2013 (2) TMI 28 - HC - Companies Law

Domestic factoring facilities - petitioner No.1 is the borrower, respondent is the Factor and M/s Liverpool Retail India Limited are the purchasers - petitioners were granted domestic factoring facilities by the respondent to the tune of Rs. 2,00,00,000/- with the condition of maximum pre-payment of 80% - petitioner gave the cheques of security amounting to Rs. 2,00,00,000/- without date towards guarantee as guarantee of Liverpool Retail India Limited who too issued the cheques for the said amount which got dishonoured for insufficient funds - complaint u/s 138 of the Negotiable Instruments Act - Held that - As per Clause 9.1 of the Agreement entered between the parties in case the said cheques were ever dishonoured, the respondent was given the right to proceed under Section 138 of the Negotiable Instrument Act. As per Clause 2 of the Undertaking, the respondent did not issue a notice of demand before filing the complaint is in itself not sufficient to exercise the jurisdiction under Section 482 Cr.P.C for quashing of the complaint, in as much as, all the ingredients of Section 138 of the Negotiable Instrument Act are satisfied. Para 10 of the complaint specifically states that vide legal notice dated 07.07.2010, the complainant company through their counsel called upon the accused persons to make the payment of the amount covered by the dishonoured cheques. The said notice was sent to the accused persons through Regd. A.D. The postal authorities have delivered the notice sent to the accused person through Regd. A.D. In view of the above discussion, it is not a fit case for exercising the jurisdiction under Section 482 Cr.P.C for quashing of the complaint.

Summary

Issues:
1. Whether the cheques issued were towards security or liability.
2. Can two complaints be filed for the same liability?
3. Was the complaint maintainable without issuing a notice as per the terms and conditions of the settlement?

Issue 1: Cheques as Security or Liability
The petitioners argued that the postdated cheques were given as security, making a complaint under Section 138 of the Negotiable Instruments Act not maintainable. However, the respondent contended that the cheques were issued in lieu of liability, as per the terms of the undertaking and agreement between the parties. The court analyzed the undertaking and agreement, noting that the cheques were subject to the liability of the borrower failing to make payment. The court held that the nature of the transaction indicated the cheques were towards liability, not security, and this disputed fact required trial for resolution. Therefore, the complaint and summoning order could not be quashed solely on this argument.

Issue 2: Filing Two Complaints for the Same Liability
The petitioners argued against maintaining two complaints for the same liability, as the respondent had already filed a complaint against another party involved. The court clarified that the purpose of the complaint under Section 138 of the Negotiable Instrument Act was for conviction/punishment, not recovery. Civil proceedings would be for recovery, and the respondent was not attempting to recover the amount twice. The court emphasized that the petitioners could not claim immunity from the Act as they had issued the cheques while guaranteeing payment, as per the agreement terms. Therefore, the complaint could not be quashed based on this argument.

Issue 3: Notice Requirement for Complaint
The petitioners contended that the complaint was not maintainable as no notice was issued as per the settlement terms. However, the court found that all ingredients of Section 138 of the Negotiable Instrument Act were satisfied. The complaint included details of a legal notice sent to the accused persons, calling for payment, and the postal authorities confirmed delivery. The court concluded that the absence of a demand notice before filing the complaint was not sufficient to exercise jurisdiction under Section 482 Cr.P.C for quashing the complaint. Therefore, the court dismissed the petition.

Conclusion
The High Court dismissed the petition seeking to quash the complaint and summoning order under Section 138 of the Negotiable Instruments Act. The court held that the cheques were towards liability, not security, and the disputed nature of this fact required trial for resolution. Additionally, the court clarified that filing two complaints for the same liability was permissible under the Act, as the purpose was not recovery but conviction. The court also found the complaint maintainable despite the absence of a specific notice, as all legal requirements were met.