Crl.M.C.No. 1951-2009 Page 1 of 28 +* THE HIGH COURT OF DELHI AT NEW DELHI Judgment reserved on : 08.07.2009 % Judgment delivered on : 24.07.2009 + Crl.M.C.No. 1951/2009 & Crl.M.A.Nos. 7276-77/2009 Rajat Pharmachem Ltd & Ors. ..... Petitioners versus State Trading Corporation of India Ltd ..... Respondent Advocates who appeared in this case: For the Petitioners : Mr. Sandeep Sethi, Sr Advocate with Mr Harpreet Singh, Mr Rajesh Gupta & Mr Sumit R Sharma For the Respondent : Mr.Ramesh Gupta, Sr. Advocate with Mr Neeraj Chaudhri, Mr Sumit Arora & Ms Meera Kaura Patel CORAM :- HON'BLE MR JUSTICE RAJIV SHAKDHER 1. Whether the Reporters of local papers may be allowed to see the judgment ? Yes 2. To be referred to Reporters or not ? Yes 3. Whether the judgment should be reported in the Digest ? Yes RAJIV SHAKDHER, J 1. This is a petition under Article 227 of the Constitution of India read with Section 482 of the Code of Criminal Procedure, 1973 (hereinafter referred to as the „Cr.P.C.‟) for quashing complaint no. 1177/3 and all proceedings emanating therefrom. 2. The Petitioners are aggrieved by virtue of the fact that vide order dated 06.05.2009, the learned Magistrate has issued summons to them. Before me, the Petitioners have assailed the summoning Crl.M.C.No. 1951-2009 Page 2 of 28 order on four counts. First, on the ground that the institution of complaint is beyond the period of limitation prescribed under the Negotiable Instruments Act, 1981 (hereinafter referred to as the „N.I. Act‟). Second, on the ground that the cheques which are the subject matter of the complaint instituted in the Court below, were given as a security for realisation of payments by Respondent from foreign buyers. The contention being that there was no debt which the Petitioners were required to discharge, as there was no consideration flowing from the Respondent to the Petitioners. The third ground of challenge being that the reason given in the return memo dated 18.02.2009, issued by the Petitioners‟ bank, being „account frozen‟, it would not amount to a dishonour of the cheques in issue, in terms of Section 138 of the N.I. Act. The last ground of challenge, is that the Court below did not have the requisite territorial jurisdiction to entertain the complaint. 3. In order to dispose of this petition, it may be necessary to briefly set out the facts as contained in the complaint:- 3.1 The Respondent/Complainant which is a company registered under the Companies Act, 1956 and a Government undertaking, having its Head Office at New Delhi, entered into an agreement with the Petitioner No.1 for export of pharmaceutical products. For this Crl.M.C.No. 1951-2009 Page 3 of 28 purpose, contractual negotiations were held and proposals were received by the Respondent from Petitioner No.1 at its Head Office at New Delhi. The said proposals finally fructified into a formal agreement dated 04.11.2004 (in short “the agreement”). This agreement admittedly was signed and sealed in Mumbai. 3.2. In terms of the said agreement, certain obligations were undertaken by both the Petitioner No.1 and the Respondent. 3.3 Broadly, a perusal of the agreement would show that it contains recitals to the effect that, Petitioner No.1 has had regular dealings with one Loben Trading Company Pte. Ltd. having its registered office at Singapore for export of pharmaceutical formulations. The Petitioner No.1, in order to avail the advantage of Respondent‟s international image and to facilitate a large volume of business, had opted to associate with the Respondent. The recitals in the said agreement go on to state that Respondent had agreed to extend its co-operation to Petitioner No.1 to promote export of pharmaceutical products. The recitals also state that Respondent has offered and Petitioner No. 1 has accepted to manufacture, supply and ship goods to the foreign buyer (described in the agreement as „Loben Trading Company Pte. Ltd.‟) on terms and conditions set out in the export orders. Crl.M.C.No. 1951-2009 Page 4 of 28 3.4 As per the Respondent/Complainant, the way the agreement is structured, the formalities for procuring the goods, packing, movement, shipment, documentation and realisation of export proceeds was to be monitored by the Petitioner No.1. Petitioner no.1 was responsible for successful execution of export agreement and realisation of proceeds. The agreement envisaged that the Respondent, through its bankers, will present to the foreign buyer, a bill of exchange for „usance period‟ (90 days D.A.). Simultaneously, on a back to back basis, Respondent would accept a bill of exchange drawn upon it upto „180 days D.A.‟. Thus, under the agreement what was envisaged was a back to back arrangement whereby, bills of exchange drawn upon the foreign buyer would have a due date upto a period of 90 days, which would fall on a date prior to the due date on the bills of exchange accepted by the Respondent. 3.5 The agreement provided that the Respondent‟s service charges equivalent to 2% of CIF value of the exports, were to be deducted alongwith all other „incidentals‟ from export proceeds realised and, the remaining amount was to be utilized for payment of bills of exchange accepted by the Respondent. In the event of there being any surplus amount, the same was to be paid to Petitioner No.1 or their nominated banker. Crl.M.C.No. 1951-2009 Page 5 of 28 3.6 The clause in the agreement on which the Respondent has laid particular stress on in the complaint is Clause 4(ii) of the agreement which provides that Petitioner No.1 would furnish post-dated cheques equivalent to the value of the bills of exchange accepted by the Respondent. These cheques were to be retained by the Respondent and were to be returned to Petitioner No.1 only after realisation of the export proceeds. The clause, however, makes it clear that the cheques would be encashed in the event of non-receipt of export proceeds on the due date. 3.7 It appears that there was no difficulty in so far as the said arrangement was concerned till April, 2008. On or around 21.04.2008, the foreign buyers started committing defaults which resulted in the outstandings reaching USD 142 million, which is, equivalent to approximately Rs 578 crores. The Respondent in the complaint, has also alleged that contrary to the understanding with Petitioner No.1, the bills of exchange and the invoices which the Respondent had accepted had been discounted by Petitioner No.1 with their bankers. Consequently, Petitioner No.1 has received huge amounts from its bankers. 3.8 To continue with the narration, in view of the circumstances that payments were not forthcoming from the foreign buyers, Crl.M.C.No. 1951-2009 Page 6 of 28 Respondent proceeded to encash all 221 cheques issued in its favour, amounting in all to Rs 1,28,32,23,576/- (Rupees One hundred twenty eight crores thirty two lacs twenty three thousand five hundred seventy six). These cheques were presented for encashment on 17.02.2009, by the Respondent with their local bank, which is, State Bank of India, Ballard Estate Branch, Mumbai. To the Respondent‟s surprise, they received information from their afore-mentioned banker, on 19.02.2009 that the cheques had been dishonoured. The said communication of their banker was accompanied by a return memo dated 18.02.2009 issued by Punjab National Bank, Bharat House, 1st Floor, Mumbai Samachar Marg, Fort, Mumbai, alongwith the cheques in issue. The return memo dated 18.02.2009 contained the remark „account frozen‟. 3.9. Left with no alternative, a legal notice dated 17.03.2009 was issued by the Respondent though its Advocates, through registered post. The copies of speed post receipts filed with the complaint seem to suggest that it was issued from Mumbai. The counsel for the Respondent has accepted this fact. 3.10. Petitioners, through their Advocates, responded to the afore- mentioned legal notice vide communication dated 25.03.2009. Apart from the fact that, the Petitioners/Accused denied their liability on Crl.M.C.No. 1951-2009 Page 7 of 28 various grounds including the ground that the 221 cheques were issued as security towards quality assurance of products and claims thereof, if any; they also demanded in the form of a counter claim a sum of Rs 570,25,25,934/- (Rupees Five hundred seventy crores twenty five lakhs twenty five thousand nine hundred thirty four). Consequently, the Respondent felt constrained to institute a criminal complaint under Section 138 read with Section 142 of the N.I. Act. To be noted that even though the allegation in the instant case is with regard to dishonour of 221 cheques, the instant complaint is confined to two (2) cheques bearing No. 923292, dated 10.01.2009 in the sum of Rs 61,76,700/- and cheque bearing No. 923293, dated 10.01.2009 in the sum of Rs 61,81,300. Both cheques were drawn on Punjab National Bank, Mid Corporate Branch, Brady House, Fort, Mumbai (PNB). Based on the material on record and pre-summoning affidavit dated 04.05.2009 of one Mr V.Pal Kishtafar, the learned Metropolitan Magistrate, issued summons to the Petitioners on 06.05.2009. 3.11 The Petitioners have impugned the said summons by way of the present petition. 4. Mr Sandeep Sethi, learned Senior Advocate appearing for the Petitioners has assailed the summoning orders, as indicated Crl.M.C.No. 1951-2009 Page 8 of 28 hereinabove, on three grounds. The first being, that the petition had been filed beyond the period of limitation prescribed under the N.I. Act. For this purpose, he brought to my notice, the relevant dates which are contained in Paragraph 7(H) of the present petition. For the purpose of convenience, the same are extracted hereinbelow:- (i) Date of cheque(s): 10.01.2009; (ii) Date of memorandum of dishonour 18.02.2009; (iii) Date of bank debit advice: 19.02.2009; (iv) Date of issuance of statutory notice: 17.03.2009; (v) Date of receipt of notice: 18.03.2009; (vi) 15 days expired on: 02.04.2009; (vii) limitation of complaint expired on: 02.05.2009; (according to the Petitioners) (Working Saturday) (viii) complaint filed on: 04.05.2009 (Monday)” 4.1 Based on the dates indicated above, he submitted that in terms of Section 142(b), the complaint had to be filed by the Respondent within ‘one month’ of the date on which the cause of action arose as per clause (c) of the Proviso to Section 138 of the N.I. Act. He, therefore, submitted that pursuant to the demand for payment of money, made vide notice dated 17.03.2009 which was received by Crl.M.C.No. 1951-2009 Page 9 of 28 the Petitioner No. 1 on 18.03.2009; the 15 (fifteen) day period prescribed under Section 138 clause (c) of the proviso to the N.I. Act, within which, the demanded amount had to be paid; expired on 02.04.2009. Consequently, the limitation for instituting the complaint, prescribed under Section 142(b) of the N.I. Act expired on 02.05.2009; which undisputedly fell on working Saturday. Therefore, the institution of the complaint by Respondent on 04.05.2009 was beyond limitation. 4.2 On the second aspect, he submits that the cheques in issue which are the subject matter of the complaint, had been issued as a security and not towards discharge in whole or in part of any „debt‟ or „other liability‟. To buttress his submission, he relied upon a judgment of the Supreme Court in the case of M S Narayana Menon alias Mami vs State of Kerala and Anr (2006) SC 3366 as also the judgment of this Court in the case of Collage Culture vs Apparel Export Promotion Council: Crl.M.No. 3011/2004 decided on 11.10.2007. 4.3 The third prong of the Petitioners‟ attack vis-à-vis the impugned order is that, the Court concerned had no territorial jurisdiction to entertain the complaint. The learned counsel submitted that undeniably, the agreement was entered into between Crl.M.C.No. 1951-2009 Page 10 of 28 the Petitioner no.1 and the Respondent, in Mumbai; the cheques in issue were drawn on a bank having its branch in Mumbai; the cheques were presented by the Respondent to their banker for encashment in Mumbai; the communication of the alleged dishonour of cheques was received by the Respondent through its banker, in Mumbai; the legal notice was issued by the Respondent‟s Advocate from Mumbai, which was posted to the Petitioners‟ address at Mumbai, where it was duly received; and lastly, the reply to the said notice was issued by the Petitioners‟ Advocate from Mumbai. He, thus, submitted that the offence, if any, was not committed within the territorial jurisdiction of the Courts in Delhi. In support of his submission, he placed reliance on the judgment of the Supreme Court in the case of Harman Electronics Private Limited and Anr vs National Panasonic India Private Limited: (2009) 1 SCC 720. The learned counsel also took me through the assertions made by the Respondent in respect of jurisdiction in Para 18 of the complaint. 5 As against this, Mr Ramesh Gupta, learned Senior Advocate submitted as follows:- 5.1 On the issue of limitation, while the learned counsel did not dispute the dates, he submitted that the 30 day period prescribed for instituting the complaint would necessarily have to exclude the date Crl.M.C.No. 1951-2009 Page 11 of 28 on which the cause of action arose after the completion of the 15 day period stipulated in the legal notice for making the payment by the Petitioners. In other words, according to the learned counsel, since the 15 day period expired on 02.04.2009, limitation would commence from 04.04.2009, and the one month period prescribed under Section 142(b) of the N.I. Act for instituting a complaint would expire on 04.05.2009. Therefore, the complaint which was filed in the Court below, on 04.05.2009, which was a Monday, was within time. To buttress his submission, he relied upon the judgment of the Supreme Court in the case of Jindal Steel and Power Limited and Anr vs Ashoka Alloy Steel Limited and Anothers: 2006 (9) SCC 340. 5.2 As regards the second contention of the Petitioners that the cheques were in the nature of a security and were not issued towards discharge in whole or in part of any debt or liability, he relied upon the provisions of the agreement and averments in the plaint to demonstrate to the contrary. 5.3 On the issue of jurisdiction, Mr Ramesh Gupta relied upon the assertions made in the complaint in particular Paragraphs 2 and 18 thereof, to demonstrate that not only several meetings were held in the Respondent‟s Head Office at New Delhi but also the proposal for Crl.M.C.No. 1951-2009 Page 12 of 28 the business transaction formulated by the Petitioner, was received and approved by the Respondent‟s head office at Delhi. In this regard, he placed reliance on the judgment of the Supreme Court in K Bhaskaran vs Sankaran Vaidhyan Balan and Anr : (1999) 7 SCC 510 and Shamshad Begum (Smt) vs B Mohammed: (2008) 13 SCC77. 6. I have heard the learned counsel for the parties. On the issue of limitation, I am of the opinion that complaint is filed within the period of limitation prescribed under Section 142(b) of the N.I. Act. But let me first extract the relevant provisions of the N.I. Act. “138. Dishonour of cheque for insufficiency, etc., of funds in the account.- Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provisions of this Act, be punished with imprisonment for [a term which may be extended to two years], or with fine which may extend to twice the amount of the cheque, or with both: Provided that nothing contained in this section shall apply unless- (a) xxxxxx xxxxxxxx (b) xxxxxx xxxxxxxx (c) the drawer of such cheque fails to make the payment of the said amount of money to the payee or, as the case may be, Crl.M.C.No. 1951-2009 Page 13 of 28 to the holder in due course of the cheque, within fifteen days of the receipt of the said notice. Explanation.- For the purposes of this section, “debt or other liability” means a legally enforceable debt or other liability.]” “[142. Cognizance of offences.- Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974)- (a) xxxxxxx xxxxxxx (b) such complaint is made within one month of the date on which the cause-of-action arises under clause (c) of the proviso to section 138: [Provided that the cognizance of a complaint may be taken by the Court after the prescribed period, if the complainant satisfies the Court that he had sufficient cause for not making a complaint within such period.]” 6.1 Applying the aforesaid provisions to the facts of the present case, the following emerges:- 6.2 The undisputed position is that the statutory notice under Section 138 of the N.I. Act was issued by the Petitioner No. 1 on 17.03.2009. The Petitioner No. 1 has stated that the notice was received by the Respondent on 18.03.2009. The Petitioner No. 1 has rightly contended that the 15 day window period as prescribed under proviso (c) of Section 138 of the N.I. Act, in respect of, the demanded amount ended on 02.04.2009. Consequently, the cause of action would arise in favour of the Respondent only on 03.04.2009. In terms of Section 12 of the Limitation Act, 1963 (in short the „Limitation Act‟), this date will have to be excluded for the purposes Crl.M.C.No. 1951-2009 Page 14 of 28 of calculating the period of limitation for institution of the complaint by the Respondent. Therefore, if the limitation commences from 04.04.2009, the institution of the complaint by the Respondent on 04.05.2009 is within the period of limitation. Admittedly 03.05.2009 was a Sunday, which as per Section 4 of the Limitation Act, is to be excluded. This according to me, is no longer res integra in view of the judgment of the Supreme Court in the case of Saketh India Ltd & Ors vs India Securities Ltd (1993) 3 SCC 1. This judgment was followed by the Supreme Court in a later judgment, i.e., Jindal Steel (supra). The facts in Jindal Steel (supra) were briefly as follows: on dishonour of the cheque, the complainant issued a notice to the accused under Section 138 of the N.I. Act, on 04.01.1997. The said notice was served on 10.01.1997 giving the accused 15 days time for making the payment. The 15 day period expired on 25.01.1997. The Supreme Court in these facts held as follows:- “Cause of action to file the complaint accrued on 26.1.1997, which day has to be excluded in computing the period of limitation, as required under Section 12(1) of the Limitation Act, 1963. Therefore, the limitation would be counted from 27.1.1997 and the complaint was filed on 26.2.1997, within a period of one month from that date, as such, the same was filed well within time. We find that the point is concluded by a judgment of this Court in Saket India Ltd. Vs India Securities Ltd in which case taking into consideration the provisions of Section 12(1) of the Limitation Act, it was laid down that the day on which cause of action had accrued has to be excluded for reckoning the period of limitation for filing Crl.M.C.No. 1951-2009 Page 15 of 28 a complaint under Section 138 of the Act. In the present case, after excluding the day when cause of action accrued, the complaint was filed well within time; as such the High Court was not justified in holding that there was two days‟ delay in filing the complaint. For the foregoing reasons, we are of the view that the High Court was not justified in quashing prosecution of the respondent.” 6.3 Mr Sandeep Sethi has laid great stress on the judgment of the Supreme Court in the case of Prem Chand Vijay Kumar vs Yashpal Singh and Another: (2005) 4 SCC 417 to buttress his submission that the complaint is barred by limitation. In my view, a close scrutiny of the ratio of the case would show that the Court was called upon to decide as to when the cause of action arises and not, as in Jindal Steel (Supra), as to whether the day on which the cause of action arises, is to be included in calculating the period of limitation of 30 days as prescribed under Section 142(b) of the N.I.Act. It is well settled that a judgment is binding precedent for what it decides and not what logically follows from it. See Bhavnagar University vs Palitana Sugar Mill (P) Ltd.: (2003) 2 SCC 111. The following observations being relevant are extracted hereinbelow:- “59. A decision, as is well known, is an authority for which it is decided and not what can logically be deduced therefrom. It is also well settled that a little difference in facts or additional facts may make a lot of difference in the precedential value of a decision. [See Ram Rakhi v. Union of India, Delhi Admn. (NCT of Delhi) v. Manohar Lal, Haryana Financial Corpn. vs Crl.M.C.No. 1951-2009 Page 16 of 28 Jagdamba Oil Mills and Nalini Mahajan (Dr) v. Director of Income Tax (Investigation)]” 7. On the aspect of the cheques being issued by the Petitioner by way of security and not towards discharge of an obligation to pay a debt in whole or in part, I am of the view that this issue can only be determined, at least in the present case, after a trial. The Petitioner‟s stand that no consideration flowed from the Respondent and hence there was no debt or other liability to be discharged is a matter in respect of which the learned Magistrate can arrive at a conclusion only after the evidence is led in the matter. Prima facie, it appears to me that there was a consideration. The jural concept of consideration as is well accepted can take either a monetary form or be even in the form of a benefit or detriment. See K.S. Bakshi & Anr. vs State & Anr. 146 (2008) DLT 125. The following observations being relevant are extracted hereinbelow:- “32. Thus where a cheque forms part of a consideration under a contract it is paid towards a liability. 33. Section 2(d) of the Indian Contract Act, 1972 defines consideration as under:- “when at the desire of the promisor, the promise or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or abstain from doing, something, such act or abstinence or promise is called a consideration for the promise.” 34. Jural concept of consideration is as :- Crl.M.C.No. 1951-2009 Page 17 of 28 “A valuable consideration in the sense of the law, may consist either in some right, interest, profit or benefit accruing to one party, or some forbearance, detriment, loss or responsibility given, suffered, or undertaken by the other.” 35. The jural concept of the consideration requires that something of value must be given, and that this can either be a benefit to the promisor or some detriment to the promisee. In the decisions reported as Chidambara iyer v renga iyer AIR 1966 SC 193 and Sonia Bhatia v State of U.P. AIR 1981 SC 1271, the Supreme Court compared the jural concept of the consideration and Section 2(d) of the Contract Act and held the two as being practically the same. It was held that the word „valuable‟ in civil law could be negative or positive. 36. Thus, “consideration” is a very wide term and is not restricted to monetary benefit. Consideration does not necessarily means money in return of money or money in lieu of goods or service. Any benefit or detriment of some value can be a consideration.” 7.1 In any event, the terms of the agreement, do seem to suggest, in particular, clause 2 and clause 4(ii), that the Petitioners were responsible not only for exclusive execution