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MADRAS HIGH COURT
Mr. M. Karpagavinayagam, J.
Gummadi Industries Ltd. & Anr. -Petitioners
versus
Khushroo F. Engineer - Respondent
Crl. R.C. Nos. 1242 and 1248 of 1998;
Crl. O.P. Nos. 387 and 388 of 1999 and
Crl. M.P. Nos. 9469 and 9497 of 1998
Decided on 11-6-1999
Counsel for the parties:
For the Petitioners: Mr. Arvind P. Datar, Advocate.
For the Respondent: Mr. R. Siva prakasam, Advocate.
IMPORTANT POINT
Words "any debt or liability" in Section 138 of Negotiable Instruments Act would include a cheque drawn by one person towards legally enforceable debt or liability of another.
Headnote:(i) Negotiable Instruments Act, 1881 - Sections 138 and 139 Dishonors of cheque - Petition to quash proceedings on plea that postdated cheque was issued as collateral security and not towards discharge of existing liability - Complainant invested an amount with first petitioner - Company and equity shares were allotted - As per agreement postdated cheques were issued by second petitioner, promotor of Company, to be encashed after 180 days if there was any short fall in amount after sale of entire shares - It could not be said that there was no liability at all and all such questions were to be canvassed only during trial. (paras 25 to 29)
(ii) Negotiable Instruments Act, 1881 - Section 138 - Dishonour of cheque - Post-dated cheque issued by second petitioner from his individual account as security for liability of the Company - Words "any debt or liability" would include a cheque drawn by one person towards liability, of another person - Second petitioner was liable to be tried for offence of dishonour of cheque First petitioner - Company since was not the drawer of cheque could not be tried and proceedings against it were liable to be quashed. (paras 30 to 33)
Result: Petitions disposed of.
Mr. M. Karpagavinayagam, J. Crl. O.P. Nos. 387 and 388 of 1999 and Crl. R.C. Nos. 1242 and 1248 of 1998 are being disposed of in this common order as the issues and the parties are the same.
2. The petitioners 1 and 2 are the accused in C.C. Nos. 7157 and 7158 of 1998 on the file of the XVIII Metropolitan Magistrate, Saidapet, Madras arising out of the private complaint filed by the respondent for the offence under Section 138 of the Negotiable Instruments Act.
3. The petitioners in M.P. Nos. 1003/98 and 1004/98, in both these cases, filed a petition before the trial court, to discharge the accused. The respondent filed a counter. After hearing the Counsel for the parties, the learned XIII Metropolitan it an Magistrate, Saidapet, Madras dismissed these petitions. Aggrieved over these orders, these two revisions have been filed before this Court. This Court admitted both the Revisions and ordered notice on 13-11-1998.
4. At this stage, the petitioners filed quashing applications in Crl. O.P. Nos. 387 and 388 of 1999, i.e, C.C. Nos. 7157 and 7158 of 1998 on the file of the XVIII Metropolitan Magistrate, Saidapet, raising some more grounds, in addition to the grounds raised in the connected Revisions, viz., Crl. R.C. Nos. 1242 and 1248 of 1998.
5. The Counsel for the petitioners on these petitions would mainly raise the following contentions:
1. The cheques in question were issued only as a collateral security by the second petitioner for the purchase of shares and given to the respondent on the express instructions that the same would not be deposited without the prior permission as per the agreement dated 15-9-1995. Suppressing the said agreement, these complaints have been filed. Therefore, when the cheques were issued not towards discharge of any liability, the complaint is not maintainable.
2. The cheques in question were issued by the second petitioner from his personal account and not from the account of the first petitioner Company and the cheques have been signed by the second petitioner in his individual capacity and not as an authorised signatory on behalf of the first petitioner and as such, the complaint as against the first petitioner is not valid.
6. The Counsel for the respondent would submit that the case of the prosecution is that the accused/the second petitioner had undertaken to repay the short term investment amount made by the complainant with the first accused -Company and towards discharge of their said liability only he issued; cheques and as such, both are liable to be proceeded.
7. I have carefully considered the submissions made by the Counsel - on either side.
8. According to the complainant the complainant made a short - term investment of Rs. 30,00,000/ - in the first accused - Company. The second accused as Promotor of the first accused Company issued four cheques in the name of the complainant towards the discharge of the liability of the first accused with interest.
9. When the cheques were presented, they were returned with an endorsement "Funds insufficient". When the statutory notice was sent to the second accused, the same was returned with an endorsement "refused". However, the accused sent replies two days later to the complainant denying their liability.
10. According to the petitioners/ accused, as per the agreement entered into between the accused-Company and the complainant dated 15-9-1995, the complainant invested a sum of Rs. 30,00,000/ - in the first petitioner Company on agreeing with the terms that the first petitioner - Company would hold the shares for a period of 180 days after which it was agreed that the shares would be purchased by the second petitioner and by way of collateral guarantee, the second petitioner gave post-dated cheques for the said amount. According to Clause 7 of the agreement, the complainant - Company would sell the shares in the market and if the sale was made at a price lower than the agreed price then the complainant would invoke the collatera
