TMI Blog2004 (4) TMI 295X X X X Extracts X X X X X X X X Extracts X X X X ..... ay Relief Undertaking (Special Provisions) Act, 1958 till the said notification remained in force i.e. upto 11-11-2003. The said period was further extended by one year i.e. upto 10-11-2004 by another notification dated 20-10-2003, a copy of which was placed on the record of this Court, during the course of hearing of the present Appeal From Order. 2. The brief facts giving rise to the present Appeal From Order are that the respondent Company has made a request to the appellant Bank to sanction in its favour a bill discounting facility of Rs. 500 Lakhs and as a security for the payment of the Company s liability to the appellant, the respondent had issued the following three post-dated cheques in favour of the appellant. Sr. Date Amount (Rs.) No. 1. 5-2-2002 Rs. 2,01,48,725 2 5-2-2002 Rs. 1,53,81,300 3 13-2-2002 Rs. 1,44,94,675 3. All the aforesaid three cheques were presented by the appellant on their due dates and the said cheques were bounced. The appellant bank, therefore, filed criminal complaints on 22-3-2002 27-3-2002 in the Court of the Metropolita ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incurred before the said undertaking was declared as a relief undertaking and remedy in the enforcement thereof shall be suspended and proceedings relating thereto pending before any Court, Tribunal, Officer or Authority shall be stayed, during one year commencing on 11-11-2002. 6. In anticipation that the Bank would encash the postdated cheque of 31-3-2003 for Rs. 100 Lakhs, the Company by its letter dated 20-3-2003 requested the appellant-Bank that the Company was facing a lot of problems on issue of postdated cheques from other secured creditors, Bankers and Board Members and that till the matter was settled in totality, the respondent Company requested the appellant Bank not to deposit the postdated cheque of 31-3-2003 for Rs. 100 Lakhs. The appellant Bank by its letter dated 22-3-2003 requested the respondent Company to take necessary steps to honour the Company s commitment when the cheque for Rs. 100 Lakhs was presented for payment on 31-3-2003. On presumption that the appellant Bank would deposit the cheque on its due date, the respondent Company filed Civil Suit No. 654 of 2003 and obtained an ex parte ad interim order on 28-3-2003 which was confirmed till the perio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Supreme Court in the case of Inderjit C. Parekh v. B.K. Bhatt AIR 1974 SC 1183 wherein while dealing with the Provisions contained in section 4(1)( a )( iv ) of the Bombay Relief Undertakings (Special Provisions) Act, 1958, in the context of the individual liabilities of Directors and officers under Employees Provident Funds Scheme, 1952, the Hon ble Supreme Court has held that the immunity cannot be extended to cover the individual obligations and liabilities of the directors and other officers of the undertaking as distinct from the obligations or liabilities of the undertaking. Neither the language of the statute nor its object would justify the extension of the immunity so as to cover the individual obligations and liabilities of the directors and other officers of the undertaking. If they have incurred such obligations or liabilities as distinct from the obligations or liabilities of the undertaking, they are liable to be proceeded against for their personal acts of commission and omission. The remedy in that behalf cannot be suspended nor can a proceeding already commenced against them in their individual capacity be stayed. Indeed, it would be strange if any such thing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the threshold. Similarly remote and farfetched is the contention that if the Directors of the company on being convicted are arrested and kept in jail, the efforts of the BIFR for reconstruction/revival of the company will not be possible and in that event the very purpose of inquiry by the BIFR will be rendered futile. 14. Mr. Vakil has further submitted that the plaint on the face of it is grossly under valued and does not bear requisite Court Fees and is, therefore, not admissible on record of the Court. The Company s under valuation of the plaint is clearly indicative that the Company has merely indulged into a speculative frivolous suit as a matter of gamble at little cost. The Company has filed the suit only on the Court Fee Stamp of Rs. 30 and obtained injunction against presentation of cheques worth Rs. 499.52 Lakhs. The Trial Court has committed a very serious error in law in entertaining the suit and granting injunction despite the fact that the issue regarding inadequate Court Fees was raised by the present appellant. 15. Mr. Vakil has further submitted that bare perusal of the notification dated 11-11-2002 makes it clear that the protection envisaged under s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e fails to enforce the right by encashing or collecting the amount of the cheque that the question of the payee resorting to some remedy provided by law to recover the amount arises. In this connection, he relied on the decision of the Rajasthan High Court in the case of Totalal v. State AIR 1963 Raj. 6 wherein it is held that the word "enforce" used in section 295(3), Companies Act, 1956, means the taking of such action on the part of the creditor which compels the debtor to effect repayment of the loan, such as, the institution of a suit, attachment or sale of the latter s properties etc. Making a demand from the debtor to repay the loan would not amount to enforcing repayment. A demand may only be a request or may be accompanied by some threat of legal action but the element of force which compels obedience which the word enforce carries is absent from it. Merely obtaining of a mortgage from the debtor would not amount to enforcing the repayment of the loan within the meaning of sub-section (3) of section 295. For it might be that the loan which was unsecured became secured after the mortgage, still the amount remained in the hands of the debtor. 17. Mr. Vakil has furt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it from the person who wrongfully gets into possession of it. The right to ownership of a property carries with it. The right to its enjoyment, right to its access and of other beneficial enjoyment incidental thereto. If any obstruction or hindrance is caused for its enjoyment or use, the owner of necessity has the remedy to have it removed. This decision was realised on for the purpose of bringing out a distinction between enjoyment and exercise of right on the one hand and enforcement of remedy on the other hand. 19. Mr. Vakil has further relied on the decision of the Hon ble Supreme Court in the case of Chairman, Railway Board v. Mrs. Chandrima Das AIR 2000 S.C. 988 wherein it is held that where a public functionaries are involved and the matter relates to the violation of fundamental rights or the enforcement of public duties, the remedy would still be available under the public law notwithstanding that a suit could be filed for damages under private law. It was more so when it was not a mere matter or violation of an ordinary right of a person but the violation of Fundamental Rights which was involved as petitioner was a victim of rape which is violative of the Fundame ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imitation Act can only be on the date which the cheque bears and cannot be on the date the cheque is handed over, for the cheque, being postdated, can never be paid till the date on the cheque arrives. 23. Mr. Vakil has further relied on the decision of the Hon ble Supreme Court in the case of Anil Kumar Sawhney v. Gulshan Rai [1993] 4 SCC 424 wherein it is held that "a cheque under section 6 of the Act is also a bill of exchange but it is drawn on a banker and is payable on demand. Thus a bill of exchange even though drawn on a banker, if it is not payable on demand, it is not a cheque. A "postdated cheque" is only a bill of exchange when it is written or drawn, it becomes a "cheque" when it is payable on demand. The postdated cheque is not payable till the date which is shown on the face of the said document. It will only become cheque on the date shown on it and prior to that it remains a bill of exchange under section 5 of the Act." 24. Mr. Vakil has further relied on the decision of the Hon ble Supreme Court in the case of Shri Ishar Alloys Steels Ltd. v. Jayaswals Neco Ltd. AIR 2001 SC 1161 wherein it is held that "to make an offence under section 138 of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the latter s enterprise has commenced, and in that event the consideration may be somewhat different from that where the defendant is yet to commence its enterprise." 26. Mr. Vakil has further relied on the decision of this Court in the case of Ashima Ltd. v. Greater Bombay Co-operative Bank Ltd. [A.O. No. 244 of 2003, dated 31-7-2003] wherein after reiterating the ratio laid down by this Court in the case of D.S. Patel Co. ( supra ) it is held that what is barred under section 4 of the Act of 1958 is the remedy for enforcement of the right and not the right itself and the Court has further held that if the suit transactions is covered by the notification, the bar under section 4 of the Act of 1958 would be against the proceedings for recovery of the loan amount and not against the recovery of the loan amount by encashing the suit cheques in ordinary course of business and in that case, the Bank would not have been able to enforce the recovery. But it certainly would not be debarred from encashing the cheques deposited with the Bank. The Court has, therefore, held that the plaintiff has no right to restrain the bank from encashing the cheques deposited with the Bank. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he picture submitted by the Company, the State Government has thought it fit to issue the notification in favour of the Company and has suspended all or any of the liabilities, rights and obligations of the Company as per the Provisions of section 4(1)( a )( iv ) of the said BRU Act. By issuance of the Notification on 11-11-2002, the State Government has suspended all the liabilities which were discharged by the Company and since the postdated cheques were issued by the Company in favour of the Bank prior to the notification issued by the State Government, the liability arose in respect thereof was also suspended. By virtue of this notification, all rights, liabilities as well as remedy of enforcement are suspended and the bank is estopped by law from depositing the cheques which are in its possession till the notification is in force. The rights of the Company would be frustrated and unnecessarily the Company would be put in an awkward position if the Bank was not restrained from depositing cheques and hence, the injunction was rightly granted by the Trial Court. 30. Mr. Nanavati has further submitted that the decision of this Court in the case of D.S. Patel Co. ( supra ) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt Bank is not entitled to exercise its right of depositing the cheques in the Bank. The Trial Court has come to the correct conclusion by holding that section 4(1)( a )( iv ) deals with two aspects, namely, suspension of remedy and stay of proceedings and hence, it relates to the stage prior to proceedings have been filed and, therefore, interim injunction was rightly granted in favour of the respondent company. 32. Mr. Nanavati has further submitted that the Hon ble Supreme Court has laid down the principles of granting interim injunction in the case of Colgate Palmolive Co. ( supra ). He has further submitted that what is to be looked at the interlocutory stage is that the Court/Commission is not really concerned with the factum of establishment of any truth or falsity but merely a prima facie case or an arguable case resulting in establishment of a prima facie case. It is on this backdrop that exercise of discretion by the commission shall have to be considered. Once having established the prima facie case before the Court, it is to be seen as to whether balance of convenience is in whose favour. If the appellant Bank is not restrained at this stage from depositing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bility. 34. In the above view of the matter, the Appeal filed by the appellant Bank against the impugned order of the Trial Court granting interim injunction to the respondent deserves to be dismissed and the order of the Trial Court is required to be confirmed by this Court. 35. After having heard the learned advocates appearing for the respective parties and after having considered their rival submissions, authorities cited in their favour and after having examined and appreciated the impugned order passed by the Trial Court in the light of the papers and documents produced and in the context of the statutory provisions, BRU Notification and decided case-law, the Court is of the prima facie opinion that the learned Trial Judge is not justified in granting injunction against the appellant Bank by restraining it from depositing the postdated cheques on their respective due dates. 36. From the foregoing discussion, the issues which arose before the Court for its careful consideration are : ( i )Whether BRU Act and the notification issued thereunder by the State Government grants protection to the Company against the Bank in respect of its right to deposit postdated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for consideration before this Court in the case of D.S. Patel Co. ( supra ) and the Division Bench in no uncertain terms, has held that a bare reference to section 4 of the Act shows that the only restrictions which it contemplates is that of temporary suspension of the rights and liabilities relating to the relief undertaking in question. The wordings of sub-clause ( iv ) at first sight, give an impression that what is suspended is not only the remedy for the enforcement of the right to hold but also the right itself. This is, however, not so. On true construction of the said sub-clause, the right itself is not suspended but only the remedy for the enforcement of the right is suspended. It is, therefore, held that when the sub-clause speaks about suspension of a right, it only means suspension of its execution or enforcement. The incidents of a right, except its executability are, therefore, not suspended by the sub-clause. An act of presentation of postdated cheque in the bank on its due date is one of the incidents of right which is not suspended and it can never be assumed to have reached the stage of executability. 40. Presentation of cheque in the Bank is more akin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the cheque is not affected. It is conscious act on the part of the Company to discharge its obligation or liability, qua the cheque amount, which accrues or incurs on the date shown on the cheque and if falls subsequent to the date on which Company is declared as relief undertaking, the BRU notification containing such declaration may not come to the Company s rescue. The Company is not restrained from making any payment to its creditors, and suppliers of goods or services. The Trial Court is, therefore, not justified in granting stay against the presentation of postdated cheques by the appellant on their due dates. 42. The next issue on which much arguments were canvassed by both the parties is the purpose of motive behind filing the suit and obtaining injunction. The appellant s case is that the suit was filed with a mala fide intention and oblique motive to shield or shelter its Directors from the rigour of the provisions of sections 138 to 142 of the Negotiable Instruments Act. The Company s answer to this allegation of argument is that there is basic falacy in this argument and it is based on mere assumption or presumption that the postdated cheques will be bounced on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the three celebrated principles of granting injunction, namely, prima facie case, balance of convenience and irreparable loss or injury. From the above discussion, it can hardly be said that any of the above ingredients is found in the present case which inspires the Court to grant injunction in favour of the Company. There is no dispute about the Company s liability to pay. There is also no dispute about the fact that the Company has given postdated cheques to the appellant. The presentation of these postdated cheques on their due dates would not affect the Company in either way as in case of their realisation, the Company s liabilities would be reduced and in case of bouncing, its Directors will have to face criminal proceedings. Hence, there is neither prima facie case nor balance of convenience in favour of the Company. No monetary loss is caused to the Company or no monetary gain is made to the appellant simply by presentation of postdated cheques. However, preventing the appellant from exercising its legal right by an indirect method and with an oblique motive to save its Directors is certainly an irreparable injury or loss caused to it and it is this area where the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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