1 PGK IN THE HIGH COURT OF JUDICATURE AT BOMBAY APPELLATE SIDE Criminal Revision Application No.8 of 2009 M/s.D.G. False Flooring Systems & ors. .. Applicants (Orig. Accused) V/s. Mr.Ashwin C. Negandhi .. .. Respondent (Orig.Complainant) WITH Criminal Revision Application No.14 of 2009 WITH Criminal Revision Application No.15 of 2009 WITH Criminal Revision Application No.16 of 2009 WITH Criminal Revision Application No.17 of 2009 WITH Criminal Revision Application No.18 of 2009 WITH Criminal Revision Application No.19 of 2009 WITH Criminal Revision Application No.20 of 2009 WITH Criminal Revision Application No.21 of 2009 2 WITH Criminal Revision Application No.22 of 2009 WITH Criminal Revision Application No.23 of 2009 WITH Criminal Revision Application No.24 of 2009 WITH Criminal Revision Application No.25 of 2009 WITH Criminal Revision Application No.26 of 2009 WITH Criminal Revision Application No.27 of 2009 WITH Criminal Revision Application No.28 of 2009 WITH Criminal Revision Application No.29 of 2009 WITH Criminal Revision Application No.30 of 2009 WITH Criminal Revision Application No.31 of 2009 WITH Criminal Revision Application No.32 of 2009 WITH Criminal Revision Application No.33 of 2009 WITH Criminal Revision Application No.34 of 2009 3 M/s.D.G. False Flooring Systems & ors. .. Applicants v/s. The State of Maharashtra .. .. Respondents Mr.Manohar H. Ramsinghani with Mr.Amol Patankar i/by Mr.Ratnakar Singh for Applicants. Mr.S.R. Chitnis, Senior Advocate i/by Mr.Sachin B. Thorat for Res.No.1. Mrs.A.A. Mane, APP for State in Criminal Revision Application Nos.14/2009 to 23/2009. Mr.S.R. Shinde, APP for State in Criminal Revision Application Nos.24/2009 to 34/2009. ------ CORAM : SMT.ROSHAN DALVI, JJ. Date of reserving the order : 2nd December, 2009 Date of pronouncing the order : 18th December, 2009 ORDER : 1.These Criminal Revision Applications challenge the order of the learned Metropolitan Magistrate, 13th Court, Dadar, Mumbai dated 23.1.2008 in 22 cases under separate criminal case numbers under the said judgment. Applicant Nos.2 and 3, who are the partners of Applicant No.1, came to be convicted of the offence punishable under Section 138 of the Negotiable Instruments Act and were sentenced to suffer a simple imprisonment for 6 months thereunder. All the 4 Applicants were directed to pay compensation which were the amounts of the cheques which came to be dishonoured in each of the criminal cases also. For failure to pay the compensation under the respective cheques in the 22 criminal cases, Applicant Nos.2 and 3 were directed to suffer simple imprisonment for further 2 months. 2.An Appeal against the said judgment filed in the Court of Sessions at Sewri, Greater Mumbai, under Appeal No. 61 of 2008, has been dismissed on 9.1.2009. The amounts deposited during the pendency of the Appeal are directed to be adjusted towards the amount of compensation. 3.These Criminal Revision Applications are filed challenging the two concurrent judgments of the Lower Courts. The ambit in the Criminal Revision Applications is extremely narrow. The material irregularity, if any, in the aforesaid two judgments is required to be seen. 4.Applicant No.2 and Respondent No.1 were partners since March 2000. Their Partnership Firm came to be dissolved on 25.11.2004 under a Deed of Partnership-cum- admission-cum-retirement (Retirement Deed) of that date, which has been marked Exhibit-34 in evidence. The complainant was the retiring partner. He had to be paid consideration for retiring. Applicant No.3 was admitted 5 to the partnership upon retirement of the complainant. The partnership Firm of Applicant No.1 was to be continued by Applicant Nos.2 and 3. Applicant No.2 was the continuing partner. Applicant No.3 is the wife of Applicant No.2 and a sleeping partner. 5.Under Clause 7 of the Retirement Deed, the complainant, as the retiring partner, was to be paid Rs.55,50,000/- on or before 31.10.2007 by 33 Post Dated Cheques (PDCs) by way of refund of his capital (goodwill) as per the schedule of payment, Annexure-A to the Retirement Deed. (These cheques are admittedly of varying amounts). 6.Under Clause 8 of the Retirement Deed, the complainant and retiring partner permitted the use of machineries enumerated in Annexure-B to the Retirement Deed to Applicant Nos.2 and 3 as continuing partners for 36 months. 7.Under Clause 9 of the Retirement Deed, Applicant Nos.2 and 3 and the Firm of Applicant No.1 undertook to pay compensation for the use of the machineries enumerated in Annexure-B to the Retirement Deed and the premises being Ground, 1st and 2nd floors, of an area of 10,000 sq. ft. at the rate of Rs.80,000/- per month for the first 12 months and at the rate of Rs.85,000/- per month for the subsequent 24 months by 36 PDCs. (The 6 amounts payable under these liabilities have been later varied by consent of the parties and further cheques of lesser amounts are issued). 8.Under Clause 15 of the Retirement Deed, Applicant Nos.2 and 3, as the continuing partners, agreed and undertook that each and every PDC for compensation as well as for return of the capital (goodwill) would be honoured and no cheque would be dishonoured under any circumstances. 9.Under Clause 16, it was agreed between the parties that if delay was made in making payment of the compensation and/or the refund of capital, the complainant would charge interest at 16% per annum for the period of default and if the situation went beyond control of the continuing partners and more than 3 cheques were dishonoured, he would take physical charge of the assets, machineries and stocks for the amount equivalent to the balance due payments. In that event, the Applicants, as the continuing partners, would have no right of any nature in the partnership premises. 10.Two PDCs came to be issued for each month for these separate and distinct liabilities. 11.The agreement has to be read as a whole. 7 12.A reading of the aforesaid 5 clauses shows that there were two distinct and separate entitlements of the complainant and two distinct and separate liabilities of the Applicants. One was towards the goodwill of the retiring partner and the other was for use of the machineries and premises specified in Clause 9 and enumerated in Annexure-B thereto. The payment of goodwill was to be by 33 PDCs. The payment for the machineries and premises was to be by 36 PDCs. It is common ground that for the goodwill PDCs of Rs.2 Lakhs were given and for the machineries and premises PDCs of Rs.80,000/-and later Rs.85,000/- were given. 13.Annexure-A shows the payment schedules. The first payment schedule is for Rs.18 Lakhs. The second payment schedule shows 56 cheques which were executed for the specific amount mentioned against them. The third payment schedule is for Rs.30 Lakhs. Whereas the first payment schedule shows payment schedule for Mr. Ashwin Negandhi (complainant), the second payment schedule shows payment schedule for compensation . Consequently, these two payment schedules are separate and distinct. Clause 7 deals with the first payment schedule. Clause 9 deals with the second payment schedule. Clauses 8 and 9 relate to the use of machineries. The permission to use the machineries is for 36 months. The payment for such user of machineries 8 is upon payment specified in Clause 9. Payment of goodwill is specified in Clause 7. Both are mutually exclusive. The undertaking under Clause 15 is for the payment in respect of both these separate and distinct liabilities being for compensation and goodwill. For delay in making payment for both of these, the consequences for payment of interest stated in Clause 16 are the same. The consequence of more than 3 defaults is to take charge of the assets and machineries. Such consequence is in respect of only cheques for compensation for use of machineries. The undertaking is in respect of both liabilities. The payment of interest under the default clause deals with delay in payment is in respect of both kinds of cheques. So much so for the payment of liabilities. 14.The default clause shows further action to be taken upon more than 3 dishonoured cheques. Upon such dishonour the consequence is of taking over the assets, machineries as well as stocks. This take-over is not of the premises described in Clause 7. This relates to the actual and juridical possession of the movable and the immovable properties. The assets and stock are the movables; the machineries and premises of the partnership firm is its immovable property. 15.Clause 11 specifies that factory premises, machineries 9 and building belong to the complainant as the retiring partner and that no licence, tenancy or any other right would be given to the Applicants in any of these. The entire assets and machineries are required to be returned to the complainant as the retiring partner on 30.9.2007, the end of the three-year period. 16.Clause 17 clarifies that juridical possession remains with the complainant as the retiring partner. This criminal complaint is not concerned with the title or possession of the premises of the partnership, which is the immovable property parties except for the defence which is taken in respect thereof. 17.It is common ground that Rs.20 Lakhs have been paid by PDCs issued by the Applicants in favour of Respondent No.1. The first dishonour of the cheque was made in December 2006. Consequently, it is seen that from December 2004 to December 2006, there was no dispute between the parties for payment under the PDCs. 18.There were however other disputes between the parties with which the PDCs are not concerned. These are disputes with regard to water supply, electricity and the use of the premises. Separate notices have been sent by both the parties upon one another for those disputes. My attention has been drawn to certain 10 letters issued in May 2005 and September 2005 by the Applicants upon the Respondent with regard to the dispute of electricity and water. Nevertheless, PDCs were issued during that period as well as after that period, as agreed upon in the Retirement Deed. 19.I have also been shown a Police compliant filed on 10.11.2005, upon denial of entry to the Applicants in the factory premises. It appears that the Police came to the rescue of the parties and peace was maintained. The business continued. Thereafter I am shown another Police complaint dated 4.1.2006. This sets out the disputes that took place on 10.11.2005 to 13.11.2005 and the entry of the Applicants thereafter. It shows the act of snatching the keys of the main door by the complainant on 3.1.2006. It states that the stock and machineries are in the possession of the complainant at their risk and responsibility. 20.It is contended on behalf of the Applicants that they were dispossessed from the partnership premises on 4.1.2006. The Police complaint does not mention this fact at all. It only talks of an act of highhandedness. The relevant part of what exactly transpired, as set out in that complaint, runs thus: On 3 rd Jan. 2006 the Landlord again entered in 11 the factory premises and snatched the keys of the Main Door and the other Doors from our security staff and kept the same with him. He is trying to create a disturbance in the factory. We wish to put the above facts in your record as we envisage another crisis shall be created by him shortly. Meanwhile the entire stock and machineries are in the possession of the Landlord at their risk and responsibility. 21. This allegation in the complaint to the Police does not show an act of dispossession. It shows the creation of disturbance. It envisages another crisis. It shows the responsibility for the possession of the stock and machineries in the premises. 22. The Applicants claim that because they were dispossessed, they could not carry on business and because they could not carry on business, they could not honour the cheques issued by them. If the Applicants were dispossessed, they are expected to take recourse to law. They could have taken recourse to civil law by filing a Suit under Section 6 of the Specific Relief Act, for recovery of possession. They could have taken recourse to criminal law by filing a complaint under Section 145 of the Criminal 12 Procedure Code. Neither remedy was restored to. In fact, they apprehended disturbance, but no complaint under Section 145 of the Criminal procedure was filed. 23. It is contended on behalf of the Applicants that they resorted to arbitration proceedings in view of the arbitration agreement between the parties under the Retirement Deed. 24. The Applicants contend that the Retirement Deed included an arbitration clause. They invoked the arbitration. Consequently, they gave a notice for arbitration on 12.1.2006. The complainant issued his statutory demand notice on 21.1.2006 and replied to the arbitration notice on 23.1.2006. 25. I have been shown Arbitration Miscellaneous Application No.47 of 2006 filed by the Applicants in the District Court, Thane, for an interim injunction in respect of the partnership premises. That Application was filed on 13.2.2006, for the mandatory relief of allowing entry to the Applicants in the partnership premises to carry on the business, for prohibitory injunction restraining the complainant from dealing with the 13 premises or creating third party rights therein and for another prohibitory injunction restraining the complainant from disturbing the use of the Applicants in their office premises which is another premises (office premises) at Thane, Belapur, Vashi and Navi Mumbai. 26. The Applicants have been granted prohibitory injunctions. The Applicants have not pursued any reliefs for the mandatory injunction of allowing them entry. Their case that they have been dispossessed is not shown. In any event, they had no juridical possession of the premises as per the clauses of the Retirement Deed recited hereinabove. They were not even licensees of the premises. They were only allowed user of the machineries specified premises for 36 months upon payment for such user. There is no question of them being in juridical possession. Juridical possession was specifically and only with the complainant as per Clause 17 of the Retirement Deed. I am told that later a part of the premises was taken back by the complainant and hence the liability for payment of compensation under Clause 9 came to be varied. A lesser amount was agreed to be paid by the Applicants to the complainant. Fresh cheques for lesser amounts were issued. There was an oral novatio between the parties to that extent. Those cheques have been 14 dishonoured. Hence any dispossession from any premises is a matter alien to the liability under the PDCs. The dispute which is created does not relate to the admittedly issued cheques for liability to pay specified amount under the Agreement dated 24.11.2004 and the oral novatio thereafter. 27. The Applicants replied to the statutory demand notice of the complainant on 8.2.2006. The reply sets out the alleged acts of harassment by Respondent No.1. These show the attitude of Respondent No.1 in securing for himself a much more advantageous position upon his retirement than he deserved or worked for. Nevertheless, the complainant issued the cheques upon his retirement and agreed to carry on business. Hence the reply does not show a genuine defence for dishonour of the cheques. Besides, the amounts which were earlier agreed to be Rs.80,000/- or Rs.85,000/- for use of machineries and assets have been reduced to Rs. 45,000/- or thereabouts upon a novatio between the parties. Further cheques are issued later and even they have been dishonoured. 28. The letter dated 8.2.2006 claims liquidated damages of Rs.48,25,000/- from the complainant, user of the premises, withdrawal of the earlier notices and claims return of certain cheques handed over to the 15 complainant. It calls for steps for effectuating arbitration. 29. The cheques for the use of the machineries and premises as well as the goodwill came to be dishonoured. Thereafter in each succeeding month each of the further PDCs for the use of the premises as well as for goodwill came to be dishonoured. No defence of the accused for not honouring the PDC, has been shown by the Applicants. 30. The first defence which was sought to be taken up in the cross-examination of the complainant is required to be considered. It will be worth seeing such defence in the exact words of the Applicants as reflected in the complainant s cross-examination in the trial. The relevant parts of the evidence, which have been shown to me, in a bid to show a valid defence to the PDCs admittedly issued, may be reproduced as follows:- Witness volunteers that accused agreed to pay the monthly compensation against the use of my premises and equipment for running the business. As per the retirement deed accused were allowed to use my factory premises for running 16 the factory, for the period of 36 months. Whenever accused felt they used the machinery and whenever I required I used the machinery. At the time when I took the possession of premises and machinery 4 cheques are issued by the accused were dishonoured. It is true that as Ex.35 I have no right to use the machinery in question during the agreement is in force. It is true that I am entitled to take the machinery, only on terminating the agreement Ex.35 by me. The premises in which the machinery is laying compounded by wall and the said premises is guarded by my guard. It is true that the installments were granted to Accused No.1, only in order to run the business and make the payment gradually by using my machinery and premises. It is not correct I stopped the accused to use the premises and machinery and hence he could not generated the funds and able to pay the installment. 17 The accused in the month of March, 2006 left the premises and hence I took the possession. No any document in respect of taking and hand over the premises was executed. There is no reference about the accused left the premises, in my correspondence with accused. There is no any reference in my record against accused that he has left the possession of premises. 31. Paragraph 11 of his cross-examination shows that the complainant entered into the suit premises and tried to disturb the possession of the Applicants by dragging out the employees and knocking them out in November 2005. This was restored by the Police. Again on 3.1.2006, the complainant highhandedly restrained the staff and employees of the Applicants from entering the premises and snatching the keys. They were forced to file a Police complaint. 32. Paragraph 12 of his evidence shows that as such the complainant prevented the entry of the Applicants in the partnership premises and the complainant has kept the premises along with stock, machineries equivalent under his exclusive possession and custody without any valid ground. 18 33. Yet no civil remedy is availed of except the notice of arbitration. No relief has been applied for or granted in the Arbitration Application with regard to the liability on the PDCs. The dispossession as a defence is not seen to be bona fide. 34. Besides taking over the possession or disallowing the use of the machineries by the complainant, has nothing to do with the payment to him as the retiring partner of the goodwill of the Firm which was to be paid in installments. That is a separate and independent liability. 35. The case sought to be made out that because the accused were not permitted to enter upon the premises, they did not honour the PDCs, is, therefore, false. 36. There is no material irregularity in the judgments of the Courts below. 37. All the above Criminal Revision Applications stand dismissed subject to what is mentioned hereinbelow. 19 38. Applicant No.2 shall be taken in custody unless the entire balance amount of the PDCs is paid to the complainant within 4 weeks from today. If the amount is paid, the substantive sentence shall stand set aside. Since Applicant No.3 is a wife of Applicant No.2 and a sleeping partner, no order is passed against her. To that extent, the trial Court s order is set aside. 39. All Criminal Revision Applications are disposed of accordingly. [SMT.ROSHAN DALVI, J.]