Criminal Misc. No. M-27793 of 2008 (O&M) IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Criminal Misc. No.M- 27793 of 2008 (O&M) Date of Decision : 19th October, 2011. Laj Kumari ….Petitioner Versus Arvind Katyal …..Respondent CORAM: HON’BLE MR. JUSTICE AUGUSTINE GEORGE MASIH Present: Mr.Harsh Kinra Advocate for the petitioner. Mr.K.S.Bassi Advocate for the respondent. * * * Augustine George Masih, J. Prayer in this petition under Section 482 Cr.P.C is for quashing of Criminal Complaint No.616/13.10.2003 dated 13.10.2003 titled as “Arvind Katyal Vs. Smt. Lal Kumari” under Section 138 of Negotiable Instrument Act, 1881 (hereinafter referred to as “the Act") (Annexure P-7) and the summoning order dated 24.07.2008 passed by the Judicial Magistrate Ist Class, Chandigarh along with proceedings arising thereform. Briefly, the facts are that an agreement to sell dated 23.05.2003 (Annexure P-1) was entered into between the petitioner, who was the buyer and respondent, who was the seller of dwelling Unit 5132 GF, Category I, Modern Housing Complex, Manimajra, UT, Chandigarh. Respondent-Arvind Katyal was the allottee of this dwelling unit by the Chandigarh Housing Board, Chandigarh which he was holding as a 1 Criminal Misc. No. M-27793 of 2008 (O&M) lessee. Relevant clauses of the agreement to sell dated 23.05.2003 for consideration of the contention of the parties are clauses 3 to 8 and 12 which are reproduced herein below: “xxxx xxxx xxxx xxxx 3. That the said seller will clear all the outstanding dues against the said dwelling unit i.e. towards price/enhanced compensation/penalty/instalments with upto date interest etc. and will get the No Dues Certificate, and lease hold to free hold from the Chandigarh Housing Board, Chandigarh before the last date of the bargain. The last date for completion of this bargain that is for final payment and execution of final papers etc. has been fixed on or before 23.08.2003. 4. That the balance amount of Rs.2,00,000/- (Rupees Two Lakhs only) shall be handed over to the said seller out of the total consideration amount of Rs.19,65,000/-(Rupees Ninteen Lakhs Sixty Five Thousand only) by the said purchaser on the same day of the handing over of the Conveyance Deed papers of the said house. 5. That the said Seller will clear all dues i.e. Electricity Bill, Water Bill or any other bills from the concerned departments before the completion of this bargain i.e final payment. If the said Seller will not clear these dues before the final payment then the said Purchaser will deduct the same amount from the total Sale Price before the final payment and the said Seller shall has no objection for the same. 6. That for the safe side of said seller, the purchaser has handed over a post dated cheque No.621964 dated 23.08.2003 drawn from State Bank of Patiala, Sector 22-B, Chandigarh bank amounting to Rs.2,00,000 (Rupees Two Lacs only) to the said seller, which shall not be encashed by the said seller until the 2 Criminal Misc. No. M-27793 of 2008 (O&M) Conveyance Deed papers are handed over to the said Purchaser by the said seller. 7. That the said purchaser has power to stop payment of the said Cheque of Rs.2,00,000/- (Rupees Two Lakhs) if the Conveyance Deed papers are not handed over to the said Purchaser by the said seller till 23.08.2003. Then the date of said Agreement of Sell shall be extended with the mutual consent of both the parties for the said purpose. 8. That the Purchaser can get the said dwelling unit transferred in her own name or in the name of any other person(s). The said seller shall have no objection for the same. That the said purchaser or his/her/their nominee(s) shall hereinafter be responsible and entitled for all type of loss or profit arising out of said deal/bargain and said purchaser is authorized by the said Seller(s) to receive any amount of earnest money/advance from any other persons(s) by virtue of this Agreement to Sell and the said Seller(s) shall not have any objection for the same at any later stage, but the said purchaser(s) shall be responsible to make the full and final payment to the said Seller(s) as per provision of Clause No.1 of this “Agreement to Sell”. All expenses on execution of final papers will be borne by the purchaser/s. xxxx xxxx xxxx 12. That the moment the Transfer policy is relaxed by the concerned authority, the same shall be enforced by the GPA holder and the said charges on account of this Transfer/Sale deed shall be borne by the GPA holder. xxxx xxxx xxxx xxx As per above clauses, the possession of the dwelling unit was handed over to the petitioner and as a matter of fact as per terms of payment Rs.17,65,000/- was either given in cash or through cheque 3 Criminal Misc. No. M-27793 of 2008 (O&M) which have been duly received by the respondent-seller. As per Clause 3 of the agreement, seller was to clear all outstanding dues against the said dwelling unit and was to get No Objection Certificate which was obtained by the seller-complainant (respondent herein) on 21.08.2003 within the time stipulated in the agreement which was up to 23.08.2003. However, he failed to get conversion of the dwelling unit from lease hold to free hold from the Chandigarh Housing Board, Chandigarh before this date. Balance amount of Rs. 2 lacs out of the total consideration amount of Rs.19,65,000/- was to be paid by the purchaser on the day of handing over of the conveyance deed papers of the house. As per Clause 5, in case the seller do not clear the dues before the final payment was to be made, the purchaser was entitled to deduct the same amount from the total sale price before making the final payment. As security for the safe side of the seller i.e. respondent Arvind Katyal-complainant, petitioner handed over a post dated cheque bearing No.621964 dated 23.08.2003 amounting to Rs.2 lacs, as per Clause 6 of the agreement, which was to be encashed only after handing over of the conveyance deed papers by the seller. Under Clause 7, the purchaser i.e. the petitioner was empowered to stop payment of the said cheque of Rs.2 lacs in case the conveyance deed papers were not handed over to the purchaser by the seller till 23.08.2003 and the date of the agreement to sell could be extended with mutual consent of the parties. As per Clause 8, the purchaser could get the said dwelling unit transferred either in her name or in the name of any other person. However, the purchaser shall be responsible to make full and final payment to the seller. As per Clause 8 of the agreement to sell, all expenses on execution of final papers were to be borne by the purchaser (s). As per Clause 12, in case of relaxation in the transfer policy, the benefit of that could be invoked by the general 4 Criminal Misc. No. M-27793 of 2008 (O&M) power of attorney holder and the said charges on account of this transfer/sale deed was to be borne by the general power of attorney holder. As the respondent failed to comply with the conditions as contained in Clause 3 of the agreement with regard to conversion of the dwelling unit from lease hold to free hold from the Chandigarh Housing Board, Chandigarh before the date stipulated in the agreement i.e. 23.08.2003, the petitioner sent a letter dated 23.08.2003 (Annexure P-2) informing the respondent that since he had failed to comply with condition of conversion of the dwelling unit from lease hold to free hold property, the payment of the post dated cheque has been stopped by her. Respondent submitted the cheque in question to the bank which was returned as dishonoured by informing the respondent on 26.08.2003 that the payment has been stopped. Consequent thereto, demand notice (Annexure P-5) through a counsel was served by the respondent on the petitioner calling upon her for payment of Rs.2 lacs within 15 days of the receipt of the notice failing which, proceedings under Section 138 of the Act shall be initiated against her. To this notice, reply was submitted by the petitioner through counsel dated 21.09.2003 (Annexure P-6) informing respondent the reasons why the payment of cheque has been stopped wherein, it was mentioned that the pre-condition for encashment of the cheque was that the respondent would hand over and deliver the conveyance deed clear from all encumbrances before the encashment of the cheque. Criminal Complaint No.616/13.10.2003 dated 13.10.2003 was filed against the petitioner under Section 138 of the Act for dishonor of cheque No.621964 dated 23.08.2009 for Rs.2 lacs in which initially, the petitioner was summoned by the trial court vide order dated 05.11.2003. 5 Criminal Misc. No. M-27793 of 2008 (O&M) This order was challenged by the petitioner under Section 482 Cr.P.C by filing Criminal Misc. No.27938-M of 2005 which was decided by this court vide order dated 24.05.2006 (Annexure P-9), after hearing the counsel for the parties, the petition was accepted and the order summoning the petitioner was set aside. The matter was remitted back to the Judicial Magistrate Ist Class, Chandigarh to pass fresh orders in accordance with law. The petitioner then filed a suit for mandatory injunction dated 11.08.2006 (Annexure P-12) directing the defendant to comply with the agreement to sell dated 23.05.2003 and adjust Rs.12,034/- and further to complete the conveyance deed as per the agreement to sell. The said suit is pending trial before the Civil Judge(Junior Division), UT, Chandigarh. The trial court vide order dated 24.07.2008 has again summoned the petitioner. It is at this stage that the petitioner has filed the present petition praying for quashing of the criminal complaint as also the summoning order. It is the contention of the counsel for the petitioner that the cheque of Rs.2 lacs was issued to the respondent as security and the payment of the said cheque was subject to fulfilling the terms and conditions of the agreement to sell. Since Clause 3 of the agreement with regard to conversion of the dwelling unit from lease hold to free hold from the Chandigarh Housing Board, Chandigarh has not been obtained by the respondent, the petitioner was entitled to stop payment of the said cheque as per clause 7 of the agreement. He contends that as per Clause 6, the cheque was to be encashed by the respondent only when the respondent would hand over the conveyance deed papers to the petitioners which was not done by the respondent and thus, the petitioner has rightly stopped the payment of the cheque in question. His further contention is 6 Criminal Misc. No. M-27793 of 2008 (O&M) that the petitioner is ready to bear all the expenses of the execution of final papers after respondent fulfils the terms of Clause 3 of the agreement. The cheque in question would not fall within ambit of Section 138 of the Act as it was not issued for a debt or liability, as per the explanation to the said section, as the same was issued in the form of security. He submits that although, the respondent has partly complied with Clause 3 of the agreement where, he has conveyed No Objection Certificate from the Board vide letter dated 21.08.2003 but the same is subject to completing the requisite formalities and those formalities have not been completed by the respondent. The procedure for conversion of lease hold to free hold is provided and published by the Chandigarh Housing Board as a Citizens’ Charter. According to Clause 6 (vi) thereof, after obtaining the No Objection Certificate for conversion of dwelling unit from lease hold to free hold. As per Clause 5(v), the allottee has to apply for conversion on the prescribed application form. On scrutiny of the application form and other related supporting documents along with the prescribed requisite conversion charges/fee, the Secretary, Chandigarh Housing Board who exercising the powers of Estate Officer, UT, Chandigarh would allow conversion. This condition had not been fulfilled uptil 23.08.2003 nor has it been fulfilled by the respondent till date, therefore, the respondent was not entitled to encash the cheque in question and thus, no offence under Section 138 of the Act is made out against the petitioner. On the other hand, counsel for the respondent submits that the respondent has fulfilled his part of the agreement and submits that as per The Chandigarh Conversion Of Residential Lease Hold Land Tenure Into Free Hold Land Tenure Rules, 1996 (hereinafter referred to as “Rules 7 Criminal Misc. No. M-27793 of 2008 (O&M) 1996”) Clause 8 deals with conversion which would be applicable to the present case as the possession of the property has been parted by the respondent who is the allottee and therefore, this part has to be complied with by the petitioner which the petitioner has not gone ahead with and therefore, the initiation of the proceedings against the respondent is in accordance with law. I have considered the submissions made by counsel for the parties and with their assistance have gone through the records of the case. The facts as stated above are not in dispute. The only question, which is required to be determined in this case, is whether the cheque in question could be termed to have been issued for the discharge of any debt or liability and would it fall within the meaning of explanation of Section 138 of the Act. Section 138 of the Act reads as under: “ 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 8 Criminal Misc. No. M-27793 of 2008 (O&M) which may extend to twice the amount of the cheque, or with both: Provided that nothing contained in this section shall apply unless: (a) The cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier. (b) The payee or the holder in due course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving a notice in writing, to the drawer of the cheque, within thirty days of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and (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, to the holder in due course of the cheque, within fifteen days of the receipt of the said notice.” A perusal of the above section would show that the person who has issued a cheque on an account maintained by him with a banker for payment of any amount of money to another person from out of that account would be deemed to have committed an offence, if the said cheque has been returned by the bank unpaid for the reasons stated in this Section provided the same had been issued for discharge in whole or in part of any debt or other liability which would as per explanation means a legally enforceable debt or liability. As per the terms of agreement dated 23.05.2003 (Annexure P-1), this cheque was to be encashed, as per Clause 6, only when the respondent handed over the conveyance deed papers to the petitioner 9 Criminal Misc. No. M-27793 of 2008 (O&M) and as per Clause 7, the petitioner was empowered to stop payment of the cheque if the conveyance deed papers were not handed over to the petitioner by the respondent till 23.08.2003, the date agreed to. As is apparent from Clause 6, this cheque was handed over to the respondent as security for the safe side of the respondent. It is not in dispute that the respondent-complainant did not hand over the conveyance deed papers on or before 23.08.2003. It is also not disputed that till date, the respondent has failed to get the conversion of the dwelling unit from lease hold to free hold from the Chandigarh Housing Board, Chandigarh. If that be so, Clause 3 of the agreement has not been complied with by the respondent and thus, the petitioner was entitled to stop payment of the cheque in question as per Clause 7 of the agreement. Further Clause 6 also fortifies this fact as the cheque could only be encashed on handing over of the conveyance deed papers to the petitioner by the respondent. Counsel for the respondent has pressed into service Clause 12 of the agreement according to which the general power of attorney holder i.e. the petitioner could get the dwelling unit transferred or execution the sale deed in case there is relaxation in the transfer policy from the concerned authority of the Chandigarh Housing Board, Chandigarh. This contention of the counsel for the respondent is totally misplaced as this is a step further when the dwelling unit has to be either transferred in the name of the petitioner or on selling the dwelling unit to some other person as a free hold dwelling unit that charges the petitioner has as per clause 8 of the agreement in any case accepted to pay which provides that all expenses on execution of final papers will be borne by the purchaser i.e. the petitioner. 10 Criminal Misc. No. M-27793 of 2008 (O&M) Reliance of the counsel for the respondent on Rule 8 of Rules 1996 is also misplaced in the given facts and circumstances of the case and the agreement dated 23.05.2003 (P-1), wherein, the responsibility of conversion of the dwelling unit from lease hold to free hold basis was taken by the respondent on him as per clause 3 of the agreement. He accordingly, was required to get the conversion from lease hold to free hold done. This is apparent from the Citizens’ Charter which has been issued by the Chandigarh Housing Board, Chandigarh. According to Clause 6 of this Charter, after obtaining No Objection Certificate for conversion of dwelling unit from lease hold to free hold, the lease holder i.e. the allottee shall apply for conversion on the prescribed application form to the Secretary, Chandigarh Housing Board, Chandigarh exercising the powers of the Estate Officer, UT, Chandigarh as per the procedure/guidelines detailed in the broucher. This has not been complied with by the respondent and, therefore, it can be said that the respondent has failed to comply with the conditions as provided under Clause 3 of the agreement to sell according to which the respondent had taken on himself the responsibility to get the lease hold of the dwelling unit converted to free hold before the date fixed i.e. 23.08.2003. Therefore, in the light of Clause 7 when read with Clause 6, the petitioner has rightly stopped payment of the cheque and the cheque cannot be said to have been issued in discharge of legally enforceable debt or liability. The petitioner thus, cannot be held to have committed an offence under Section 138 of the Act. In this light of the above, the Criminal Complaint No.616/13.10.2003 dated 13.10.2003 cannot be sustained as also consequential summoning order dated 24.07.2008, 11 Criminal Misc. No. M-27793 of 2008 (O&M) Accordingly, the present petition is allowed. The Criminal Complaint No.616/13.10.2003 dated 13.10.2003 titled as “Arvind Katyal Vs. Smt. Laj Kumari” filed under Section 138 of the Act (Annexure P-7) and the summoning order dated 24.07.2008 passed by Judicial Magistrate Ist Class, Chandigarh as also all consequential proceedings arising therefrom are hereby quashed. 19th October, 2011. (AUGUSTINE GEORGE MASIH) Seema-II Judge 12