M.A. Abida v M/S HMT Watches Ltd.

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT:** ## **THE HONOURABLE MR. JUSTICE B.KEMAL PASHA** **TUESDAY, THE 25TH DAY OF FEBRUARY 2014/6TH PHALGUNA, 1935** ## **Crl.MC.No. 2366 of 2008 ( )** **---------------------------AGAINST THE ORDER/JUDGMENT IN ST 1208/2007 of J.M.F.C. - III, COCHIN** ## **PETITIONER(S)/ACCUSED:** **-----------------------------------** **M.A.ABIDA, W/O P.S. SALAHUDIN, PROPRIETRIX, M/S.SWISS TIME AGENCIES S-66 GCDA COMPLEX, MARINE DRIVE, COCHIN 682 031.** **BY ADVS.SRI.P.JACOB VARGHESE (SR.) SRI.VIVEK VARGHESE P.J. SRI.P.J.VINOD JOSEPH** ## **RESPONDENT/COMPLAINANT & STATE(S):** **------------------------------------------------------------** ## **1. M/S.HMT WATCHES LTD.** **57/2225, DURBAR HALL ROAD ERNAKULAM, COCHIN -682 016 REPRESENTED BY ITS DULY AUTHORIZED REPRESENTATIVE MR. V.S. OMANAKKUTTAN.** **2. STATE OF KERALA, REPRESENTED BY THE PUBLIC PROSECUTOR, HIGH COURT OF KERALA ERNAKULAM.** **R1 BY ADV. SRI.M.PATHROSE MATTHAI (SR.) R1 BY ADV. SRI.SAJI VARGHESE R1 BY ADV. SMT.MARIAM MATHAI** **THIS CRIMINAL MISC. CASE HAVING BEEN FINALLY HEARD ON 25-02-2014, ALONG WITH CRMC. 2367/2008, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:** ## **CRL.M.C.No.2366/08** ## **APPENDIX** ## **PETITIONERS' EXTS.** ANNEXURE A1 - COPY OF THE AUDITED STATEMENT OF ACCOUNTS, SIGNED BY THE BRANCH-IN-CHARGE AND ACCOUNTS OFFICER. ANNEXURE A2 - COPY OF THE LETTER OF THE PETITIONER DTD. 11.5.05. ANNEXURE A3 - COPY OF THE LETTER OF THE 1ST RESPONDENT DTD. 16.5.05. ANNEXURE A4 - COPY OF THE MINUTES OF THE MEETING HELD WITH THE SETTLEMENT COMMITTEE ON 21.3.06. ANNEXURE A5 - COPY OF THE MINUTES OF THE MEETING DTD.6.5.06. ANNEXURE A6 - COPY OF THE LETTER ISSUED TO THE 1ST RESPONDENT FORWARDING PAYMENT DT.12.5.06. ANNEXURE A6(a) - COPY OF THE LETTER ISSUED TO THE 1ST RESPONDENT FORWARDING PAYMENT DT.30.6.06. ANNEXURE A6(b) - COPY OF THE LETTER ISSUED TO THE 1ST RESPONDENT FORWARDING PAYMENT DT.31.7.06. ANNEXURE A7 - COPY OF THE LETTER ISSUED BY THE PETITIONER DT. 11.7.06. ANNEXURE A8 - COPY FO THE REPLY LETTER OF THE 1ST RESPONDENT DT.18.7.2006. ANNEXURE A9 - COPY OF THE LETTER OF THE ACCOUNTS OFFICER DT. 24.7.06. ANNEXURE A10 - COPY OF THE LETTER OF THE PETITIONER ADDRESSED TO THE ACCOUNTS OFFICER, DTD. 29.7.2006. ANNEXURE A11 - COPY OF THE LETTER DTD 27.9.2006 OF THE 1ST RESPONDENT. ANNEXURE A12 - COPY OF THE LETTER OF THE PETITIONER DTD.28.9.06. ## **CRL.M.C.No.2366/08** ANNEXURE A13 - COPY OF THE COMMON NOTICE ISSUED WITH RESPECT TO THE 57 NOS. CHEQUES DTD.9.10.2006. ANNEXURE A14 - COPY OF THE REPLY LAWYER NOTICE DTD. 14.10.2006. ANNEXURE A15 - COPY OF THE REPLY LAWYER NOTICE ISSUED BY THE 1ST RESPONDENT COMPANY DT. 10.2.2007. ANNEXURE A16 - CERTIFIED COPY OF THE COMPLAINT IN ST 1208/07 DTD.20.11.2006. ANNEXURE A16(a) - CERTIFIED COPY OF THE COMPLAINT IN ST 1209/07 DTD.20.11.2006. ANNEXURE A16(b) - CERTIFIED COPY OF THE COMPLAINT IN ST 1210/07 DTD.20.11.2006. ANNEXURE A16(c) - CERTIFIED COPY OF THE COMPLAINT IN ST 1211/07 DTD.20.11.2006. ANNEXURE A16(d) - CERTIFIED COPY OF THE COMPLAINT IN ST 1212/07 DTD.20.11.2006. ANNEXURE A17 - TRUE COPY OF THE NOTICE DT.9.10.2006 ISSUED BY THE RESPONDENTS TO M/S SWISS TIME AGENCIES. ## **RESPONDENTS' EXTS.** // TRUE COPY // P.S. TO JUDGE. **[CR]** ## **B. KEMAL PASHA, J.** ............................................................ Crl.M.C. No. 2366 of 2008 & Crl.M.C. No.2367 of 2008 ............................................................ Dated this the 25[st] day of February, 2014 ## **C O M M O N O R D E R** The petitioner, who is the accused in 20 criminal cases instituted on the basis of private complaints filed by the 1[st] respondent, as complainant, alleging the offence punishable under Section 138 of the Negotiable Instruments Act (hereinafter referred to as 'the N.I.Act), consequent to the dishonour of 57 cheques for a total amount of ₹1,79,86,357/-, has come up with the prayer for the intervention of this Court under Section 482 Cr.P.C., for getting the complaints in those 20 cases pending on the files of the Judicial First Class Magistrate's Courts-III and IV Kochi, quashed. Crl.M.C. Nos. 2366 of 2008 & Crl.R.P. No.2367 of 2008 -:2:- 2. According to the petitioner, the said cases were taken cognizance of, and the same are pending trial before the Judicial First Class Magistrate's Court-III, Kochi as C.C.Nos.1208, 1209, 1210, 1211 and 1212 of 2007, and before the Judicial First Class Magistrate's Court-IV, Kochi as C.C.Nos.1790, 1791, 1792, 1793, 1794, 1795, 1796,1824, 1825, 1826, 1827, 1828, 1829,1830 and 1831 of 2007. 3. The gist of those complaints is that the petitioner had issued all those 57 cheques dated 28.9.2006 to the 1[st] respondent in discharge of the outstanding liability of the petitioner to the 1[st] respondent, and when all those cheques were presented for collection, the same were returned dishonoured with the dictum “ _Payment stopped by the drawer_ ”. A composite notice of demand dated 9.10.2006 was allegedly issued. Even though a detailed reply notice was issued denying the liability, the amounts covered by the said cheques were not paid within the statutory period, and hence those complaints. Crl.M.C. Nos. 2366 of 2008 & Crl.R.P. No.2367 of 2008 -:3:- 4. According to the petitioner, the petitioner was the ReDistribution Stockist(RDS) of watches manufactured by the 1[st] respondent Company, for the State of Kerala, for the period from 1992 till 2006. The petitioner was having running credit facility with the 1[st] respondent Company, till 30.09.2003 and thereafter the business was being done on “ _cash and carry_ ” basis. According to the petitioner, during the period in which credit facility was there, the 1[st] respondent Company used to collect undated cheques towards amounts covered by distinct invoices with respect to various consignments, for securing payment of amounts covered by such invoices. The said 57 cheques in question were issued to the 1[st] respondent as undated cheques during the period prior to 30.09.2003, as mentioned above. When the 1[st] respondent stopped credit facility to the RDSs substantial amounts were due from all such RDSs, a major portion of which being interest accrued on part-payment. According to the petitioner, a settlement was arrived at between Crl.M.C. Nos. 2366 of 2008 & Crl.R.P. No.2367 of 2008 -:4:- the RDSs from South India and the Chairman of the 1[st] respondent at Chennai on 19.07.2004, in which waiver of interest on delayed payments was assured to be considered and it was agreed upon to conduct the joint audit of accounts of the RDSs through the respective branch offices in the States concerned. Accordingly, joint audit of accounts of the petitioner was conducted at Kochi, and the whole outstanding liability of the petitioner was arrived at ₹44,19 lakhs for settlement, subject to the approval of the Board for debit of ₹34.20 lakhs due as interest on delayed payment. All the said amounts arrived at in the settlement were paid by the petitioner and all such payments were duly accepted by the 1[st] respondent Company. 5. It is the specific case of the petitioner that the Chairman and Managing Director (C&MD) of M/s HMT Watches Ltd. which is the holding company of the 1[st] respondent Company constituted a 'High-level Settlement Committee' consisting of Sri.Jolly Peter, General Manager (Finance), HMT Crl.M.C. Nos. 2366 of 2008 & Crl.R.P. No.2367 of 2008 -:5:- Ltd. as Team Manager along with Sri.P.K.Narayana Moorthi, General Manager (Marketing), HMT Ltd. and Sri.S. Venkanna, Assistant General Manager (Finance) HMT Industries, as members. In the mean time, the petitioner had effected a total payment of ₹18.19 lakhs towards the total amount of ₹44.19 lakhs arrived at in the Chennai settlement. The Settlement Committee approved the figure as ₹44.19 lakhs, as the balance amount to be paid; but instead of allowing interest debit of ₹ 34.20 lakhs, the committee allowed the debit of ₹6.84 lakhs only towards interest. Adding the balance interest, the total liability was re-fixed at ₹71.55 lakhs and the net balance was arrived at, after adjusting the payment, at ₹48.36 lakhs. The entire amount as agreed upon was directed to be paid before 30.4.2006. On the basis of the further request of the petitioner for reconsideration regarding the debit of the interest portion, the Settlement Committee convened a further meeting on 6.5.2006. In the meanwhile, the petitioner had effected payment of a Crl.M.C. Nos. 2366 of 2008 & Crl.R.P. No.2367 of 2008 -:6:- further amount of ₹5 lakhs also. In the said meeting the Committee had agreed to reduce the total liability to ₹66.42 lakhs, from 71.55 lakhs, which was determined earlier. After giving credit to payments already made, the net balance outstanding was fixed at ₹38.00 lakhs, which was directed to be paid in specific instalments, on or before 31.07.2006. In the minutes of the said meeting it was specifically noted as follows:- _“With the above settlement, all pending issues has been considered as closed between the parties. After payment of the full amount, HMT Watches Ltd. has to return 57 Nos. security cheques held by them to M/s Swiss Time Agencies.”_ 6. As per the said settlement, the entire balance amount of ₹38 lakhs along with interest at ₹22,082/- due thereon, were paid by the petitioner to the 1[st] respondent Company even before the agreed date of 31.07.2006 itself. Subsequent to the payment of the entire amount, the petitioner requested the 1[st] Crl.M.C. Nos. 2366 of 2008 & Crl.R.P. No.2367 of 2008 -:7:- respondent Company to return the said 57 cheques kept in their custody, through letter dated 11.07.2006. The joint General Manager of the 1[st] respondent, on getting the letter, replied through letter dated 18.07.2006 that the cheques are in the custody of the branch office and the same would be returned subject to the final decision and outcome of the Settlement Committee, with respect to the return of cheques. 7. Thereafter, the petitioner received letter dated 24.07.2006 requesting the petitioner to furnish fresh cheques for the full value of the invalid cheques, if any, immediately. The letter was properly replied by the petitioner. On receipt of the reply, the Accounts Officer issued letter dated 27.09.2006 to the petitioner, intimating that all the 57 cheques would be presented on 28.09.2006 for collection, and thereby requesting the petitioner to honour those cheques. Since the amounts covered by the said cheques were not due to the 1[st] respondent from the petitioner, the petitioner intimated the Bank for stoppage of the Crl.M.C. Nos. 2366 of 2008 & Crl.R.P. No.2367 of 2008 -:8:- payment. Even though the Accounts Officer was requested by the petitioner not to misuse the cheques in his custody, all those cheques were presented, got dishonoured and thereupon a demand notice dated 9.10.2006 was issued to the petitioner by somebody ' _for the Showroom in Charge'_ of the 1[st] respondent Company. 8. Even though the notice was properly replied, the aforesaid 20 private complaints were filed against the petitioner under Section 142 of the N.I.Act alleging the offence under Section 138 of the N.I.Act, and hence these Crl.M.Cs. 9. In Crl.M.C.2366/08, the petitioner has prayed to get the complaints in C.C.Nos.1208, 1209, 1210, 1211 and 1212 of 2007 which are pending before the Judicial First Class Magistrate's Court-III, Kochi, quashed. In Crl.M.C.2367/08, the petitioner has prayed to get the complaints in C.C.Nos.1708, 1791, 1792, 1793, 1794, 1795, 1796 of 2007, 1824, 1825, 1826, 1827, 1828, 1829,1830 and 1831 of 2007 pending before the Crl.M.C. Nos. 2366 of 2008 & Crl.R.P. No.2367 of 2008 -:9:- Judicial First Class Magistrate's Court-IV, Kochi, quashed. 10. Heard the learned Senior Counsel Sri.Jacob Varghese, appearing for the petitioner, Sri.Saji Varghese, learned counsel appearing for the 1[st] respondent Company, and the learned Public Prosecutors Sri. A.J. Jose Aediaiodi and Sri.Liju V. Stephen, for the 2[nd] respondent State. 11. The main argument forwarded by the learned Senior Counsel for the petitioner is that all those 57 cheques are not supported by consideration and that those cheques cannot be treated as cheques issued in discharge of any legally enforceable debt or liability and therefore, complaints under Section 142 of the N.I.Act alleging offence under Section 138 of the N.I.Act, are not maintainable. It is further argued that there is not even a demand as contemplated under Section 138(b) of the N.I.Act and therefore, those complaints are not maintainable in that score also. It is further argued that the 1[st] respondent cannot approbate and reprobate and file the complaints, after Crl.M.C. Nos. 2366 of 2008 & Crl.R.P. No.2367 of 2008 -:10:- accepting the payments based on a proper settlement arrived at by the Committee constituted by the “C&MD” of the 1[st] respondent, Company. 12. _Per contra_ , the learned counsel for the 1[st] respondent has vehemently supported the validity of the private complaints by arguing that the Settlement Committee was constituted only for the limited purpose of making proposals regarding a probable settlement and the outcome of such proposals were to be finalised and accepted by the Board of Directors of the 1[st] respondent, as per Section 291 of the Company's Act. It is argued that any such proposals of the Settlement Committee were not accepted or approved by the Board of Directors of the 1[st] respondent Company and therefore, such proposals are not binding on the 1[st] respondent Company. In such a case, it is argued that, complaints under Section 142 alleging offence under Section 138 of the N.I.Act, consequent to the dishonour of the cheques, are perfectly maintainable. It has been alternatively Crl.M.C. Nos. 2366 of 2008 & Crl.R.P. No.2367 of 2008 -:11:- argued that this Court, at this stage, cannot go into the validity of the private complaints based on the documents produced by the petitioner, in order to quash the private complaints by exercising the powers conferred on this Court under Section 482 Cr.P.C. 13. The case of the petitioner is that the said 57 undated cheques were obtained prior to 28.9.2003 by the 1[st] respondent from the petitioner just as security towards specific invoices, for securing payments covered by the said invoices. Each such undated cheque was in respect of the amount covered by such specific invoices. At the same time, the 1[st] respondent is not presently admitting the fact that those cheques were undated cheques. The constitution of the Settlement Committee as per order No.3W/2005 dated 9.03.2006 of the “C&MD” of 1[st] respondent Company consisting of Sri.Jolly Peter as Team Leader, Sri. P.K. Narayana Moorthi and Sri.S.Venkanna as members, is not in dispute. The learned counsel for the 1[st] respondent has produced a copy of the said order for the Crl.M.C. Nos. 2366 of 2008 & Crl.R.P. No.2367 of 2008 -:12:- reference of this Court. The said order is prepared in the letter head showing the caption _'HMT Watches Ltd., Registered office, HMT Bhavan, 59, Bellary, Bangalore-560 032'_ and the same is signed by Sri.M.S.Zahed, Chairman. Evidently, it seems that the said order was issued by the Chairman of M/s HMT Watches Ltd. The said order shows that the Settlement Committee constituted as above, has to arrive at suitable proposals after examining all the relevant issues concerning the recovery of dues from the RDSs, for early settlement of dues from each of the RDSs. It was also specifically ordered that the Committee shall specifically complete the task positively before 31[st] March, 2006. 14. When considering the documents admittedly issued on behalf of the 1[st] respondent Company, produced by the petitioner along with these Crl.M.Cs., evidently the contention forwarded by the learned counsel for the 1[st] respondent that the said 57 cheques were not undated cheques, has no legs to Crl.M.C. Nos. 2366 of 2008 & Crl.R.P. No.2367 of 2008 **==> picture [28 x 10] intentionally omitted <==** stand. Annexure A1 seems to be a settlement arrived at between the Accounts in Charge one V.S. Omanakuttan along with one K.K. Ganguly, Branch in Charge, and the petitioner as RDS, whereby the net balance was arrived at ₹44.19 lakhs, as is evident from Annexure A1. The said V.S. Omanakuttan, Accounts in Charge is none other than the person who has filed all these private complaints for and on behalf of the 1[st] respondent Company, as a person who is authorized to verify and sign the complaints. In his personal capacity, the said V.S. Omanakuttan cannot say that there was no such settlement or arriving of the net balance at ₹44.19 lakhs. At the same time, as pointed out by the learned counsel for the 1[st] respondent, the Company can contend that there was no such settlement, if it is shown that the said Branch in Charge or Accounts in Charge were not authorised by the Company to have a settlement talk with the concerned RDSs. Crl.M.C. Nos. 2366 of 2008 & Crl.R.P. No.2367 of 2008 -:14:- 15. Annexure A2 is the letter issued by the petitioner to the Chairman, M/s HMT Ltd. Bangalore, by which the petitioner had sought for the payment of the balance amount of ₹39.19 lakhs, after having made a payment of ₹5 lakhs through cheque dated 31.3.2005 out of the amount of ₹44.19 lakhs finalised in the discussion, in four instalments and also by undertaking that the petitioner would continue the business on ' _cash and carry_ ' basis. 16. Annexure A3 letter dated 16.05.2005 from the General Marketing Manager(W) of M/s HMT Watches Ltd. to the petitioner shows that the Company had received Annexure A2 letter. It has been stated therein that they have not received payments as scheduled in the letter. Further, the petitioner was reminded to make the payments as 'committed by' the petitioner. The subject in Annexure A3 letter is “ _settlement of outstanding dues_ ”. Therefore, the General Marketing Manager(W) of M/s HMT Watches Ltd. also cannot say that there was no settlement Crl.M.C. Nos. 2366 of 2008 & Crl.R.P. No.2367 of 2008 -:15:- at all. 17. Annexure-A4 is the minutes of the meeting held on 21.03.2006 between the petitioner and the Settlement Committee constituted by the Chairman and M.D. vide order dated 9.03.2006, which was referred earlier. It has been shown in Annexure A4 that the net amount was arrived at ₹48.36 lakhs. The representative of the petitioner had requested to adjust genuine claims amounting to ₹24.50 lakhs as detailed in the 2[nd] page of Annexure-A4. The Committee has informed the representative of the petitioner to take up the said issues separately with M/s HMT Watch Marketing Division and based on the confirmation given by Watch Marketing Division, credit for the same would be allowed. It has been noted that the representative of the petitioner had agreed to make one payment before 31.3.2006 and the due date for payment of the balance amount would be informed on or before 27.03.2006; but not later than 30.04.2006. It seems that one Sri.P.S.Salahudin Crl.M.C. Nos. 2366 of 2008 & Crl.R.P. No.2367 of 2008 -:16:- and one William John have represented the petitioner in the settlement talk. Sri. Jolly Peter has signed in the minutes for the Settlement Committee. 18. Annexure-A5 is the copy of the minutes of the meeting held on 6.5.2006 between the petitioner and the Settlement Committee, in which Sri.P.S. Salahudin has participated for and on behalf of the petitioner, and all the other members of the Committee were also present. It is noted therein that the representative of the petitioner had requested the Committee to further reduce the interest due to the Company. After detailed deliberations, in view of the dumping of watches during 1998-1999, a further discount of 15% was considered towards interest to arrive at a final settlement and consequently as per Annexure-A5, the total amount due was found to be ₹38 lakhs. It has been specifically noted therein that “W _ith the above settlement, all pending issues has been considered as closed between the parties. After payment of the full amount, HMT_ Crl.M.C. Nos. 2366 of 2008 & Crl.R.P. No.2367 of 2008 -:17:- _watches Ltd. has to return 57 Nos. security cheques held by them to M/s Swiss Time Agencies, Ernakulam_ ”. From that alone it is evident that the present stand taken by the 1[st] respondent, Company that 57 undated cheques were not received as security, is incorrect. It seems that 57 cheques were received as “security cheques” as is admitted in Annexure-A5. The Settlement Committee also might have been made aware of the fact that 57 cheques were there as “security cheques” with the 1[st] respondent Company from the petitioner. If as a matter of fact, the said members of the Settlement Committee had no authority to take a decision in the matter, such an information would not have been furnished by the 1[st] respondent Company to the members of the Settlement Committee. Therefore, at least on 6.5.2006, the 1[st] respondent Company had admitted the fact that 57 “security cheques' of the petitioner are with them. It seems that the said 57 “security cheques” were subsequently filled in with the date 28.09.2006. Therefore, it is evident from Crl.M.C. Nos. 2366 of 2008 & Crl.R.P. No.2367 of 2008 -:18:- Annexure-A5 dated 6.05.2006 that those cheques were undated cheques at least till 6.05.2006. 19. As per the entries in page No.2 of Annexure-A5, an amount of ₹38 lakhs was fixed as one time settlement. It was also agreed that the said amount of ₹38 lakhs should be paid by three instalments as noted in the chart incorporated in page No.2 of Annexure-A5. The first instalment of ₹8 lakhs has to be paid before 13.5.2006, the 2[nd] instalment of ₹15 lakhs has to be paid before 30.6.2006 and the last and final instalment of ₹15 lakhs, with interest at 13% from 30.6.2006 up to the date of payment of the 3[rd] instalment, has to be paid before 31.7.2006. Therefore, it is evident that a concrete agreement between the Settlement Committee and the petitioner had taken place on 6.05.2006 regarding the balance amount to be paid as one time settlement and its mode of repayment, as is evident from Annexure-A5. 20. Annexure-A6 is letter dated 12.05.2006 issued by the Crl.M.C. Nos. 2366 of 2008 & Crl.R.P. No.2367 of 2008 -:19:- representative of the petitioner to 'Showroom in Charge' of M/s HMT Watches Ltd., the contents of which are as follows: _“Please find enclosed chq.No:131647 dated 12.05.06 for ₹ 800000/-(Rs. Eight Lakh only) being the 1[st] instalment as per the settlement dated 6[th] May 2006 with Mr.Shri Jolly Peter-GMF-MTL-Team Leader, and the other two committee members under the committee constituted by CMD vide office order No.(W)/2005 dated 9[th] March 2006 at HMT Bhavan, No:59, Bellary Road, Bangalore-560032. Kindly issue a receipt for the cheque._ _Please also issue receipt for ₹500000/-(Rs. Five Lakh only) paid on 25.03.06 towards the 1[st] instalment.”_ 21. Therefore, Annexure-A6 was issued as a covering letter when cheque dated 12.05.2006 for ₹8 lakhs was issued as the first instalment as per the settlement dated 6.05.2006. The said cheque was issued evidently to the 'Showroom in Charge' of M/s HMT Watches Ltd. It seems that the said cheque was accepted and encashed. The 1[st] respondent, Company has no case that the said cheque was dishonoured or returned to the Crl.M.C. Nos. 2366 of 2008 & Crl.R.P. No.2367 of 2008 -:20:- petitioner. 22. Annexure-A6(a) is letter dated 30.06.2006 issued by the representative of the petitioner to the 'Showroom in Charge' of M/s HMT Watches Ltd. by stating that a cheque dated 30.6.2006 for ₹10 lakhs towards part-payment of the 2[nd] instalment was enclosed therewith. The 1[st] respondent, Company has no case that the said cheque was dishonoured or the same was not encashed. 23. Annexure-A6(b) is letter dated 31.07.2006 issued by the Power of Attorney holder of the petitioner to the 'Showroom in Charge' of M/s HMT Watches Ltd., the contents of which are reproduced hereunder: _“Dear Sir,_ _Sub: One Time Settlement against all dues to_ _M/s HMT Watches Ltd._ _Ref: 1) Minutes of meeting of “Settlement Committee” dated 06.05.06. 2) Payment of ₹8 lacs made on 12.05.06 vide Ch.No.131647._ Crl.M.C. Nos. 2366 of 2008 & Crl.R.P. No.2367 of 2008 -:21:- _3) Payment of ₹10 lacs made on 30.06.06 vide Ch.No.131657._ _With reference to the above, we are enclosing the following cheques towards full and final payment of all dues to HMT Watches Limited as agreed with b;y the Settlement Committee on 06.05.2006._ _1) Ch. No.131663 dtd 31.07.06 for ₹ 20,00,000/- of Vijaya Bank, Broadway Branch, Ernakulam._ _2) Ch. No.131664 dtd 31.07.06 for ₹ 22082/- of Vijaya Bank, Broadway Branch, Ernakulam - Interest on delay for the above amounts from 30.06.06 to 31.07.06 as per the terms of settlement._ _You may please take note that the remittance of the entire amount agreed as per the one time settlements made without prejudice to our claim pending settlement with the marketing Division for issue of 'Credit Notes' under various counts/Head to the tune of ₹24.50 Lacs, which is outside the purview of the one time settlement.”_ Crl.M.C. Nos. 2366 of 2008 & Crl.R.P. No.2367 of 2008 -:22:- 24. The 1[st] respondent Company has no case that the said amounts were not received and the 1[st] respondent has no case that the said cheques issued for ₹20 lakhs and ₹22082/were dishonoured or not encashed. 25. The learned Senior Counsel for the petitioner has pointed out that at the bottom of Annexure-A6, Annexure-A6(a) and Annexure-A6(b) the seal of M/s HMT Watches Ltd. is seen affixed. In Annexure-A6, the seal shows the date 13[th] May, 2006. The seal in Annexure-A6(a) shows the date as 30[th] June, 2006, and the seal in Annexure-A6(b) shows the date as 31[st] July, 2006. Apart from all the above, it has been pointed out that the very same V.S.Omanakuttan, who was authorised by the 1[st] respondent Company to file private complaints, has affixed his signature in Annexure-A6(b) just above the seal of M/s HMT Watches Ltd. by showing his designation as A.O., i.e., Accounts Officer. 26. The seals of M/s HMT Watches Ltd. affixed in Crl.M.C. Nos. 2366 of 2008 & Crl.R.P. No.2367 of 2008 -:23:- Annexure-A6, Annexure-A6(a) and Annexure-A6(b) shows that those letters as well as the cheques enclosed therewith were ' **RECEIVED** ', by the 1[st] respondent Company. 27. Annexure-A7 letter dated 11.07.2006 was issued by the representative of the petitioner to the General Manager, Marketing(W), M/s HMT Watches Ltd., Bangalore, requesting that the cheques issued by the petitioner, the list of which was appended with the said letter, were pending with M/s HMT Watches Ltd. and the same were cheques for “security payments” of different bill amounts. As per Annexure-A7 it was requested as hereunder: “S _ince the amount covered under the bills are now settled and paid by us, the liability with respect to the consideration of these cheques have already been discharged. Moreover, many of the bank account is not in operation at present. Therefore, the cheques as per the details enclosed herewith may kindly be returned to us at the earliest_ .” Crl.M.C. Nos. 2366 of 2008 & Crl.R.P. No.2367 of 2008 -:24:- 28. Annexure-A8 is the reply dated 18.07.2006 issued by the Joint General Manager(SR) of M/s HMT Watches Ltd. to the petitioner in respect of Annexure-A7, acknowledging the receipt of Annexure-A7. It was mentioned therein that those cheques were not in the custody of General Manager Marketing(W); the cheques were with the branch office, with whom the petitioner deals. It was also mentioned therein that as per letter dated 25.05.2006 addressed to the Branch in Charge, the petitioner had stated that the final settlement was under discussion with the Committee. In Annexure-A8, the petitioner was directed to let the 1[st] respondent “ _know the outcome as well as decision on return of cheques by the Committee_ .” The petitioner was requested to get the decision from the Committee regarding settlement, and the ' _status of the cheques_ ' consequent to the settlement. 29. It seems that the aforesaid V.S.Omanakuttan, Accounts Officer, who was authorised to file all these private complaints against the petitioner, issued Annexure-A9 letter Crl.M.C. Nos. 2366 of 2008 & Crl.R.P. No.2367 of 2008 -:25:- ## dated 24.07.2006, the contents of which reads as follows: _“Dear Sir,_ _We are surprised to receive a copy of your letter dated 11.07.2006 addressed to our GMM(W), Bangalore regarding cheques lying with us stating that many of the Bank Accounts on which the said cheques were drawn were not in operation at present._ _In this connection, we wish to write that the recently validated/issued cheques lying with us pertains to your outstanding to the company. It is not clear from your above letter whether you have closed the said Bank Accounts or not. If you have closed the same, you should have informed us before closing the accounts and should have furnished fresh valid cheques in lieu of the invalid cheques, if any._ _In the above circumstances, we request you to please furnish us fresh cheques for the full value of the invalid cheques, if any, immediately.”_ 30. Through Annexure-A9, it seems that the petitioner was requested to forward the 1[st] respondent fresh cheques for the full value of the invalid cheques, if any, immediately. Crl.M.C. Nos. 2366 of 2008 & Crl.R.P. No.2367 of 2008 -:26:- Therefore, the contents of Annexure-A9 also clearly reveal that as on 24.07.2006, the date on which Annexure-A9 was issued, he was retaining all the said 57 cheques. When the said cheques were subsequently filled up with dates as 28.09.2006, it is evident that as on 24.07.2006 also those cheques remained undated. The said V.S.Omanakuttan who issued Annexure-A9 has acknowledged the receipt of Annexure-A6(b) wherein the final payment made by the petitioner was clearly acknowledged by him. 31. As rightly pointed out by the learned Senior Counsel for the petitioner, the petitioner was taken aback to see the contents of Annexure-A9. Shocked on seeing the contents, it seems that the petitioner had issued Annexure-A10 detailed letter narrating the entire events to the very same Accounts Officer. It was made clear therein that the demand for fresh cheques forwarded through Annexure-A9 was totally unwarranted and unsustainable. He was reminded of regarding Crl.M.C. Nos. 2366 of 2008 & Crl.R.P. No.2367 of 2008 -:27:- the one time settlement effected with respect to the outstanding dues. He was also warned that the cheques in the custody of the 1[st] respondent should not be presented for collection by putting fresh dates in those cheques. Annexure-A10 is dated 29.07.2006. 32. Then comes, Annexure-A11 letter dated 27.09.2006 issued by the aforesaid V.S.Omanakuttan, Accounts Officer to the petitioner showing that 57 cheques of the petitioner, totaling ₹1,79,86,357/- were lying with the Company towards the amount outstanding to the Company, on the account of the petitioner. The petitioner was informed that the above cheques would be deposited on 28.09.2006, and further the petitioner was requested to honour the said cheques on presentation. It is quite evident that all those undated cheques were filled in by the said V.S. Omanakuttan with the very same date as 28.09.2006, presented it, and got it dishonoured. On getting Annexure-A11, the petitioner, through the Power of Attorney holder, properly Crl.M.C. Nos. 2366 of 2008 & Crl.R.P. No.2367 of 2008 -:28:- replied by Annexure-A12 letter dated 28.09.2006; once again clearly affirming that the amounts secured through the cheques have already been cleared and no amount was legally due to the Company from the petitioner. He was also warned against the misuse of those 57 cheques as well as any attempt of misappropriation or breach of trust by such misuse. 33. Thereafter, it has come out that the petitioner has received Annexure-A13, which is allegedly a notice of demand issued to the petitioner in respect of the dishonour of 57 cheques, thereby demanding an amount of ₹1,79,90,127/- with bank charges, within 15 days, by cash/D.D. It seems that the 1[st] respondent is treating Annexure-A13 as a notice of demand within the meaning of Section 138(b) of the N.I.Act. The said notice was issued by somebody, by stating _'For Showroom in Charge_ '. To a query put by this Court as to who has affixed the signature in Annexure-A13, it seems that the learned counsel for the 1[st] respondent is unable to answer. According to the learned Crl.M.C. Nos. 2366 of 2008 & Crl.R.P. No.2367 of 2008 -:29:- counsel for the 1[st] respondent, no such ground has been taken up in these Crl.M.Cs. 34. The learned Senior Counsel for the petitioner has pointed out that the petitioner has filed Crl.M.Appl.No.7758/12 in Crl.M.C.No.2366/08 for the production of Annexure-A17. In the said Crl.M.Appl. it has been clearly pointed out that the notice allegedly issued for and on behalf of the 1[st] respondent Company, as a notice under Section 138 of the N.I.Act, is not a legally issued one and that the said notice does not create any cause of action entitling the 1[st] respondent to prosecute the matter further. Therefore, it is evident that the petitioner has a case that Annexure-A13 does not conform to the requirements of a demand as contemplated under Section 138(b) of the N.I. Act. 35. The learned counsel for the 1[st] respondent has strenuously contended that regarding the question of identity of the person who affixed the signature in Annexure-A13 ' _For Showroom in Charge'_ , is purely a question of fact and the 1[st] Crl.M.C. Nos. 2366 of 2008 & Crl.R.P. No.2367 of 2008 -:30:- respondent is presently handicapped, as the stage of evidence has not come and that in such case, the 1[st] respondent should be permitted to adduce evidence on that aspect, before the court below in those private complaints. I am not impressed. As per Section 138(b) of the N.I.Act, _“Nothing contained in Section 138 of the N.I.Act shall apply unless -_ _(b) The payee or the holder in due course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving a notice in writing, to the drawer of the cheque, [within thirty days] of the receipt of information by him from the bank regarding the return of the cheque as unpaid.”_ 36. As per the Act, unless the payee or the holder in due course of the cheque, as the case may be, makes a demand for the payment of the amount covered by the cheque, by giving a notice in writing, to the drawer of the cheque within the stipulated time, an offence contemplated under Section 138 of the N.I.Act will not come into play. Even though the learned Crl.M.C. Nos. 2366 of 2008 & Crl.R.P. No.2367 of 2008 -:31:- counsel for the 1[st] respondent has contended that Annexure-A13 is issued by the payee, who is the 1[st] respondent, signed by the authorized officer of the 1[st] respondent, Company, the contents of Annexure-A13 notice shows otherwise. 37. Even the name of the signatory is not shown in Annexure-A13. It seems that somebody has affixed the signature above the designation “ _For Showroom in Charge_ ”. In such a case no other evidence is required to conclude that such unnamed person, who is the signatory, was not the person who was authorized by the 1[st] respondent Company, to forward a demand notice as contemplated under Section 138(b) of the N.I.Act. If as a matter of fact, if any such person was specifically authorised, the contents of Annexure-A13 would have revealed that such a specifically named person was authorised to forward the demand. Further, at least, his name should have found a place in Annexure-A13. On reading the contents, it seems that if at all such an authorisation was given by the 1[st] respondent, Crl.M.C. Nos. 2366 of 2008 & Crl.R.P. No.2367 of 2008 -:32:- Company, it should at least be to the ' _Showroom in Charge_ '. Unfortunately, the ' _Showroom in Charge_ ' has not cared to affix his signature; whereas some unnamed person ' _For Showroom in Charge'_ has opted to affix the signature in Annexure-A13. 38. On the above aspect, the learned Senior Counsel for the petitioner has offered an explanation. The Settlement Committee was constituted and appointed by the Chairman and Managing Director of the 1[st] respondent, Company. The Settlement Committee had taken a decision and based on that settlement, payments were made by the petitioner; and without any hesitation or objection such amounts were willingly accepted as payment towards the terms of settlement by the 1[st] respondent Company. In such a case, no officer of the Company would normally be willing to show his name in such a letter as definitely it would be against the decisions taken at the higher level by the Chairman and M.D. as well as some General Managers of the 1[st] respondent Company. Therefore, according Crl.M.C. Nos. 2366 of 2008 & Crl.R.P. No.2367 of 2008 -:33:- to the learned Senior Counsel, the signatory to Annexure-A13 has deliberately suppressed his name and has not revealed his name anywhere in Annexure-A13. 39. Considering all the above, it is evident that some person has forwarded a demand through Annexure-A13. Admittedly Annexure-A13 was not issued by a lawyer engaged by the 1[st] respondent. Evidently, the same was not issued by a person who was authorised by the 1[st] respondent on that behalf. Whether such a demand can be treated as a demand within the meaning of Section 138(b) of the N.I.Act, is a short question to be decided. The learned Senior Counsel for the petitioner has invited my attention to the decision in _**Rahul Builders v. Arihant Fertilizers & Chemicals and another** [(2008) 2 SCC 321]_ wherein it was held as hereunder: _“Service of notice, it is trite, is imperative in character for maintaining a complaint. It creates a legal fiction. Operation of Section 138 of the Act is limited by the proviso. When the proviso applies, the main Section would_ Crl.M.C. Nos. 2366 of 2008 & Crl.R.P. No.2367 of 2008 **==> picture [28 x 10] intentionally omitted <==** _not. Unless a notice is served in conformity with proviso (b) appended to Section 138 of the Act, the complaint petition would not be maintainable. Parliament while enacting the said provision consciously imposed certain conditions.”_ One of the mandatory requirements of such a notice of demand enumerated under Section 138(b) of the N.I.Act is that the notice of demand in writing should be by the payee or the holder in due course of the cheque demanding the payment of the amount covered by the cheque. When the Parliament has used such a phraseology it would mean that the said provision should be construed strictly as per the decision reported in **Rahul** 's case _supra._ Unless a notice is served in conformity with proviso (b) appended to Section 138 of the Act, the complaint petition would not be maintainable. 40. When the name of the signatory to Annexure-A13 is not available anywhere in Annexure-A13, it cannot be said that it was issued by an authorised officer of the 1[st] respondent Crl.M.C. Nos. 2366 of 2008 & Crl.R.P. No.2367 of 2008 -:35:- Company. Therefore, it cannot be treated as a demand forwarded either by the payee or the holder in due course of the cheques. On that technical legal aspect, I have no hesitation to hold that there is no legal notice of demand in respect of the dishonour of the said 57 cheques in this case, as mandated under Section 138(b) of the N.I.Act. 41. In an offence under Section 138 of the N.I.Act, even though the presumptions under Sections 118 as well as Section 139 of the N.I.Act are available to the complainant, it is the duty of the complainant to bring out the _prima facie_ materials to invite an offence under Section 138 of the N.I.Act. When there is no valid demand notice as contemplated under Section 138(b) of the N.I.Act, the said complaints must necessarily fail. With regard to the contents of Annexure-A13 also, it could be seen that the so called person who had issued Annexure-A13 had not cared to reveal anything as to the details regarding the invoices or bills in discharge of which such 57 cheques were allegedly Crl.M.C. Nos. 2366 of 2008 & Crl.R.P. No.2367 of 2008 -:36:- issued. It has clearly come out that those cheques were issued years back; that too, when such transactions were prior to 28.09.2003. It is the specific case of the petitioner that after the said date, all further transactions were on ' _cash and carry_ ' basis. The petitioner was clamouring for getting back the said 57 cheques happened to be there in the custody of some officers of the 1[st] respondent Company, most probably with the said V.S.Omanakuttan. After making all the payments towards the one time settlement entered into by the Settlement Committee constituted by the Chairman and Managing Director of the 1[st] respondent Company, with the petitioner, the petitioner was running from pillar to post to get back those cheques back. 42. It seems that after squeezing all the amounts covered by the settlement from the petitioner, the very same person who had received the payments as an authorised officer of the Company has preferred to file private complaints alleging an offence under Section 138 of the N.I.Act, on the basis of those Crl.M.C. Nos. 2366 of 2008 & Crl.R.P. No.2367 of 2008 -:37:- cheques which had issued towards specific invoices, years back. Material alteration has been clearly committed in this case as those undated cheques, which were issued in discharge of some specific invoices at the time when those cheques were issued, have been now altered, by filling up all the cheques with the very same date as 28.09.2006. Of course, the 1[st] respondent may argue that when undated cheques were willfully parted with by the petitioner, it was as good as an authority given to the payee to put dates of his choice in it, and in such a case, it may not amount to material alteration. At the same time, such a contention cannot be forwarded in the present case because filling up of date as 28.09.2006 in such cheques which were issued for specific invoices prepared and issued years back, itself amounts to material alteration of all the contents of the cheques. Matters being so, the 1[st] respondent is guilty of misusing the said 57 numbers of cheques by materially altering its contents. Crl.M.C. Nos. 2366 of 2008 & Crl.R.P. No.2367 of 2008 -:38:- 43. There is no meaning in contending that these cheques were not relating to the transactions which were settled by the Settlement Committee. As I have pointed out earlier, it is evident from page No.2 of Annexure-A5 that after payment of the full amount, an amount of ₹38 lakhs arrived at the settlement made by the Settlement Committee, M/s HMT Watches Ltd. had to return '57 Nos. of security cheques' held by them, to the petitioner. Matters being so, it is evident that these 57 cheques based on which the present complaints have been filed are the very same 57 Nos. of cheques mentioned in page No.2 of Annexure A5. It is further evident from the contents of Annexure A5 that those cheques were issued as “security cheques”. When the amounts relating to those credit transactions for which 57 undated cheques were issued, were settled and those payments were made, those 57 cheques are to be treated as cheques without any consideration. Further, it cannot be treated as cheques issued in discharge of any legally enforceable debt or Crl.M.C. Nos. 2366 of 2008 & Crl.R.P. No.2367 of 2008 -:39:- liability so as to make out an offence within the meaning of Section 138 of the N.I. Act. 44. The learned counsel for the 1[st] respondent has invited my attention to Section 291 of the Company's Act, 1956 by pointing out that the proposal of the Settlement Committee has no validity at all, unless it is approved and accepted by the Board of Directors. Here, in this particular case, as I have pointed out earlier, the 1[st] respondent Company itself, has received payments towards the alleged settlement arrived at by the Settlement Committee. Without making any objections, the payments were accepted, as if those payments were being accepted on the basis of the settlement arrived at by the Settlement Committee. After accepting such payments in the said manner, the 1[st] respondent cannot approbate and reprobate. 45. The learned counsel for the 1[st] respondent, Company has pointed out that in all the transactions between the petitioner Crl.M.C. Nos. 2366 of 2008 & Crl.R.P. No.2367 of 2008 -:40:- and the 1[st] respondent, a total amount of ₹198.87 lakhs as on 1.4.2004 was due to the Company from the petitioner and in such case, the so called settlement arrived at by the Settlement Committee for an amount of ₹44.19 lakhs is totally unacceptable to the Company. It has been further argued that the 1[st] respondent, Company who was entitled to get that much amount was legally entitled to credit those amounts received from the petitioner, towards the amounts due to the 1[st] respondent from the petitioner and that it was not adjusted towards the alleged settlement. I have already pointed out the acknowledgment and receipts issued by the 1[st] respondent Company, with the seal of the 1[st] respondent in Annexure A6, Annexure A6(a) and Annexure A6(b). When such payments were received, and such endorsements with the seal were made in Annexures A6(a) and (b), the 1[st] respondent Company cannot turn round and say at present that those payments were amounts adjusted towards the total amount due from the petitioner and not towards the Crl.M.C. Nos. 2366 of 2008 & Crl.R.P. No.2367 of 2008 -:41:- amount arrived at in the settlement. 46. Another important aspect is with regard to the admitted part-payments. The argument forwarded by the learned counsel for the 1[st] respondent that the amounts paid by the petitioner as mentioned in Annexure A6, Annexure A6(a) and Annexure A6(b) were duly adjusted by the 1[st] respondent, Company towards the amount due from the petitioner, is a double edged weapon. When part-payments were adjusted towards the transactions for which cheques were issued prior to the presentation of the cheques or the issuance of the notice of demand as contemplated under Section 138(b) of the N.I.Act, an offence under Section 138 of the N.I.Act, on the basis of such cheques, cannot be attracted. Here, in this case, if the said amounts evidently paid by the petitioner were treated by the 1[st] respondent as part-payments towards the earlier transactions, the said 57 cheques which were issued years back as security cheques cannot be made use of, for alleging an offence under Crl.M.C. Nos. 2366 of 2008 & Crl.R.P. No.2367 of 2008 -:42:- Section 138 of the N.I.Act. The other argument forwarded by the learned counsel for the 1[st] respondent is that it was after adjusting those payments covered by Annexure-A6, AnnexureA6(a) and Annexure-A6(b), the cheques in question were issued. 47. All the aforesaid transactions evidencing the receipt of payments are controvertible documents, admittedly issued for and on behalf of the 1[st] respondent Company. When such payments were accepted either as part-payments or by way of full and final settlement, the cheques which were issued in relation to the said transactions could not be pressed into service for filing complaints alleging an offence under Section 138 of the N.I.Act. The learned Senior Counsel has invited my attention to the decision of this Court in _**Ravindran Pillai v. HiLITE Builders Pvt. Ltd** . [2012 (4) KLT 955]_ wherein it was held as follows: _“Where an incontrovertible document, admittedly, executed by the complainant and another, that too signatory of the cheque, would disclose that liability_ Crl.M.C. Nos. 2366 of 2008 & Crl.R.P. No.2367 of 2008 -:43:- _covered by such cheque had been taken over by another company, and, that the company proceeded against has no liability over the cheque issued in its name, it is not even a matter touching upon disputed facts but one unmistakably showing that the holder of the cheque is not entitled to the presumption under S.139 of the N.I.Act. In a summary trial for the offence under S.138 of the N.I.Act, as already pointed out, whether the directors of the company which is proceeded against on the allegations constituting a foundation for action in terms of S.141 of the Act should face a prosecution, is a matter to be looked into in the backdrop that the courts exist to do substantial justice. Where this Court is prima facie satisfied of the displacement of presumption under S.139 of the N.I.Act by an incontrovertible document, with the facts presented revealing that a dispute as to which of the two companies, the 1st accused or Swargachitra, both of which have the 2nd accused as its Managing Director has the liability under the cheque, can be decided only in a properly framed suit before a competent civil court, the ends of justice demand_ Crl.M.C. Nos. 2366 of 2008 & Crl.R.P. No.2367 of 2008 -:44:- _quashing of the proceedings against the petitioners, who are proceeded as directors of a company.”_ In the case in the decision noted _supra_ , based on the observations made above, the criminal proceedings were quashed under Sections 482 Cr.P.C. ## 48. In **Rahul** 's case, _supra_ it was further held as follows: _“The statute envisages application of the penal provisions. A penal provision should be construed strictly; the condition precedent wherefor is service of notice. It is one thing to say that the demand may not only represent the unpaid amount under cheque but also other incidental expenses like costs and interests, but the same would not mean that the notice would be vague and capable of two interpretations. An omnibus notice without specifying as to what was the amount due under the dishonoured cheque would not subserve the requirement of law. Respondent 1 was not called upon to pay the amount which was payable under the cheque issued by it.”_ 49. The learned counsel for the 1[st] respondent has invited my attention to the decision reported in _**L.I.C. v. Escorts Ltd.**_ Crl.M.C. Nos. 2366 of 2008 & Crl.R.P. No.2367 of 2008 -:45:- _**and Others** [(1986) 1 SCC 264]_ wherein it was held in paragraph 95: _“So the modern practice is to confer on the Directors the right to exercise all the company's powers except such as the general law expressly provides must be exercised in general meeting.”_ In Annexure-A15, which is caused to be issued by the 1[st] respondent to the then learned counsel for the petitioner, in paragraph No.2, a contention has been taken that M/s HMT Watches Ltd. is a different and distinct company and legal entity from HMT Limited, which is having shares in the first named company. In page No.2 it was further contended that the so called settlement was never approved by the Board of Directors of the first named company and that only certain proposals or recommendations were made by a Committee which had no authority or power to make any agreement or settlement to forgo the money due to the company. It has been clearly admitted in page No.2 of Annexure A15 that, Crl.M.C. Nos. 2366 of 2008 & Crl.R.P. No.2367 of 2008 -:46:- “ _Whatever payments made by your client from time to time were received and accounted against the balance outstanding amount due to our client from your client_ .” ## In page No.1 of Annexure A15 it was noted that, _“It is true that your client had issued 57 signed cheques drawn for specific amounts against outstanding invoices for amounts due to our client.”_ Matters being so, it is evident that what has been contended in short is that there were part-payments regarding the amounts towards the transactions covered by the said 57 cheques. 50. Following the decision in _**Rahul Builders' case** supra_ , the Division Bench of this Court in _**Joseph Sartho v. G. Gopinathan and Another** [2008 (4) KLT 509]_ , which was a case wherein a cheque was issued in discharge of a debt and subsequently the payee has received part-payment of amount covered by the cheque, it has been held that the bouncing of such a cheque, which did not represent the whole amount covered by the cheque cannot be made use of, for filing a Crl.M.C. Nos. 2366 of 2008 & Crl.R.P. No.2367 of 2008 -:47:- ## complaint alleging an offence under Section 138 of the N.I.Act. ## In _**John G. v. Alosious and Another** [2010 (2) KLT 901]_ , it has been held, _“The Explanation to S.138 of the Negotiable Instruments Act would show that the debt or liability mentioned in S.138 is legally enforceable debt or liability. When there is part payment before presenting the cheque, it could not be said that there is legally enforceable debt or liability to the extent shown in the instrument. When the amount shown in the cheque is more than what is legally due or enforceable, no offence u/S.138 is made out, unless the cheque is presented with endorsement regarding partial discharge.”_ ## 51. The learned counsel for the 1[st] respondent has invited ## my attention to the decision in _**State of Haryana and others v.**_ _**Bhajan Lal and others** [1992 Supp (1) SCC 335]_ wherein it was held in paragraph 102 as follows: _“In the backdrop of the interpretation of the various relevant provisions of the Code under Chapter XIV and of the principles_ Crl.M.C. Nos. 2366 of 2008 & Crl.R.P. No.2367 of 2008 -:48:- _of law enunciated by this Court in a series of decisions relating to the exercise of the extraordinary power under Article 226 or the inherent powers under Section 482 of the Code which we have extracted and reproduced above, we give the following categories of cases by way of illustration wherein such power could be exercised either to prevent abuse of the process of any Court or otherwise to secure the ends of justice, though it may not be possible to lay down any precise, clearly defined and sufficiently channelised and inflexible guidelines or rigid formulae and to give an exhaustive list of myriad kinds of cases wherein such power should be exercised._ _(1) Where the allegations made in the First Information Report or 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 a case against the accused._ _(2) Where the allegations in the First Information Report and other materials, if any, accompanying the F. I. R. do not disclose a cognizable offence, justifying an investigation by police officers under Section 156 (1) of the Code except under an order of a Magistrate within the purview of Section 155(2) of the Code._ Crl.M.C. Nos. 2366 of 2008 & Crl.R.P. No.2367 of 2008 -:49:- _(3) Where the uncontroverted allegations made in the FIR or complaint and the evidence collected in support of the same do not disclose the commission of any offence and make out a case against the accused._ _(4) Where, the allegations in the F.I.R. do not constitute a cognizable offence but constitute only a non-cognizable offence, no investigation is permitted by a police officer without an order of a Magistrate as contemplated under Section 155(2) of the Code._ _(5) Where the allegations made in the F.I.R. or complaint are so absurd and inherently improbable on the basis of which no prudent person can ever reach a just conclusion that there is sufficient ground for proceeding against the accused._ _6.Where there is an express legal bar engrafted in any of the provisions of the Code or the concerned Act (under which a criminal proceeding is instituted) to the institution and continuance of the proceedings and/ or where there is a specific provision in the Code or the concerned Act, providing efficacious redress for the grievance of the aggrieved party._ _(7) Where a criminal proceeding is manifestly_ Crl.M.C. Nos. 2366 of 2008 & Crl.R.P. No.2367 of 2008 **==> picture [28 x 10] intentionally omitted <==** _attended with mala fide and/ or where the proceeding is maliciously instituted with an ulterior motive for wreaking vengeance on the accused and with a view to spite him due to private and personal grudge.”_ 52 _._ Further, the learned counsel for the 1[st] respondent has brought to my attention, the decision in _**Amit Kapoor v. Ramesh Chander and Another** [(2012) 9 SCC 460],_ wherein it was held as hereunder: _**27.1.** Though there are no limits of the powers of the Court under Section 482 of the Code but the more the power, the more due care and caution is to be exercised in invoking these The criminal powers. power of quashing proceedings, particularly, the charge framed in terms of Section 228 of the Code should be exercised very sparingly and with circumspection and that too in the rarest of rare cases._ _**27.2.** The Court should apply the test as to whether the uncontroverted allegations as made from the record of the_ Crl.M.C. Nos. 2366 of 2008 & Crl.R.P. No.2367 of 2008 -:51:- _case and the documents submitted therewith prima facie establish the offence or not. If the allegations are so patently absurd and inherently improbable that no prudent person can ever reach such a conclusion and where the basic ingredients of a criminal offence are not satisfied then the Court may interfere._ _**27.3.** The High Court should not unduly interfere. No meticulous examination of the evidence is needed for considering whether the case would end in conviction or not at the stage of framing of charge or quashing of charge._ _**27.4.** Where the exercise of such power is absolutely essential to prevent patent miscarriage of justice and for correcting some grave error that might be committed by the subordinate courts even in such cases, the High Court should be loath to interfere, at the threshold, to throttle the prosecution in exercise of its inherent powers._ _**27.5.** Where there is an express legal bar enacted in any of the provisions of the Code or any specific law in force to the very initiation or institution and continuance of such criminal proceedings, such a bar is intended to provide specific protection to an accused._ Crl.M.C. Nos. 2366 of 2008 & Crl.R.P. No.2367 of 2008 -:52:- _**27.6.** The Court has a duty to balance the freedom of a person and the right of the complainant or prosecution to investigate and prosecute the offender._ _**27.7.** The process of the court cannot be permitted to be used for an oblique or ultimate/ulterior purpose._ _**27.8.** Where the allegations made and as they appeared from the record and documents annexed therewith to predominantly give rise and constitute a “civil wrong” with no “element of criminality” and does not satisfy the basic ingredients of a criminal offence, the court may be justified in quashing the charge. Even in such cases, the court would not embark upon the critical analysis of the evidence._ _**27.9.** Another very significant caution that the courts have to observe is that it cannot examine the facts, evidence and materials on record to determine whether there is sufficient material on the basis of which the case would end in a conviction; the court is concerned primarily with the allegations taken as a whole whether they will constitute an offence and, if so, is it an abuse of the process of court leading to injustice._ Crl.M.C. Nos. 2366 of 2008 & Crl.R.P. No.2367 of 2008 -:53:- _**27.10.** It is neither necessary nor is the court called upon to hold a full-fledged enquiry or to appreciate evidence collected by the investigating agencies to find out whether it is a case of acquittal or conviction._ _**27.11.** Where allegations give rise to a civil claim and also amount to an offence, merely because a civil claim is maintainable, does not mean that a criminal complaint cannot be maintained._ _**27.12.** In exercise of its jurisdiction under Section 228 and/or under Section 482, the Court cannot take into consideration external materials given by an accused for reaching the conclusion that no offence was disclosed or that there was possibility of his acquittal. The Court has to consider the record and documents annexed therewith by the prosecution._ _**27.13.** Quashing of a charge is an exception to the rule of continuous prosecution. Where the offence is even broadly satisfied, the Court should be more inclined to permit continuation of prosecution rather than its quashing at that initial stage. The Court is not expected to marshal the records with a view to decide admissibility and reliability of the documents or records but is an opinion formed prima facie.”_ Crl.M.C. Nos. 2366 of 2008 & Crl.R.P. No.2367 of 2008 -:54:- The facts and circumstances of the case in hand clearly reveal that this is a case covered by paragraphs ' _27.2, 27.4, 27.5, 27.6, 27.8, and 27.9'_ of the decision noted _supra_ , in which the powers of this Court under Section 482 Cr.P.C can be exercised to quash the complaints. 53. The learned counsel for the 1[st] respondent has argued that at the most the petitioner has to face the ordeal of the trial in 20 criminal cases pending before two courts only, whereas the complainant may be able to establish the maintainability of those complaints, if allowed to continue. It is argued by the learned counsel for the 1[st] respondent that the hardships to the Union of India in quashing the said complaints will outweigh the hardships to which the petitioner may be put in defending the said cases. It has to be noted that the petitioner, who is a lady, has to undergo the ordeals of the trial in 20 criminal cases and she has to languish at the corridors of the courts for years to come, for completing the said procedures unnecessarily. Those Crl.M.C. Nos. 2366 of 2008 & Crl.R.P. No.2367 of 2008 -:55:- cases are instituted on the basis of 57 cheques, which were materially altered. The 1[st] respondent cannot fall back on the original consideration to make those complaints maintainable, on the claim of the 1[st] respondent that further amounts are due as balance after adjusting the amounts paid by the petitioner as part-payments towards the transactions covered by the amounts shown in those cheques, which were issued as undated 'security cheques'. The complaint alleging an offence under section 138 of the N.I.Act cannot be equated with a suit on accounts. Over and above the same, there is no legal statutory notice as contemplated under Section 138(b) of the N.I.Act in this case, and therefore, there is no cause of action for any of those complaints. In the result, both these Crl.M.Cs. are allowed and the private complaints pending before the Judicial First Class Magistrate's Court-III, Kochi as C.C.Nos.1208, 1209, 1210, 1211 and 1212 of 2007 and the private complaints pending before the Crl.M.C. Nos. 2366 of 2008 & Crl.R.P. No.2367 of 2008 -:56:- Judicial First Class Magistrate's Court-IV, Kochi as C.C.Nos.1708, 1791, 1792, 1793, 1794, 1795, 1796, 1824, 1825, 1826, 1827, 1828, 1829,1830 and 1831 of 2007, are quashed. **Sd/- B. KEMAL PASHA, JUDGE** ul/- [True copy] P.S. to Judge.