RAM CHANDRA AGARWAL vs STATE OF U. P.

Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2013 Supreme(All) 283

[2013(2) ADJ 530]
ALLAHABAD HIGH COURT
BEFORE : SUNIL HALI, J.
RAM CHANDRA AGARWAL AND OTHERS ....Applicants
Versus
STATE OF U.P. AND ANOTHER ....Respondents
(Criminal Misc. Application Nos. 14646 of 2012, 34950, 34952, 34953, 34955, 34956, 36563, 36565, 36567, 36570, 36568, 36560, 36569 of 2011, 15118 of 2012, 34954 of 2011, decided on 24th January, 2013)

Advocates:
Counsel :
Arun Kumar, A. Chaturvedi, A.K. Dixit and Vinay Saran for the Applicants; A.G.A., Arvind Kr. Shukla, V.M. Zaidi and Krishna Agrawal for the Respondents.

Headnote:(A) Negotiable Instruments Act, 1881—Sections 138, 139, 140, 141, 142, 118 (a) and 7—Code of Civil Procedure, 1908—Section 20—Criminal Procedure Code, 1973—Sections 172 to 182—Dishonour of cheque—Complaint—Territorial jurisdiction—Determination of—Offence by company—Whether liability can be transferred to subsequent buyer of company—Which has drawn cheques for discharge of its debt or liability under Section 138—Applicants are Directors of company—In present case, ingredients of Section 138 are fully complied with—To create offence under Section 138 mental elements are not necessary—When cheque dishonoured for insufficiency of fund—Existence of a live account—And cheque drawn for discharge of debt/liability—Further demand notice issued—In event of non-payment of cheque amount, offcence under Section 138 committed—Admittedly, companies who have purchased retail and whole sale business of applicants company—Did not have any live account, where cheques were drawn—In term of Section 139 presumption drawn in favour of holder of cheque—Company is a juristic person—Issue of territorial jurisdiction—In view of K. Bhaskaran’s case (1999 (7) SCC 510) one of five local areas can become place of trial—However, venue of enquiry/trial has primarily to be determined by averments contained in complaint—In present case applicants are liable for transanctions as liability not transferred to subsequent buyer. [Paras 2, 6, 9, 13, 16, 17, 19, 20, 27 and 30]
       (B) Negotiable Instruments Act, 1881—Section 7—”Drawer”—Definition of—Maker of bill of exchange or a cheque. [Para 17]
       (C) Negotiable Instruments Act, 1881—Section 141—Word “Deemed”—Applicability of—It applies to company and persons responsible for acts of company. [Para 23]
       (D) Negotiable Instruments Act, 1881—Section 138—Offence thereunder—Territorial jurisdiction—Question of—In view of K. Bhaskaran’s case (1999 (7) SCC 510) one of five local areas can become place of trial—(i) Drawing of the cheque; (ii) Presentation of cheque to the bank; (iii) Return of the cheque unpaid by the drawee bank; (iv) Giving notice in writing to drawer of cheque demanding payment of cheque amount and (v) Failure of drawer to make payment within 15 days of the receipt of the notice. [Para 28]
       (E) Code of Civil Procedure, 1908—Section 20—”Cause of action”—Meaning of—Every fact which it is necessary to establish to support a right—Or obtain a judgment. [Para 31]
       (F) Criminal Procedure Code, 1973—Sections 172 to 182—Territorial jurisdiction—Determination of—One of several acts leading to Commission of offence—Will not take away jurisdiction of Court—Within territory of which majority of acts have been perpetrated. [Para 36]

JUDGMENT

Hon’ble Sunil Hali, J.—Common questions involved in all the aforesaid applications relate to the question as to whether liability can be transferred to subsequent buyer of the company which has drawn cheques for discharge of its debt or liability under Section 138 of Negotiable Instruments Act (herein after referred to as N.I. Act). Since this question is involved in all the aforesaid applications, it is deemed proper to decide them by a common judgement.

In order to determine this issued Application under Section 482 No. 14646 of 2012 is taken as leading case and in order to appreciate the controversy involved certain facts are required to be noted for proper adjudication of the case, which is as under:

2. Vishal Retail limited is duly registered under the Companies Act having its registered and Corporate office at Plot No. 332, Near Telco Service Station, Behind Shokeen Farmlands, Rangpuri Extension, New Delhi. Applicants No. 1 to 3 are Directors of the Company. Respondent No. 2 (hereinafter called as the complainant) is in the business of Garment stitching and manufacturing of ready-made garments. Applicants accused had a running agreement with the complainant for stitching of garments of the cloths/fabric/materials which were supplied by the accused applicants i.e. Vishal Retails Limited. As per agreed terms, the accused applicants company were required to make payments of the job work conducted by the complainant within stipulated time span of 60-75 days from the date of delivery of finished goods which was supplied against way bill issued by the accused persons. As agreed upon in terms of the agreement accused persons have issued post dated cheques to the complainant. Every thing went on smoothly until March 2011. Cheques which were issued for its encashment after March, 2011 could not be encashed as a result of which present controversy has arisen. In the present case, Cheque No. 477738 for an amount of Rs 6,45,510/- was issued on 16.4.2011 drawn on A/c No. 31003763038, SBI, South Extension, New Delhi. Aforesaid cheque was presented by the complainant to their bankers in Bhadohi where they are carrying their business. The said cheque was presented on 27.4.2011 which was returned with memo of the Bank that the cheque could not be cleared due to insufficient funds.

3. Statutory notice was issued by the complainant to the accused to make the payment within a period prescribed therein. Receiving no response from the applicants in this behalf present complaint has been filed before the Trial Court.

4. Allegations contained in the complaint are that for purpose of discharging their liability cheque No. 477738 was issued for an amount of Rs 6,45,510/- drawn at SBI, South Extension, New Delhi. The said cheque was presented by the complainant to their bankers in Bhadohi where they are carrying on their business. The said cheque was however returned on 27.4.2011 accompanying memo of the bank with endorsement that it could not be encashed on account of insufficient funds. Consequently statutory notice was issued to the accused persons on 21.5.2011 calling upon them to make payments within 15 days from the date of receive of the notice. It emanates from the complaint that the accused No. 5, 7 to 17 named in the complaint had responsed to the statutory notice issued on 21.5.2011, however, other accused persons did not chose to reply the same. It further transpires in the complaint that retail and whole sale business of Vishal Retail Limited was transferred to Air Plaza Retail Holdings Private Limited and T.P.G. Whole Sale Private Limited respectively on 14.3.2011 under the Business Transfer Agreement in the following manner :

(a) That the retail undertaking of the company to Air Plaza Retail Holdings Private Limited (a Company owned by Shri Ram Groups)

(b) The whole sale undertaking of the company to T.P.G. Whole Sales Private Ltd (a subsidiary of TPG VW Limited).

5. In terms of the agreement it was agreed between the partie

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2013 Supreme(All) 283

Cases Referred (2)