Criminal Misc. No.A-778-MA of 2007 -1- **** IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH 1. Criminal Misc. No.A-778-MA of 2007 Date of decision : 17.12.2008 Haryana Agro-Industries Corporation Ltd. .....Appellant Versus K.L.Jindal and others ...Respondents 2. Criminal Misc. No.A-779-MA of 2007 Haryana Agro-Industries Corporation Ltd. .....Appellant Versus K.L.Jindal and others ...Respondents 3. Criminal Misc. No.A-780-MA of 2007 Haryana Agro-Industries Corporation Ltd. .....Appellant Versus K.L.Jindal and others ...Respondents 4. Criminal Misc. No.A-781-MA of 2007 Haryana Agro-Industries Corporation Ltd. .....Appellant Versus K.L.Jindal and others ...Respondents 5. Criminal Misc. No.A-782-MA of 2007 Haryana Agro-Industries Corporation Ltd. .....Appellant Versus Criminal Misc. No.A-778-MA of 2007 -2- **** K.L.Jindal and others ...Respondents CORAM : HON'BLE MR. JUSTICE S. D. ANAND Present: Mr.Pankaj Gupta, Advocate for the appellant Mr. Arun Sharma, Advocate for the respondent No.1. Mr. Hari Om Sharma, Advocate for respondent no.4. S. D. ANAND, J. The appellant- complainant- Haryana Agro-Industries Corporation Ltd. has filed a plea under Section 378 (4) of the Code of Criminal Procedure to obtain leave to appeal against the order dated 13.9.2007 vide which the learned Trial Court had dismissed the complaint filed by the appellant-complainant under Section 138 of the Negotiable Instruments Act against the respondents/accused and acquitted the latter i.e. respondents/accused. Before proceeding to undertake the adjudicatory exercise, it would be appropriate to notice, at the very outset, that the learned counsel for the parties agreed that the appellant/applicant had already invoked the arbitration clause as between it and three promoters and even an award has been passed by the Arbitrator in favour of the appellant/applicant and against the three promoters. It is common ground that two promoters i.e. S.K.Kansal and T.N.Singla had already been ordered to be discharged by this Court. This fact, even otherwise, is noticed in the order under challenge itself. The appellant is a Public Sector Undertaking of the Government of Haryana and has been incorporated as a Government company. In terms of an 'Assisted Sector Agreement' dated 26.4.1995, executed between the appellant and the three promoters (K.L.Jindal, S.K.Kansal and T.N.Singla, out of which two promoters S.K.Kansal and Criminal Misc. No.A-778-MA of 2007 -3- **** T.N.Singla have already been discharged by this Court) agreed to collaborate with each other “for the profitable implementation and setting up of the project for the production of the refined oil, vanaspati ghee and distilled oil through a company already got incorporated by the private promoters under the name and style of Shivaka Industries Ltd. at Barwala (Distt. Ambala).” The equity share holding of the appellant therein was to the extent of Rs. 34 lacs. Clause 24(b) of the said Agreement provided that the private promoters i.e. the accused No.1 to 3 “shall be bound to purchase the said equity share-holding of the complainant Corporation in the company after the expiry of the period of three years from the date of commencement of commercial production by the company or at the expiry of a period of five years from its incorporation, whichever is earlier.” The appellant having been incorporated on 29.6.1992 and the commercial production by it having commenced with effect from 7.12.1995, “the buy- back of the equity share-holding of the complainant Corporation became due on 28.06.1997 against the consideration of Rs.48,20,356/-, determined as per the Clause 24(c) of the Agreement ibid.” The promoters expressed inability to discharge the liability in the context of buy- back aforementioned at one go and requested for being allowed to pay the due amount in instalment. After discussion, the promoters agreed to make initial payment of Rs. 10 lacs in the month of October, 1997 and the balance amount in monthly instalments of Rs.5.00 lacs each. This buy- back arrangement was accepted by M/s Golden Land Development (India) Ltd., which is the accused No.4, on behalf of the private promoters being the sister concern of M/s Shivaka Industries Ltd. The said private promoters (accused No.1 to 3) and M/s Golden Land Development (India) Ltd. (accused No.4) were, however, required to execute a supplementary Criminal Misc. No.A-778-MA of 2007 -4- **** tripartite agreement with the complainant Corporation in which a clause of penal interest @ 3% p.a. Over and above the documentary rate of interest from the date of default committed by the private promoters of M/s Shivaka Industries Ltd. was to be stipulated. Thereafter, M/s Golden Land Development (India) Ltd. (hereinafter referred to as “M/s Golden Land”) issued post dated cheques under reference which were payable during the month of May, 1998. Those cheques were issued on behalf of the promoters. However, those cheques bounced on account of 'stop payment instruction' by the drawer. The appellant issued a registered statutory notice to the M/s Golden Land. That notice was received undelivered thereby giving rise the presumption that it had been duly delivered because it had been issued on the last indicated address of the M/s Golden Land. On appraisal of the evidence adduced at the trial, the learned Trial Magistrate dismissed the complaint on a finding that appellant had failed to prove the ingredients of offence under Section 138 of the Negotiable Instruments Act. For recording that finding, learned Trial Magistrate noticed that no contract at all could be infer to have been effectuated as between the appellant and M/s Golden Land. In the absence of tripartite agreement which both the parties were required to sign in pursuance of the offer made by the M/s Golden Land (Annexure A- 1) and the acceptance thereof by the appellant vide Annexure A-2. In that context, the following relevant observations were made by the learned Trial Magistrate:- “33. Before filing the present complaint, the complainant had served a legal notice, which is statutory, Ex.C6 upon the accused persons. Perusal of the same is very much relevant Criminal Misc. No.A-778-MA of 2007 -5- **** for fastening any kind of liability upon the accused No.4. It is pertinent to mention here that the present proceedings are not regarding any criminal liability of the accused for not honouring the buy-back agreement as also admitted by CW1 but regarding the criminal liability regarding the dishonouring the cheque in question, Ex.C4. The cheque in question was issued by the accused No.4, so at the maximum there will be criminal liability of the accused No.4 only, if the other ingredients of Section 138 of the Negotiable Instruments Act are proved. On the basis of dishonouring of the cheque in question, no criminal liability can be fastened upon the accused No.1 to 3 and admittedly, the accused No.2 & 3 who had approached the Hon'ble High Court had been discharged. 34. Now resuming with the legal notice, Ex.C6, it has been recited therein that there was a liability of the three promoters of M/s Shivaka Industries i.e. accused No.1 to 3 under the buy- back agreement that was worked out as Rs.48,20,356/-, Accused No.4 had given a offer to the complainant vide letter (Ex.C3) for purchasing the shares of M/s Shivaka Indusries as per the terms and conditions contained in FAC, on behalf of the promoters of M/s Shivaka Industries. That offer was accepted by HAIC (Complainant Corporation) with a express condition that the promoters had to sign a tripartite agreement and that agreement was not signed till the date of notice and admittedly, till date. The Complainant Corporation had accepted the cheques of the accused No.4 subject to the condition that the promoters had to sign a tripartite agreement Criminal Misc. No.A-778-MA of 2007 -6- **** within a week. There would have been liability of the accused No.4 only when the tripartite agreement would have been signed. 35. The learned counsel for the complainant has argued that the accused No.4 had made the offer vide Ex.C3, which was accompanied with the cheques and it was accepted by the Complainant Corporation vide its resolution Ex.C-11, so the cheque in question was issued against the legal liability. But this court does not find merit in such arguments. Admittedly, the accused No.4 had made an offer to the Complainant Corporation vide Ex.C3 to purchase shares of M/s Shivaka Industries on behalf of the promoters on the same terms and conditions as agreed between the promoters of M/s Shivaka Industries and the Complainant Corporation. In response to that offer, the Complainant Corporation passed resolution Ex.C11. The accused No.4 was allowed to purchase the shareholding of the Complainant Corporation on behalf of the promoters as per the revised terms as indicated in the agenda placed before the Board of Directors before the meeting in which the said resolution was passed. No such agenda has been produced or proved in the present proceedings. But one thing is clear that the offer of the accused No.4 was not accepted as givne in the letter Ex.C3. Certain new terms and conditions were imposed. xxx xxxx xxxxx 41. In the instant case, the offer of the accused No.4 vide Ex.C3 was not accepted as it is but certain conditions Criminal Misc. No.A-778-MA of 2007 -7- **** were imposed, meaning thereby the offer was accepted with a variance, so it amounted to counter proposal offer, which was not accepted by the accused, so there was no contract between the Complainant Corporation and the accused No.4 to buy the shares of M/s Shivaka Industries. When there was no contract, the question of any legal liability of the accused No.4 to issue the cheque in question and also on the date when the cheque was presented by the complainant Corporation for encashment, does not arise at all. When there was no liability on the part of the accused No.4 to issue the cheque, it rightly instructed its banker to stop the payment and accordingly, the main ingredient of the offence under Section 138 of the Negotiable Instruments Act i.e. the cheque has to be issued in discharge of any debt or liability, is not proved.” Learned counsel appearing on behalf of the appellant argues that the impugned order deserves outright invalidation in view of the fact that there was a presumption of existence of liability in terms of the provisions of Section 139 of the Negotiable Instruments Act which (presumption) had not rebutted by the M/s Golden Land by adducing any evidence to that effect. Learned counsel for the appellant otherwise is not in a position to contest the factual finding by the learned Trial Court that no tripartite agreement between the appellant and M/s Golden Land came to be executed. It may be noticed that M/s Golden Land had otherwise nothing at all to do with the contract between the appellant and the promoters. It is only in the event of inability on the part of the promoters to comply with the Criminal Misc. No.A-778-MA of 2007 -8- **** buy-back clause that M/s Golden Land are averred to have agreed to buy- back the equity shares of SIL held by HAIC. M/s Golden Land had agreed to do so in pursuance of arrangement which it had with the promoters. That matter came up for consideration before the Board of Directorsat its meeting held on 17.11.1997 wherein the Managing Director of the corporation was authorised “to enter into a supplementary agreement with private promoters in such cases where the private promoters fail to buy back the shareholding of the Corporation on due dates as per the Financial Collaboration Agreement entered into with them for setting up project under the assisted/joint sector scheme.” The resolution further resolved that “the Managing Director of the Corporation is authorized to impose penalty @ 3% from the date of default over and above the interest rate being charged at the time of release of equity in the project by other Development Financial Institutions for term loans or the prevailing rate of interest being charged by Development Financial Institutions for terms loan of 5 years tenure on the date of default, which ever is higher. In case of further default penal interest @ 3% over and above the agreed interest be charged besides retaining the option of proceeding against the promoters and the company as per the original FCA.” The resolution further provided that “M/s Golden Land Development India Limited is allowed to buy back the shareholding of HAIC on behalf of the promoters as per the revised terms as indicated in the agenda placed before the meeting.” It is, thus, apparent that appellant and M/s Golden Land had to enter into supplementary which would have governed the agreement between them. As already noticed, no such agreement came to be executed between them at all. It cannot, thus, be said that M/s Golden Land had undertaken any liability on behalf of promoters which (liability) Criminal Misc. No.A-778-MA of 2007 -9- **** could be enforced by a resort to provisions of Section 138 of the Negotiable Instruments Act. Though there can be no dispute with the provisions of law that a non party to the contract can issued a cheque in respect of debt incurred by another and the non honouring of that cheque (on account of insufficiency of funds) would render that party liable to prosecution under Section 138 of the Negotiable Instruments Act, it is evident in the present case no legal agreement came to be executed as between the appellant and M/s Golden Land. In the light of the above discussion, the petitions are held to be denuded of merits and are ordered to be dismissed. December 17, 2008 (S.D. ANAND) Pka JUDGE