9911796707
TMI Blog2004 (4) TMI 295X X X X Extracts X X X X X X X X Extracts X X X X ..... the Bombay Relief Undertaking (Special Provisions) Act, 1958 till the said notification remained in force i.e. upto 11-11-2003. The said period was further extended by one year i.e. upto 10-11-2004 by another notification dated 20-10-2003, a copy of which was placed on the record of this Court, during the course of hearing of the present Appeal From Order. 2. The brief facts giving rise to the present Appeal From Order are that the respondent Company has made a request to the appellant Bank to sanction in its favour a bill discounting facility of Rs. 500 Lakhs and as a security for the payment of the Company's liability to the appellant, the respondent had issued the following three post-dated cheques in favour of the appellant. Sr. Date Amount (Rs.) No. 1. 5-2-2002 Rs. 2,01,48,725 2 5-2-2002 Rs. 1,53,81,300 3 13-2-2002 Rs. 1,44,94,675 3. All the aforesaid three cheques were presented by the appellant on their due dates and the said cheques were bounced. The appellant bank, therefore, filed criminal complaints on 22-3-2002 & 27-3-2002 in the Court of the Metropolitan Magistrate, Ahmedabad for offences under section 138 read with section 142 of the Neg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer or Authority shall be stayed, during one year commencing on 11-11-2002. 6. In anticipation that the Bank would encash the postdated cheque of 31-3-2003 for Rs. 100 Lakhs, the Company by its letter dated 20-3-2003 requested the appellant-Bank that the Company was facing a lot of problems on issue of postdated cheques from other secured creditors, Bankers and Board Members and that till the matter was settled in totality, the respondent Company requested the appellant Bank not to deposit the postdated cheque of 31-3-2003 for Rs. 100 Lakhs. The appellant Bank by its letter dated 22-3-2003 requested the respondent Company to take necessary steps to honour the Company's commitment when the cheque for Rs. 100 Lakhs was presented for payment on 31-3-2003. On presumption that the appellant Bank would deposit the cheque on its due date, the respondent Company filed Civil Suit No. 654 of 2003 and obtained an ex parte ad interim order on 28-3-2003 which was confirmed till the period mentioned in the date of notification was over, by an order dated 22-4-2003. 7. It is this order dated 22-4-2003 which was passed below application Exh. 6-7 in Civil Suit No. 654 of 2003 is under challenge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the context of the individual liabilities of Directors and officers under Employees Provident Funds Scheme, 1952, the Hon'ble Supreme Court has held that the immunity cannot be extended to cover the individual obligations and liabilities of the directors and other officers of the undertaking as distinct from the obligations or liabilities of the undertaking. Neither the language of the statute nor its object would justify the extension of the immunity so as to cover the individual obligations and liabilities of the directors and other officers of the undertaking. If they have incurred such obligations or liabilities as distinct from the obligations or liabilities of the undertaking, they are liable to be proceeded against for their personal acts of commission and omission. The remedy in that behalf cannot be suspended nor can a proceeding already commenced against them in their individual capacity be stayed. Indeed, it would be strange if any such thing was within the contemplation of law. 12. Mr. S.B. Vakil has further relied on the decision of this Court in the case of Vijay Mills Co. Ltd. v. State of Gujarat 1990 (1) GLR 557 wherein, while interpreting the Provisions contained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in that event the very purpose of inquiry by the BIFR will be rendered futile. 14. Mr. Vakil has further submitted that the plaint on the face of it is grossly under valued and does not bear requisite Court Fees and is, therefore, not admissible on record of the Court. The Company's under valuation of the plaint is clearly indicative that the Company has merely indulged into a speculative frivolous suit as a matter of gamble at little cost. The Company has filed the suit only on the Court Fee Stamp of Rs. 30 and obtained injunction against presentation of cheques worth Rs. 499.52 Lakhs. The Trial Court has committed a very serious error in law in entertaining the suit and granting injunction despite the fact that the issue regarding inadequate Court Fees was raised by the present appellant. 15. Mr. Vakil has further submitted that bare perusal of the notification dated 11-11-2002 makes it clear that the protection envisaged under section 4(1)(a)( iv) of the BRU Act would not be made available inasmuch as under the said Provision, the exercise of right, privilege, obligation or liability accrued or incurred before the undertaking was declared a relief undertaking was not to be sus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of Totalal v. State AIR 1963 Raj. 6 wherein it is held that the word "enforce" used in section 295(3), Companies Act, 1956, means the taking of such action on the part of the creditor which compels the debtor to effect repayment of the loan, such as, the institution of a suit, attachment or sale of the latter's properties etc. Making a demand from the debtor to repay the loan would not amount to enforcing repayment. A demand may only be a request or may be accompanied by some threat of legal action but the element of force which compels obedience which the word 'enforce' carries is absent from it. Merely obtaining of a mortgage from the debtor would not amount to enforcing the repayment of the loan within the meaning of sub-section (3) of section 295. For it might be that the loan which was unsecured became secured after the mortgage, still the amount remained in the hands of the debtor. 17. Mr. Vakil has further relied on the decision of the Hon'ble Supreme Court in the case of Premeir Automobiles Ltd. v. Kamlekar Shantaram Wadke of Bombay [1976] 1 SCC 496 wherein while rejecting the contention raised by Mr. Sorabjee appearing for the respondents that even if the Civil Court h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the owner of necessity has the remedy to have it removed. This decision was realised on for the purpose of bringing out a distinction between enjoyment and exercise of right on the one hand and enforcement of remedy on the other hand. 19. Mr. Vakil has further relied on the decision of the Hon'ble Supreme Court in the case of Chairman, Railway Board v. Mrs. Chandrima Das AIR 2000 S.C. 988 wherein it is held that where a public functionaries are involved and the matter relates to the violation of fundamental rights or the enforcement of public duties, the remedy would still be available under the public law notwithstanding that a suit could be filed for damages under private law. It was more so when it was not a mere matter or violation of an ordinary right of a person but the violation of Fundamental Rights which was involved as petitioner was a victim of rape which is violative of the Fundamental Right of a person guaranteed under Art. 21 of the Constitution. 20. Mr. Vakil has further relied on the decision of the Hon'ble Supreme Court in the case of Dhannalal v. Kalawatibai AIR 2002 SC 2572 wherein while referring to certain legal maxims, the Hon'ble Supreme Court has held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. Gulshan Rai [1993] 4 SCC 424 wherein it is held that "a cheque under section 6 of the Act is also a bill of exchange but it is drawn on a banker and is payable on demand. Thus a bill of exchange even though drawn on a banker, if it is not payable on demand, it is not a cheque. A "postdated cheque" is only a bill of exchange when it is written or drawn, it becomes a "cheque" when it is payable on demand. The postdated cheque is not payable till the date which is shown on the face of the said document. It will only become cheque on the date shown on it and prior to that it remains a bill of exchange under section 5 of the Act." 24. Mr. Vakil has further relied on the decision of the Hon'ble Supreme Court in the case of Shri Ishar Alloys Steels Ltd. v. Jayaswals Neco Ltd. AIR 2001 SC 1161 wherein it is held that "to make an offence under section 138 of the Act, it is mandatory that the cheque is presented to the bank within a period of six months from the date on which is it drawn or within the period of its validity, whichever is earlier. It is a cheque drawn which has to be presented to the bank within the period specified therein. When a postdated cheque is written or drawn, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ein after reiterating the ratio laid down by this Court in the case of D.S. Patel & Co. (supra) it is held that what is barred under section 4 of the Act of 1958 is the remedy for enforcement of the right and not the right itself and the Court has further held that if the suit transactions is covered by the notification, the bar under section 4 of the Act of 1958 would be against the proceedings for recovery of the loan amount and not against the recovery of the loan amount by encashing the suit cheques in ordinary course of business and in that case, the Bank would not have been able to enforce the recovery. But it certainly would not be debarred from encashing the cheques deposited with the Bank. The Court has, therefore, held that the plaintiff has no right to restrain the bank from encashing the cheques deposited with the Bank. 27. Mr. Vakil has further relied on the another decision of this Court in the case of Ashima Ltd. v. Dombivli Nagarik Sahakari Bank Ltd. [A.O. No. 253 of 2003, dated 11-9-2003] wherein also the same view was taken by this Court and it was held that the plaintiff Company has no right to restrain the Bank from enforcing either the postdated cheques deposi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iabilities which were discharged by the Company and since the postdated cheques were issued by the Company in favour of the Bank prior to the notification issued by the State Government, the liability arose in respect thereof was also suspended. By virtue of this notification, all rights, liabilities as well as remedy of enforcement are suspended and the bank is estopped by law from depositing the cheques which are in its possession till the notification is in force. The rights of the Company would be frustrated and unnecessarily the Company would be put in an awkward position if the Bank was not restrained from depositing cheques and hence, the injunction was rightly granted by the Trial Court. 30. Mr. Nanavati has further submitted that the decision of this Court in the case of D.S. Patel & Co. (supra) really helps to the respondent Company rather than it helps to the appellant Bank, as in that case the Court has clearly held that the right itself is not suspended, but only the remedy for the enforcement of right is suspended. The Court has further clarified that the suspension of the rights means suspension of its execution or enforcement. If the appellant Bank is allowed to de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respondent company. 32. Mr. Nanavati has further submitted that the Hon'ble Supreme Court has laid down the principles of granting interim injunction in the case of Colgate Palmolive Co. (supra). He has further submitted that what is to be looked at the interlocutory stage is that the Court/Commission is not really concerned with the factum of establishment of any truth or falsity but merely a prima facie case or an arguable case resulting in establishment of a prima facie case. It is on this backdrop that exercise of discretion by the commission shall have to be considered. Once having established the prima facie case before the Court, it is to be seen as to whether balance of convenience is in whose favour. If the appellant Bank is not restrained at this stage from depositing the cheque, it would adversely affect to the revival prospects of the Company and the purpose for which the relief undertaking status was granted to the Company would be frustrated as the Company had earmarked its funds towards realisation of the cheques given for discharging current liabilities and to that extent, its other commitments would not have been fulfilled. As against this, by granting interim re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rities cited in their favour and after having examined and appreciated the impugned order passed by the Trial Court in the light of the papers and documents produced and in the context of the statutory provisions, BRU Notification and decided case-law, the Court is of the prima facie opinion that the learned Trial Judge is not justified in granting injunction against the appellant Bank by restraining it from depositing the postdated cheques on their respective due dates. 36. From the foregoing discussion, the issues which arose before the Court for its careful consideration are :- (i )Whether BRU Act and the notification issued thereunder by the State Government grants protection to the Company against the Bank in respect of its right to deposit postdated cheques on their due dates? (ii )Whether an act of depositing the cheque is an act of exercise of right or it is an act of enforcement of remedy? (iii )Whether filing of suit and obtaining an injunction in Notice of Motion application by the Company is considered to be mala fide to save its Directors from the rigour of criminal proceedings to be initiated against them under the Provisions of sections 138 & 142 of the Negotiabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement of the right to hold but also the right itself. This is, however, not so. On true construction of the said sub-clause, the right itself is not suspended but only the remedy for the enforcement of the right is suspended. It is, therefore, held that when the sub-clause speaks about suspension of a right, it only means suspension of its execution or enforcement. The incidents of a right, except its executability are, therefore, not suspended by the sub-clause. An act of presentation of postdated cheque in the bank on its due date is one of the incidents of right which is not suspended and it can never be assumed to have reached the stage of executability. 40. Presentation of cheque in the Bank is more akin to make a demand from the debtor to repay the loan, but it would not amount to enforcing repayment. The words enforcement of remedy used in sub-clause (iv) convey the meaning of institution of suit, attachment of sale of the Company's properties etc. Presentation of cheque may be an incident of right, or may be accompanied by some threat of legal action, but the element of threat which compels obedience which the words 'enforce-ment of remedies, carry, is absent from it and h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore, not justified in granting stay against the presentation of postdated cheques by the appellant on their due dates. 42. The next issue on which much arguments were canvassed by both the parties is the purpose of motive behind filing the suit and obtaining injunction. The appellant's case is that the suit was filed with a mala fide intention and oblique motive to shield or shelter its Directors from the rigour of the provisions of sections 138 to 142 of the Negotiable Instruments Act. The Company's answer to this allegation of argument is that there is basic falacy in this argument and it is based on mere assumption or presumption that the postdated cheques will be bounced on presentation. The Company is a running unit making payment to its creditors and suppliers in a phased manner. The balance is maintained for these purposes in the account from which the postdated cheques are given. If the cheques are allowed to be presented and realised, it would upset the whole arrangement. This argument looks to be very attractive but does not tend to reasons. As observed earlier, the Company is not restrained from allowing the postdated cheques given to the appellant to be cleared. Even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heques on their due dates would not affect the Company in either way as in case of their realisation, the Company's liabilities would be reduced and in case of bouncing, its Directors will have to face criminal proceedings. Hence, there is neither prima facie case nor balance of convenience in favour of the Company. No monetary loss is caused to the Company or no monetary gain is made to the appellant simply by presentation of postdated cheques. However, preventing the appellant from exercising its legal right by an indirect method and with an oblique motive to save its Directors is certainly an irreparable injury or loss caused to it and it is this area where the Trial Court should have restrained itself from granting discretionary and equitable relief to the Company. 44. The impugned order dated 22-4-2003 passed by the Trial Court is hereby quashed and set aside. This Appeal From Order is accordingly allowed and Rule made absolute in Civil Application No. 2961 of 2003. 45. At this stage, Mr. S.I. Nanavati, learned Senior Counsel appearing for the respondent Company requested for stay against the operation of this judgment and further requested to continue stay granted by the Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
