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TMI Blog2009 (2) TMI 927X X X X Extracts X X X X X X X X Extracts X X X X ..... oth these petitions be disposed of by a common order. 2. Facts necessary for the disposal of the petition are noticed as under. An E-auction was floated by M/s MSTC Ltd., Bangalore, offering sale of the Fertilizer Plant and Machinery of M/s Neyvli Lignite Corporation Ltd. (hereinafter referred to as "NLC"). In the E-auction, M/s MMT Machinery Traders (herein after referred to as "MMT") was accepted as the highest bidder. In order to execute the contract, MMT proposed to enter into an agreement with M/s State Trading Corporation of India Ltd. (hereinafter referred to as "STC"), the respondent herein (complainant before the Trial Court) for disposing of/marketing the entire ferrous and non-ferrous scrap of the above referred plant and machinery of NLC. Accordingly, an agreement was arrived at between MMT and the respondent and the said agreement was styled as "MOU" signed on 28th April, 2005, along with other agreements, so as to enable MMT to purchase the said fertilizer, plant and machinery of NLC. 3. Learned senior counsel for the petitioners submits that as per the complaint of the respondent, in pursuance of the alleged financial agreeme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for a higher amount, he would be convicted if it is held that existence of debt in respect of large part of the said amount has not been proved. The appellant clearly said that nothing is due and the cheque was issued by way of security. The said defence has been accepted as probable. If the defence is acceptable as probable the cheque therefore cannot be held to have been issued in discharge of the debt as, for example, if a cheque is issued for security or for any other purpose the same would not come within the purview of section 138 of the Act. 7. Counsel for the petitioners has also relied upon a judgment of the Single Judge of this court in Criminal Misc. No. 3011/04, M/s Collage Culture & Ors. vs. Apparel Export Promotion Council & Anr. 8. The present petition is opposed by the learned senior counsel appearing for the respondent primarily on the ground that this is not a fit case for the court to exercise its extra ordinary jurisdiction vested under section 482 of Cr. P.C. He submits that the complaint ordinarily cannot be quashed or interfered with at the threshold and a criminal trial should not be nipped in the bid as the merits and demerits of the case can only be crys ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iction and put an end to the process of investigation and trial provided under the law. 11. It would thus be appropriate to reproduce the relevant portion of the complaint, MOU and the notice issued by respondent to the petitioner herein under Section 138 of the Negotiable Instruments Act. Some of the relevant paragraphs of the complaint, reads as under: 6 That it was agreed by M/s Metro Machinery Traders that they would furnish two corporate guarantees for the complainant's funding of Rs. 150 crore (Rupees One hundred fifty Crore.) The accused No. 1 M/s Bishan Saroop Ram Kishan Agro Pvt. Ltd. stood as one of the Corporate Guarantors on behalf of the said M/s Metro Machinery Traders for a sum of Rs. 75 crore. The accused No. 2 Shri Ram Kishan is the Chairman-cum-Managing Director of M/s Bishan Saroop Ram Kishan Agro Pvt. Ltd. All the other directors of Bishan Saroop Ram Kishan Agro Ltd. are/were as the material time, in-charge of the business of the said company M/s Bishan Saroop Ram Kishan Agro Pvt. Ltd. The said Directors of M/s. Bishan Saroop Ram Kishan Agro Pvt. Ltd. under the Chairmanship of the accused No. 2 passed a resolution as Board Members authorizing the Chairman ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion for executing the Sale order awarded by MSTC Ltd, Bangalore, to MMT for dismantle and disposal of entire Fertilizer Plan belonging to NLC. NOW, THEREFORE, IT IS HEREBY AGREED BETWEEN THE PARTIES AND DECLARED AS FOLLOWS: CLAUSE 1: STC will make payment of the total sum of Rs. 149,79,96,511 (Rs. One Hundred Forty Nine Crores, Seventy Nine Laths, Ninety Six Thousand, Five Hundred and Eleven Only) by way of Demand draft Drawn in favour of Neyveli Lignite Corporation Ltd, payable at Neyveli. The above payment will be made by two separate Bank Drafts, one for Rs. 1,38,71,16,511/- and the other for Rs. 11,08,80,000/- Clause 3: Sureties to STC : The two firms, M/s Bishan Swarup Ram Kishan Agro Pvt. Ltd. and M/s Mahesh Agro Pvt. Ltd, owned and managed by two major partners, Mr. Ram Kishan and Mr. Mahesh Kumar respectively will each Chairman-cum-Managing Directors, duly authorized by Resolutions passed by their Board of Directors along with a post dated Cheques of Rs. 75.0 cr each. In addition to this, each Partner of MMT will give a personal Guarantee Bond by way of Affidavit. The aforesaid Guarantees shall be duly executed to ensure the sale of the entire stock of NLC Plant by ST ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inafter called STC) having its corporate office at Jawahar Vyapar Bhawan, 1, Tolstoy Marg, New Delhi-110001 agreeing to provide finance to M/s Metro Machinery Traders (hereinafter called MMT) for Grant of Financial Assistance for purchase and Marketing of the entire Fertilizer Plant and Machinery belonging to Nevyeli Lignite Corporation Ltd. in accordance with the terms and conditions of the MOU signed between STC and MMT on 28.4.2005 M/s Bishan Swaroop Ram Kishan Agro Pvt. Ltd., 5584, Lahori Gate, Delhi-110006 through its Chairman-cum-Managing Director (hereinafter referred to as the "GUARANTOR") herein execute his Deed of Corporate Guarantee in favour of STC. In witness whereof, I, Ram Kishan, hereby guarantee in my capacity as Chairman-cum-Managing Director and on behalf of M/s Bishan Swaroop, Ram Kishan, Agro Pvt. Ltd. to reimburse all outstanding amounts, losses and expenses, if any, which are due to STC and MMT arising out of or in connection with MMT/s failure to perform its obligations under the MOU dated 28.4.2005 and Sale Agreement dated 29th April, 2005. The liability of the Guarantor under this guarantee shall not exceed Rs. 75 crores. This guarantee is secu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The respondent in support of its complaint also filed affidavit by way of evidence, oath on affidavit Relevant portion of which reads as under: This guarantee is secured by a post dated Cheque bearing No. 472815 for Rs. 75,00,00,000 (Rupees Seventy five crore) drawn on State Bank of Mysore, in favour of STC," The guarantor agrees to indemnify STC against all losses, damages, costs, claims and expenses, whatsoever, which STC may suffer, pay or incur by reason of or in connection with any such default on the part of MMT including of any legal proceedings taken against it, or the guarantor for recovery of money. 15. The Deed of Corporate Guarantee as well as the Statutory Notice issued by the respondent (complainant) to the petitioner herein, were also annexed by the complainant along with his complaint. 16. The only question which arises for consideration is whether the cheques in the sum of Rs. 75.0 crores each were issued for a debt which was in existence at the time of issuance of cheque or whether this cheque was issued as a guarantee to secure future debt and to indemnify against losses and damages. To buttress his argument that the cheque, subject matter of the compl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... through the complaint and documents filed with the complaint by the respondent herein. It is not in dispute that under sections 118 read with 139 of the NI Act, there is a presumption in favour of the holder of the cheque that he holds the cheque, for discharge, in whole or in part, of any debt or any liability. However it is also to be borne in mind that before passing an order summoning the accused persons under section 138 of the NI Act, the court is duty bound to carefully look into the complaint and the supporting documents, to see if prima-facie any case is made out against the accused persons or not. In the case of DCM Financial Services Ltd. v. J.N. Sareen reported at (2008) 8 SCC 1, the Apex Court has held: 12. The underlying purpose for which Parliament enacted section 138 of the Act is not in doubt or dispute. What, however, is necessary to be borne in mind is the distinction between a civil proceeding and a criminal proceeding. What is also necessary to be borne in mind is the standard of proof in a civil suit and a criminal case. 13. Averments made in the complaint petition supported by the statements of the complainant form the basis for taking cognizance of an of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e issued in response to the funding of Rs. 150.0 crores by the complainant (respondent herein) and the petitioner herein stood as one of the corporate guarantor. 20. Relevant portion of the MOU, Deed of Guarantee and Statutory Notice clearly and categorically confirm that the cheque of Rs. 75 crores each were issued as a collateral security for a debt which was yet to accrue. Furthermore, I am afraid, that the judgment in the case of P.P. Sharma (supra), relied upon by the respondent (complainant before the trial court,) cannot come to his aid and rescue, as in the present case, the above mentioned documents sought to be relied upon by the petitioner, were annexed by the respondent themselves before the trial court and thus are not required to be proved as the petitioners have also placed reliance on them. The respondent (complainant before the trial court) has taken a stand that the cheques were issued as collateral security. The question of taking up this defence by the petitioner comes at the next stage. The complaint, statutory notice issued by the complainant (respondent herein) as well as the MOU and Deed of Corporate Guarantee filed along with the complaint and relied upon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come within the purview of Section 138 of the Act. 22. In the case of V.Y. Jose and Anr. vs. State of Gujarat and Anr. reported at 2008 (16) SCALE 167, the Apex Court on the point of exercise of inherent powers under section 482 of Cr.P.C., has held as under: 15..........Section 482 of the Code of Criminal Procedure, saves the inherent power of the court. It serves a salutary purpose viz. a person should not undergo harassment of litigation for a number of years although no case has been made out against him. It is one thing to say that a case has been made out for trial and as such the criminal proceedings should not be quashed but it is another thing to say that a person should undergo a criminal trial despite the fact that no case has been made out at all. (emphasis supplied) 21. Before parting, however, we may notice a decision of this Court in from State of Madhya Pradesh vs. Awadh Kishore Gupta [(2004) 1 SCC 691] whereupon strong reliance has been placed by Mr. Jain. This Court, therein upon referring to Bhajan Lal (supra) opined as under: 11. As noted above, the powers possessed by the High Court under Section 482 of the Code are very wide and the very plenitude o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be of secondary importance. It is the material collected during the investigation and evidence led in the court which decide the fate of the accused person. The allegations of mala fides against the informant are of no consequence and cannot by itself be the basis for quashing the proceedings. (Emphasis in original) 22. No exception can be taken to the aforementioned principles of law, as therein also it has categorically been held that exercise of inherent power under Section 482 is permissible where allegations set out in the complaint do not constitute the offence for which cognizance has been taken by the Magistrate. It is evidently a case of that nature. 23. A bare reading of the documents relied upon and relevant portion of which has been reproduced above (statutory notice issued by the respondent to the petitioners, the complaint and the affidavit by way of evidence, Deed of Corporate Guarantee and the Memorandum of Understanding of Understanding dated 28th April, 2005), leave no scope for any doubt that the cheques in question were not issued against a debt which was in existence at the time of issuance of cheque. The cheques were issued not for an existing debt due, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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