Full Judgment
S.K. Keshote, J.
1. All these 9 Special Criminal Applications arise from9 criminal complaints filed by the respondent No. 2against the petitioners. The facts and parties arecommon in all 9 criminal complaints filed by respondentNo. 2 for conviction and sentence of the petitioners underSection 138 of the Negotiable Instruments Act, 1881(hereinafter referred to as 'Act, 1881') and as saidearlier the same proceed on identical facts. In fact theseparate criminal complaints are to be filed fordishonour of different cheques. The parties are commonand identical prayer has been made in these matters. Thegrounds raised for quashing and setting aside of thecriminal complaints are identical and the matters aretaken up for hearing together and are being decided bythis common order.
2. The facts of the case are taken from the SpecialCriminal Application No. 132 of 2000. The firstpetitioner is a company incorporated under the CompaniesAct, 1956 having its registered office at 2121-DI, 2ndPhase, Peenya Industrial Area, Bangalore - 560 058 andhaving office at Bombay at the address mentioned in thecause title of the petition. The petitioner No. 2 to 6are directors of the company. The respondent No. 1 isState of Gujarat and respondent No. 2 is the companyregistered under Companies Act having main objects offinancier and carrying on his business from the addressmentioned in the cause title of the petition.
3. The respondent No. 2 on or about August, 1995 at therequest made by the petitioners have financed forpurchase of machinery and entered into a Hire PurchaseAgreement with the second respondent on 24.8.1995. Therespondent No. 2 after deducting first/initial Hirepurchase rental and fee amount to be paid by thepetitioners have disbursed a sum of Rs. 1,93,99,109/=(Rupees One crore ninety three lac ninety nine thousandone hundred and nine only). As per the agreement of24.8.1995 the sum advanced by the respondents have to bepaid by the petitioners in 36 monthly installments ofRs. 7,72,156/= commencing from 24.8.1995 and ending on24.7.1998. The petitioners pursuant to the agreementdated 24.8.1995 have handed over to the respondent No. 2in all 15 cheques of Rs. 7,81,343/= each aggregating toRs. 1,17,20,395/- as and by way of collateral security forrepayment of 36 installments as per the agreementaforestated. It is the case of the petitioners that allthose 15 cheques have been signed by the petitioner No. 4.There were the post dated cheques as and by way ofcollateral security. The petitioners No. 2 and 4 havealso given personal guarantee for this sum advanced tothe petitioners by the respondent No. 2 The respondentNo. 2 has also given the bill discounting facility to thepetitioners. The petitioners have discounted bills withthe respondent No. 2 The petitioners have also given thepost dated cheques as and by way of collateral securityto the respondent No. 2. The respondent No. 2 hasdeposited all the above post dated cheques with theirbankers viz. Allahabad Bank, Nanpura Branch forclearance on 1.7.1998. All the post dated cheques sodeposited were returned/dishonoured by the petitioners'banker viz. Canara Bank, Colaba Branch, on 2.7.1998.The petitioners' bankers on the said day informed therespondent No. 2's banker viz. Allahabad Bank, NanpuraBranch by their written memo dated 2.7.1998. Thepetitioners submit that as per the agreement dated24.8.1995 the respondent No. 2 had no authority whatsoeverto deposit the said post dated cheques issued by thepetitioners in favour of the respondent No. 2 by way ofcollateral security. The grievance of the petitioner isthat the respondent No. 2 could not have deposited thesaid post dated cheques given as and by way of securitywithout intimating the petitioners. After bounced of thecheques aforesaid it is not in dispute that therespondent No. 2 issued statutory notice under Section 138of the Act, 1881 on 23.7.1998 through its advocate to allthe petitioners at their addresses. Those legal noticeshave been received by the petitioners on 25.7.1998. Itis also not in dispute that the respondent No. 2 has filedcomplaints under Section 138 of the Act, 1881 in thecourt of Judicial Magistrate, Fist Class, 3rd court,Surat being Criminal Complaints No. 6479 of 1998 to 6482of 1998 and 6486 of 1998 to 6490 1998 against thepetitioners. The petitioners state that one M/s. TimesGuarantee Limited having its registered office at GroundFloor, Times of India building, Dr. D.N. Road,Mumbai-400001 has filed winding up petition under Section433(e) and 434 of the Companies Act, 1956 (hereinafterreferred to as 'Act, 1956') in Karnataka High Court on11.2.1999 which was registered as Company Petition No. 40of 1999 against the first petitioner company. In thewinding up petition what it is averred by the petitionersthat the petitioner therein M/s. Times Guarantee Limited,has taken out the company Application No. 74 of 1999 forappointment of provisional Liquidator. Further prayerhas also been made in that application for injunctionrestraining the petitioners, their servants and agentsfrom selling, transferring, alienating or encumbering anyof the company's assets. The petitioners stated thatthere are other company petitions which are filed inKarnataka High Court, Bangalore against the petitionerNo. 1 company of winding up thereof under Act, 1956.Those petitions are stated to have been accepted and thewinding up court issued a show cause notice to thepetitioner No. 1 company. The petitioners submit thatsome of the creditors have also issued statutory noticesunder Sections 433 and 434 of the Act, 1956 calling uponthe petitioner No. 1 to show cause as to why companyshould not be wound up. The petitioners submit that inview of winding up petitions field and pending in theKarnataka High Court under Sections 433 and 434 of theAct, 1956, the provisions of Section 536 of the said actbecome applicable. It is the say of the petitioners thatthere is no enforceable debt or other liabilities withinthe meaning of section 138 of the Act, 1881. Thepetitioners said that in view of the Section 536(2) readwith Section 441 of the Act, 1956 the proceedings underSection 138 of the Act, 1881 is not maintainable. Thepetitioners further submit that there is a legal bar todisposition of the property by the company or itsdirectors and, therefore, the company cannot make paymentafter the winding up proceedings have been initiated.This legal bar as what it is averred is more particularlystated under Section 536(2) read with Section 441 of theAct, 1956.
4. The petitioners further submit that there can be nooffence under section 138 of Act, 1881 in the event ofthe petition of winding up of the company is presented inview of the clear provision of section 536(2) of the Act,1956. By presenting company petition for winding up theoperation of section 536(2) read with section 441(2) ofthe Act, 1956 will come into effect and because of thesame the company is not able to pay the said amount toany creditor as the said payment would be void in thelight of sections 536(2) and 441 of the Act, 1956 willcome into effect and because of the same the company isnot able to pay the said amount to any creditor as thesaid payment would be void in the light of the aforesaidprovisions.
5. The petitioner submitted that the petitioner No. 1company has filed reference before BIFR under SIC (SP)Act, 1985 (hereinafter referred to as Act, 1985') and theBoard has registered the reference under section 15(1) ofthe Act, 1985 being the reference No. 49 of 2000. Inview of the reference filed by The petitioners underSection 15(1) of the Act, 1985, all the proceedings filedunder the provisions of the Act, 1881 are suspendedunless and until the Board finally decides the reference.
6. Making reference to the provisions as contained inSections 16 and 22 of the Act, 1985 the petitionerssubmit that the proceedings initiated by respondent No. 2under Section 138 of the Act, 1881 stand suspended. Itis averred that complaint filed by the respondent No. 2will also not survive on the ground that the parties havearrived at a stand and agreed to accept payment ininstallments and have accordingly executed a consentterms which is to be filed in the court of JudicialMagistrate, First Class, 3rd Court, Surat. Thepetitioners in view of the said consent terms have handedover fresh 10 post dated cheques to the respondent No. 2.The consent terms are dated 9.9.98. In view of theconsent terms and in view of 10 postdated cheques,earlier cheques which are issued by the petitioner standcancelled. The petitioner also made reference to thesuit filed by respondent No.2 being Suit No. 5823/98 inthe High Court of Judicature at Bombay. It is statedthat the said suit has been filed by respondent No. 2 forrecovery of hire charges and also handing over thepossession of the machinery on which the amount wasadvanced by the respondent No. 2. In the said suit adecree was passed on the consent terms which were made bythe petitioners by executing consent terms dated9.9.1998. The Bombay High Court what it is stated on thebasis of the admissions and acknowledges made by thepetitioners by executing the consent terms dated 9.9.98was pleased to pass decree on 6.4.1999 in the suitaforestated. It is the say of the petitioners that therespondent No. 2 has also agreed to extent time to makepayment in installments commencing from 30.4.1999 to30.3.2000. In view of the decree of the High Court dated6.4.1999 the complaints which are pending before theJudicial Magistrate, First Class, 3rd Court, Surat areliable to be quashed and set aside. Reference has alsobeen made that as per the decree dated 6.4.1999 aprovision is made for the appointment of the courtreceiver and court receiver is appointed who has visitedthe factory premises of the petitioners. The referencehas also been made to the summary Suit No. 261 of 1998filed by respondent No. 2 to recover the amount advancedto the petitioner under the bill discounting facility.That suit has also been stated to have been decreed. Thepetitioner submit that the criminal complaints filed byrespondent No. 2 also required to be quashed and set asideon the ground that cheques which are issued by thepetitioner in favour of respondent No. 2 as and by way ofcollateral security are not legally enforceable underSection 138 of the Act, 1881.
7. The petitioners have formulated the pointed to beurged in the matter, which are as under :-
'(a) The complaint filed by the respondentno. 2 requires to be quashed in view ofsec. 536(2) and 441(2), 442 & 531 of theCompanies Act, The said compliant is alsorequired to be quashed in view of thefact that the reference filed by thepetitioner under the provision of SIC(SP) Act, 1985. The said reference isduly registered by the board and inquiryu/s 16 is pending.
(b) The complaint is also required to bequashed and set aside in view of the factthat the consent term was arrived andduly signed by the parties to theproceedings on 9.9.1998, as per the saidconsent term, the earlier cheques standdischarge / invalid by issuing 10 freshcheques by the petitioner to therespondent.
(c) The compliant is required to be quashedon the ground of decree passed by HighCourt.
(d) The complaint is not maintainable in viewof Arbitration Clause in the agreementdated 24.8.1995'.
8. In this petition, notice was issued on 16.2.2000 andthe interim relief in terms of para 20(b) is grantedwhich continues till date. The respondent No. 2 has notfiled any reply to the Special Criminal Application. Sofar as respondent No. 1 is concerned he has also not filedreply to the Special Criminal Application.
9. Shri A.D. Shah, learned counsel for the respondentsmade oral submissions in these matters. He placedreliance on the following decisions in support of hiscontentions :-
(1) Anil Hegde v. Indian Acrylics Limited AIR 2000SC 145.
(2) Pankaj Mehra and Anr. v. State of Maharashtra& Ors. JT 2000(2) SC 113.
(3) M/s. BSI Ltd. & Anr. Etc. vs. Gift HoldingsPvt. Ltd. & Anr. JT 2000(2) SC 127.
10. I have given my thoughtful considerations to thesubmissions made by the learned counsel for therespondent No. 2.
11. In this Special Criminal Applications the petitionerprayed for quashing of aforesaid all 9 complaints. Butit appears from the facts of these cases to avoid anytechnical objection which may come against thepetitioners of misjoinder of causes of action separatepetitions have been filed. In all these Special CriminalApplications, the State of Gujarat has been made a party.The State of Gujarat is neither necessary nor properparty to these petitions. These petitions arise fromproceedings initiated by respondent No. 2 against thepetitioners for their convictions and sentences for theoffences under Section 138 of the Act, 1881. These arethe private complaint filed by respondent No. 2. TheState of Gujarat is not a prosecutor. Despite of thisclear position the State of Gujarat has been impleaded asparty in all these 9 matters. When State of Gujarat hasbeen impleaded as party in these matters and the courthas issued notice to it, it has no option except toinstruct its advocate to appear in these matters.Consequently, heavy financial burden falls on the Stateof Gujarat to pay the amount of fees for the services tobe rendered to it by the Government Advocate in thesematters. Though the State of Gujarat is not necessaryparty in these matters and the petitioners also notpraying any relief against it still for this impleadmentof it in these matters it has to shoulder this heavyfinancial burden of litigation expenses. Whatever amountis spent by the State of Gujarat in defending thepetitions which are filed against it is a peoples moneyand it is concern to the litigants to see that the partywho is neither necessary nor proper in the matter may notbe impleaded. It is not the case where the petitionersare laymen. The petitioners have filed these petitionsthrough the advocate and he has to take all the care thata person who is neither necessary nor proper party to thelis is not joined. This act on the part of thepetitioners results in causing heavy financial burden tothe State of Gujarat in these matters therein it isneither necessary nor proper party. It is a case whereGovernment Advocate at the most will appear as guestartist that is what to say not to play any role. I havealready taken the view in such matters the State ofGujarat is neither necessary nor proper party. In theHigh Court of Gujarat Rules, 1993 I do not find anyprovision where any obligation is there on the litigantin such matters that the State of Gujarat has to beimpleaded as party as a rule. It is only a practiceprevalent in the court that in all criminal matters theState of Gujarat has to be impleaded as partyirrespective of the fact whether it is necessary orproper or not and further despite of the fact thatagainst it no relief is prayed for. This practiceresults in putting unnecessary heavy financial burden onthe State of Gujarat deserves to be discontinued so thatthe peoples' money may not be wasted in the litigation inwhich the State of Gujarat has no interest and thelitigants have no lis whatsoever with the State ofGujarat.
Re: Point No. 1.
It is an admitted fact the criminal complaintsunder section 138 of the Act, 1881, have been filed bythe respondent No. 2 in the Court of Judicial MagistrateFirst Class, 3rd Court, Surat on 8-9-1998. M/s. TimesGuaranty Ltd., as per the petitioners' own case, issuedstatutory notice under section 434 of the Act, 1956 tothe petitioner-company which has been received by it on29-9-98. The notice is dated 21-9-98. In these facts,the winding up petition being Company Petition No. 40/99could not have been presented by Time Guaranty Ltd. inthe Karnataka High Court at Bangalore before three weeksof 22-9-98, the date on which statutory notice undersection 434 of the Act, 1956 has been received by thepetitioners. Reference, here, may have to sub-clause (a)of subsection (1) of section 434 of the Act, 1956, whichreads as under:
434(1) A company shall be deemed to be unable topay its debts-
(a) if a creditor, by assignment orotherwise, to whom the company isindebted in a sum exceeding five hundredrupees then due, has served on thecompany, by causing it to be delivered atits registered office, by registered postor otherwise, a demand under his handrequiring the company to pay the sum sodue and the company has for three weeksthereafter neglected to pay the sum, orto secure or compound for it to thereasonable satisfaction of the creditor;
Leaving apart this legal position and factual aspect,from the document annexure `E' at page No. 76 of thespecial criminal application, i.e. the copy of thepetition under sections 433, 434 and 439 of the CompaniesAct, of the M/s. Times Guaranty Finance Ltd. filedagainst the petitioners in Karnataka High Court atBangalore, it is clear that this petition for winding-upcould not have been presented on or before 11-1-99. Fromthe affidavit of S.R. Ramesh Babu, duly constitutedattorney of the petitioner - compnay i.e. Times GuarantyFinance Ltd., it is clear that this petition could nothave been filed on or before 11-2-99 i.e. the date onwhich this affidavit has been sworn in support of thepetition. From these facts, which are borne out from thecopies of documents filed by the petitioners themselvesin this petition, there remains no doubt whatsoever thatthis winding-up petition being Company Petition No. 40/99has been filed in the Karnataka High Court at Bangaloreby Times Guaranty Finance Ltd. on or after 11-2-99.This petition is of the year 1999 and it is filed in theyear 1999. The order restraining the petitioner No. 1company herein from alienating or encumbering any of theits assets until further orders has been made by theKarnataka High Court at Bangalore in Company PetitionNo. 40/99 with Company Application No. 74/99 on 24-3-99.The criminal complaints under section 138 of the Act,1881 were filed by the respondent No. 2 in this mattermuch before the presentation of the first winding uppetition in the Karnataka High Court at Bangalore againstthe petitioners. The case of the respondent No. 2 is onmuch higher pedestal than the case which was there beforethe Hon'ble Supreme Court in the case of Pankaj Mehra &Ors. vs. State of Maharashtra & Ors. (supra). Thismatter is squarely covered by decision in that matter ofthe Apex Court so far as the first part of this pointNo. 1 raised by the petitioners is concerned.
12. In the case of Pankaj Mehra & Ors. vs. State ofMaharashtra (supra), their Lordships of the Hon'bleSupreme Court held as under:
29. The words 'the drawer of such chequefails to make the payment' are ostensiblydifferent from saying 'the drawer refuses to makepayment'. Failure to make payment can be due tothe reasons beyond the control of the drawer. Anillustrative case is, if the drawer is not acompany but individual who has become so pauperor so sick as he cannot raise the money to paythe demanded sum, can he contend that sincefailure to make payment was on account of suchconditions he is entitled to be acquitted? theanswer cannot be in the affirmative though theaforesaid conditions can be put forth whileconsidering the question of sentence.
'30. We therefore feel that legislature hasthoughtfully used the word 'fails' instead ofother expressions as failure can be due tovariety of reasons including his disability topay. But the offence would be complete when thedrawer 'fails' to make payment within thestipulated time, whatever be the cause of suchfailure.'
In view of this decision of the Apex Court, thecontention of the petitioners that as a winding-uppetition was pending against the petitioner No. 1-company, the complaints filed by the respondent No. 2under sec. 138 of the Act, 1881, has to be quashed andset aside, is devoid of any merits and substance.
So far as the second part of this first pointraised by the petitioners is concerned, it is suffice tosay that it is also of little help to the petitioners.This point is also squarely covered by the decision ofthe Apex Court in the case of M/s. BSI Ltd. & Anr.Etc. vs. Gift Holdings Pvt. Ltd. & Anr. (supra).The petitioners made a reference under sec. 15 of theAct, 1985 before the BIFR on 10-1-2000. This referencemade by the petitioners has been registered by BIFR on21.01.2000 which is borne out from the document, annexure`I' at page No. 95 of the petition. I cannot do betterthan to reproduce herein the relevant portion of thejudgment aforesaid of Hon'ble Supreme Court:
12. We do not think it necessary to labour onthe scope of Section 22A of SICA in the presentbatch of appeals as the BIFR did not pass anyorder against any company involved herein untilthe expiry of the period of 15 days from thereceipt of notice contemplated in clause (c) ofthe proviso to Section 138 of the NI Act. Sonone of the companies was interdicted by any suchorder envisaged in Section 22A during the aboveperiod of 15 days. Hence, we are unable to findany help from the said provision which couldsalvage the appellants from the prosecutionproceedings against them.
13. Switching back to sub-section (1) ofSection 22 of SICA, we may point out that itsoperation commence in respect of the companiesinvolved in this batch of appeals only after theexpiry of the period of 15 days envisaged inclause (c) of the proviso to Section 138 of the NI Act within which the companies did not pay theamount covered by the cheques. the ban imposed,as per Section 22(1) of the SICA, is againstmaintainability of the following legal actions:
(1) Proceedings for the winding up of thecompany;
(2) Proceedings for execution, distress orthe likes against any of the properties of thecompany;
(3) Proceedings fro the appointment of areceiver in respect of such properties;
(4) Suits for recovery of money or forenforcement of any security against the companyor guarantee in respect of any loan or advancegranted to the company.
14. Some of the learned counsel pointed outthat when a company is convicted under Section138 of the NI Act the court can only impose afine as the sentence since a juristic person likethe company cannot possibly be sent to prison.On its premise, learned counsel contended thatrecovery of the fine covered by such sentencewould be impractical on account of the banenvisaged in Section 22(1) of SICA againstproceedings for execution, distress or the likesas against any of the properties of the company.As a corollary, it was submitted that prosecutionagainst the company cannot be maintained since acourt would not be able to effectively impose asentence on a company after convicting it of theoffence under Section 138 of NI Act.
15. The fallacy of the above contention istwo-fold. First is that maintainability of aprosecution proceeding is not to be tested on thetouchstone of any practical hurdle in enforcingthe sentence which might be imposed on a companyafter conviction. Second is, there is noinsurmountable hurdle for recovery of the finecovered by the sentence even from a sickindustrial company because the ban contained inSection 22(1) is only conditional as could bediscerned from the last limb thereof which readsthus; 'Except with the consent of the Board or,as the case may be, the Appellate Authority.' Itmeans that with such consent the court would bein a position to resort to proceedings fordistress against the properties of the sickindustrial company. Hence the aforesaidcontention has no merit at all.
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16. The said contention is also devoid ofmerits. The word 'suit' envisaged in Section 22(1) cannot be stretched to criminal prosecutions.The suit mentioned therein is restricted to'recovery of money or for enforcement of anysecurity against the industrial company or of anyguarantee in respect of any loans or advancegranted to the industrial company. As the suitis clearly delineated in the provision itself,the context would not admit of any otherstretching process.
17. A criminal prosecution is neither forrecovery of money nor for enforcement of anysecurity etc. Section 138 of the NI Act is apenal provision the commission of which offenceentails a conviction and sentence on proof of theguilt in a duly conducted criminal proceedings.Once the offence under Section 138 is completedthe prosecution proceedings can be initiated notfor recovery of the amount covered by the chequebut for bringing the offender to the penalliability. What was considered in MaharashtraTubes Ltd. (supra) is whether the remedyprovided in Section 29 or 31 of the State FinanceCorporation Act, 1951 could be pursuednotwithstanding the ban contained in Section 22of the SICA. Hence the legal principleadumbrated in the said decision is of no avail tothe appellants.
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18. The conclusion which we have to draw isthat if commission of the offence under Section138 of the NI Act was completed before thecommencement of proceedings under Section 22(1)of SICA there is no hurdle in any of theprovisions of SICA against the maintainabilityand prosecution of a criminal complaint dulyinstituted under Section 142 of the NI Act. Thedecisions rendered by the High Courts, which areassailed before us in this batch of appeals, aretherefore not liable to be interfered with.Appeals are accordingly dismissed. Special LeavePetitions heard along with the above appeals arealso hence dismissed.
This matter is squarely covered by this decision of theHon'ble Supreme Court on the second part of the firstpoint raised, no further discussion needs to be made onthis contention. The prayer made for quashing andsetting aside of the complaint filed by the respondentNo. 2 under sec. 138 of the Act, 1881, on this groundcannot be granted.
Re.: Point No. 2
19. In support of this point, reliance has been placedby the petitioners on the decision of the Andhra PradeshHigh Court in the case of Voruganti C. Gopaiah vs.Godavari Fertilizers & Chemicals Ltd. & another reportedin 2000 DoCh. 1007. On the earlier occasion, at onepoint of time when Mr. Tanna argued the matter, zeroxcopy of the decision was given to the Court, which islying in the file. The Andhra Pradesh High court in thatcase held that the liability under a dishonoured chequeissued towards the outstanding amount on a given date gotwiped out where on issue thereof it was agreed by thepayee to accept the payment in installments. A decisiongiven by the court, leaving apart the fact that decisionmay not be binding on the court, has to be read in thecontext of the facts thereof. The ratio of the decisionis on the facts of that case and I have no hesitation tosay that this decision is clearly distinguishable on thefacts of the case. The agreement to pay liability underdishonoured cheque between the parties was after the dateon which the criminal complaints were filed by therespondent No. 2 under section 138 of the Act, 1881,against the drawer in the Court. Otherwise also, thispoint has no merits and substance. The agreement isdated 9-9-1998, a copy of which is there on the recordfiled by the petitioners as annexure J' at page No. 107.This is captioned as 'Consent Terms'. It is not the caseof either of the parties whether the same is presented inthe Criminal Court or not. Be that as it may. Toconsider this point further, I consider it to beappropriate to reproduce that agreement 'Consent Terms'in this judgment, which reads as under:
CONSENT TERMSMAY IT PLEASE YOU WORSHIP:-
We, the complainant and Accused beg tosubmit and pray as under:-
1. The accused for themselves and undertaketo the Hon'ble court to pay to the Complaint asum of Rs. 2,89,10,100/- (Rupees Two Crores EightyNine Lakhs Ten Thousand Only) in 10 monthlyinstallments on the last day of each monthbeginning from 30th September, 1998 and ending on30th June, 1999.
2. The accused confirms having anUndertaking (hereto annexed ) in favour of thecomplainant on 9th September, 1998 and alsoconfirms having handed over to the Complainant 10post dated cheques in discharge of their totalliability, as per details mentioned hereinunder:-
______________________________________________________________________Sr. Cheque Date Amount Name of BankNo.______________________________________________________________________1. 269767 30.9.98 20,00,000 Global Trust Bank Ltd.2. 269768 31.10.98 -do- -do-3. 269769 30.11.98 -do- -do-4. 269770 31.12.98 -do- -do-5. 269771 31.1.99 34,85,000 -do-6. 269772 28.2.99 -do- -do-7. 269773 31.3.99 -do- -do-8. 269774 30.4.99 -do- -do-9. 269775 31.5.99 -do- -do-10. 269776 30.6.99 -do- -do-______________________________________________________________________ 3. The Accused agrees undertakes andguarantees that the said postdated cheques shallbe honoured on first present of their respectivedue dates and also irrevocably undertakes.
(iii) To honour the said cheques upon theirpresentation for payment by thecomplainant.
(iv) Not to intimate their bankers to stopthat payment on any of the chequesdelivered to the complainant.
(v) Not to close their bank account withoutobtaining the complainant's priorpermission in writing and
(vi) Not to give any notice requesting thecomplainant not to present any of thesaid cheques on their respective duedates.
5. It is expressly understood between theparties hereto that upon receipt of the finalinstalment, as agreed, the complainant shallwithdraw the said Criminal complaints.
6. The Accused are aware that in the eventof any default in payment of any one of theinstallments on the part of the accused to honourits commitment, as per the above schedule, thecomplainant shall be at liberty to proceedagainst the accused in the concerned court andpress for appropriate reliefs in the saidcriminal complaints.
Dated this 9th day of September, 1998.
For Electrex Ind. Ltd.
Sd/-
Anand V. Hedge,
Chairman and Managing
Director.
From the perusal of these 'Consent Terms', I find that itis incorrectly stated by the petitioners that after thisagreement, the respondent No. 2 has to withdraw thecomplaints. It is expressly agreed upon by thepetitioners that only after receipt of final installment,the complainant shall withdraw the criminal complaints.It is a case where the very first cheque given, as whatstated by the counsel for the respondent No. 2, has beenbounced. The agreement to withdraw the complaints couldhave been pressed in service only where the last chequehas been encashed. In para-6 of the agreement, theaccused in the complaints, the petitioners herein, agreedthat in the event of any default in payment of any one ofthe installments on their part, the complainant shall beat liberty to proceed against the accused in the Courtand press for appropriate relief in the criminalcomplaints. This term of the 'Consent Terms' clinchesthe issue and in the eventuality of accused failed tohonour their commitments, as per the schedule in theconsent terms, the respondent No. 2 shall be free toproceed with the criminal complaints and that what it hasbeen done in the present case. On first default inpayment of installments i.e. the dishonour of thecheque, it is open to the respondent No. 2 to proceedagainst the petitioners in complaints and rightly it hasproceeded. In the facts of this case, this agreement isof no help to the petitioners in this case. This isnothing but only a dishonest plea on the part of thepetitioners in this case. Learned Criminal court belowwas perfectly legal and justified in its approach to takecognizance in the complaint and issue summons forsecuring their attendance in the Court to thepetitioners.
Re.: Point No.3:
20. Under section 138 of the Act, 1881, the drawers ofthe dishonoured cheques are to be punished for theircriminal liability but the payee of the cheques will notget the money. It is a criminal liability of the drawerof the cheque. For the recovery of the amount, the payeeof the cheque has to file appropriate civil suit. It isnot the law nor it is the case of the petitioners that onconviction or discharge of the drawer of the dishonouredcheque, he is relieved of his liability to pay the debt.That liability still continues and for the recovery ofthat amount, the payee has to file a suit. This has tobe filed within limitation. In this case, the respondentNo. 2 has filed the civil suits in the Bombay High Courtand those suits have been decreed but therefrom it cannotbe taken that these criminal complaints could not havebeen pressed by the payee and the Court has to go to theextent of quashing and setting aside of the same.Leaving apart this legal aspect, otherwise also, it isnot the case of the petitioners that the decreetal amounthas been paid by them to the respondent No. 2. This pointraised again is nothing but only a dishonest plea takenby the petitioners and only on the basis of which norelief can be granted to them in this case.
21. The last point raised regarding the maintainabilityof the criminal complaint in view of the arbitrationclause in the agreement dated 24-8-95, it is suffice tosay that there is no such condition in that agreement,and otherwise also, if such condition is there, I have myown reservation whether it could have been pressed inservice to the extent to pray for quashing and settingaside of the criminal complaints. Arbitration clause maybe of any help to the petitioners as a defence availableto them, in the suit filed for recovery of the debt.From the facts of this case, I find that even thisarbitration clause is not pressed by the petitioners inthe suits filed by the respondent No. 2 for recovery ofthis amount in the Bombay High Court. The decrees havebeen passed, may be on the basis of agreement i.e. dated19-9-98. This point raised in these petitions has nomerits. This is a criminal liability and on proof of theingredients for the offence as provided under sec. 138of the Act, 1881, the petitioners appropriately besentenced on conviction. This contention raised by thepetitioners is also devoid of any substance and merits.
22. The approach of the petitioners to this court atthis stage in a criminal complaint filed by respondentNo. 2 in which cognizance has been taken and summons wereissued to the petitioners for their appearance in thecourt is wholly misplaced. After issue of summons byMagistrate in the criminal complaint, the accused haveample opportunity to present their case before the courtconcerned and it is no more res-integra that the courthas all the power to discharge or acquit them of theoffence, if no offence is made out. At such a stage,this direct approach to this court by petitioners isdifficult to appreciate. The petitioners in such mattershave efficacious alternative remedy for redressal oftheir grievances. The litigant should have permitted thelaw to take its own course and any petition circumventingthat course if filed directly before this court has to bediscouraged. Not only this that the petitioners haveefficacious alternative remedy to approach to theMagistrate in this matter with their grievance, butagainst the order, if it goes against them, they haveanother efficacious alternative remedy to go to the courtof Sessions under Section 397 of Cr.P.C. At this stage,even revision application may not be competent before theSessions Court and if that is the position then how farit is justified for the petitioners to file this petitionin this court under Article 227 of the Constitution.Reference here may have to the decision of the Apex Courtin the case of Khacheru Singh v. State of U.P. and anr.reported in AIR 1982 SSC 784(2), wherein, their Lordshipsof Hon'ble Supreme Court held:
'Heard counsel. Special leave granted.
2. We do not see any justification though weare not expressing any opinion on the merits ofthe case, for the order passed by the learnedAdditional Sessions Judge, Merut in CriminalRevision No. 83 of 1979, which was affirmed by theHigh Court of Allahabad by its order dated7.5.80. All that the learned Magistrate had donewas to issue a summons to respondent No. 2Satyavir Singh. If eventually, the learnedMagistrate comes to the conclusion that nooffence was made out against Satyavir Singh, itwill be open to him to discharge or acquit him,as the case may be. But it is difficult toappreciate why the order issuing 'summons' to theaccused should be quashed. We, therefore, setaside the orders passed by the Sessions Court andthe High Court, restore that of the learnedSpecial Judicial Magistrate, First Class, Merut,dated February 2, 1979 and remit the matter tothe trial Court for disposal in accordance withlaw.
3. The appeal shall stand disposed of interms of this order.
Order accordingly'
23. The conduct of the petitioners that after filing ofthe criminal complaints they agreed to make the paymentof the amount in installments and postdated cheques wereissued but they could not stand to their commitment, andnow by taking these technical points are praying forquashing and setting aside of the complaints, is nothingbut only a dishonest one. In the petition under Article227 of the Constitution, the conduct of the litigant isvery very relevant and important and where the Court issatisfied that it is dubious or it is nothing but only anact on their part to abuse the process of the Court or tomake all attempts not to pay the amount to the payee ofthe dishonoured cheque though debt is admitted, thepetitions can be dismissed without going on the merits ofthe matter. Here, this course has not been adopted butfor this conduct as well as these are the matters wherethe petitioners have abused the process of the Court,exemplary costs has to be awarded in favour of therespondent No. 2 and against the petitioners. Therespondent No. 1 has also to be awarded costs in thesematters as it is neither necessary nor proper party inthe case.
24. In the result, all these special criminalapplications are dismissed. Rule is discharged in eachpetition. Interim relief, if any, granted stands vacatedin all these cases. The petitioners are directed to payRs. 10,000/as costs of each petition to the respondentNo. 2. The petitioners are further directed to payRs. 1000/- as costs in each case to the respondent No. 1.