Whether or not a common Order for summoning Respondents in different cases filed by a common Petitioner can be passed when the Respondent parties are unrelated


Court :
Delhi High Court

Brief :
The approach adopted by the Delhi High Court is much upholding the rightful procedures of the Court. The High Court of Delhi has pointed out the error in the cognizance of the Trial Court and has remanded the matter back to the Trial Court to make the necessary corrections.

Citation :
Crl.M.C. No. 1522/2020 and Crl.M.A. Nos. 8139/2020 and 10160/2020

  • ORDER SUMMARY: Vikas Bajaj & Anr. V. M/s Kanika Investments Ltd.
  • DATE OF ORDER: 18th March 2020
  • JUDGES: Justice Anu Malhotra
  • REFERENCE: Crl.M.C. No. 1522/2020 and Crl.M.A. Nos. 8139/2020 and 10160/2020

PARTIES:

  • Vikas Bajaj and Another (petitioners)
  • M/s Kanika Investments Ltd. (Respondent)

SUBJECT

The following Order deals with three suits filed by the petitioner under sections 138, 141, 142, 148 of the Negotiable Instruments Act and sections 25 and 26 of the Payments and Settlement Systems Act in which a single common summon was issued by the Court to the respondent parties.

AN OVERVIEW

1. The petitioners sought quashing of the Order of the Trial Court dated 11.3.2019 and all subsequent proceedings qua complaint case No. 1565/2019 u/s. 138 of the Negotiable Instruments Act pending before the Trial Court.

2. The Order was passed by Trial Court in common for three distinct complaint cases having one party in common irrespective of the fact that the opposite parties were unrelated.

3. While two cases in which common summons was issued related to Section 138 of the NI Act, the third case pertained to offence under Section 138 NI Act, read with Section 25 of the Payment and Settlement Act, 2007.

4. The Delhi High Court set aside the impugned Order and remanded back the matter to Trial Court to consider the aspect of summoning and the applicability of the provisions of both the Acts.

IMPORTANT PROVISIONS:

The Negotiable Instruments Act, 1881:

· Section 138 – Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provisions of this Act, be punished with imprisonment (for a term which may be extended to two years), or with fine which may extend to twice the amount of the cheque, or with both: Provided that nothing contained in this section shall apply unless -

(a) the cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier;

(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; and

(c) the drawer of such cheque fails to make the payment of the said amount of money to the payee or, as the case may be, to the holder in due course of the cheque, within fifteen days of the receipt of the said notice.

Explanation. -  For the purposes of this section, "debt or other liability” means a legally enforceable debt or other liability.

· Section 141- (1) If the person committing an offence under section 138 is a company, every person who, at the time the offence was committed, was in charge of, and was responsible to the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly:

Provided that nothing contained in this sub-section shall render any person liable to punishment if he proves that the offence was committed without his knowledge, or that he had exercised all due diligence to prevent the commission of such offence:

Provided further that where a person is nominated as a Director of a company by virtue of his holding any office or employment in the Central Government or State Government or a financial corporation owned or controlled by the Central Government or the State Government, as the case may be, he shall not be liable for prosecution under this Chapter.

(2) Notwithstanding anything contained in sub-section (1), where any offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to, any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.

Explanation. - For the purposes of this section, -

(a) "company” means any body corporate and includes a firm or other association of individuals; and

(b) "director”, in relation to a firm, means a partner in the firm.

· Section 142 - Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974) -

(a) no court shall take cognizance of any offence punishable under section 138 except upon a complaint, in writing, made by the payee or, as the case may be, the holder in due course of the cheque;

(b) such complaint is made within one month of the date on which the cause of action arises under clause (c) of the proviso to section 138:

[Provided that the cognizance of a complaint may be taken by the Court after the prescribed period, if the complainant satisfies the Court that he had sufficient cause for not making a complaint within such period.]

(c) court inferior to that of a Metropolitan Magistrate or a Judicial Magistrate of the first class shall try any offence punishable under section 138.

· Section 148 – (1) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), in an appeal by the drawer against conviction under Section 138, the Appellate Court shall order the appellant to deposit such sum which shall be a minimum of twenty per cent of the fine or compensation awarded by the trial Court:

Provided that the amount payable under this sub-section shall be in addition to any interim compensation paid by the appellant under Section 143-A.

(2) The amount referred to in sub-section (1) shall be deposited within sixty days from the date of the order, or within such further period not exceeding thirty days as may be directed by the Court on sufficient cause being shown by the appellant.

(3) The Appellate Court may direct the release of the amount deposited by the appellant to the complainant at any time during the pendency of the appeal:

Provided that if the appellant is acquitted, the Court shall direct the complainant to repay to the appellant the amount so released, with interest at the bank rate as published by the Reserve Bank of India, prevalent at the beginning of the relevant financial year, within sixty days from the date of the order, or within such further period not exceeding thirty days as may be directed by the Court on sufficient cause being shown by the complainant.

The Payment and Settlement Systems Act, 2007

· Section 25(1) - Where an electronic funds transfer initiated by a person from an account maintained by him cannot be executed on the ground that the amount of money standing to the credit of that account is insufficient to honour the transfer instruction or that it exceeds the amount arranged to be paid from that account by an agreement made with a bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provisions of this Act, be punished with imprisonment for a term which may be extended to two years, or with fine which may extend to twice the amount of the electronic funds transfer, or with both: Provided that nothing contained in this section shall apply unless -

(a) the electronic funds transfer was initiated for payment of any amount of money to another person for the discharge, in whole or in part, of any debt on other liability;

(b) the electronic funds transfer was initiated in accordance with the relevant procedural guidelines issued by the system provider;

(c) the beneficiary makes a demand for the payment of the said amount of money by giving a notice in writing to the person initiating the electronic funds transfer within thirty days of the receipt of information by him from the bank concerned regarding the dishonour of the electronic funds transfer; and

(d) the person initiating the electronic funds transfer fails to make the payment of the said money to the beneficiary within fifteen days of the receipt of the said notice.

· Section 26 - (1) Where a person contravenes the provisions of section 4 or fails to comply with the terms and conditions subject to which the authorisation has been issued under section 7, he shall be punishable with imprisonment for a term which shall not be less than one month but which may extend to ten years or with fine which may extend to one crore rupees or with both and with a further fine which may extend to one lakh rupees for every day, after the first during which the contravention or failure to comply continues.

(2) Whoever in any application for authorisation or in any return or other document or on any information required to be furnished by or under, or for the purpose of, any provision of this Act, wilfully makes a statement which is false in any material particular, knowing it to be false or wilfully omits to make a material statement, shall be punishable with imprisonment for a term which may extend to three years and shall also be liable to fine which shall not be less than ten lakh rupees and which may extend to fifty lakh rupees.

(3) If any person fails to produce any statement, information, returns or other documents, or to furnish any statement, information, returns or other documents, which under section 12 or under section 13, it is his duty to furnish or to answer any question relating to the operation of a payment system which is required by an officer making inspection under section 14, he shall be punishable with fine which may extend to ten lakh rupees in respect of each offence and if he persists in such refusal, to a further fine which may extend to twenty-five thousand rupees for every day for which the offence continues.

(4) If any person discloses any information, the disclosure of which is prohibited under section 22, he shall be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to five lakh rupees or an amount equal to twice the amount of the damages incurred by the act of such disclosure, whichever is higher or with both.

(5) Where a direction issued under this Act is not complied with within the period stipulated by the Reserve Bank or where no such period is stipulated, within a reasonable time or where the penalty imposed by the Reserve Bank under section 30 is not paid within a period of thirty days from the date of the order, the system provider or the system participant which has failed to comply with the direction or to pay the penalty shall be punishable with imprisonment for a term which shall not be less than one month but which may extend to ten years, or with fine which may extend to one crore rupees or with both and where the failure to comply with the direction continues, with further fine which may extend to one lakh rupees for every day, after the first during which the contravention continues.

(6) If any provision of this Act is contravened, or if any default is made in complying with any other requirement of this Act, or of any regulation, order or direction made or given or condition imposed thereunder and in respect of which no penalty has been specified, then, the person guilty of such contravention or default, as the case may be, shall be punishable with fine which may extend to ten lakh rupees and where a contravention or default is a continuing one, with a further fine which may extend to twenty-five thousand rupees for every day, after the first during which the contravention or default continues.

ISSUES

The High Court framed the following issue -

· Whether or not a common Order for summoning Respondents in different cases filed by a common Petitioner can be passed when the Respondent parties are unrelated.

ANALYSIS OF THE ORDER

1. The Metropolitan Magistrate of the Tees Hazari Court of Delhi was dealing with three cases filed by a common Petitioner namely:

M/s Kanika Investment Limited v. M/s MSP Yatra Private Limited;

M/s Kanika Investment Limited v. Mr. MahendraSinghM/s Kanika Investment Limited v. Mrs. Madhu Chauhan.

While two cases related to Section 138 of the Negotiable Instruments Act, 1881, the third case pertained to offence under Section 138 of the said Act, read with Section 25 and 26 of the Payments and Settlement Act, 2007. The Respondent parties in the three cases instituted differed and were unrelated.

The Trial Court disregarded the above-mentioned facts and passed a common Order, dated 11.3.2019, summoning the Respondents in the three suits.

2. In Vikas Bajaj &Anr. v. M/s Kanika Investments Ltd., the Delhi High Court quashed the Order of the Trial Court dated 11.3.2019. The petitioners submitted that the procedure prescribed for determination of liability under the Payment & Settlement Systems Act, 2007 is not completely in parimateria with the provisions under the Negotiable Instruments Act, 1881.

The impugned order was set aside on two grounds:

(i) The Respondent parties thereby summoned, were unrelated;

(ii) In one of the cases, the offence alleged against the accused related to dishonour of an NACH mandate (Electronic Fund Transfer), which is covered under section 25 of the Payment and Settlement Act 2007, but the Trial Court made no observation as to its applicability.

3. The High Court of Delhi has rightly set aside the impugned order since it lacked adequate observation and cognizance as to the applicability of the provisions of the Payment and Settlement Systems Act, 2007. The Court stated that "it was also essential for the learned Trial Court to consider the aspect of the applicability or otherwise of the provisions of the Payments & Settlement Systems Act, 2007, read with the terms of the contours of the complaint in CC No. 1565/19, in as much as it has been submitted specifically on behalf of the petitioner that the petitioner is entitled to be tried, if required, to be so tried under the appropriate provisions of law."

4. Passing of a common order for summoning in distinct and unrelated parties when the subject matter of the cases are also distinct, has twin negative consequences:

(i) It causes unnecessary complexities and confusion in the legal procedure;

(ii) It tends to ignore other dissimilarities also which might be there in the different suits, what has also happened in the case in hand.

Therefore, the order passed by the learned High Court is an attempt to ensure fair proceedings and justice to the court procedure.

CONCLUSION

The approach adopted by the Delhi High Court is much upholding the rightful procedures of the Court. The High Court of Delhi has pointed out the error in the cognizance of the Trial Court and has remanded the matter back to the Trial Court to make the necessary corrections. The same is particularly keeping up with the duty of higher courts to provide judicial scrutiny to decisions of their subordinate courts when challenged. The Trial Court has rightly been remanded the matter for considering the discrepancies in the applicability of both the Acts involved and taking a decision accordingly.

 

Garima Dikshit
on 23 November 2020
Published in Others
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