Joyachan T. Joseph v. State of Kerala and Pamba Electronics Systems Pvt. Ltd.

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR. JUSTICE B.SUDHEENDRA KUMAR MONDAY, THE 21ST DAY OF MAY 2018 / 31ST VAISAKHA, 1940 Crl.MC.No. 5626 of 2017 AGAINST THE JUDGMENT IN CC 1563/2017 ON THE FILE OF THE JUDICIAL FIRST CLASS MAGISTRATE COURT, (NI ACT CASES) PALLURUTHY, KOCHI) PETITIONER(S)/ACCUSED PERSON JOYACHAN T. JOSEPH AGED 43 YEARS, S/O. T.V JOSEPH, THATTANPARAMBIL HOUSE, THURUTHOOR P.O, PUTHENVELIKKARA, PARAVOOR, ERNAKULAM. BY ADVS.SRI.S.RADHAKRISHNAN SRI.S.RAJ MOHAN SMT.R.ANJALI SRI.ADITYA THEJUS KRISHNAN RESPONDENT(S)/COMPLAINANT: 1. STATE OF KERALA REPRESENTED BY PUBLIC PROSECUTOR, HIGH COURT OF KERALA, ERNAKULAM - 682 031. 2. PAMBA ELECTRONICS SYSTEMS PVT. LTD, HAVING ITS REGISTERED OFFICE AT 1/140, PAMBA HOUSE, KUREEKKAD P.O ERNAKULAM, REPRESENTED BY ITS MANAGING DIRECTOR,SRI. P.S SASIDHARAN. R2 BY ADV. SRI.K.JAYAKUMAR (SR.) R2 BY ADV. SRI.N.AJITH R BY PUBLIC PROSECUTOR E. C. BINEESH THIS CRIMINAL MISC. CASE HAVING BEEN FINALLY HEARD ON 12-4-2018, THE COURT ON 21-05-2018,THE COURT ON THE SAME DAY PASSED THE FOLLOWING: Crl.MC.No. 5626 of 2017 () APPENDIX ## PETITIONER(S)' EXHIBITS ANNEXURE I A TRUE COPY OF THE COMPLAINT CC NO. 1563/2017 FILED BEFORE THE JFCM COURT, PALLURUTHY. ANNEXURE II A TRUE COPY OF THE AGREEMENT DATED 22.09.2016. ANNEXURE III A TRUE COPY OF THE MINUTES OF THE MEETING OF THE BOD OF THE COMPLAINANT COMPANY, HELD ON 04.02.17. ANNEXURE IV A TRUE COPY OF THE MINUTES OF THE MEETING OF THE BOARD OF DIRECTORS OF THE COMPLAINANT COMPANY DATED 06.03.2017. ANNEXURE V A TRUE COPY OF THE NOTICE DATED 04.03.2017, SENT BY THE 2ND RESPONDENT TO THE COMPLAINANT. ## B. SUDHEENDRA KUMAR, J. -------------------------- ## Crl.M.C. No. 5626 of 2017 ------------------------ Dated this the 21[st] day of May, 2018 ## ORDER The petitioner is the accused in C.C. No. 1563 of 2017 on the files of the court of the Judicial Magistrate of First Class (N.I.Act Cases), Palluruthy. The prayer in this Crl. M.C. is to quash Annexure-I complaint and further proceedings against the petitioner in C.C. No. 1563 of 2017 on the files of the Court below. ## 2. Heard both sides. 3. The learned counsel for the petitioner has argued that since the cheque in question was not issued in discharge of a legally enforceable debt or other liability, no prosecution under Section 138 of the N.I.Act can be sustained. Per contra, the learned counsel for the 2[nd] ## Crl.M.C. No. 5626 of 2017 -2- respondent, has argued that the cheque in question was issued towards the discharge of a legally enforceable debt, which arose out of Annexure-II agreement executed and signed by the petitioner and consequently, Annexure-I is perfectly justified. 4. Admittedly, the complainant is a limited Company incorporated under the Companies Act and engaged in the business of electronics manufacturing. 5. The contention in Annexure-1 complaint which led to the issuance of the cheque in question can be briefly stated as follows:- “The accused and his friends approached the complainant for purchasing the share of the company and entered into an agreement with the complainant dated 22-09-2016. In the said agreement the accused and his friends agreed to purchase the share of the company and also agreed to wipe off the loans and other liabilities of the company. Crl.M.C. No. 5626 of 2017 -3- As per the said agreement, the accused and other persons agreed to pay an amount of Rs. 169.42 lakhs. Out of which the accused issued Cheque dated 10-12-2016 for an amount of Rs. 1,50,000/(Rupees one crore fifty lakh only)”. As per the agreement, the friends of the accused, made part payment and the accused promised that, the cheque will be honoured when it is presented before the bank. Based on his assurance and believing the part payment made by the other persons, the complainant issued the shares of the company to the accused and other persons. 6. Annexure -II is the agreement referred to in Annexure-I complaint. It is stated in Annexure-II that the petitioner and others, who were the buyers as per Annexure-II, agreed to bring in Rs. 169.42 lakhs as loan to the Company, which shall be utilized to repay the liabilities of the Company. It was further stated that the petitioner and others agreed to pay the complainant a consideration of Rs. 61,16,000/- for 30280 equity shares of the company. Crl.M.C. No. 5626 of 2017 -4- 7. It is clear on a reading of Annexure-I read with Annexure -II, that the cheque in question was issued by way of advancing a loan of Rs. 169.42 lakhs to the Company as agreed by the parties in Annexure-II agreement. It is clearly stated that the said loan would be utilized to repay the liabilities of the Company. 8. Now the question to be considered is as to whether the cheque in question was issued in discharge of an existing legally enforceable debt or other liability or not. It is clear from the averments in the complaint that the amount covered by the cheque in question was issued as a loan for wiping off the liabilities of the Company. It is true that the said cheque was issued in response to the terms of Annexure-II agreement. However, there is no iota of doubt that the cheque in question was issued only for advancing the amount to the complainant by way of loan and not in discharge of any existing debt or other Crl.M.C. No. 5626 of 2017 -5- liability. 9. The Apex Court in Indus Airways Pvt. Ltd. And Others v Magnum Aviation Private Limited and Another [(2014) 12 SCC 539] held that if a cheque is issued as an advance payment for purchase of goods and for any reason, purchase order is not carried to its logical conclusion either because of its cancellation or otherwise and the material for which purchase order was placed is not supplied, the cheque cannot be held to have been drawn for an existing debt or liability. 10. The Apex Court in Sampelly Satyanarayana Rao v. Indian Renewable Energy Development Agency Ltd. (AIR 2016 SC 4363) held that the crucial question to determine the applicability of S. 138 of the Act is whether the cheque represents discharge of existing enforceable debt or liability or whether it represents advance payment without there being subsisting debt or liability. In the Crl.M.C. No. 5626 of 2017 -6- case on hand, the cheque in question was issued to the complainant as a loan to enable the complainant to clear off the liability of the Company to third parties. 11. The amount covered by the cheque in question was not due to the complainant from the petitioner as on the date of presentation of the cheque, as the said cheque was issued by way of advancing the loan to the complainant to enable the complainant to wipe off the liabilities of the Company to the third parties. Therefore, by no stretch of imagination, it can be said as per the averments in the complaint that the cheque in this case was issued in discharge of an existing debt or liability. If that be so, the prosecution of the petitioner under Section 138 of the Negotiable Instruments Act, on the strength of the said cheque, cannot be sustained and consequently, Annexure-I complaint cannot be sustained. In the result, this Crl.M.C. stands allowed Crl.M.C. No. 5626 of 2017 -7- quashing Annexure-I complaint and further proceedings against the petitioner in C.C. No. 1563 of 2017 on the files of the court below, in exercise of the inherent power under Section 482 Cr.P.C., to meet the ends of justice. It is ordered accordingly. Sd/-B. SUDHEENDRA KUMAR, JUDGE . Ani/18/5/ ## /true copy/ P.S. To Judge