TMI Blog2010 (8) TMI 1173X X X X Extracts X X X X X X X X Extracts X X X X ..... th of February, 2004 with the proposal to import asafetida (Heeng) and rolling scrap in the name of NAFED from Tazikistan/Kyrgystan and was advanced a sum of Rs. 10 Crores for this purpose. A Memo of Understanding dated 20th September, 2004 was executed. 3. Learned Counsel for the petitioner has not referred or controverted the allegations made in the complaint on merits. However, four contentions are raised. These contentions have been dealt with below. 4. It was submitted that the summoning order dated 26th April, 2006 was a non-speaking and mechanical order which was passed without application of mind by the learned Metropolitan Magistrate (Magistrate, for short). The summoning order placed on record is not cyclostyled. It is a computer print-out which is also partly hand written. The first line of the order states that the Magistrate had heard the learned Counsel for the complainant and had perused the affidavit of the complainant filed on record. It records that the complaint was well within the period of limitation. It states that the learned Magistrate was of the opinion that prima facie there was sufficient evidence and grounds to summon the accused. Learned Counsel f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore, no offence under Section 138 of the Act is made out on dishonour of a cheque given as a security. He relies upon M.S. Narayana Menon @ Mani v. State of Kerala and Anr. (2006) 6 SCC 39 and a judgment of this Court in K.S. Bakshi and Anr. v. State and Anr. 146 (2008) DLT 125. 9. The complaint has to be read as a whole and one or two sentences are not to be read out of context. Allegations made in the complaint in brief have been stated above. It is stated in the complaint that pursuant to the Memorandum of Understanding dated 16th September, 2004, the respondent/NAFED had paid a sum of Rs. 10 Crores to the petitioner by way of a cheque. It is further alleged that the petitioner did not comply with its commitment and supply the goods for which advance of Rs. 10 Crores was paid. Several meetings and phone calls were made and letters were written and thereafter cheque of Rs. 10 Crores was presented for encashment but was dishonoured for insufficient funds. In the case of K.S. Bakshi (Supra), there was an agreement between the builder and the owners for construction on a property as per the terms and conditions mentioned in the Memorandum of Understanding, creating mutual ri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 29. Under the agreement, the accused company had a liability to pay Rs. 138 lakh to the complainant and other owner of the said property and discharge of this liability was treated fundamental to the agreement, nonperformance thereof would entitle the complainant and the other owner to rescind the contract. 30. In the instant case, money in sum of Rs. 126.5 lakh was to be paid by the accused company to the complainant and other owner. It is irrelevant whether such money was to be retained and returned in future on due performance of the agreement. What is relevant for purposes of Section 138 of the NI Act is the fact that at the time of issuance of cheques the accused company had a liability to pay money to the complainant and other owner of the said property. 31. A distinction has to be drawn between a cheque issued as security and a cheque issued towards discharge of a liability to pay notwithstanding that the money is by way of security for due performance of the contract. A cheque given as security is not to be encashed in presaenti. It becomes enforceable if an obligation is future is not enforced. It is not tendered in discharge of a liability which has accrued. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... given another cheque of Rs. 1 Crore which was dishonoured but subsequently payments in lieu thereof were made. It is stated in the complaint that this cheque of Rs. 1 Crore was towards earnest money. Payment of this cheque towards earnest money cannot be set off and reduced from the cheque of Rs. 10 Crores which was advanced and given pursuant to the advance payment of Rs. 10 Crores made by the respondent to the petitioner. In view of the said submission, I do not think at this stage, the petitioner is entitled to any relief. It may be appropriate here to refer to the observations of the Supreme Court in I.C.D.S. Ltd. v. Beena Shabeer and Anr. (2002) 6 SCC 426, which are as under: 10. The language, however, has been rather specific as regards the intent of the legislature. The commencement of the section stands with the words 'Where any cheque'. The abovenoted three words are of extreme significance, in particular, by reason of the user of the word 'any' - the first three words suggest that in fact for whatever reason if a cheque is drawn on an account maintained by him with a banker in favour of another person for the discharge of any debt or other liability, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his contentions. The facts in that case were that post dated cheques were given as security subject to the terms and conditions that the said cheques were to be replaced by demand drafts for the equivalent amount. The accused in that case had made the payment by way of demand drafts but the complainant instead of returning the cheques presented them. The court opined once the payment against those cheques was made by way of Demand Drafts the liability qua these cheques ceased to exist and therefore the complainant was not entitled to present those cheques even if some amount or balance was outstanding. 14. In Mojj Engineering Systems Ltd. and Ors. v. A.B. Sugars Ltd. (2008) DLT 579, it has been observed as under: 7. Even otherwise, prima facie, it was the petitioners who had handed over the undated cheque for a certain amount to the respondent in terms of a contract between the parties. Since an undated cheque cannot be encashed, it can only mean that the petitioners had authorized the complainant to enter an appropriate date on it. In Young v. Grote (1827) 4 Bing. 253 it was held that when a blank cheque is signed and handed over, it means the person signing it has given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16. The last contention raised by the learned Counsel for the petitioner was based upon the compromise/Memorandum of Understanding dated 3rd May, 2007. It was submitted that by this Memorandum of Understanding the parties had compromised the matter which amounted to and resulted in compounding of the offence. Reference was made to a judgment of learned Single Judge of this Court in Venkatesh Dutt v. M.S. Shares East Ltd. 2004 (109) DLT 610. The said contention has to be rejected in view of the reasons given in Thakur Arora v. State 2009 (157) DLT 737. In this case it was observed: 7. Learned Counsel for the Petitioner submits that the judgment of this Court in Venkatesh Dutt is no longer good law in view of the judgment of the Supreme Court in Lalit Kumar Sharma and Anr. v. State of U.P. III (2008) DLT (Crl.) 114 (SC) : III (2008) BC 204 : II (2008) CCR 430 (SC). He submits that when the compromise did not materialize, the cheques issued thereunder could not be said to have been issued in discharging the liability of the original debts and therefore no subsequent complaint would be maintainable. 8. In the present case the MOU contained a clear stipulation that if the ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inct. Aggrieved person has a right to file as many complaints as many cheques were given to him as every cheque under the Act provides an independent and fresh cause of action to the aggrieved person. 11. It was therefore concluded that- 12. In view of the foregoing reasons, the petition is allowed, the complaint filed by the respondent under Section 138 of the Act for cheque of Rs. One crore and the proceedings arising therefrom stand quashed whereas the subsequent complaints filed by the respondent arising out of as many as seven cheques shall continue being independently maintainable. 12. It appears that the aforementioned enunciation would no longer good law in view of the subsequent judgment of the Supreme Court in Lalit Kumar Sharma. The facts in this case were that M/s. Mediline India (P) Limited borrowed a loan of Rs. 5 lakhs from the complainant and in repayment thereof issued two cheques dated 30th November 1999 and 10th December 1999 for Rs. 3 lakhs and Rs. 2 lakhs respectively. The Company had two directors, namely, Ashish Narula and Manish Arora. The cheques on presentation were dishonoured with the remarks insufficient funds . The complainant then file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith reference to Section 62 of the Contract Act, 1872. It has been observed as under: 10. One of the essential requirements of 'novation', as contemplated by Section 62, is that there should be complete substitution of a new contract in place of the old. It is in that situation that the original contract need not be performed. Substitution of a new contract in place of the old contract which would have the effect of rescinding or completely altering the terms of the original contract, has to be by agreement between the parties. A substituted contract should rescind or alter or extinguish the previous contract. But if the terms of the two contracts are inconsistent and they cannot stand together, the subsequent contract cannot be said to be in substitution of the earlier contract. 11. In the instant case, the rights under the original contract were not given up as it was specifically provided in the subsequent contract that the rights under the old contract shall stand extinguished only on payment of the entire amount of Rs. 9,51,000. Since the amount was not paid by the appellants as stipulated by the subsequent contract, the rights under the original contract were ..... X X X X Extracts X X X X X X X X Extracts X X X X
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