0

Delhi HC: Bounced cheques still count as acknowledging the debt, extending the time limit; Revision Petition dismissed.

CASE TITLE – M/S VOIR INDIA ELECTRONICS PVT. LTD. v. M/S POLYBLENDS (INDIA) PVT. LTD.

CASE NUMBER – C.R.P. 69/2022 & CM APPL. 22206/2022

DATED ON – 20.05.2024

QUORUM – Justice Dharmesh Sharma

 

FACTS OF THE CASE

This is a revision petition filed in terms of Section 115 of the Civil Procedure Code, 19081 by the petitioner, who is the defendant in the main suit bearing No. 379/20182 instituted by the respondent/plaintiff before the learned Additional District Judge, assailing the impugned order dated 21.02.2022, whereby the learned Trial Court has dismissed the application under Order VII Rule 10 & 11 of the CPC filed by the petitioner/defendant. The respondent/plaintiff is a Private Limited company incorporated under the Companies Act, 1956, and is engaged in the business of manufacturing and trading of Plastic Dana of different colours, polypropylene etc., and supplying the same to its customers. The petitioner/defendant had business dealings with respondent/ plaintiff under which the petitioner purchased the materials of plastic dana of different colours/reinforced ABS etc. from time to time on a credit basis and made payments to the invoices raised. Due to the aforesaid business transactions, there arose a debit balance of Rs.10,25,916/-, which became payable by the petitioner/defendant along with interest @ 18% per annum as per the terms of the agreement between the two parties. The said amount was not paid despite a legal notice dated 16.01.2018, which was sent on 18.01.2018, and thus, a suit for recovery was filed on 03.04.2018 by the respondent/plaintiff against the petitioner/defendant before the learned Trial Court. The Learned Trial Court in the impugned order dated 21.02.2022, comprehensively dealt with the expression „cause of action‟. Further, insofar as the issue of territorial jurisdiction is concerned, it was observed that as per the Memorandum of Association (MoA), the registered office of the plaintiff i.e. M/S Polyblends India Pvt. Ltd. is situated in Delhi. However, as per the invoices, the address of the plaintiff is shown in Gurgaon, Haryana and that of the defendant in Greater Noida. Referring to Order VII Rule 10 of the CPC and because a plaint is to be taken at its face value, the learned Trial Court held that it had the jurisdiction to entertain the suit.

 

LEGAL PROVISIONS

Section 18 of the Limitation Act, 1963 deals with the effect of an acknowledgement in writing on the limitation period for a lawsuit or application.

 

CONTENTIONS BY THE PETITIONER

The petitioner in its written statement alleged that the last bill was raised on 31.01.2014 and thereafter, no goods were ever purchased by the petitioner from the respondent for the sole reason that the respondent started supplying defective and sub-standard quality of goods and there has been no dealing after 31.01.2014. It was further averred that in the suit filed before the learned Trial Court, the period of limitation of three years started from 02.03.2014, which would have ended on 01.03.2017 and the respondent had filed the suit on 03.04.2018, which is barred under Article 15 of the schedule under the Limitation Act, 1963.

CONTENTIONS BY THE RESPONDENT

The Learned Counsel for the respondent pointed out that the last part payment of Rs. 25,000/- was received by them from the petitioner on 12.03.2015 and thereafter, no payment was made and, in this regard, a reply was also filed by the respondent/plaintiff. They further referred to the ledger account starting from 1st April, 2015 to 31st March, 2016, and averred that the three cheques bearing No. 057043, 057044 and 057045 for a sum of Rs. 75,000/- each issued by the petitioner, were dishonoured by the Bank with the remark “Cheq Return‟, and stated that in previous precedents it was held that payment by cheque, which is dishonoured, would amount to an acknowledgement of debt and liability.

 

COURT ANALYSIS AND JUDGEMENT

The Hon’ble High Court of Delhi stated that the present revision petition is bereft of any merits. The last of the bill/invoice by which the delivery of goods was made to the petitioner/defendant, was on 31.01.2014. The plea that the limitation period started running from the due date i.e. 02.03.2014 and would have expired after 3 years, was said to be misconceived since, it was brought on the record that a payment of Rs. 25,000/- was made by the petitioner/defendant on 12.03.2015 towards the running account between the parties as prima facie brought out on appreciating the entries in the ledger of the respondent/plaintiff, which would have formed a part of the plaint. The Hon’ble High Court further stated, that the three cheques dated 07.05.2015 for a sum of Rs.75,000/- each had been issued by the petitioner/defendant towards part payment of the bills/invoices, which on their presentation were dishonoured. And that being the case, the payment made by the petitioner/defendant through cheques, which got dishonoured, would be tantamount to an acknowledgment of debt and liability and the period of limitation would stand extended by virtue of Section 18 of the Limitation Act, 1963. And held that in view of the foregoing discussion, the revision petition should be dismissed with cost of Rs. 25,000/-, which should be deposited with the Delhi High Legal Services Committee, New Delhi.

 

“PRIME LEGAL is a full-service law firm that has won a National Award and has more than 20 years of experience in an array of sectors and practice areas. Prime legal fall into a category of best law firm, best lawyer, best family lawyer, best divorce lawyer, best divorce law firm, best criminal lawyer, best criminal law firm, best consumer lawyer, best civil lawyer.”

Judgement Reviewed by – Gnaneswarran Beemarao

Click here to view full Judgement

0

Delhi High Court Affirms Trustees’ Liability Under Section 138 NI Act: Notice to Trust Validly Served Through Trustees

CASE TITLE – HARPREET SAHNI & ANR. v. SHRICHAND HEMNANI & ORS.

CASE NUMBER – CRL.M.C. 6094/2022 & CRL.M.A. 23877/2022 + CRL.M.C. 6095/2022 & CRL.M.A. 23881/2022 + CRL.M.C. 6096/2022 & CRL.M.A. 23889/2022 + CRL.M.C. 6097/2022 & CRL.M.A. 23894/2022

DATED ON – 15.05.2024

QUORUM – Justice Navin Chawla

FACTS OF THE CASE

These petitions have been filed under Section 482 of the Code of Criminal Procedure, 1973 (in short, ‘Cr.P.C.’) challenging the Order dated 20.12.2019 passed by the learned Metropolitan Magistrate-02 (NI Act), Delhi (hereinafter referred to as the ‘Trial Court’) in Complaint Case No.5505/2019, titled Shrichand Hemnani v. Mother’s Pride Punjabi Bagh & Ors. (in CRL.M.C. 6094/2022); Complaint case No. 5503/2019 titled Puja Hemnani v. Mother’s Pride Punjabi Bagh & Ors. (in CRL.M.C. 6095/2022); Complaint case No. 5504/2019 titled Asha Hemnani v. Mother’s Pride Punjabi Bagh & Ors. (in CRL.M.C. 6096/2022) and Complaint case No. 5501/2019 titled Vinod Hemnani v. Mother’s Pride Punjabi Bagh & Ors. (in CRL.M.C. 6097/2022) (hereinafter collectively referred to as the ‘Complaint Cases’), filed by the Respondents herein, under Section 138 of the Negotiable Instruments Act, 1881 (in short, ‘NI Act’). The above complaint cases have been originally filed by the Respondents herein, making 10 accused including Presidium Eduvision Trust, through its Trustees. In the Complaints, it is averred that somewhere in December, 2014, the respective respondents/complainants had contacted either the accused no.3, that is, Ms.Sudha Gupta, Chairman of Mother’s Pride Punjabi Bagh and Presidium Eduvision Trust or/and the accused no.2, that is, Presidium Eduvision Trust, through its trustees, for admission of the child in the school of Mother’s Pride Educational Institute Pvt. Ltd.. It was alleged that the accused nos.3 to 10 came in contact with the respondents and the family members, and represented and assured them about their position, inter alia, in the accused no.2, that is, Presidium Eduvision Trust, and also claimed about their relationship with the Mother’s Pride Educational Institute Pvt. Ltd.. It is alleged that based on their representation, the Respondents have allegedly extended loans to the accused, in the joint name of accused no.1-Mother’s Pride Punjabi Bagh and the accused no.2-Presidium Eduvision Trust. It is alleged that the accused were to pay interest at the rate of 19.5% per annum on the loan amount for the period of the loan. It is alleged that till the month of June, 2018, accused nos.1 to 10 paid interest on the said loan, however, thereafter they defaulted in payment of interest. It is claimed that on 01.12.2018, when the Respondents deposited the cheques issued by the accused nos.1 to 10 for repayment of the loan, the same were dishonoured with the remark „Funds Insufficient‟. It is averred that the Respondents thereafter issued respective legal notices dated 28.01.2019 to the accused nos.1 to 10 to repay the cheques amount, however, the same was not paid. The Respondents in the original complaints also pleaded and made similar allegations.

 

LEGAL PROVISIONS

Section 319 of the Criminal Procedure Code, 1973, deals with powers prescribes to the court to take action against someone who wasn’t originally named as an accused in the chargesheet.

Section 482 of the Criminal Procedure Code, 1973, deals with the Inherent Powers prescribes to the High Courts, which states the High Court has by its very nature, independent of any specific provision in the CrPC.

Section 138 of the Negotiable Instruments Act, 1881, deals with the situation such as when a cheque issued by someone (drawer) bounces because there aren’t enough funds in their account to cover the amount.

Section 141 of the Negotiable Instruments Act, 1881, deals with offences by companies related to negotiable instruments, most commonly cheques, where it assigns liability for cheque dishonorment offences by companies to specific individuals within the company.

Section 142 of the Negotiable Instruments Act, 1881, deals with how courts handle complaints regarding bounced cheques, which are covered under Section 138 of the Act.

 

CONTENTIONS BY THE PETITIONER

The Learned Counsel for the Petitioners argued that for maintainability of a complaint under Section 138 of the NI Act read with Section 142 of the NI Act, service of notice under Proviso (b) to Section 138 of the NI Act on the accused is mandatory. He also submitted that in the Complaint Cases, admittedly, the alleged demand notice dated 28.01.2019 was not addressed to the Petitioners in their individual capacity. He argued that, therefore, the complaints against the petitioners are not maintainable and the petitioners cannot be summoned in the same. The Learned Counsel further stated that merely by amending the complaints and now, in the relevant paragraphs, making averments against inter alia the Petitioners, and by merely changing the number of the accused, the Respondents cannot be said to have satisfied the requirements of Section 141 of the NI Act. He submits that, therefore, even otherwise the Complaint Cases, as against the Petitioners, are liable to be dismissed.

CONTENTIONS BY THE RESPONDENTS

The Learned Counsel for the Respondents submitted that the Trust (the accused no.2 in the Complaint Cases) had been issued the legal/demand notice dated 28.01.2019, to be served through its Trustees. The Respondents were not aware of the Trustees of the said Trust till the deposition of the official of the Axis Bank. He submitted that though the Respondents had dealt with the Petitioners, they were not aware of their status as Trustees of the accused no. 2. He also argued that the notice addressed to the Trust through its Trustees is sufficient notice to the Trustees themselves in their individual capacity as well.

The Learned Counsel argued that once it was discovered that the Petitioners are the Trustees of the accused no.2 Trust and are also alleged to be involved in the alleged transactions with the Respondents, they are liable to be proceeded against, in terms of Section 141 of the NI Act. He stated that the purpose of Section 319 of the Cr. P.C. is to address such a situation.

COURT ANALYSIS AND JUDGEMENT

The Hon’ble High Court viewed that Proviso (b) to Section 138 of the NI Act read with Section 142 of the NI Act shows that for the maintainability of a complaint for an offence under Section 138 of the NI Act, the payee or the holder in due course of the cheque, as the case may be, should make a demand for the payment of the said amount of money by giving a notice in writing ‘to the drawer of the cheque’ within 30 days of the receipt of information by him from the bank regarding the return of the cheque as unpaid. The notice, therefore, is to be given ‘to the drawer of the cheque’. Section 7 of the NI Act defines the term ‘drawer’ as the maker of the bill of exchange or cheque. And in the present cases, the cheques are drawn by the accused no.2 Trust. It is, therefore, the ‘drawer of the cheques’. The notice has, admittedly, been issued to the ‘drawer’, that is, the accused no.2- Trust. The same has been addressed to be served on the drawer/Trust through its Trustees. Presently, it is not disputed by the petitioners that they are the Trustees of the accused No.2-Trust. And also noticed that Section 141 of the NI Act states that for the purpose of Section 141 of the NI Act, the term ‘company’ means any body corporate and includes a firm or other association of individuals. It is not disputed by the petitioners that a Trust will be covered by the above definition of the term ‘company’ and, therefore, the Trustees would be persons who would be responsible to the Trust for the conduct of its business and be in-charge of its business and, therefore, deemed to be guilty of the offence under Section 138 of the NI Act. The Notice having been served on the Trust through its Trustees, all the Trustees are deemed to have been duly served with the legal/demand notices, thereby meeting the requirement of Proviso (b) to Section 138 of the NI Act. And as far as the plea of the Learned Counsel for the Petitioners that the Respondent has merely changed the number of the accused in the complaints and there is a lack of necessary pleadings in the complaint cases in this regard, for which the Court found no merit in the same.

“PRIME LEGAL is a full-service law firm that has won a National Award and has more than 20 years of experience in an array of sectors and practice areas. Prime legal fall into a category of best law firm, best lawyer, best family lawyer, best divorce lawyer, best divorce law firm, best criminal lawyer, best criminal law firm, best consumer lawyer, best civil lawyer.”

Judgement Reviewed by – Gnaneswarran Beemarao

Click here to view full Judgement.

0

Accused Condemned in Cheque Bounce Case for Failing to Honor Payment Undertaking; Fined Rs 5 Lakhs: Supreme Court

Case Title: Satish P. Bhatt v. The State of Maharashtra & Anr

Case No.: Criminal Appeal No. of 2024 (arising out of Special Leave Petition (CRL.) No.7433 of 2019)

Decided on: 3rd January, 2024

CORAM: THE HON’BLE MR. JUSTICE VIKRAM NATH AND HON’BLE MR. JUSTICE RAJESH BINDAL

Facts of the Case

The case centered around a petitioner who, despite numerous court directives, demonstrated a lackadaisical approach to meeting financial obligations, leading to the revocation of bail and suspension of sentence. Both the petitioner and an intervenor faced convictions under the Negotiable Instruments Act and were sentenced to ten months with a combined liability of Rs. 5 crores. Despite settlement agreements, the petitioner failed to adhere to payment schedules, prompting repeated court interventions. The High Court annulled the bail and sentence suspension due to non-compliance. The appellant contested this decision, asserting that he had fulfilled his part of the settlement. The intervenor, claiming a partnership ratio, alleged fraudulent alteration of the settlement terms.

Issue

The central issue in this case is the complainant’s extended legal struggle since 2007 and the non-realization of intended benefits from previous court orders, leading to the Supreme Court directing the appellant and intervenor to surrender for sentence within four weeks.

Legal Provision

Section 138 of Negotiable Instruments Act, 1881 provides for criminal provision regarding a cheque bounced due to insufficiency of funds.

Court’s analysis and decision

The Supreme Court has affirmed the annulment of the suspension of sentence and bail for individuals convicted of cheque bounce, citing a breach of previous commitments. Justices Vikram Nath and Rajesh Bindal, on the matter, noted that despite the High Court’s order on March 20, 2019, the convicts failed to fulfill the agreed-upon payment. Consequently, the interim protection provided through bail and sentence suspension would be revoked automatically, without the need for court intervention.

The Supreme Court observed that the complainant had been engaged in litigation since 2007 and had not yet benefited from the outcomes of previous judgments. In this context, it was highlighted that “the complainant has still not received not only the benefits of the order dated 03.07.2018 but also of the Trial Court’s order dated 26.08.2011. Despite being entitled to a higher amount as per the Trial Court’s order, he agreed to accept a significantly lesser sum. He has been involved in litigation for almost 16 years since 2007.” Consequently, the Supreme Court instructed the appellant and intervenor to surrender within four weeks to serve the sentence.

“PRIME LEGAL is a full-service law firm that has won a National Award and has more than 20 years of experience in an array of sectors and practice areas. Prime legal fall into a category of best law firm, best lawyer, best family lawyer, best divorce lawyer, best divorce law firm, best criminal lawyer, best criminal law firm, best consumer lawyer, best civil lawyer.”

Written by- Afshan Ahmad

Click here to read the judgement