Dr. Baiju Senadhipan v. Kerala Academy of Health Sciences and Research (P) Ltd and State of Kerala

## **`IN THE HIGH COURT OF KERALA AT ERNAKULAM`** ## **`PRESENT`** ## **`THE HONOURABLE MR. JUSTICE A. BADHARUDEEN`** ``` WEDNESDAY, THE 30[TH] DAY OF NOVEMBER 2022 / 9TH AGRAHAYANA, 1944 ``` ## **`CRL.MC NO. 7533 OF 2019`** ## **`ST.NO.1046/2018 OF JUDICIAL MAGISTRATE OF FIRST CLASS , S.PARAVOOR`** ## **`PETITIONER/ACCUSED:`** ``` DR.BAIJU SENADHIPAN AGED 52 YEARS S/O.SENADHIPAN, MUTHUMANAYIL, NADUVATH CHERRY CHAVARA SOUTH.P.O., KOLLAM DISTRICT BY ADVS. K.SASIKUMAR SRI.S.ARAVIND ``` ## **`RESPONDENTS/COMPLAINANTS:`** ``` 1M/S KERALA ACADEMY OF HEALTH SCIENCES AND RESEARCH(P) LTD A COMPANY INCORPORATED UNDER THE COMPANIES ACT 1956 WITH ITS REGISTERED OFFICE AT ASHTAMUDI HOSPITAL AND TRAUMA CARE CENTRE, THATTAMALA, MEVARAM, KOLLAM REPRESENTED BY ITS MANAGING DIRECTOR, DR.JACOB JOHN AGED 52 S/O.K.J.JOHN, KOCHUPUTHEN VEEDU, 6/59, POOYAPPALLI.P.O, KOLLAM-691537 2STATE OF KERALA REPRESENTED BY THE PUBLIC PROSECUTOR, HIGH COURT OF KERALA, ERNAKULAM-682031 R1 BY ADV. SRI.B.MOHANLAL R2 BY PP-SRI.G.SUDHEER ``` ``` THIS CRIMINAL MISC. CASE HAVING COME UP FOR ADMISSION ON 30.11.2022, THE COURT ON THE SAME DAY PASSED THE FOLLOWING: ``` ``` CRL.MC NO. 7533 OF 2019 2 ``` ## ORDER This is a petition filed under Section 482 of the Code of Criminal Procedure. The petitioner herein is the accused in S.T.No.1046/2018 on the filed of the Judicial First Class Magistrate Court, South Paravoor. 2. Heard the learned counsel for the petitioner as well as the respondent/original complainant. 3. It is submitted by the learned counsel for the petitioner that a cheque for Rs.50,00,000/- (Rupees Fifty Lakh Only) in favour of the complainant by the accused, after execution of Annexure A2, when dishonoured, complainant herein launched prosecution alleging commission of offence under Section 138 of the Negotiable Instruments Act (for short, ‘the NI Act’ hereinafter). According to the learned counsel for the petitioner, as per Annexure A2 agreement, it was mutually agreed between the complainant and the accused to sell 20,40,000 numbers of equity shares to the accused, for a total sum of Rs.2,00,00,000/- (Rupees Two Crores Only). As per Clause No.3 in the agreement, it was agreed to transfer Rs.50,00,000/- (Rupees Fifty ## **`CRL.MC NO. 7533 OF 2019 3`** Lakh Only) forthwith and simultaneous to the execution of the agreement by way of RTGS to the credit of the complainant. However, the case put up by the complainant before the trial court was that, instead of remitting Rs.50,00,000/- through RTGS, as agreed, the same was issued by way of cheque. 4. According to the learned counsel for the petitioner, though Annexure A2 agreement was entered into between the parties, no amount paid, as per the terms of the agreement. He also submitted that if at all the case put up by the complainant to the effect that Rs.50,00,000/- has been paid as advance towards transfer of 20,40,000 numbers of shares as agreed, the agreement was not acted upon by paying the remaining amount of Rs.1,50,00,000/- (Rupees One Crore Fifty Lakh Only). He also submitted that failure to pay advance amount as in Clause No.3 or the balance amount should entail an automatic recession of the contract, as provided in Clause No.4 of the agreement. 5. The learned counsel for the petitioner placed the decision of the Apex Court reported in Dashrathbhai Trikambhai Patel Vs. Hitesh Mahendrabhai Patel & Anr. [2022 LiveLaw (SC) 830] . In the said decision, in Paragraph No.16, the Apex Court held that, the offence under Section 138 is ``` CRL.MC NO. 7533 OF 2019 4 ``` tipped by the dishonour of the cheque when it is sought to be encashed. Though a post-dated cheque might be drawn to represent a legally enforceable debt at the time of its drawing, for the offence to be attracted, the cheque must represent a legally enforceable debt at the time of encashment. If there has been a material change in the circumstance such that the sum in the cheque does not represent a legally enforceable debt at the time of maturity or encashment, then the offence under Section 138 is not made out. 6. Per contra, it is submitted by the learned counsel for the respondent/complainant that civil disputes in between the parties pending before the trial court and he had filed a counter in this matter, highlighting those facts as well as pointing out the consideration passed between the parties insofar as the cheque in question is concerned. 7. In this matter, the learned counsel for the respondent placed decision of the Apex Court reported in Sampelly Satyanarayana Rao Vs. Indian Renewable Energy Development Agency Limited [2016 (10) SCC 458] , to contend that dishonour of a post-dated cheque given for repayment of loan instalment which is also described as security in the loan agreement is covered under Section 138 of the NI Act. He also submitted that a post-dated cheque is a well recognized mode of payment and therefore, the present ``` CRL.MC NO. 7533 OF 2019 5 ``` prosecution cannot be quashed and the matter shall go for trial. 8. The crux of the dispute herein is centered on Annexure A2 agreement. On reading of Annexure A2 agreement, it is easy to find that there was mutual agreement between the complainant and the accused for sale of 20,40,000 equity shares pertaining to M/s.Kerala Academy of Health Sciences and Research Private Limited, in favour of the accused for a total consideration of 2,00,00,000/- (Rupees Two Crores Only) as per Clause No.2 in the agreement. As per Clause No.3, it has been provided that Rs.50,00,000/- (Rupees Fifty Lakh Only) shall forthwith and simultaneous to the execution of the agreement, to be transferred within fourteen days of information of ROC approving the resolution for enhancement of share capital to Four Crores by RTGS to the credit of the company in an account stated therein maintained at Federal Bank Ltd., Chathannoor. Clause 4 of the agreement stipulated that Rs.1,50,00,000/- (Rupees One Crore Fifty Lakh Only) shall be cleared by the accused within a period of one month from the date of payment of Rs.50,00,000/- (Rupees Fifty Lakh Only). A specific clause has been incorporated as last item in Clause No.4 is to the effect that “failure to pay the advance amount as in Clause (3) or the balance amount as in Clause (4) shall entail an automatic recession of the agreement.” In this ``` CRL.MC NO. 7533 OF 2019 6 ``` matter, no payment on advance by way of RTGS has been effected. The complainant would submit that payment of advance by way of cheque was effected instead of RTGS and the same was dishonoured. Consequently, prosecution was launched. 9. In this context, it is relevant to refer Paragraph No.8 of the complaint. Paragraph No.8 is as under: “8) It is submitted that item No.5 cheque dated 15.12.17, drawn and delivered on 30.10.17, has turned out to be one in discharge of the liability of the accused in a sum of Rs.5000000/-, on 15.12.17. As a matter of fact the amount of Rs.5000000/- was mutually agreed as a genuine pre-estimate of damages in case the accused resiles from his proposal dtd. 30.10.17 and agreement dtd. 21.11.2017. The complainant sustained losses exceeding the sum of Rs.5000000/-.” A plain reading of the same would go to show that Annexure A2 agreement never acted upon and there was no consequent transfer of equity shares, as agreed. This is the reason why the complainant raised a contention in the complaint as extracted above to the effect that, it was mutually agreed as a genuine pre-estimate of damages in the case accused resiles from his proposal dated 30.10.2017. Eventhough such contention has ``` CRL.MC NO. 7533 OF 2019 7 ``` been raised in Paragraph No.8 of the complaint, Annexure A2 agreement does not show any such clause. To the contrary, agreement provides for recession of contract for non-payment of advance and the remaining amount to be paid, as agreed. 10. Law regarding quashment of complaints also is well settled. In the decisions reported in [1988(1) SCC 692], Madhavrao Jiwajirao Scindia v. Sambhajirao Chandrojirao Angre; [1992 Supp (1) SCC 335], State of Haryana v. Bhajan Lal; [1995 (6) SCC 194], Rupan Deol Bajaj v. Kanwar Pal Singh Gill; [1996 (5) SCC 591], Central Bureau of Investigation v. Duncans Agro Industries Ltd.; [1996 (8) SCC 164], State of Bihar v. Rajendra Agrawalla; [1999 (3) SCC 259], Rajesh Bajaj v. State NCT of Delhi; [2000 (3) SCC 269], Medchl Chemicals & Pharma (P) Ltd. v. Biological E.Ltd.; [2000 (4) SCC 168], Hridaya Ranjan Prasad Verma v. State of Bihar; [ 2001(8) SCC 645], M.Krishnan v. Vijay Singh; [2005(1) SCC 122], Zandu Pharmaceutical Works Ltd. v. Mohd. Sharaful Haque, the Apex Court summarised the principles while quashing a complaint. The principles are as under: (i) A complaint can be quashed where the allegations made in the complaint, even if they are taken at their face value and accepted in their entirety, do not prima facie constitute any offence or make out the case alleged against the ``` CRL.MC NO. 7533 OF 2019 8 ``` accused. For this purpose, the complaint has to be examined as a whole, but without examining the merits of the allegations. Neither a detailed inquiry nor a meticulous analysis of the material nor an assessment of the reliability or genuineness of the allegations in the complaint, is warranted while examining prayer for quashing of a complaint. (ii) A complaint may also be quashed where it is a clear abuse of the process of the Court, as when the criminal proceeding is found to have been initiated with mala fides/malice for wreaking vengeance or to cause harm, or where the allegations are absurd and inherently improbable. (iii) The power to quash shall not, however, be used to stifle or scuttle a legitimate prosecution. The power should be used sparingly and with abundant caution. (iv) The complaint is not required to verbatim reproduce the legal ingredients of the offence alleged. If the necessary factual foundation is laid in the complaint, merely on the ground that a few ingredients have not been stated in detail, the proceedings should not be quashed. Quashing of the complaint is warranted only where the complaint is so bereft of even the basic facts which are absolutely necessary for making out the offence. ``` CRL.MC NO. 7533 OF 2019 9 ``` (v) A given set of facts may make out: (a) purely a civil wrong; or (b) purely a criminal offence; or (c) a civil wrong as also a criminal offence. A commercial transaction or a contractual dispute, apart from furnishing a cause of action for seeking remedy in civil law, may also involve a criminal offence. As the nature and scope of a civil proceeding are different from a criminal proceeding, the mere fact that the complaint relates to a commercial transaction or breach of contract, for which a civil remedy is available or has been availed, is not by itself a ground to quash the criminal proceedings. The test is whether the allegations in the complaint disclose a criminal offence or not. 11. This is the context in which the question as to whether there is a legally enforceable debt in this matter required to be addressed. As discussed hereinabove, eventhough Annexure A2 agreement was executed with offer to pay of Rs.50,00,000/- (Rupees Fifty Lakh Only) as advance for getting 20,40,000 numbers of equity shares and to pay the balance amount of Rs.1,50,00,000/- (Rupees One Crore Fifty Lakh Only) thereafter within one month, the agreement in fact, not acted upon. If so, by operation of the last portion of Clause 4, the agreement stands rescinded and the agreement does not contain anything in as much as payment of damages is concerned. That ``` CRL.MC NO. 7533 OF 2019 10 ``` apart, entitlement of damages and its quantum are matters of evidence to be proved in a properly instituted civil suit and the evidence also must be so exhaustive. Claim for damages cannot be considered in a prosecution launched under Section 138 of the NI Act, where summary trial procedure would apply. Therefore, the cheque in question, carries no legally enforceable debt, since the debt or liability covered the cheque in this matter stands rescinded as per the last portion of Clause No.4 in the agreement. Therefore, the cheque in dispute cannot be held as one issued towards security for a legally enforceable debt or liability, as argued by the learned counsel for the respondent/complainant. Therefore, the prosecution based on the said cheque, cannot be sustained in the eye of law. In view of the above, this complaint is liable to be quashed. However, it is made clear that quashment of this complaint shall not, in any way, stands as a bar for the parties to go for mediation in the other civil and criminal cases pending and settle the dispute by process of mediation. Sd/A. BADHARUDEEN JUDGE Bb ``` CRL.MC NO. 7533 OF 2019 11 ``` ## **`APPENDIX OF CRL.MC 7533/2019`** ``` PETITIONER’S ANNEXURES ``` - `ANNEXURE A1 A CERTIFIED COPY OF THE COMPLAINT IN ST NO.1046/18 OF THE TEMPORARY JUDICIAL FIRST CLASS MAGISTRATE'S COURT, S.PARAVOOR` - `ANNEXURE A2 A TRUE COPY OF THE AGREEMENT DATED 21.11.2017 EXECUTED BETWEEN THE PETITIONER AND THE COMPLAINANT` - `ANNEXURE A3 THE E-MAIL FROM THE COMPLAINANT ON 1.11.2017` - `ANNEXURE A4 A TRUE COPY OF THE REPLY DATED 14.02.2018 FORWARDED ON BEHALF OF THE PETITIONER` - `ANNEXURE A5 PHOTOCOPY OF THE AGREEMENT DATED 15-052018 EXECUTED BETWEEN KERALA ACADEMY OF HEALTH SCIENCES AND RESEARCH (P) LTD., WITH SANTHWANAM HOSPITAL CO-OPERATIVE SOCIETY LTD., NO. Q.167` - `ANNEXURE A6 CERTIFIED COPY OF THE SALE DEED NO. 1655/21/I DATED 03-09-2021 OF KOTTIYAM SUB REGISTRY` - `ANNEXURE A7 PLAINT IN C.S. NO. 88/2021 OF THE HON'BLE COMMERCIAL COURT KOLLAM (PRINCIPAL SUB COURT)` - `RESPONDENTS’ ANNEXURES` - `ANNEXURE-R1(A) THE TRUE COPY OF THE O.S.NO:31/2018 DATED 11/01/2018 ON THE FILE OF THE MUNSIFF COURT AT KOLLAM` - `ANNEXURE-R1(B) THE TRUE COPY OF THE C.S.NO:88/2021 DATED 29/03/2021 ON THE FILE OF THE COMMERCIAL COURT, KOLLAM (PRINCIPAL SUB COURT)` //TRUE COPY// PA TO JUDGE