M/S. Aryan Biological ... vs M/S. Vishwakarma Metal Box & Ors.
2022 Latest Caselaw 3279 Del

               Neutral Citation Number:2022/DHC/005392




$~30
*    IN THE HIGH COURT OF DELHI AT NEW DELHI

                                      Reserved on: 10th October, 2022
                                     Decided on: 07th December, 2022
+      CRL.M.C. 5900/2019 & CRL.M.A. 40707/2019
       M/S. ARYAN BIOLOGICAL
       CORPORATION & ANR.                 ..... Petitioners
                     Through: Mr. Sheikh Imran Alam, Vinod
                              Kumar and Mr. Imran Alam
                              Sheikh Advocate.
                          V
       M/S. VISHWAKARMA METAL BOX & ORS....Respondents
                          Through:    Mr. Vinod Kumar, Advocate.
%

CORAM:
HON'BLE MR. JUSTICE SUDHIR KUMAR JAIN
JUDGMENT

1. The present petition is filed under section 482 Code of Criminal

Procedure, 1973 (hereinafter referred to as "the Code") for quashing

of the impugned order dated 28.06.2018 (hereinafter referred to as the

"impugned order") whereby notice under section 251 of the Code

was given to the petitioners alongwith consequential proceedings

passed in complaint titled as M/s Vishwakarma Metal Box &

another V M/s Aryan biological Corporation & another bearing

CC no. 17879/2016 by the Court of Sh. Mohit Sharma, Metropolitan

Neutral Citation Number:2022/DHC/005392

Magistrate-01, District West, Tis Hazari Courts, Delhi (hereinafter

referred to as the "trial Court").

2. The respondents no.1 and 2/complainants (hereinafter referred

to as "the respondents") have filed a complaint under section 138 of

the Negotiable Instruments Act, 1881 (hereinafter referred to as the

"NI Act") titled as M/s Vishwakarma Metal Box & another V M/s

Aryan biological Corporation & another bearing CC no.

17879/2016 on the allegations that the respondent no. 2/Sanjay Gaur is

carrying on wholesale business of metal boxes under the name and

style of M/s Vishwakarma Metal Box, the respondent no. 1 being its

sole proprietor. The accused no.2, namely, Anuj Singhal who is

carrying on business in the name of M/s Aryan Biological Corporation

i.e., the accused no.1 (hereinafter referred to as "the petitioners")

approached the respondents for purchase of Metal Boxes.

2.1 The respondents sold metal boxes time to time to the petitioners

and raised bills/invoices towards such sales subject to terms and

conditions. The petitioners purchased goods from respondents during

the period from 04.09.2011-18.10.2012 against which the demands

were raised through 45 invoices with total value of Rs.65,57,525.23/-.

Neutral Citation Number:2022/DHC/005392

The petitioners duly received and accepted the invoices. The sales

were made against C-forms and the petitioner no.2 has represented

and assured to the respondents to issue C-forms and accordingly VAT

@ 2 % on the sale price was charged against the normal VAT of

12.5%. The petitioners were extremely irregular in payments against

the raised invoices/bills and committed gross delays.

2.2 The petitioners towards part discharge of liability from time to

time have already paid Rs Rs.47,64,953/- leaving behind unpaid

balance of Rs.17,92,572.23/- The petitioners towards partial discharge

of their contractual liability, issued 03 cheques bearing no. 419140,

419139 and 419138 dated 05.01.2013, 29.12.2012, 25.12.2012 drawn

on State Bank of Patiala, Baroti, Tehsil- Kasauli, District Solan,

Himachal Pradesh amounting to Rs 2,00,000/-, Rs 50,000/- and

Rs.1,00,000/-, respectively. The respondents presented the said

cheques in the Corporation Bank on 08.03.2013 for encashment but

returned back unpaid due to the reason "Payment Stopped by the

Drawer" vide return memo dated 08.03.2013. The respondents also

served a legal notice dated 14.03.2013 to the petitioners. The

petitioners despite service of legal notice did not make payment of

Neutral Citation Number:2022/DHC/005392

cheque amount. The respondents being aggrieved, filed the complaint

bearing CC no. 17879/2016. The trial court vide impugned order dated

28.06.2018 ordered for giving notice under section 251 of the Code to

the petitioners.

3. The petitioners being aggrieved, filed the present petition to

challenge the impugned order on the grounds that demand notice was

issued to call upon the petitioners to pay Rs.17,92,572.23/- and not to

pay cheque amount of Rs.3,50,000/- and as such notice was not the

mandate of the NI Act. The impugned order is against law and is liable

to be set aside. The trial court proceedings are arbitrary and based on

conjectures and surmises. The respondents have already filed a suit

bearing no. CivDJ/613323/2016 for recovery of Rs.17,92,572.23/-

which is stated to be pending in the Court of Additional District Judge,

West, Tis Hazari. It is prayed that the impugned order be quashed.

The respondents also filed a short reply wherein it is stated that

the factual averments made by the petitioners are erroneous and

distorted. There is delay in filing the present petition. The defense of

the petitioners cannot be considered at this stage.

Neutral Citation Number:2022/DHC/005392

4. The counsel for the petitioners advanced oral arguments and

also submitted written submissions. The counsel for the petitioners in

the brief note stated that the cheques in question alleged to have been

dishonored/bounced are amounting to Rs.3,50,000/- whereas in legal

notice dated 14.03.2013 the petitioners were asked to pay

Rs.17,92,572.23/- and as such, legal notice dated 14.03.2013 is not in

legal conformity as per mandate of section 138 of NI Act. The counsel

for the petitioner relied upon M/s Rahul Builders V Arihant

Fertilizers & Chemicals, (2008) 2 SCC cases 321.

5. The section 138 of the NI Act reads as under:-

138 Dishonour of cheque for insufficiency, etc., of funds in the account. --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 be extended to two years], or with fine which may extend to twice the

Neutral Citation Number:2022/DHC/005392

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 in due 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 cheque 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.

Explanation.-- For the purposes of this section, "debt or other liability" means a legally enforceable debt or other liability.

6. The Supreme Court in K. Bhaskaran V Sankaran Vaidhyan

Balan AIR 1999 SC 3762 regarding basic ingredients of offence

punishable under section 138 observed as under:-

The offence under Section 138 of the Act can be completed only with the concatenation of a number of acts. Following are the acts which are components of the said offence : (1) Drawing of the cheque, (2) Presentation of the cheque to the bank, (3) Returning the cheque unpaid by the drawee bank, (4) Giving notice in writing to the drawer of the cheque demanding payment of the cheque amount, (5) failure

Neutral Citation Number:2022/DHC/005392

of the drawer to make payment within 15 days of the receipt of the notice.

7. The Supreme Court in the case of Kusum Ingots & Alloys

Ltd. V Pennar Peterson Securities Ltd. & others, (2000) 2 SCC

745 has laid down the following ingredients as necessary for taking

cognizance under Section 138 of the NI Act:-

(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 for the discharge of any debt or other liability;

(ii) that cheque has been presented to the bank within a period of six months from the date on which it is drawn of within the period of its validity whichever is earlier;

(iii) 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;

(iv) 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;

(v) the drawer of such cheque fails to make payment of the said amount of money to the payee or the holder in due course.

8. The counsel for the respondents argued that the petition has

been filed to delay the proceedings before the Trial Court. The

document dated 21.02.2013 as referred in the present petition was

Neutral Citation Number:2022/DHC/005392

never filed before the trial court. The present petition is filed after a

delay of 18 months and the petitioners did not explain the delay. The

present petition is filed after the trial court has closed the opportunity

to cross examine the respondent no. 2. The statutory demand notice

dated 14.03.2013 contains all necessary ingredients to attract section

138 of NI Act which does not provide any format for the notice to be

issued. The notice under section 138 of NI Act should only indicate

the details of the dishonored cheque. The court while dealing with a

quashing petition, should ordinarily proceed on the basis of the

averments in the complaint and the defense of the accused cannot be

considered at this stage as held in Sampelly Satyanarayan Rao V

Indian Renewable Energy Development Agency Ltd, 2016(10)

SCC 458 & K.R. Indira V Dr. G. Adinarayana 2003(8)SCC300.

9. The Supreme Court in Smt. Nagawwa V Veeranna

Shivalingappa Konjalgi, 1976 (3) SCC 736 regarding eventualities

when a magistrate should not take cognizance observed as under:-

(1) where the allegations made in the complaint or the statements of the witnesses recorded in support of the same taken at their face value make out absolutely no case against the accused or the complainant does not disclose the essential ingredients of an offence which is alleged against the accused;

Neutral Citation Number:2022/DHC/005392

(2) where the allegations made in the complaint are patently absurd and inherently improbable so that no prudent person can ever reach a conclusion that there is a sufficient ground for proceeding against the accused; (3) where the discretion exercised by the Magistrate in issuing process is capricious and arbitrary having been based either on no evidence or on materials which are wholly irrelevant or inadmissible; and (4) where the complaint suffers from fundamental legal defects such as, want of sanction, or absence of a complaint by legally competent authority and the like."

10. As per the respondents, the petitioners have purchased the

Metal Boxes from the respondents against which the demands were

raised through 45 invoices for total value of Rs.65,57,525.23/-. The

sales were also made against the C-form. The petitioners have paid

only Rs.47,64,953/- leaving behind outstanding balance of

Rs.17,92,572.23/-. The petitioners towards partial discharge of their

liability, issued three cheques bearing no. 419140, 419139 and 419138

dated 05.01.2013, 29.12.2012, 25.12.2012 drawn on State Bank of

Patiala, Baroti, Tehsil- Kasauli, District Solan, Himachal Pradesh

amounting to Rs 2,00,000/-, Rs 50,000/- and Rs 1,00,000/-

respectively. The respondents have filed the present complaint under

section 138 of NI Act on the basis of these three cheques total

amounting to Rs. 3,50,000/- which got dishonored due to the reason

Neutral Citation Number:2022/DHC/005392

"Payment Stopped by the Drawer" as intimated to the respondents

vide return memo dated 08.03.2013. Thereafter, the respondents

served a legal notice dated 14.03.2013 to the petitioners and as per the

respondents, the petitioners despite service of notice dated 14.03.2013

did not make the payment of cheque amount i.e. Rs.3,50,000/-. The

relevant portion of the notice dated 14.03.2013 relating to the claims

of the respondents reads as under:-

We, therefore, on behalf of our client above named call upon you to forthwith and in any event not later than 15 (fifteen) days from the receipt hereof;

i. pay our client the outstanding amount of Rs.17,92,572.23p. (Rupees seventeen lacs ninety two thousand five hundred seventy two and paise twenty three only), together with interest thereon at the rate of 24% per annum for the entire period of delay and default computed with effect the date of each of the Invoices;

ii. issue all the C-Forms against the supplies made by our client, inter alia, as detailed herein above OR pay the differential amount of VAT for the entire value of the Sale Price, together with interest thereon at the rate of 24% per annum for the entire period of delay and default computed with effect the date of each of the Invoices;

iii. pay a further amount of Rs.22,000/- (Rupees twenty two thousand only) towards cost / fee of this notice; failing which, we have standing instructions to institute appropriately legal proceedings - both civil and

Neutral Citation Number:2022/DHC/005392

criminal - against you, in the court of law and without any further reference to you in this regard.

11. The issue which needs judicial consideration and adjudication is

that the legal notice dated 14.03.2013 is bad in law for the purpose of

complaint under section 138 of NI Act as in the said notice, the

respondents have claimed the entire outstanding amount of

Rs.17,52,572.23/- from the petitioners instead of raising claim of

cheque amount i.e. Rs.3,50,000/- and whether the respondents were

required to raise a demand of Rs.3,50,000/- in the demand notice

dated 14.03.2013 for the purpose of filing the present complaint under

section 138 of NI Act.

12. It is accepted proposition of law that a notice has to be read as a

whole and in the demand notice, a demand for cheque amount is

required to be made. If no such demand is made, then the demand

notice would not pass the test of legal requirement of section 138 NI

act. If in addition to the cheque amount, the claims of interest, cost etc.

are also made, then the validity of the notice would depend upon the

language of the notice. If in the demand notice, the breakup of the

claims i.e., cheque amount, interest, damages etc. are specifically and

distinctly mentioned then the demand notice is not bad in law for the

Neutral Citation Number:2022/DHC/005392

purpose under section 138 of NI Act. It was held in case of Suman

Sethi V Ajay K. Churiwal and another (2000) 2 SCC 380 as under:-

"8. It is a well-settled principle of law that the notice has to be read as a whole. In the notice, demand has to be made for the "said amount" i.e. the cheque amount. If no such demand is made the notice no doubt would fall short of its legal requirement. Where in addition to the "said amount" there is also a claim by way of interest, cost etc. whether the notice is bad would depend on the language of the notice. If in a notice while giving the break-up of the claim the cheque amount, interest, damages et c. are separately specified, other such claims for interest, cost etc. would be superfluous and these additional claims would be severable and will not invalidate the notice. If, however, in the notice an omnibus demand is made without specifying what was due under the dishonoured cheque, the notice might well fail to meet the legal requirement and may be regarded as bad.

9. This Court had occasion to deal with Section 138 of the Act in Central Bank of India v. Saxons Farms 3 and held that the object of the notice is to give a chance to the drawer of the cheque to rectify his omission. Though in the notice demand for compensation, interest, cost etc. is also made the drawer will be absolved from his liability under Section 138 if he makes the payment of the amount covered by the cheque of which he was aware within 15 days from the date of receipt of the notice or before the complaint is filed."

[Underlining is ours for emphasis] As therein, some other sums were indicated in addition to the amount of cheque, it was, therefore, not held to be a case

Neutral Citation Number:2022/DHC/005392

where the dispute might be existing in respect of the entire outstanding amount.

13. The Supreme Court in case of M/s Rahul Builders V Arihant

Fertilizers & Chemicals (2008) 2 SCC cases 321 as relied upon by

the petitioners considered the issue that failure on the part of

complainant to serve proper notice, strictly in terms of proviso

appended to section 138 of NI Act would lead to quashing of criminal

proceedings.

13.1 In this case, there was an outstanding payment of Rs.8,72,409/-

towards appellant and due to this reason, the respondent no.1 issued a

cheque amounting to Rs.1,00,000/- in favour of the appellant which

got dishonored on the ground that the account was closed. Thereafter,

the appellant sent a notice to the respondent no. 1 wherein, the

appellant requested the respondent no. 1 to remit the payment of

pending bills within 10 days, failing which suitable action would be

taken. The respondent no. 1 despite notice, did not make the payment

and accordingly the complaint under section 138 of NI Act was filed.

The respondent no. 1 filed an application for rejection of the complaint

on the ground that the legal demand notice issued by the respondent

no. 1 was not valid. The application was rejected by the concerned

Neutral Citation Number:2022/DHC/005392

court. Thereafter, the revision petition filed before the District and

Session Judge was also got dismissed. However, the High Court under

section 482 Cr.P.C has quashed the criminal proceedings by holding

that 15 days notice was not served upon the respondent no.1 and

further in the demand notice the appellant being the complainant has

demanded the entire outstanding amount of Rs.8,72,409/- but the

cheque was issued for Rs.1,00,000/-. It was observed that the notice

was not as per the statutory requirements under section 138 of NI Act.

Thereafter, the present appeal was filed before the Supreme Court.

13.2 The Supreme Court observed that the penal provision shall be

construed strictly and for initiating criminal action as per section 138

of NI Act, the service of notice is a condition precedent. The

respondent no. 1 was not called upon to pay the amount which was

payable under the cheque issued by it. It was further observed that no

demand was made for the payment of cheque amount as such the

decision of the High Court was ordered to be upheld and the appeal

was accordingly dismissed. The Supreme Court has observed as

under:-

10. Service of a notice, it is trite, is imperative in character for maintaining a complaint. It creates a

Neutral Citation Number:2022/DHC/005392

legal fiction. Operation of Section 138 of the Act is limited by the proviso. When the proviso applies, the main Section would not. Unless a notice is served in conformity with Proviso (b) appended to Section 138 of the Act, the complaint petition would not be maintainable. The Parliament while enacting the said provision consciously imposed certain conditions. One of the conditions was service of a notice making demand of the payment of the amount of cheque as is evident from the use of the phraseology "payment of the said amount of money". Such a notice has to be issued within a period of 30 days from the date of receipt of information from the bank in regard to the return of the cheque as unpaid. The statute envisages application of the penal provisions. A penal provision should be construed strictly; the condition precedent wherefor is service of notice. It is one thing to say that the demand may not only represent the unpaid amount under cheque but also other incidental expenses like costs and interests, but the same would not mean that the notice would be vague and capable of two interpretations. An omnibus notice without specifying as to what was the amount due under the dishonoured cheque would not subserve the requirement of law. Respondent No. 1 was not called upon to pay the amount which was payable under the cheque issued by it. The amount which it was called upon to pay was the outstanding amounts of bills, i.e., Rs. 8,72,409/-. The notice was to respond to the said demand. Pursuant thereto, it was to offer the entire sum of Rs. 8,72,409/-. No demand was made upon it to pay the said sum of Rs. 1,00,000/- which was tendered to the complainant by cheque dated 30.04.2000. What was, therefore, demanded was the entire sum and not a part of it.

12. On this aspect of the matter, we may consider K.R. Indira v. Dr. G. Adinarayana [(2003) 8 SCC 300] wherein this Court upon noticing Suman Sethi (supra) stated the law, thus:

Neutral Citation Number:2022/DHC/005392

"...However, according to the respondent, the notice in question is not separable in that way and that there was no specific demand made for payment of the amount covered by the cheque. We have perused the contents of the notice.

Significantly, not only the cheque amounts were different from the alleged loan amounts but the demand was made not of the cheque amounts but only the loan amount as though it is a demand for the loan amount and not the demand for payment of the cheque amount, nor could it be said that it was a demand for payment of the cheque amount and in addition thereto made further demands as well. What is necessary is making of a demand for the amount covered by the bounced cheque which is conspicuously absent in the notice issued in this case. The notice in question is imperfect in this case not because it had any further or additional claims as well but it did not specifically contain any demand for the payment of the cheque amount, the non-compliance with such a demand only being the incriminating circumstance which exposes the drawer for being proceeded against under Section 138 of the Act"

13. As in the instant case, no demand was made for payment of the cheque amount, we are of the opinion that the impugned judgment cannot be faulted.

14. For the reasons aforementioned, there is no merit in this appeal which is dismissed accordingly.

14. The perusal of demand notice dated 14.03.2013 reflects that the

respondents have mentioned that the petitioners during the period

w.e.f. 04.09.2011 to 18.10.2012, purchased the goods from the

respondents total amounting to Rs.65,57,525.23/- and have already

Neutral Citation Number:2022/DHC/005392

paid Rs.47,64,953/- leaving behind an unpaid balance of

Rs.17,92,572.23/- The respondents also mentioned that towards the

part discharge of liability, the petitioners issued three cheques total

amounting to Rs.3,50,000/- which on presentation, got dishonored on

the ground "Payment Stopped by the Drawer" which was intimated to

the respondents vide cheque returning memo dated 08.03.2013. The

petitioners were also called upon to issue C-forms which were

allegedly not supplied by the petitioners. The respondents also

mentioned that the petitioners despite repeated requests regarding the

payment of balance amount have not paid the balance amount.

Accordingly, the petitioners were called upon to pay the balance

outstanding amount of Rs.17,52,512.23/- besides satisfaction of all

other claims.

15. The perusal of demand notice 14.03.2013 reflects that although

the respondents have also referred the dishonor of three cheques,

subject matter of the present complaint but they have claimed the

entire outstanding amount of Rs.17,52,512.23/-. The legal notice dated

14.03.2013 is not confined to the cheque amount. The respondents

have not specifically asked for the payment of cheque amount within

Neutral Citation Number:2022/DHC/005392

the stipulated period within the mandate of section 138 of NI Act. The

cheque amount is not separately mentioned and identifiable from

entire outstanding amount of Rs.17,52,512.23/-. In notice dated

14.03.2013, an omnibus demand is made without specifying the

cheque amount and as such notice dated 14.03.2013 failed to meet

legal requirements of section 138(b) of NI Act. The demand notice

accordingly is bad in law i.e., as per section 138(b) of NI Act.

16. In view of the above discussion, the impugned order dated

28.06.2018 by which the notice under section 251 Cr.P.C was ordered

to be given to the petitioners cannot be sustained and as a consequence

of which the criminal complaint bearing CC no. 17879/2016 titled as

M/s Vishwakarma Metal Box & another V M/s Aryan biological

Corporation & another is quashed.

17. The present petition alongwith pending applications, if any,

stands disposed of.

SUDHIR KUMAR JAIN (JUDGE)

DECEMBER 07, 2022/sk/kg