2022 Supreme(Mad) 1737

IN THE HIGH COURT OF JUDICATURE AT MADRAS
M. NIRMAL KUMAR, J.
D. Chandrasekar - Appellant
Versus
Tamil Nadu Industrial Development Corporation Limited, Rep. by its Secretarial Officer (Legal), Sheela Devi, Chennai - Respondent
Crl.R.C. No. 721 of 2016
Decided On : 27-05-2022

The main legal point established in the judgment is that the liability of the accused under Section 138 of the Negotiable Instrument Act was established by his admission of liability through the agreement and the issuance of the post-dated cheque in his individual capacity, and that the defense raised by the accused regarding the validity of the agreement and the cheque was not tenable.

Headnote:

Negotiable Instrument Act - Conviction under Section 138 - Ex.P4/cheque issued in his individual capacity by the petitioner and that is the reason, the petitioner alone prosecuted under Section 138 of Negotiable Instrument Act and the question of following Section 141 of the Act does not arise - The petitioner/accused intended to run a cold chain facility company in the name of M/s.Devaraj Agro Industries Private Limited. He approached the respondent/complainant and on his project report, the respondent/complainant gave a loan for Rs.30 lakhs, which was a buy back arrangement, wherein, the money is invested by way of shares with lock in period of three years time for the entrepreneur to develop his business and to stabilise. Thereafter, the shares would be re-conveyed, in the associate sector agreement/Ex.P2 all these conditions are given in detail. It is a tripartite agreement. The petitioner signed the agreement and issued the cheque in his individual name. One of the condition is that the interest rate at 12.63% for Rs.30 lakhs which works out around Rs.42,86,309/- is fixed as liability, for which, a post-dated cheque handed over by the petitioner/accused. After three years, when the petitioner/accused called for to buy back the shares and to pay the amount, he was giving one reason or other and delayed. Finally, the cheque was presented and got dishonoured and thereafter, proceedings initiated. P.W.1 examined and through her Exs.P1 to P12 marked. From Ex.P7-letter written by the accused, it is seen that the accused not raised any objection for the cheque amount or about the issuance of cheque by the accused in his individual capacity. The respondent/complainant indicated its intention to exercise its right to disinvest its shareholdings in M/s.Devaraj Agro Industries Private Limited to the petitioner/accused by its letter/Ex.P5 dated 25.04.2011 vide reference No.Lr.No.300(3)/Sect/2011 for which, the accused sent a reply by both Exs.P7 and P8/letter, the above reference number is recorded in all these letters. Till then, the accused not raised any objection with regard to issuance of post-dated cheque, later he questions the validity of Ex.P2 and takes a defence that it is a post-dated cheque given for the purpose of security, further claiming the petitioner/accused being an individual, has nothing to do with the liability of M/s.Devaraj Agro Industries Private Limited. This defence is far-fetched, as could be seen from the admission in his letters Ex.P7 and P12. He admits his liability and as Managing Director of M/s.Devaraj Agro Industries Private Limited writes several letters seeing sometime. It is to be seen that the petitioner/accused while signing Ex.P2 handed over the cheque Ex.P4 in his individual capacity. In none of the communication he raised any objection. For the purpose of the case now, such defence is attempted. Further, the citations relied upon by the petitioner's, except four decisions, all the other citations already placed, argued in detail before the trial Court. The trial Court considered the same and finally convicted the petitioner/accused. With regard to four decisions, all pertains to Section 141 of the Negotiable Instrument Act, viz., the leading case is Aneeta Hada Vs. Godfather Travels and Tours Private Limited.

Fact of the Case:

The petitioner/Accused in C.C.No.4595/2011 was convicted for the offence under Section 138 of Negotiable Instrument Act and sentenced to undergo one year Simple Imprisonment and to pay a fine of Rs.42,86,309/-, the cheque amount as compensation. The complainant/Tamil Nadu Industrial Development Corporation Ltd. (TIDCO) is a Government of Tamilnadu Enterprises, incorporated under the provisions of Companies Act, 1956. The object of TIDCO is to identify and promote large and medium scale industrial establishments in Tamil Nadu in association with private parties or with private enterprises. The complainant represented by one Mrs.Sheela Devi, the Secretarial Officer (Legal). The accused approached the complainant-Corporation for joint participation in the equity capital of the company and agreed to form a company named M/s.Devaraj Agro Industries (P) Ltd. with an intention of setting up an integrated cold chain infrastructure and agro processing plants and to act as consultant/collaborator in supply chain management for food stuffs and edible goods. The complainant- Corporation entered into an Associate Sector Agreement with the accused on 11.03.2008, as he is the co-promoter of M/s.Devaraj Agro Industries (P) Ltd., Chennai. It is a tripartite agreement, the complainant invested Rs.30 lakhs by way of investment in equity capital of M/s.Devaraj Agro Industries (P) Ltd. As per clause 18(b) of the said agreement, the accused agreed to purchase the entire equity shares held by the complainant in M/s.Devaraj Agro Industries (P) Ltd. and agreed to pay the price calculated as per the procedures contemplated under clause 19 of the said agreement and to ensure the same, he handed over the post dated cheque bearing No.022430 for a sum of Rs.42,86,309/- (Rupees Forty Two lakhs Eighty Six thousand Three hundred and Nine only) drawn on Indian Bank, Anna Nagar Branch, Chennai in favour of the complainant with lock in period of three years. On 25.04.2011, the complainant sent an advance notice to the accused to remit the sale consideration of Rs.42,86,309/- within 7 days from 05.05.2011. The accused sent a reply on 09.05.2011 seeking some more time, till the end of May, 2011 and promised to buy back the shares as per the agreement. The complainant sent a re-joinder on 11.05.2011 informing that, extension of time cannot be considered and demanded the accused to pay the amount within 7 days from 05.05.2011. Since the accused failed to make the remittance, the complainant presented the cheque on 16.05.2011. The said cheque was returned on the same day with an endorsement “Funds Insufficient”. Therefore, the complainant sent a statutory notice on 31.05.2011. Though the same was received and acknowledged by the accused, no payments made and thereafter following the procedure, a complaint was filed.

Finding of the Court:

The petitioner/accused intended to run a cold chain facility company in the name of M/s.Devaraj Agro Industries Private Limited. He approached the respondent/complainant and on his project report, the respondent/complainant gave a loan for Rs.30 lakhs, which was a buy back arrangement, wherein, the money is invested by way of shares with lock in period of three years time for the entrepreneur to develop his business and to stabilise. Thereafter, the shares would be re-conveyed, in the associate sector agreement/Ex.P2 all these conditions are given in detail. It is a tripartite agreement. The petitioner signed the agreement and issued the cheque in his individual name. One of the condition is that the interest rate at 12.63% for Rs.30 lakhs which works out around Rs.42,86,309/- is fixed as liability, for which, a post-dated cheque handed over by the petitioner/accused. After three years, when the petitioner/accused called for to buy back the shares and to pay the amount, he was giving one reason or other and delayed. Finally, the cheque was presented and got dishonoured and thereafter, proceedings initiated. P.W.1 examined and through her Exs.P1 to P12 marked. From Ex.P7-letter written by the accused, it is seen that the accused not raised any objection for the cheque amount or about the issuance of cheque by the accused in his individual capacity. The respondent/complainant indicated its intention to exercise its right to disinvest its shareholdings in M/s.Devaraj Agro Industries Private Limited to the petitioner/accused by its letter/Ex.P5 dated 25.04.2011 vide reference No.Lr.No.300(3)/Sect/2011 for which, the accused sent a reply by both Exs.P7 and P8/letter, the above reference number is recorded in all these letters. Till then, the accused not raised any objection with regard to issuance of post-dated cheque, later he questions the validity of Ex.P2 and takes a defence that it is a post-dated cheque given for the purpose of security, further claiming the petitioner/accused being an individual, has nothing to do with the liability of M/s.Devaraj Agro Industries Private Limited. This defence is far-fetched, as could be seen from the admission in his letters Ex.P7 and P12. He admits his liability and as Managing Director of M/s.Devaraj Agro Industries Private Limited writes several letters seeing sometime. It is to be seen that the petitioner/accused while signing Ex.P2 handed over the cheque Ex.P4 in his individual capacity. In none of the communication he raised any objection. For the purpose of the case now, such defence is attempted. Further, the citations relied upon by the petitioner's, except four decisions, all the other citations already placed, argued in detail before the trial Court. The trial Court considered the same and finally convicted the petitioner/accused. With regard to four decisions, all pertains to Section 141 of the Negotiable Instrument Act, viz., the leading case is Aneeta Hada Vs. Godfather Travels and Tours Private Limited.

Issues: The main issues in the case were whether the accused was liable under Section 138 of the Negotiable Instrument Act for dishonoring the cheque issued in his individual capacity, and whether the defense raised by the accused regarding the validity of the agreement and the cheque was tenable.

Ratio Decidendi: The court found that the accused, by signing the agreement and issuing the cheque in his individual capacity, had admitted his liability and had not raised any objection to the issuance of the post-dated cheque. The court also noted that the defense raised by the accused regarding the validity of the agreement and the cheque was far-fetched and not supported by the evidence and communications between the parties. The court further emphasized that the citations relied upon by the petitioner's, except four decisions, all the other citations already placed, argued in detail before the trial Court and the trial Court considered the same and finally convicted the petitioner/accused.

Final Decision: The Criminal Revision Case was dismissed by the court, upholding the conviction of the petitioner/accused under Section 138 of the Negotiable Instrument Act.