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IN THE HIGH COURT OF BOMBAY
N.J. JAMADAR, J.
Karmayogi Shankarraoji Patil & Ors. – Appellants
Versus
Ruia & Ruia Pvt. Ltd. & Ors. – Respondents
Criminal Writ Petition No. 5208, 5209 of 2017
Decided on : 03-08-2022
N.I. Act - Dishonoured Cheques - Sections 138, 141 - Summary
Fact of the Case:
The complainant, a company engaged in trade, entered into an agreement with the accused, a cooperative society running a sugar factory, for the supply of molasses. The accused issued cheques to cover the advance payment but failed to deliver the molasses as per the agreement, leading to dishonoured cheques and subsequent legal action by the complainant.
Finding of the Court:
The court found that the accused's liability under the settlement agreement was a matter for trial, and the accused's plea that the entire due amount was paid was not sufficient to dismiss the complaints.
Issues: The issues included the validity of demand notices, invocation of Section 141 of the N.I. Act against the accused, and the discharge of the accused based on the payment of the entire due amount.
Ratio Decidendi: The court held that the accused's liability under the settlement agreement warranted trial, and the mere payment of the entire due amount did not justify dismissing the complaints. The court also emphasized the validity of the demand notices and the applicability of Section 141 of the N.I. Act to the accused.
Final Decision: The court allowed the petitions, directing the accused to deposit interest and costs of litigation within a stipulated period. If the accused complied, the complaints would be closed, and the accused discharged; otherwise, the complaints would proceed in accordance with the law.
JUDGMENT :
1. Since these petitions arise out of identical facts and common question in law is involved, both the petitions are decided together.
2. Rule. Rule made returnable forthwith and, with the consent of the Counsels for the parties, heard finally.
3. The challenge in these petitions is to the orders passed by the learned Additional Sessions Judge, Greater Mumbai, in Criminal Revision Application Nos.1234 of 2016 and 1235 of 2016, whereby the learned Additional Sessions Judge was persuaded to dismiss the Revision Applications and affirm the orders dated 4th January, 2016, passed by the learned Metropolitan Magistrate, 33rd Court, Ballard Pier, Mumbai, in Criminal Complaint Nos.8222/SS/2015 and 8223/SS/2015, of issue of process against the accused-petitioners herein for the offence punishable under Sections 138 read with 141 Negotiable Instruments Act, 1881 (“the N. I. Act”).
4. Shorn of unnecessary details, the background facts relevant for determination of these petitions can be summarized as under-
(b) The petitioners - accused run a sugar factory. On 21st October, 2014, the accused had entered into an agreement with the complainant to supply and sale ‘A’ grade molasses having TRS 50% and above for industrial/export/liquor purpose. The respondent No.1 agreed to pay an advance amount of Rs.3,49,65,000/- to accused. Under the terms of the agreement, the delivery of the molasses, as per schedule, was the essence of the contract. In the event of default in the delivery of the specified quantity of molasses, as per schedule, for the quantity short supplied the price was to be reduced by Rs.500/-, per MT for the month of November, 2014, Rs. 750/-, for the month of December, 2014 and Rs.1000/-, for the month of January, 2015. To cover the advance payment of Rs.3,49,65,000/-, the accused No. 1 had drawn Seven cheques in favour of the complainant payable on 21st October, 2014.
(c) It seems that there was failure on the part of accused No.1 to supply the molasses in accordance with the terms of the contract. Correspondence was exchanged between the parties. In lieu of seven cheques, referred to above, the accused No.1 had drawn four cheques for Rs. 50,00,000/-, each, payable on 15th January, 2015. Eventually, those four cheques were also dishonored on presentment on 10th April, 2015. Thereupon, the accused gave a proposal to settle the dispute by incorporating the terms and conditions in a letter dated 4th June, 2015 (the letter of settlement). The accused No.1, while acknowledging the debt of Rs.2,62,79,654/-, agreed to pay a sum of Rs.1,57,75,607/- towards the full and final settlement of the complainant's claim. Under the terms of the said settlement, the accused had drawn cheque bearing No.519921 for a sum of Rs.50,00,000/- payable on 20th June, 2015, cheque No-519922 for a sum of Rs.42,75,607/- payable on 10th July, 2015 and cheque No. 519923 for an amount of Rs.65,00,000/- payable on 31st July, 2015 on State Bank of India, Branch – Indapur. The accused further agreed that in the event of default in payment of any of the installments, the entire amount of Rs.2,62,79,654/- would become due and payable and the complainant would be entitled to initiate appropriate legal action to recover the entire due amount.
(d) The complainant received payment of a sum of Rs. 50,00,000/- on 17th June, 2015 via RTGS. The accused No.1 paid a further sum of Rs.23,00,000/- via RTGS in between 16th July,
The judgment emphasizes the importance of trial to determine liability under settlement agreements and the applicability of Section 141 of the N.I. Act. It also clarifies the conditions under which t....
The dishonour of cheques and the existence of a legally enforceable debt must be proved, and the presumption under section 139 of the NI Act can only be rebutted with strong evidence.
Presumption against the drawer of the cheque, dishonour of cheques due to closure of the account, and the petitioner's failure to rebut the presumption.
Once the entire cheque amount is paid and accepted, the liability under Section 138 of the Negotiable Instruments Act ceases, and interest cannot be claimed unless specified in the cheque.
The main legal point established in the judgment is the requirement for specific averments to establish vicarious liability under Section 141 of the Negotiable Instruments Act, and the court's power ....
The presumption of liability under Section 139 of the Negotiable Instruments Act applies despite account seizure; the burden to disprove liability lies with the accused.
The dishonour of a cheque due to 'Account Closed' falls within the parameters of Section 138 of the N.I. Act, and the presumption under Section 139 applies.
(1) Dishonour of cheque – A post-dated cheque issued after debt has been incurred would be covered by definition of ‘debt’ – However, if sum payable depends on a contingent event, then it takes colou....
A PRESUMPTION THAT A CHEQUE PERTAINS TO A LEGALLY ENFORCEABLE DEBT OR LIABILITY ARISES WHEN THE SIGNATURE ON THE CHEQUE IS ADMITTED, BUT THIS PRESUMPTION IS REBUTTABLE AND THE BURDEN OF PROOF LIES ON....
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