POONAM MANSHANI Vs. J&K BANK LTD

JUDGEMENT

(1.) ON 6.8.2007 respondent/Bank instituted a complaint against petitioners and proforma respondents all associated with a trading company styled as "Prinkaya Overseas Pvt. Ltd", with allegations that on their request the Bank extended financial assistance to aforesaid company which by 15lh Nov.2001 enhanced to the limit of Rs. 25.00 crores as beginning credit ship (pre -shipment loan) Rs. 15.00 crores as bid bond/bank guarantee/inline letter of credit/foreign letters of credit, Rs. 50.00 crores as post shipment limit and Rs. 25.00 crores as forward exchange cover which was availed by them from time to time without however adhering to the expected schedule of repayment due to which the account became irregular and outstanding against the company as non -performing assets as on 19.4.2007 swelled into Rs. 2465647157 - in beginning credit limit and to Rs. 1622101104/ - in inline letter of credit etc as on 19.4.2007. On 26.12.2006 however, Raj Kumar Jain one of the Directors of company issued a post dated cheque No. 3298J36 with 19.1.2007 the date of its encashment at the office of respondent/Bank at Lajpatnagar, New Delhi alongwith draft cover letter No. POPL/2006 dated: 26.12.2006 to meet part liability on account of inline letter of credit extended under account No. 3126 but as the date of encashment approached the company, the company through said Sh. Jain approached the Bank with the request that presentation of the post dated cheque be deferred as the company expected to get an amount of Rs. 7.50 crores from prospective buyer of their rice Division after vacation of a particular restraint order purporting to have been passed by High Court of Gujarat which the bank exceeded to but ultimately when it deposited the cheque with Air cargo Branch of the Bank on 8.6.2007, and sent for collection through Regional Collection Centre, New Delhi to Bharat Overseas Bank, wherefrom it was returned with endorsement "funds insufficient". Thus banker of accused returned the cheque unpaid alongwith the aforesaid memo despite enough time having been given to the company for due deposits. Accordingly, while alleging that the conduct of aforesaid company amounted to an offence under Negotiable Instrument Act the respondent/Bank sought criminal action against them through the aforesaid complaint. On 16.8.2007 the Court of, Chief Judicial Magistrate, Srinagar before whom the complaint was lodged passed a preliminary order after recording statements of the complainant and one Sh. Roshan Khyial Khan, the attorney of the Bank and opined that contents of the complaint and materials submitted therewith disclosed commission of an offence under Sec. 138 read with Sec. 142 of Negotiable Instruments Act, and while taking cognizance of the case directed issuance of process against petitioner/company and its directors first through summons and letter through bailable warrants and posted the matter for their appearance. Aggrieved thereby the petitioners, some among directors of the aforesaid company seek quashment of the above said complaint, the aforesaid order of learned Chief Jud./Magistrate, alongwith arrest warrants issued against them and pro forma respondents chiefly on three grounds: First, that after issuance of the bounced cheque to Lajpatnagar branch of respondent/Bank, the company issued another cheque under No. 330448 for Rs. 1.25 crores in lieu thereof and sought to deposit remaining amount of Rs. 3.75 crores after receiving the amount from the buyer of its rice division which was cashed by them, withdrawing the demand notice earlier sent through Advocate due to which no dishonest intention could be attributed to the petitioners herein. Secondly, that the cheque for Rs. 5.00 crores had been drawn on Bharat Overseas Bank in the name of company itself and as such the company and not the respondent/Bank being drawee of the cheque no case accrued to them for institution of the complaint under Sec. 138 of the Act. Thirdly, that the Court of Chief Judicial Magistrate, Srinagar had no territorial jurisdiction to entertain the complaint. During their submissions the rival counsel have reiterated and further elaborated the contents of their respective pleadings quoting certain precedents also in support of thereof which if necessary would be discussed in due course. The companys counsel has also added that respondent/Bank has, also initiated action under Realization of Securities Act also against their landed properties in New Delhi.

(2.) I have heard learned counsel and considered the mater. In so far as the factum of outstanding against petitioners herein on account of over draft facility availed by them from respondent/Bank is concerned it is not dsnied at all nor for that matter the fact that petitioners herein as front men of the company under reference have been doing business with respondent/bank by availing over draft facilities and making periodical deposits towards the outstanding which is clear on the face of the mater. That petitioner/company issued a cheque for Rs. 5.00 crores for adjustment against their liability to respondent/bank is not denied and that it was returned unpaid due to insufficiency of amount in their account is clear from the records,. That it had been drawn in the name of petitioner/company on Bharat Overseas Bank too is a fact apparent on record alongwith the one that another cheque bearing No. 330448 for Rs. 1.25 crores was issued by company which was encashed by respondent/bank. In gamut of these admitted facts the questions which arise for determination in the matter rare: First, whether cheque No. 330448 for Rs. 1.25 crores was issued by petitioner/company in lieu of cheque No. 329836 for Rs. 5.00 crores and if so, what would be its effect on liquidity of earlier cheque and the consequences thereof. Secondly, the cheque for Rs. 5.00 crores having been drawn in favour of the company itself, whether respondent/bank was not a drawee in legal sense of the expression and as such incapable of invoking the provisions of the N.I. Act and finally that the cheque having been drawn on Bharat Overseas Bank, New Delhi whether or not Chief Judicial Magistrate, Srinagar had jurisdiction to entertain the complaint and take cognizance thereof.

(3.) ON first question the petitioner contention that by issuing second cheque, they had impliedly withdrawn the earlier one and the respondent/bank by having it cashed had by conduct acknowledged that. In that behalf it may in the first instance be observed that expression "in lieu of would ordinarily mean "instead of and as such would not be applicable to the transaction under reference for simple reason that a cheque for Rs. 1.25 crores can neither be given nor accepted instead of a cheque for Rs. 5.00 crores or as a substitute thereof or to indemnifying the same, because of the huge difference between the amount meant to be paid or received under the two. That being so, the expression "in lieu of essentially appears to be inapplicable for the simple reason of its being impracticable in the meaning suggested. If at all anything in given factual scenario of the case it can mean on account of the earlier cheque drawn for a larger amount which in the final analysis would mean part payment of the amount mentioned in earlier cheque and acceptance whereof by the creditor would not in any case mean abandonment of the remaining credit, or automatic extension in the time fixed for payment in view whereof the petitioners would in law suffer the consequences of the return of the earlier cheque uncashed for want of money in the account want of sufficient funds would continue or they should stand discharged there from. Considering the matter. Under Chapter VII of the Negotiable Instruments Act the maker of a cheque would only been from liability thereof either by cancellation or by release or by a payment there under. None of the three existing the petitioners cannot be said to have absolved themselves from the liability they incurred under first cheque of Rs. 5.00 crores which bounced. In that view of the matter therefore, the contention that latter cheque was issued by petitioners and accepted, by respondent/bank in lieu of earlier one does not appear to be tenable to wash of the effect of the return of earlier cheque.