1. This Criminal Petition is filed to quash the proceedings against
Chief Metropolitan Magistrate, Secunderabad.
2. Notices are served on the respondents 1 and 2. Heard.
3. The petitioners are aggrieved by the complaint filed by the 2nd
Negotiable Instruments Act, 1881 (for short 'the Act').
4. According to the complainant, the petitioners approached the
one year. Three Bank Guarantees were issued as follows:
1) Bank Guarantee in favour of the Engineer-in-Chief, Indira
Sagar Polavaram Project, Dowlaisaram. The Bank guarantee was
valid up to 08.08.2016, and on specific request, it was extended till
09.08.2017, and once again, extended till 09.08.2018. The
commission required to be paid is Rs.76,52,772/-.
2) Bank Guarantee in favour of the Engineer-in-Chief, Indira
Sagar Polavaram Project, Dowlaisaram. The same was valid up to
09.08.2016, and the same was extended up to 09.08.2017, and on
specific request, the same was extended up to 09.08.2018. The
commission required to be paid is Rs.1,47,13,833/-.
3) Bank Guarantee in favour of the Engineer-in-Chief, Indira
Sagar Polavaram Project, Dowlaisaram. The same was valid up to
24.08.2017, and the same was extended up to 24.08.2018. The
commission required to be paid is Rs.2,02,02,544/-.
The 2nd petitioner, who is the Chairman and Managing
Director of A1 company, issued a cheque for Rs.4,25,69,149/-,
drawn on Bank of Baroda, Arikirevula, West Godavari Branch,
towards the repayment of the commission to the complainant Bank.
The said cheque, when presented for clearance, was returned
unpaid with an endorsement, "funds insufficient", vide cheque
return memo dated 23.10.2017. According to the complainant,
there was a legally enforceable debt, and without keeping a
sufficient balance, the cheque was issued, and the dishonor of the
cheque is an offence punishable under Section 138 of the
Negotiable Instruments Act. Since the amount covered by the
cheque was not paid, even though a notice was issued, the
complaint was filed.
5. It is stated in the complaint that a reply notice dated
14.11.2017 was given, and there was e-mail correspondence. The
three Bank Guarantees, agreement between the parties, letters
issued for extension of the Bank Guarantees, e-mail
correspondence, cheque return memo, notice, and the reply notice,
are all filed along with the complaint.
6. Learned counsel appearing for the petitioner would submit
that the cheque in question was taken long before the date of its
presentation, as a security, in relation to the transaction with the
Bank, and not specifically towards the commission of Bank
Guarantees. The commission for the Bank Guarantees, that were
provided by the Canara Bank, had to be paid by the Bank of
Baroda, and not the petitioners herein, which is evident from the e-
mail correspondence, and the copy of the reply notice which are
filed along with the compliant. Further, the Escrow agreement in
between the petitioners and the Bank of Baroda is not disputed by
the complaint, which clearly reflects the liability of the Bank of
Baroda to pay the commissions, and not the petitioners'.
7. The extract of the admitted documents would be relevant for
consideration. The e-mail correspondence, addressed by
B.Manohar, Manager, Canara Bank, Prime Corporate Branch, to
the Bank of Baroda, Hyderabad Bank, is exacted below:
"Sent: Thursday, October 05, 2017 12:26 PM
TO: [email protected]
Cc: Lokesh Varada CM PCB: VEERA BHADRA REDDY DCM PCB-
SECBAD; SATYA VARMA AGM PCB; Koteswara Rao PPCB; GDP SHARMA
SM PCB; Suryam DVSR
Subject: Fw: M/s.Transstroy-JSC EC UES -JV Payment of BG
Commission
Dear Sir,
This has reference to your trailing mail, wherein you had informed the
party viz., Transtroy (India) Pvt.Ltd to remit the BG Commission of
Rs.4,25,69,149/- will be paid out of the proceeds of future Running Bills
payment of the Polavaram Authority.
As the BGs already extended and almost 2 months over since extension,
we request you to release the BG commission of Rs.4,25,69,149-
immediately and credit the same to us by ways RTGS as per the details
mentioned below:
BANK: CANARA BANK
BRANCH: PRIME CORPORATE BRANCH
ACCOUNT: 209272434
IFSC Code: CNRB 0002657
Thanks & Regards
B.MANOHAR
Manager
Canara Bank
Prime Corporate Branch
1-7-1 TSR Complex, SP Road,
Secunderabad-500003
T: +40 2343 8641"
"From: CFS Hyderabad Branch, Hyderabad, Telangana
(mailto: [email protected])
Sent: 08 August 2017 12:49
To: vp_acc: V.SREEDHAR
Cc: [email protected];[email protected]
Subject: M/s.Transstroy-JSC EC UES-JV Payment of BG Commission
Dear Sir,
We refer to your letter dated 02.08.2017 received today for payment of BG
Commission for the Bank Guarantees issued by Canara Bank and Central
Bank of India for execution of Polavaram Project and inform as under:
As requested by the captioned firm, payment of BG commission of Rs.4.25
Crores to Canara Bank for renewal of Bank Guarantees of Rs.175.93 Crs
issued by them towards Mobilization Advance Guarantee of Polavaram
Project for further period of 1 year from the Escrow Account as per the
Escrow Mechanism.
Further as per the firms' request for payment of BG commission will be
paid out of the proceeds of future Running Bills payment of the Polavaram
Authority as per the payment mechanism of Escrow Account with our
Bank.
This is for your information and doing needful.
Regards
Jakkaiah Lalam
Assistant General Manager"
8. In the reply notice dated 14.11.2017, it is stated as follows:
"2. Our clients states that the letter addressed by them on
2/8/2017 to your client is explicitly clear that the BG commission
amounts for extension of BGs in respect of Polavaram Project will
be paid by their Escrow account Bank M/s.Bank of Baroda once
the payment on IPCs are released by their Employer the
Government of AP as the said Bills are pending due to GST issue.
Our client states that they have addressed a letter on the same day
to their Escrow account Banker M/s.Bank of Baroda to transfer
the BG commission to your Bank directly once the amount towards
IPC Bill is credited."
9. The Escrow Agreement in between the Bank of Baroda and
petitioners states the withdrawals as follows:
"(ii) to pay such amount towards payment of the guarantee
commission and other fees, costs and charges due and
payable as advance for renewal of the bank guarantees issued
by the Lender pursuant to the Facility."
10. From the above admitted documents and communication, it is
clear that the complainant Bank is entitled to receive the amount of
commission from the Escrow account, to be paid out of the
proceeds of future running bills of the Polavaram Authority. The e-
mail was in fact, addressed by the complainant Bank to the Bank of
Baroda on 05.10.2017, to release the Bank Guarantee commission
of Rs. 4,25,69,149/- and credit the said amount to the complainant
Canara Bank. A copy of the Bank of Baroda's e-mail dated
08.08.2017, addressed by the Assistant General Manager of Bank
of Baroda, was sent to the Canara Bank, wherein the Bank of
Baroda undertook to pay the Bank Guarantee commission out of
the proceeds of future running bills payments of the Polavaram
Authority, in accordance with the payment mechanism of the
Escrow account with Bank of Baroda.
11. In pursuance of the agreement in between petitioner's Bank of
Baroda and Canara Bank, and the correspondence made by the
complainant/Canara Bank to Bank of Baroda, the Bank Guarantee
commission can only be recovered from the Escrow account with
the Bank of Baroda, CFS, Hyderabad Branch, and that too, out of
the proceeds of the running payments from the Polavaram
Authority.
12. As seen from the complaint, and the documents filed along
with the complaint, there is no liability of the petitioners to pay the
Bank Guarantee Commission. The same is apparent from the
record filed by the complainant that the outstanding, which
according to the complainant is the Bank Guarantee commission.
13. The explanation under Section 138 of Negotiable Instruments
Act clarifies the meaning "debt or other liability". Once a cheque is
issued towards the discharge of any debt or liability, and is
subsequently returned unpaid, the non-payment of the outstanding
amount covered by the cheque entails prosecution under Section
138 of the Negotiable Instruments Act. If the cheque is given
pursuant to an agreement in between the parties, the burden is on
the complainant to prove that there is a legally enforceable debt,
i.e., to the extent of the outstanding amount covered by the cheque.
The fundamental burden is on the complainant to prove existence
of a legally enforceable debt, and only under such circumstances,
does the presumption under Sections 118 or 119 of the Negotiable
Instruments Act come into play. Though the question of
'enforceable debt' is a subject matter of trial, however, when the
complainant accepts that the liability to pay the commission is on
Bank of Baroda, and also addressed communication to the Bank of
Baroda regarding the payment of the commission, it is for the
complainant to substantiate the outstanding.
14. The complainant has filed e-mail correspondence and the reply
notice, which clearly indicate that it is for the Bank of Baroda to
pay the commission insofar as the Bank Guarantees are concerned.
Having accepted the same, the complainant ought to have explained
in the complaint how the liability shifted onto the accused to pay
the commission. It is not the case of the complainant that, at the
first instance when the Bank Guarantees were issued or during the
subsequent extension, the petitioners/accused had paid the
amounts. Nothing is placed on record to suggest that, in the
absence of payment by Bank of Baroda, the petitioners had
undertaken to pay the commission for the extension period of the
Bank Guarantees. In light of the fact that the payment of the
Commission by the Bank of Baroda would be out of the proceeds of
running bills payments of the Polavaram authority, which was also
accepted by the Canara Bank/complainant, it cannot be said that
the petitioners are liable. In the said circumstances, it cannot be
said that the complainant has proved the existence of any legally
enforceable debt on the part of the petitioners, except for stating in
the complaint that the petitioners issued a reply notice dated
14.11.2017 admitting the receipt of notice of liability for payment of
the bank commission covered by the cheque. Having gone through
the reply notice, it is not mentioned in the reply notice of the
petitioners that the petitioners are liable to pay the commission,
and it is specifically stated that the Bank of Baroda has to pay the
commission.
15. In the circumstances discussed above, the complainant
accepted that the liability to pay the commission charges for the
extension of Bank Guarantee would lie on the Bank of Baroda.
However, it has not substantiated how the petitioners are liable to
pay the commission as covered by the cheque.
16. For the said reasons, the petition is liable to be allowed.
17. In the result, the proceedings against the petitioners in
C.C.No.1473 of 2018 on the file of XIX Additional Chief Metropolitan
Magistrate, Secunderabad, are hereby quashed.
18. Accordingly, Criminal Petition is allowed. Consequently,
miscellaneous applications, if any, shall stand disposed off.
__________________
K.SURENDER, J
Date: 19.03.2025
kvs
HON'BLE SRI JUSTICE K.SURENDER
CRIMINAL PETITION No.3922 of 2019
Date: 19.03.2025
kvs
