Crl. Misc. No.M-31977 of 2010 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. Crl. Misc. No.M-31977 of 2010 Date of Decision: 25.04.2011 M/s Shree Bhagwati Apparels India Limited and others ....Petitioners Versus M/s Bibby Financial Services India Private Limited ...Respondent CORAM : Hon'ble Ms. Justice Nirmaljit Kaur Present:- Mr. S.C. Singhal, Advocate for the petitioners. Mr. M.S. Vinaik, Advocate Mr. Deepak Bashta, Advocate and Mr. Gurpreet Singh, Advocate for the respondent. ***** 1. Whether Reporters of Local Newspapers may be allowed to see the judgment ? 2. To be referred to the Reporters or not ? 3. Whether the judgment should be reported in the Digest ? ** NIRMALJIT KAUR, J. This is a petition under Section 482 Cr.P.C for quashing of the impugned complaint No.3560 of 2010 dated 28.07.2010 filed under Section 138 read with Section 142 of Negotiable Instruments Act and the summoning order dated 28.09.2010. Petitioner no.1, a private Company, is stated to be manufacturing garments and supplying the same to M/s Liverpool Retail India Limited. Since the amount involved in the purchase orders is huge, the petitioner has availed domestic factoring facility extended by Crl. Misc. No.M-31977 of 2010 2 respondent-M/s Bibby Financial India Pvt. Ltd. Under this facility the respondent Company pays sale amount to the extent of 80% of the sale invoices raised by the petitioner company towards the goods supplied to M/s Liverpool Retail India Limited. For clarification and proper understanding, it may be noticed that in the present transaction, the petitioner No.1 is the borrower, respondent is the `Factor' and M/s Liverpool Retail India Limited are the purchasers. The petitioners were granted domestic factoring facilities on 18.03.2011 by the respondent to the tune of ` 2,00,00,000/- with the condition of maximum pre-payment of 80%. The petitioner gave the cheques of security amounting to ` 2,00,00,000/- without date towards guarantee as guarantee of Liverpool Retail India Limited. On 09.06.2009, M/s Liverpool Retail India Limited was supplied goods and their invoices were discounted and M/s Liverpool Retail India Limited too issued the cheques for the said amount. The cheques were of different dates i.e 14.09.2009 to 16.12.2009. On 05.11.2009, the said cheques were dishonoured for insufficient funds. Thereafter, the respondent had no choice but to deposit the cheques given by the petitioners as guarantee. Their cheques were dishonoured. Hence, on 20.04.2010, the respondent filed the complaint against M/s Liverpool Retail India Limited and its Directors. Thereafter the complainant deposited the cheques issued by the petitioner as guarantor of the said amount. The cheques issued by the petitioner were also dishonoured. Accordingly, the second complaint was filed on 28.07.2010 under Section 138 of the Negotiable Instruments Act against the petitioners. The petitioners were summoned vide order dated 28.07.2010. While praying for quashing of the complaint and the summoning order, learned counsel for the petitioners raised following Crl. Misc. No.M-31977 of 2010 3 arguments :- (i) that the post dated cheques were given towards security, therefore, no complaint under Section 138 of the Negotiable Instruments Act is maintainable. Reliance was placed on the judgments of Hon'ble the Apex Court rendered in the case titled as M.S. Narayana Menon @ Mai vs. State of Kerala and another passed in Criminal Appeal No.1012 of 1999 and the judgment of Delhi High Court rendered in the case titled as M/s Collage Culture & Ors. vs. Apparel Export Promotion Council & Anr. passed in Crl. M.C. No.3011/2004. (ii)The respondent has already preferred a complaint under Section 138 of the Negotiable Instruments Act against M/s Liverpool Retail India Limited whose invoices were financed by the respondent and who duly acknowledged the domestic factoring facilities and in response thereto issued the cheques for the whole amount of the invoices. Therefore, the respondent cannot maintain two complaints for same liabilities. (iii)that no notice as per the terms and conditions of the settlement was issued to the petitioners and, therefore, the complaint was not maintainable. Learned counsel for the respondent, on the other hand, submitted that the petitioners have concealed the material facts. The petitioner No.1 i.e the Managing Director had executed an undertaking, wherein, he had submitted that in case, the borrower fails to make payment of the amount outstanding under the facility within a period of seven days after a demand is made by him for the said amount, he shall have a right to present the cheques issued by the Executant i.e the guarantor/petitioner No.1 for the said amount and it was, further, undertaken that neither the executant nor anybody else authorized by the borrower shall intimate the Bankers to stop the payment due on the said cheques. In addition, an Crl. Misc. No.M-31977 of 2010 4 agreement for the Factoring of Receivables had also been executed between the parties on 30.03.2009 and as per Clause 9.1(xviii) of the said agreement, the respondent acted well within its right by filing the complaint under the Negotiable Instruments Act when the same was dishonoured upon presentation. Further, the purchaser of goods and the seller, both are principally liable to make payment to the Factor, who in the present case, is the respondent. In the present case, both the parties i.e the seller and the purchaser have defaulted and both are principally liable to the Factor i.e the respondent, until all payments have been made. Learned counsel vehemently opposed the fact that the said cheques were towards security. It was contended that the same were subject to the undertaking and the agreement between the parties. As such, they were in lieu of their liability, in case, the borrower did not make the payment. After hearing learned counsel for the petitioners, the first issue that requires to be decided is as to whether the cheques, in dispute, were towards security or the word used is a misnomer in the undertaking. The Managing Director of the petitioner firm-Shri Bhagwati Apparels India Limited gave an undertaking on 30.03.2009. Learned counsel for the petitioners referred to Clause 2 of the Undertaking to show that the cheques were towards security. The same reads as under :- “ 2. That in consideration of you, Bibby Financial Services (India) Private Limited, a company incorporated under the Companies Act, 1956 having its office at Plot No.121, First Floor, Sector 44, Gurgaon, Haryana sanctioning factoring facilities upto a Prepayment Limit of ` 2,00,00,000/- (Rupes Two Crores only) (“Facility”) to the Borrower, the Executant deposits herewith post dated/security cheques, details whereof are mentioned in Schedule 1 attached hereto for a total amount of ` 2,00,00,000/- only, favouring yourself. In case the Borrower fails to make payment of the amount outstanding under the Crl. Misc. No.M-31977 of 2010 5 Facility within a period of seven days after a demand is made by you for the said amount you shall have a right to present the cheques issued by the Executant for the said amount.” No doubt, the cheques are stated to be mentioned as given towards security as per the undertaking and there is also no dispute that the cheques that were deposited were the same as mentioned in the said Schedule. However, at the same time, we cannot loose sight of the fact that they were submitted in pursuance to the liability, which is apparent from perusal of the same Undertaking given by the Managing Director of the petitioner's firm, which reads as under :- “ 3. That neither the Executant nor any other authorized representative/official of the Borrower shall issue stop payment instructions to the banker in respect of the cheque/s issued to you, and affirm that the Executant or anybody else authorized by the Borrower shall not intimate the bankers to stop the payment due on the said cheque/s. The Executant agrees to ensure the availability of adequate funds in the bank account of the Borrower on which these cheques favouring Bibby Financial Services (India) Private Limited are issued, and undertake that the bank account shall not be closed, without prior intimation to you.” In fact, the said paragraph further goes on to read that in the event the Borrower defaults in honouring any of the cheque/s, the respondent, herein, shall be at liberty to initiate proceedings under the relevant provisions of the Negotiable Instruments Act, the Indian Penal Code, and/or any other enactment/s. Thus, the entire undertaking has to be read a whole to arrive at the conclusion that the cheque is towards security or liability. Further, an agreement had been executed between the parties i.e the petitioner No.1 as Borrower and the respondent as Factor. Clause Crl. Misc. No.M-31977 of 2010 6 9.1(xviii) of the Agreement reads as under :- “9.1 The Borrower hereby warrants, agrees and undertakes as under :- (xviii) that the Borrower shall at all times ensure that sufficient funds are made available in his bank account, on which the post dated/security cheques issued by the Borrower to Bibby have been drawn. Bibby shall not be required to give any notice to the Borrower before presenting the post dated/security cheques. In the event Bibby presents the post dated/security cheques furnished to it and the same are dishonoured for any reason whatsoever Bibby shall inter alia, have a right to proceed against the Borrower under the Negotiable Instrument Act, 1881;” Thus, the cheques were issued by the petitioners were actually subject to the terms of the Undertaking dated 30.03.2009 and conditions in the Agreement also of the same date. Moreover, as per the nature of the transaction between the parties, the Borrower who in the present case, happens to be the petitioner No.1 makes itself liable for rendering all outstanding amounts to the Factor i.e the respondent in the event of the purchaser of goods i.e. M/s Liverpool Retail India Limited defaulting in making payment. In view of the above, it cannot be said, at this stage, that the cheques were towards security. The said fact being disputed and debatable, it is a matter to be decided in trial. Thus, the complaint and the summoning order cannot be quashed on the first argument raised by learned counsel for the petitioners that the cheques were towards security. The question, as to whether, the cheques were towards security or towards their liability or otherwise, being a disputed question, the judgments relied on by the learned counsel for the petitioners rendered in the case titled as M.S. Narayana Menon @ Mani and M/s Collage Culture & Ors.(supra) will not help the petitioners while seeking quashing of the complaint under Crl. Misc. No.M-31977 of 2010 7 Section 482 Cr.P.C on the said ground. With respect to the second argument that the two complaints cannot be filed for the same liability, also has no merit, in as much as, the respondent, under no circumstances, is trying to recover the amount twice. It is not a recovery suit. While invoking the provisions of Section 138 of the Negotiable Instrument Act, the complainant seeks conviction/punishment of the accused for commission of the said offence. For recovery of the amount, civil proceedings will lie, therefore, the complaint cannot be quashed on the ground that the complaint has also been filed against M/s Liverpool Retail India Limited, who had also issued the cheques for whole amount of the invoices. In view of the undertaking and the agreement referred to above, the petitioners No.2 and 3 cannot claim immunity from the provisions of Section 138 of the Negotiable Instrument Act as they had also issued the cheques while executing deeds of guarantee, guaranteeing to the respondent that its dues under the arrangement with petitioner No.1 would be paid without any protest and notwithstanding any dispute between the borrower and the respondent. Moreover, as per Clause 9.1 of the Agreement as reproduced above, in case the said cheques were ever dishonoured, the respondent was given the right to proceed under Section 138 of the Negotiable Instrument Act. With respect to the third argument raised by learned counsel for the petitioners that as per Clause 2 of the Undertaking, the respondent did not issue a notice of demand before filing the complaint is in itself not sufficient to exercise the jurisdiction under Section 482 Cr.P.C for quashing of the complaint, in as much as, all the ingredients of Section 138 of the Negotiable Instrument Act are satisfied. Para 10 of the complaint specifically states that vide legal notice dated 07.07.2010, the complainant company through their counsel called upon the accused persons to make the payment of the amount covered by the dishonoured cheques. The said Crl. Misc. No.M-31977 of 2010 8 notice was sent to the accused persons through Regd. A.D. The postal authorities have delivered the notice sent to the accused person through Regd. A.D. It is also mentioned in para 11 of the complaint that the complainant company had also issued a legal notice dated 07.07.2010 to Ashok Kumar Mittal son of Vijay Kumar Mittal, Managing Director and Anil Kumar Mittal, Director M/s Shree Bhagwati Apparels India Limited in lieu of the present dishonoured cheques and since Ashok Kumar Mittal and Anil Kumar Mittal, both have resigned from the post of Managing Director and Director of the accused No.1-Company, they were not impleaded as party and in their place, accused No.2-Amit Mittal and accused No.3-Pooja Mittal have been impleaded as accused being the Managing Director and Director of accused No.1 i.e M/s Shree Bhagwati Apparels India Limited and there is no requirement to issue legal notice in the individual capacity. In view of the above discussion, it is not a fit case for exercising the jurisdiction under Section 482 Cr.P.C for quashing of the complaint. Dismissed. (NIRMALJIT KAUR) 25.04.2011 JUDGE gurpreet