum, can he contend that since failure to make payment
was on account of such conditions he is entitled to be acquitted?
The answer cannot be in the affirmative though the aforesaid
conditions can be put forth while considering the question of
sentence."
18. In the instant case, the dishonor of the cheques and subsequent failure to
make the payment within 15 days of the notice of demand took place
much before filing of the winding up proceedings and appointment of the
provisional liquidator.
19. The Petitions, therefore, have to fail; the same are accordingly dismissed.
20. Pending applications also stand disposed of.
(G.P. MITTAL)
JUDGE
FEBRUARY 21, 2013
vk
