- 1 - appln 3112 of 2010 vks IN THE HIGH COURT OF JUDICATURE AT BOMBAY CRIMINAL APPELLATE JURISDICTION CRIMINAL APPLICATION NO. 3112 OF 2010 M/s Right Fin Caf Pvt.Ltd. ..Applicant -Versus- M/s Denholm Steels Ltd and ors ..Respondents .......... Mr. M . H. Ramsinghani, for the applicant. Mr. S. A. Shaikh, APP for the State Dr. Sai Kumar Pathrudu for respondent Nos 1 and 2. .......... CORAM : R. C. CHAVAN, J. DATE : 27th JUNE 2011. P.C. 1. This is an application for leave to file appeal against acquittal of the original accused Nos 1, 2 and 7 ordered by the learned Metropolitan Magistrate, 28th Court, Esplanade, Mumbai, for offence punishable under Section 138 of the Negotiable Instrument Act. The complainant had given inter corporate deposits of Rs.25,00,000/- to the accused No.1 company of which accused No.2 was Managing Director. Accused No.7 was the signatory of the cheque in question. - 2 - appln 3112 of 2010 Accused company had also given shares of Rs.30 lacs to the complainant company. Out of those inter corporate sum, Rs. 10,00,000/- had been repaid on 18.1.1996, leaving the balance of Rs.15,00,000/-. A cheque for Rs.15,00,000/- issued by the accused No. 2 and signed by accused No.7 was presented to the bank. It was dishonoured on 17.7.1996. The complainant issued notice on 20th July, 1996 which was received by the accused on 26.7.1996. Since the accused No.1 company did not pay the amount under the cheque, complainant filed complaint against accused No.1 company and all its Directors. 2. Eventually action proceeded only against accused Nos 1 and accused Nos 2 and 7 who were responsible for running the affairs of the accused No.1 company. 3. Before the complaint was filed, complainant company had recovered sum of Rs.2,29,990/-, by selling some of the shares of accused company which had been given in security. Complainant did not make a reference to this sum either in the notice or in the complaint. Apart from this during the pendency of the complaint, consent terms had been filed at Exhibit P.19 before the trial Court which were signed by original accused No.7 who was responsible for drawing the cheque. Accused No.7 claims to have resigned on 15.6.1996 and - 3 - appln 3112 of 2010 intimation about his resignation was given to the Registrar of Companies on 6.3.1997. Yet during the pendency of the complaint, this very accused had signed consent terms whereby he had agreed to repay Rs.50,000/- per month for first four months and thereafter Rs.1,00,000/- per month till outstanding dues are settled. 4. Learned Magistrate upon consideration of the evidence held that the accused had given shares as security towards deposit, which were sold and not accounted for in the complaint. The learned Magistrate found that the accused had repaid sum of Rs.10,00,000/- and yet corresponding number of shares were not returned by the complainant company to the accused. Learned Magistrate, therefore, came to the conclusion that the complainant failed to establish existence of a legally enforceable debt or liability on the part of respondent-accused and therefore acquitted them. 5. I have heard learned counsel for the applicant and respondent Nos 1 and 2 i.e. Company and its Managing Director. The question, whether failure on the part of complainant to account for sale of shares worth Rs.2,29,990/- before the complaint was filed would extinguish or diminish the legally enforceable liability which is required to be established - 4 - appln 3112 of 2010 under Section 138 of the Negotiable Instrument. Both in my view require examination. 6. Learned counsel for the respondent has referred to the provisions of Section 138 of the Negotiable Instruments Act, 1881 and judgment of this Court in M/s Pioneer Drip Systems Pvt. Ltd and anr -vs- M/s Jain Irigation Systems Ltd., 2010 ALL MR (Cri) 237. I have my own doubts as to whether legally enforceable liability referred to in section 138 of the Negotiable Instrument Act, refers to the liability at the time of filing complaint, because section 138 begins with following words, “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.” (emphasis supplied) 7. Therefore, possibly the question of liability would have to be determined with reference to the date of drawal of cheque and not any subsequent date. Diminishing liability due to subsequent payments would be material only for determining - 5 - appln 3112 of 2010 the quantum of punishment that may be imposed. But as far as existence of legally enforceable liability is concerned, it may be referable only to the date on which cheque is drawn. All this would be required to be examined. Leave granted. Admit. Call for R & P. ( R. C. CHAVAN, J.)