CR.MA/9138/2005 1/68 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD CRIMINAL MISC.APPLICATION No. 9138 of 2005 WITH CRIMINAL MISC.APPLICATION No. 9151 of 2005 CRIMINAL MISC.APPLICATION No. 9152 of 2005 CRIMINAL MISC.APPLICATION No. 9153 of 2005 CRIMINAL MISC.APPLICATION No. 9154 of 2005 CRIMINAL MISC.APPLICATION No. 9155 of 2005 CRIMINAL MISC.APPLICATION No. 9216 of 2005 CRIMINAL MISC.APPLICATION No. 9217 of 2005 CRIMINAL MISC.APPLICATION No. 9219 of 2005 CRIMINAL MISC.APPLICATION No. 9221 of 2005 CRIMINAL MISC.APPLICATION No. 9222 of 2005 CRIMINAL MISC.APPLICATION No. 9224 of 2005 CRIMINAL MISC.APPLICATION No. 9225 of 2005 CRIMINAL MISC.APPLICATION No. 9227 of 2005 CRIMINAL MISC.APPLICATION No. 9228 of 2005 CRIMINAL MISC.APPLICATION No. 9230 of 2005 CRIMINAL MISC.APPLICATION No. 9232 of 2005 CRIMINAL MISC.APPLICATION No. 9233 of 2005 CRIMINAL MISC.APPLICATION No. 9283 of 2005 CRIMINAL MISC.APPLICATION No. 9285 of 2005 CRIMINAL MISC.APPLICATION No. 9286 of 2005 CRIMINAL MISC.APPLICATION No. 9288 of 2005 CRIMINAL MISC.APPLICATION No. 9289 of 2005 CRIMINAL MISC.APPLICATION No. 9291 of 2005 For Approval and Signature: HONOURABLE MR.JUSTICE K.A.PUJ ================================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? CR.MA/9138/2005 2/68 JUDGMENT 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ================================================= MRS. INDUMATI BANSILAL SHAH & 3 - Applicant(s) Versus ANANT GIRDHARLAL SHAH & 1 - Respondent(s) ================================================= Appearance : MR BN KESHWANI for Petitioners. None for Respondent No. 1. MR AD OZA, PUBLIC PROSECUTOR for Respondent No.2. ================================================= CORAM : HONOURABLE MR.JUSTICE K.A.PUJ Date : 28/10/2005 COMMON ORAL JUDGMENT 1.All these Cri. Misc. Applications are filed under Section 482 of the Code of Criminal Procedure invoking the inherent jurisdiction of this Court and praying for quashing and setting aside the Summons issued by the learned CR.MA/9138/2005 3/68 JUDGMENT Judicial Magistrate First Class, Gandevi in Criminal Cases Nos. 185 to 190 of 2000 under Section 138 of the Negotiable Instruments Act. Since common issues are involved and arguments are commonly advanced by the learned advocate appearing for the petitioners and the learned Public Prosecutor appearing for the respondent No. 2 – State in all these matters, the same are being disposed off by this common judgment. 2.Cri. Misc. Application No. 9138 of 2005 is filed by the petitioners – original Accused Nos. 4,5,9 & 10 in Criminal Case No. 185 of 2000 pending in the Court of Judicial Magistrate First Class, Gandevi. The said Criminal Case was filed by Shri Anant Girdharlal Shah under Section 138 of the Negotiable Instruments Act. Likewise, Cri. Misc. Application Nos. 9151 to 9155 of 2005 are filed by the same petitioners – original CR.MA/9138/2005 4/68 JUDGMENT accused Nos. 4,5,9 & 10 in Criminal Case Nos. 186, 187, 189, 188 & 190 of 2000 respectively pending in the Court of Judicial Magistrate First Class, Gandevi. All these petitions are hereinafter referred to as Group 1 petitions. 3.Cri. Misc. Application Nos. 9216 of 2005 is filed by the petitioners – original Accused Nos. 2,3,7 & 8 in Criminal Case No. 185 of 2005 pending in the Court of Judicial Magistrate First Class, Gandevi. The said Criminal Case was filed by Shri Anant Girdharlal Shah against M/s. K.M. Developers & Others. 4.Similarly, Cri. Misc. Application Nos. 9217, 9219, 9221, 9222 & 9224 of 2005 are filed by the same petitioners – original Accused Nos. 2,3,7 & 8 in Criminal Case Nos. 186, 187, 188, 189 & 190 of 2000 respectively pending in the Court of Judicial Magistrate First Class, CR.MA/9138/2005 5/68 JUDGMENT Gandevi. All these petitions are hereinafter referred to as Group 2 petitions. 5.Similarly, Cri. Misc. Application No. 9225 of 2005 is filed by the petitioners – original Accused Nos. 1 & 6 in Criminal Case No. 185 of 2000 pending in the Court of Judicial Magistrate First Class, Gandevi and all other petitions, namely, Cri. Misc. Application Nos. 9227, 9228, 9230, 9232 & 9233 of 2005 are filed by the same petitioners – original Accused Nos. 1 & 6 in Criminal Case Nos. 186, 187, 188, 189 & 190 of 2000 pending in the Court of Judicial Magistrate First Class, Gandevi. All these petitions are hereinafter referred to as Group 3 petitions. 6.Lastly, Cri. Misc. Application No. 9283 of 2005 is filed by the petitioner – original Accused No. 11 in Criminal Case No. 185 of 2000 pending CR.MA/9138/2005 6/68 JUDGMENT in the Court of Judicial Magistrate First Class, Gandevi and all other petitions, namely, Cri. Misc. Application Nos. 9285, 9286, 9288, 9289 and 9291 of 2005 are filed by the same petitioner – Accused No. 11 in Criminal Case Nos. 186 to 190 of 2000 respectively pending in the Court of Judicial Magistrate First Class, Gandevi. All these petitions are hereinafter referred to as Group 4 petitions. 7.Since all the petitioners of Group 1 to 4 petitions are accused in the Criminal Case Nos. 185 to 190 of 2000 filed by different complainants and facts are more or less similar, for the sake of convenience, the facts are taken from Cri. Misc. Application No. 9138 of 2005 of Group 1 petitions. 8.The facts in nut shell are that the accused No. 1 in all the above Criminal Cases is an CR.MA/9138/2005 7/68 JUDGMENT Association of persons and accused Nos. 4,5,6,9,10 and 11 are in their individual capacities and Hindu Undivided Family of Bansilal Ratilal Shah, Shailesh Bansilal Shah, Rajnikant Ratilal Shah & Harsh Rajnikant Shah in their representative capacity are its members. The said Association was formed on 09.04.1990 by Memorandum of Association. Under the said Memorandum of Association, a Managing Committee was appointed for carrying on day to day business of the Association of person of M/s. K.M. Developers with general power to do such acts and things as may be necessary for and incidental to carry on business of Association of persons with specific power to open and operate Bank accounts and to issue cheque for and on behalf of Association of person. Kartas of HUF being accused Nos. 3,7 & 8, namely, Shri Shailesh, Rajnikant and Harsh Ratilal Shah and accused No. 6 Shri Jayesh CR.MA/9138/2005 8/68 JUDGMENT Bansilal were the members of the said Managing Committee. All the six complainants in Criminal Case Nos. 185 to 190 of 2000 are family members and were holders of Govt. Stock of gold bonds, 1998 issued by the Reserve Bank of India. They have lent in January 1997 gold bonds to Accused No. 1 i.e. M/s. K.M. Developers with liberty to pledge the same as security for raising loans with understanding to return the gold bonds on or before stipulated date, and accused No. 1 issued post dated cheques in favour of the complainants for different amounts which represented the value of the gold covered by gold bonds and also the interest receivable under the gold bonds from the R.B.I. Agreement in this regard was executed on 07.01.1997. 9.The Accused No. 1 was engaged in the business and development of Real Estate. There was CR.MA/9138/2005 9/68 JUDGMENT heavy recession in the market and hence, accused No. 1 was unable to return the gold bonds on or before the agreed date and hence, time for return of gold bonds was extended from time to time and on every occasion, fresh post dated cheques were obtained by the complainants from accused No. 1. Finally on 25.06.1999, the time for return of gold bonds was extended upto 30.09.1999 and fresh post dated cheques dated 30.09.1999 for different amounts (totaling to Rs.3,67,46,878) were obtained by complainants from accused No. 1. These post dated cheques were obtained by the complainant on 25.06.1999 from accused No. 1. 10.The accused No. 1 had taken loans from different persons by pledging the gold bonds as per liberty given to the accused No. 1. Because of financial crisis, the accused No. 1 was unable to make payments of loan and hence, the CR.MA/9138/2005 10/68 JUDGMENT accused No. 1 expressed its inability to return the gold bonds and consequently parties arrived at a new contract Novatio whereby the original complainants were entitled to directly receive back the gold bonds from the Creditors of accused No. 1 by making payment of the loan amount for and on behalf of the accused No. 1 to the creditors of accused No. 1. The complainants also obtained from accused No. 1 requisite consent letters dated 28.06.1999. Thereafter, second agreement was executed between accused No. 1 and the complainants on 03.07.1999 under which complainants directly made payments of total amount of Rs.1,73,00,000/- on behalf of accused No. 1 and received back all the gold bonds on different dates i.e. 01.07.1999 to 12.07.1999 and from 06.08.1999 to 24.08.1999 as per copy of purshis filed before the Sessions Court, Valsad at Navsari by complainants. The complainants have CR.MA/9138/2005 11/68 JUDGMENT redeemed all the gold bonds and received back requisite quantity of gold and the requisite amount of interest in August 1999 from R.B.I. The complainants have filed purshis to this effect before the Sessions Court, Valsad at Navsari. 11.The dispute arose between the parties thereafter. The complainants were claiming, entire amounts of Rs. 3,67,46,878/- of post dated cheques without adjusting the value of the gold and the amount of interest received from R.B.I. The accused No. 1 expressed its readiness and willingness to pay Rs.1,73,00,000/- paid by complainants on behalf of accused No. 1 with reasonable interest. Negotiations went on and complainant did not present the post dated cheques dated 30.09.1999. The matter was to be referred to the Sole Arbitrator, Shri Vora, Common CR.MA/9138/2005 12/68 JUDGMENT Architect of parties, as per Arbitration clause contained in both agreements. Despite this fact, the complainants deposited the disputed cheques with the Bankers on 07.12.1999 without informing the accused No. 1 and the cheques were returned unpaid by their Bankers at Bombay. The complainants thereafter served statutory notices dated 22.12.1999 demanding total amount of Rs.3,67,46,878/- with interest. The accused No. 1 gave reply dated 11.01.2000 refuting the claim and expressing its willingness and readiness to pay the amount which was paid on its behalf by complainants to its Creditors with reasonable interest and also invoked the Arbitration clause of the Agreement. Complainants declined to refer the dispute to sole Arbitrator Shri Vora by giving counter reply dated 28.01.2000. The accused No. 1 thereafter approached the High Court of Bombay which has appointed Justice Mr. CR.MA/9138/2005 13/68 JUDGMENT Chandurkar as Sole Arbitrator before whom both parties appeared and filed their claims as well as replies and led oral as well as documentary evidence. They have also advanced their arguments. However, due to the death of Justice Mr. Chandurkar, the award could not be declared. In the meantime, the complainants filed six complaints being Criminal Case Nos. 185 to 190 of 2000 before the Court of Judicial Magistrate First Class, Gandevi and process was issued in each of these six complaints on 01.02.2000 for the offence under Section 138 of Negotiable Instruments Act. 12.After service of the process on all the accused except accused No. 11, discharge application was filed and the learned J.M.F.C. vide his order dated 08.11.2001 has allowed the said application and dropped all proceedings. So far as accused No. 11 is concerned, no CR.MA/9138/2005 14/68 JUDGMENT summons was served upon him. The complainants have, therefore, thought it fit not to proceed against the said accused No. 11 and hence, pursis was filed by the complainants declaring that they do not want to proceed with the matter against accused No. 11 and accordingly, proceedings were dropped and his name was ordered to be deleted from the complaints by the learned Magistrate. 13.Being aggrieved by the said order of the learned Magistrate, the original complainants have filed Criminal Revision Application Nos. 7 to 12 of 2002 before the Learned Sessions Judge, who vide his order dated 20.03.2004 directed to restore to file all complaints. Being aggrieved by the said order of the learned Sessions Judge, the accused persons have preferred Criminal Revision Application Nos. 260 to 265 of 2004 and 312 to 314 of 2004 CR.MA/9138/2005 15/68 JUDGMENT to this Court which have been rejected by this Court vide its order dated 17.06.2005. This Court has also rejected the alternative prayer of the accused persons to examine the matter in exercise of inherent powers under Section 482 of the Criminal Procedure Code. 14.The original accused persons – present petitioners have, therefore, filed the present petitions before this Court making aforesaid prayers. 15.Mr. B.N. Keshwani, learned advocate appearing for the petitioners in all these matters has submitted that the learned Magistrate has passed the impugned order of issuance of process against the petitioners – accused persons mechanically and without any application of mind. He has further submitted that the impugned order passed by the learned CR.MA/9138/2005 16/68 JUDGMENT Magistrate is not a speaking order at all and there is nothing in the impugned order indicating or prima facie showing that the learned Magistrate passed the order after application of his mind to the facts and documentary evidence brought on record. The order regarding issuance of process in this manner has resulted into great prejudice and injustice to the petitioners and if such an order is allowed to stand, it will result into miscarriage of justice and hence, the said order is liable to be quashed and set aside. Mr. Keshwani has further submitted that the learned Magistrate has failed to take a note of an important fact that in his statement on oath recorded by the learned Magistrate under Section 200 of Cr.P.C., the complainants made absolutely false statements to the effect that the accused persons had obtained money (cash) and that the complaints were filed for recovery CR.MA/9138/2005 17/68 JUDGMENT of the same. It is not at all the case of the complainants all throughout that any money was ever paid by the complainants to the petitioners or to any other persons. The complainant has obtained the order of issuance of process from the learned Magistrate by suppressing material facts and by suppressing material documentary evidence. The complainants have lent Gold Bonds to the accused No. 1 Association with specific understanding that the Accused No. 1 was at liberty to pledge the same for raising funds against the security of the said Bonds and it was further agreed that accused No. 1 should return the Gold Bonds on or before the agreed date. The post dated cheques were given by accused No. 1 to the complainant by way of collateral security for the due performance of the Contract for returning the Gold Bonds in question on or before the stipulated date. There was no CR.MA/9138/2005 18/68 JUDGMENT existing debt on the date on which the cheques were given and thus, the question of invoking the provisions of Section 138 of the Act does not arise at all. He has further submitted that the complainants have suppressed the material facts with regard to execution of the agreement dated 25.06.1999 as well as 03.07.1999 with an ulterior motive to obtain order of issuance of process. The cheques given to the complainants were to be presented to the Bank only after the complainants did not receive the Gold Bonds from the Creditors of accused No. 1 by extended period. He has, therefore, submitted that by suppressing all those material facts, the order of issuance of process obtained by the complainants is bad in law and against the settled principles of law, equity and justice and in this view of the matter, there is no question of invoking the provisions of Section 138 of the Negotiable CR.MA/9138/2005 19/68 JUDGMENT Instruments Act against the petitioners and the process issued by the learned Magistrate is, therefore, liable to be quashed and set aside. 16.In support of his submissions, Mr. Keshwani has relied on the decision of the Hon'ble Supreme Court in the case of Pepsi Foods Ltd., reported in [1998] 5 S.C.C. 749 wherein it is held that summoning of accused in a criminal case is a serious matter. The Criminal Law cannot be set into motion as a matter of course. It is not that the complainant has to bring only two witnesses to support his allegations in the complaint to have the Criminal Law set into motion. The Court has further observed that the Magistrate has to examine the nature of the allegations made in the complaint and the evidence, both oral and documentary, in support thereof and would that be sufficient for the complainant in bringing CR.MA/9138/2005 20/68 JUDGMENT charge home to the accused. It is not that the Magistrate is a silent spectator at the time of recording the preliminary evidence before summoning the accused. The Magistrate has to carefully scrutinize the evidence brought on record and may even himself put questions to the complainant and his witnesses to elicit answers to find out the truthfulness of the allegations or otherwise and then examine if any offence is prima facie committed by all or any of the accused. Mr. Keshwani has, therefore, submitted that the order passed by the learned Magistrate is absolutely in violation of the aforesaid legal proposition laid down by the Hon'ble Supreme Court. 17.Mr. Keshwani has further submitted that the learned Magistrate at Gandevi has no jurisdiction to entertain the complaints filed against the accused persons. The entire CR.MA/9138/2005 21/68 JUDGMENT transaction of lending of Gold Bonds and the execution of both the Agreements dated 07.01.1997 and 03.07.1999 and the issuance of all the cheques took place at Bombay. The cheques were issued on the Bank situated at Bombay and the cheques were presented by the original complainant through their collecting Agents, namely, the Bilimora Bank at Mumbai to the bankers of Accused No. 1 and these cheques were dishonored at Bombay. The complainants and accused persons are all permanent residents of Bombay and doing their respective business at Bombay. Thus, the alleged offence punishable under Section 138 of the Act was committed at Bombay and not within the jurisdiction of the Court of learned JMFC, Gandevi and hence, the learned Magistrate has no jurisdiction to entertain the complaint. The first part of Section 138 of the Act creates an offence by laying down that when any cheque drawn by a CR.MA/9138/2005 22/68 JUDGMENT person on an account maintained by him with a banker for payment of any amount of money to another person 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 provision of this Act, be punished with imprisonment for a term which may extend to two years or with fine which may extend to twice the amount of the cheque or with both. The offence under Section 138 of the Act would be complete as soon as all the ingredients of the first part of Section 138 of the Act are committed. The proviso to Section CR.MA/9138/2005 23/68 JUDGMENT 138 of the Act regarding presenting the cheque within the period of six months, and payee or holder-in-due course of the cheque making demand for the payment of amount of cheque by giving notice in writing to drawer of the cheque within fifteen days, and the drawer failing to make payment of the said cheque amount of money to the payee within fifteen days of the receipt of notice are not the ingredients of the offence, but they are only conditions precedent to filing of the complaint as held by this Court in the case of Satishkumar Jayantilal Shah V/s. State of Gujarat and Another, 1997 (2) G.L.H. 605 and also held by the Hon'ble Supreme Court in the case of Sadanand Bhadran V/s. Madhavan Sunil Kumar, [1998] 6 S.C.C. 514 and Central Bank of India V/s. Saxons Farms and Others, [1999] 8 S.C.C. 221. CR.MA/9138/2005 24/68 JUDGMENT 18.Mr. Keshwani has further relied on the decision of the Hon'ble Supreme Court in the case of Sadanandan Bhadran vs. Madhavan Sunil Kumar, reported in (1998) 6 Supreme Court Cases 514, the Hon'ble Supreme Court has held that on a careful analysis of Section 138 it is seen that its main part creates an offence when a cheque is returned by the bank unpaid for any of the reasons mentioned therein. The significant fact, however, is that the proviso lays down three conditions precedent to the applicability of the Section 138 and for that matter, creation of such offence and the conditions are; (i) the cheque should have been presented to the bank within six months of its issue or within the period of its validity, whichever is earlier; (ii) the payee should have made a demand for payment by registered notice after the cheque is returned unpaid; and (iii) that the drawer should have failed to pay CR.MA/9138/2005 25/68 JUDGMENT the amount within 15 days of the receipt of the notice. It is only when all the above three conditions are satisfied that a prosecution can be launched for the offence under Section 138. 19.Mr. Keshwani has further submitted that in the case of K. Bhaskaran, reported in [1999] 7 Judgment Today S.C. 558, it is observed that the Provisions contained in Proviso to Section 138 are the components – ingredients of the offence under Section 138 of the Act. He has further submitted that while deciding this case, the earlier binding decision of the Hon'ble Supreme Court in Sadanand's case was not brought to the notice of the Division Bench of the Hon'ble Supreme Court. Apart from this, the later decision of the Hon'ble Supreme Court in the case of Central Bank of India (Supra) would be binding on all the Courts. The Larger Bench consisting of three Judges of the Hon'ble CR.MA/9138/2005 26/68 JUDGMENT Supreme Court in the case of Shri Ishar Alloy Steels Limited V/s. Jayaswals Neco Ltd., [2001] 3 S.C.C. 609 has also specifically observed that Section 138 provides that 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, for 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 the Bank, such person shall be deemed to have committed an offence punishable with imprisonment as prescribed therein subject to the conditions mentioned in Clauses (a), (b), (c) and (d) of the Proviso. Mr. Keshwani has, therefore, submitted that this later decision CR.MA/9138/2005 27/68 JUDGMENT of the Hon'ble Supreme Court is binding and hence, it cannot be said by any stretch of imagination that the place at which the conditions mentioned in the Proviso to Section 138 are fulfilled will give jurisdiction to the Court of that place obviously because these are conditions precedent to filing of the complaint. For this purpose, he relied on the decision of the Hon'ble Supreme Court in the case of Kapurchand Pokhraj V/s. State of Bombay, A.I.R. 1958 S.C. 993 wherein it is held that prior sanction before filing of a complaint is a condition precedent and that such a condition precedent is not an ingredient of an offence. He has, therefore, submitted that the learned JMFC at Gandevi had no territorial jurisdiction to entertain the complaints in question simply because the original complainants deposited the