Central Board of Trustees Vs. Shri Kumar Rajan RP Hindustan Newsprint Ltd. - The claim of Appellant was to be satisfied in full, otherwise breach of provision of Section 30(2)(e) would have occurred. We, thus, are inclined to issue direction to the Successful Resolution Applicant to make payment of the admitted claim of the Appellant towards provident fund dues to save the plan from invalidity.

NCLAT (21.06.2023) In Central Board of Trustees Vs. Shri Kumar Rajan RP Hindustan Newsprint Ltd. [Company Appeal (AT) (CH) (Ins) No. 268/2021] held that;

• The claim of Appellant was to be satisfied in full, otherwise breach of provision of Section 30(2)(e) would have occurred. We, thus, are inclined to issue direction to the Successful Resolution Applicant to make payment of the admitted claim of the Appellant towards provident fund dues to save the plan from invalidity.

Excerpts of the order; 

# 1. Aggrieved by the Order dated 29/02/2021 in IA(IBC)/21/KOB/2021 in TIBA/03/KOB/2019, passed by the National Company Law Tribunal, Kochi Bench, whereby this Application, preferred by the Resolution Professional (RP) was approved. Subsequent to the approval of the Resolution Plan on 29/01/2021, the RP sent an email dated 09/02/2021 informing the Appellant regarding the Admission of their claim only to the extent of 35.13%. It is submitted by the Learned Counsel for the Appellant that the RP had classified them as ‘Operational Creditors’ without approving the Notice of the Adjudicating Authority based on the ratio laid down by this Tribunal in the matter of ‘Jet Aircraft Maintenance Engineers Welfare Association Vs Ashish Chhawchharia, Resolution Professional of Jet Airways (India) Ltd. & Ors.’ reported in Company Appeal (AT) (CH) (Ins) No. 752/2021 which relied upon the Apex Court Judgment in the matter of ‘Sunil Kumar Jain vs Sundaresh Bhatt’, reported in Civil Appeal No. 407/2023, dated 30/01/2023.

# 2. Initially, the Claim Petition under Form F was filed for Rs. 23,74,92,674/- (Rupees Twenty Three Crores Seventy Four Lakhs Ninety Two Thousand Six Hundred and Seventy Four Only) before the ‘Interim Resolution Professional’ (“IRP”) on 26/02/2020. Thereafter a revised claim in Form F was filed for Rs. 30,46,31,880/- (Rupees Thirty Crore Forty Six Lakhs Thirty One Thousand Eight Hundred and Eighty Only) on 21/10/2020 and the same was also admitted by the RP. It is submitted that the EPFO would have to be paid in priority to all other claims and that even in Liquidation Proceedings, the EPFO is outside the waterfall mechanism provided under Section 53 of the Code. However, the RP intimated them that they are entitled to only 35.13% of the total admitted claim of Rs. 30,46,31,880/- (Rupees Thirty Crore Forty Six Lakhs Thirty One Thousand Eight Hundred and Eighty Only). This Tribunal in ‘Jet Aircraft Maintenance Engineers Welfare Association Vs. Ashish Chhawchharia, Resolution Professional of Jet Airways (India) Ltd. & Ors.’ reported in [(2022) SCC OnLine NCLAT 418] dated 21/10/2022 has observed as follows:

• 117. In the appeal filed by the Regional Provident Fund Commissioner, it has been pleaded that the claim was filed by the Appellant for an amount of Rs.24,40,65,594/- towards damages under Section 14B of Employees’ Provident Funds & Miscellaneous Provisions Act 1952, as per the order dated 17.10.2018. It is further mentioned that interest under Section 7Q was also levied of Rs.12,85,92,763/-, which amount was paid by the establishment. The amount which was claimed by the Appellant was fully admitted by the Resolution Professional. List of Creditors mentions the admitted amount of the Appellant. The Appellant has filed his claim in Form B, which Form B is at page 102 to 104 of the Appeal. The Appellant’s claim was not in the nature of workmen dues. The claim was also with regard to damages imposed under Section 14B of the 1952 Act. The Appellant was treated as Operational Creditor by the Resolution Professional, hence, the Appellant was allocated a fixed amount of Rs.15,000/- which was allocated to all Operational Creditors except the workmen.

• 118. Challenge to the Resolution Plan by the Appellant is on the ground that Section 11 of the 1952 Act requires priority over all other dues and further Section 36(4)(a)(iii) excludes provident fund dues from the liquidation estate of the Corporate Debtor. We have already dealt with provisions of Section 36(4)(a)(iii) in foregoing paras of this judgment. Now, we, need to look into Section 11 of 1952 Act. The Section 11 of the 1952 Act provides for priority of payment of contributions over other debts. Learned counsel for the Appellant has relied on judgment of the Hon’ble Supreme Court in “Maharashtra State Cooperative Bank Limited vs. Assistant Provident Fund Commissioner & Others, (2009) 10 SCC 123”. The Hon’ble Supreme Court dealing with Section 11 of 1952 Act laid down following in Para 67:

• “67. The expression “any amount due from an employer” appearing in sub-section (2) of Section 11 has to be interpreted keeping in view the object of the Act and other provisions contained therein including sub-section (1) of Section 11 and Sections 7A, 7Q, 14B and 15(2) which provide for determination of the dues payable by the employer, liability of the employer to pay interest in case the payment of the amount due is delayed and also pay damages, if there is default in making contribution to the Fund. If any amount payable by the employer becomes due and the same is not paid within the stipulated time, then the employer is required to pay interest in terms of the mandate of Section 7Q. Likewise, default on the employer’s part to pay any contribution to the Fund can visit him with the consequence of levy of damages.”

• 119. The above judgment lays down that any amount due from employer appearing in sub-section (2) of Section 11 also covers the amount determined under Section 14B and there cannot be any quarrel to the preposition as laid down by the Hon’ble Supreme Court in the above case. The priority for payment of debt under Section 11 of the 1952 Act has to be looked into in view of the mechanism which is specifically provided under Section 53(1) of the Code. We have already dealt the provision of Section 36(4)(a)(iii) of the Code and held that provident fund dues are not subject to distribution under Section 53(1) of the Code. The issue is fully covered by three member bench judgment of this Tribunal in “Tourism Finance Corporation of India Ltd. vs. Rainbow Papers Ltd. & Ors.” (Supra). In view of foregoing discussion, we hold that provident fund dues were entitled to be paid in full. In view of the judgment of Supreme Court in “Maharashtra State Cooperative Bank Limited vs. Assistant Provident Fund Commissioner & Others” (Supra), the claim of Appellant was to be satisfied in full, otherwise breach of provision of Section 30(2)(e) would have occurred. We, thus, are inclined to issue direction to the Successful Resolution Applicant to make payment of the admitted claim of the Appellant towards provident fund dues to save the plan from invalidity.”

# 3. In the aforenoted Judgment a clear direction was given to the ‘Successful Resolution Applicant’ to make payment of the admitted Claims towards Provident Fund dues and the same was upheld by the Hon’ble Apex Court in Civil Appeal No. 407/2023, dated 30/01/2023. The Hon’ble Apex Court has laid down that the share of workmen dues shall be kept outside the ‘Liquidation assets and the concerned workmen / Employees shall have to be paid the same, out of such Provident fund, Gratuity Fund, if any available. The words, ‘if any available’, cannot be read to mean that the workmen and empolyees are not entitled for Provident fund, Gratuity Fund, Pension fund, if not available with the Liquidator. As ratio of the Judgement in ‘Jet Aircraft Maintenance Engineers Welfare Association Vs. Ashish Chhawchharia, Resolution Professional of Jet Airways (India) Ltd. & Ors. (Supra) of this Tribunal was upheld by the Hon’ble Apex Court, this Tribunal is of the earnest view that both Provident Fund and Gratuity Fund is to be paid in full as per the Provisions of  ‘EPF and NP Act, 1952’ and ‘Payment of Gratuity Act, 1972’. This Tribunal in the matter of ‘Mrs. C.G. Vijayalakshmi Vs. Shri. Kumar Rajan, Resolution Professional of Hindustan Newsprint Limited (Corporate Debtor) & Ors. and Batch matters’, in Company Appeal (AT) (Ins) No. 29, 44, 56 to 58 & 62 to 86 of 2021, while allowing the Appeals of the same Corporate Debtor and dealing with the same issue has observed as follows:

• “…..Since admittedly the amounts paid are only 35.13% having treated them as ‘Secured Creditors’, we are of the considered view that indeed there was a violation of the provisions of Section 30(2) of the Code, with respect to the payment of ‘PF’ and ‘Gratuity’ only.”

# 4. Keeping in view, the afore noted principle is applicable to the facts of this case, the instant Company Appeal (AT) (CH) (Ins) No. 268/2021 is allowed with a direction to include these amounts in the ‘Resolution Plan’. No Order as to Costs. Connected Pending Interlocutory Applications, if any, are ‘closed’.

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STCI vs Dsk Southern Projects Private Limited - he Hon’ble NCLAT in its order in the matter of The Directorate of Enforcement V/s. Shri. Manoj Kumar Agarwal (supra) has held that the Enforcement Directorate cannot hold or encumber the property of Corporate Debtor upon commencement of CIRP in its case.

NCLT Mumbai C-IV (28.04.2023) In STCI  vs Dsk Southern Projects Private Limited  [IA-383/ 2022 IN CP.(IB)178/MB-IV/2021] held that;

• The Hon’ble NCLAT in its order in the matter of The Directorate of Enforcement V/s. Shri. Manoj Kumar Agarwal (supra) has held that the Enforcement Directorate cannot hold or encumber the property of Corporate Debtor upon commencement of CIRP in its case.

Excerpts of the order; 

1. The instant Interlocutory Application is being filed by the Applicant, the Mr. Manoj Kumar Agarwal, the then Resolution Professional of M/s DSK Southern Projects Private Limited, the Corporate Debtor. The Applicant submits that CIRP in this case commenced on 09.12.2021 and the Resolution Plan in case of said Corporate Debtor was approved under Section 31(1) of the Insolvency and Bankruptcy Code,2016 by Mumbai Bench of NCLT vide its order dated 17.02.2023. 

2. The Applicant has filed this Application seeking appropriate directions against the Respondent i.e. The Deputy Director, Directorate of Enforcement, Mumbai for the release of the property of the Corporate Debtor aggregating to a value of Rs. 32,47,55,298 (Rupees Thirty-Two Crores Forty Seven Lakhs Fifty Five Thousand Two Hundred and Ninety Eight only) seized by the Respondent herein named vide surmises of provisional attachment Order (PAO) No. 2019 in File No. ECIR NO. 01/MBZO-II/2018 dated 14.02.2019. 

3. The Applicant submits that the Respondent herein-named is a Law Enforcement Agency/Statutory Authority formed under the provisions of the Foreign Exchange Regulation Act. 1947, and has passed a Provisional Attachment Order no. 01/2019 in file no. ECIR No. 01/MBZO-11/2018 dated 14.02.2019 and vide the surmises of the same, has seized and attached the immovable and movable property of the Corporate Debtor having an aggregate value of Rs.32,51,10,596/- (Rupees Thirty-Two Crores Fifty-One Lakhs Ten Thousand Five Hundred Ninety-Six only). 

3.1.The Applicant had sent a letter dated 21.12.2021 to the Respondent stating that the Provisional Attachment of the assets of the Corporate Debtor under CIRP is in gross violation of the provisions of the Code which are binding on all stakeholders including statutory authorities. The Applicant further submitted that vide order dated 09.12.2021 there is moratorium imposed under section 14 of the Code which shall continue during CIRP inter alia prohibiting "transferring, encumbering, alienating or disposing of by the Corporate Debtor any of its assets or any legal right or beneficial interest therein". Therefore, from the commencement of CIRP initiation, the property of the Corporate Debtor is protected by such moratorium. Furthermore, the Applicant has also informed the Respondent that from the day of passing of the CIRP Order, the powers of the Board of Director stand suspended and all the powers of the said Board of Directors are now vested with the Applicant. Furthermore, the Applicant vide the said letter had also requested the Respondent to provide the Applicant with Information and Documents regarding the Corporate Debtors such as bank statements, property deeds inter-alia. However, the Respondent has neither complied with the letter of the Applicant and released the attached property of the Corporate Debtor, nor has it replied to the same, thereby sufficiently clarifying that the Respondent has attempted to supersede the Jurisdiction of this Hon'ble Tribunal. 

3.2.The said act of subsisting and continued attachment of the asset (movable/ immovable property) of the Corporate Debtor is in constant violation of Sections 14, 18, 20 and 32(A) of the Insolvency and Bankruptcy Code and against the letter and the spirit of the precedent laid down by the Hon'ble National Company Law Tribunal in the matter of The Directorate of Enforcement V/s. Shri. Manoj Kumar Agarwal {Company Appeal (At)(Insolvency) No.575/2019}, wherein it was held at para 42 that “In our view, there is no conflict between PMLA and Insolvency and Bankruptcy Code,2016 and even if a property has been attached in the PMLA which is belonging to the Corporate Debtor, if CIRP is initiated, the property should become available to fulfil objects of Insolvency and Bankruptcy Code,2016 till a resolution takes place or sale of liquidation asset occurs in terms of Section 32A”. 

4. This Bench heard the Counsel(s) for the Applicant as well as Respondent and perused the material available on record. 

4.1.This Bench notices that Insolvency and Bankruptcy Code,2016 was amended w.e.f. 28.12.2019 inserting therein Section 32A which provides here as under – 

“32A. Liability for prior offences, etc.— 

(1) Notwithstanding anything to the contrary contained in this Code or any other law for the time being in force, the liability of a corporate debtor for an offence committed prior to the commencement of the corporate insolvency resolution process shall cease, and the corporate debtor shall not be prosecuted for such an offence from the date the resolution plan has been approved by the Adjudicating Authority under section 31, if the resolution plan results in the change in the management or control of the corporate debtor to a person who was not-- 

(a) a promoter or in the management or control of the corporate debtor or a related party of such a person; or 

(b) a person with regard to whom the relevant investigating authority has, on the basis of material in its possession, reason to believe that he had abetted or conspired for the commission of the offence, and has submitted or filed a report or a complaint to the relevant statutory authority or Court: 

Provided that if a prosecution had been instituted during the corporate insolvency resolution process against such corporate debtor, it shall stand discharged from the date of approval of the resolution plan subject to requirements of this sub-section having been fulfilled: 

Provided further that every person who was a designated partner as defined in clause (j) of section 2 of the Limited Liability Partnership Act, 2008 (6 of 2009), or an officer who is in default, as defined in clause (60) of section 2 of the Companies Act, 2013 (18 of 2013), or was in any manner incharge of, or responsible to the corporate debtor for the conduct of its business or associated with the corporate debtor in any manner and who was directly or indirectly involved in the commission of such offence as per the report submitted or complaint filed by the investigating authority, shall continue to be liable to be prosecuted and punished for such an offence committed by the corporate debtor notwithstanding that the corporate debtor's liability has ceased under this subsection. 

(2) No action shall be taken against the property of the corporate debtor in relation to an offence committed prior to the commencement of the corporate insolvency resolution process of the corporate debtor, where such property is covered under a resolution plan approved by the Adjudicating Authority under section 31, which results in the change in control of the corporate debtor to a person, or sale of liquidation assets under the provisions of Chapter III of Part II of this Code to a person, who was not-- 

(i) a promoter or in the management or control of the corporate debtor or a related party of such a person; or 

(ii) a person with regard to whom the relevant investigating authority has, on the basis of material in its possession reason to believe that he had abetted or conspired for the commission of the offence, and has submitted or filed a report or a complaint to the relevant statutory authority or Court. 

Explanation.--For the purposes of this sub-section, it is hereby clarified that,- 

(i) an action against the property of the corporate debtor in relation to an offence shall include the attachment, seizure, retention or confiscation of such property under such law as may be applicable to the corporate debtor; 

(ii) nothing in this sub-section shall be construed to bar an action against the property of any person, other than the corporate debtor or a person who has acquired such property through corporate insolvency resolution process or liquidation process under this Code and fulfils the requirements specified in this section, against whom such an action may be taken under such law as may be applicable. 

(3) Subject to the provisions contained in sub-sections (1) and (2), and notwithstanding the immunity given in this section, the corporate debtor and any person who may be required to provide assistance under such law as may be applicable to such corporate debtor or person, shall extend all assistance and cooperation to any authority investigating an offence committed prior to the commencement of the corporate insolvency resolution process.” 

4.2.This Bench finds that the provisional order attaching the properties of the Corporate Debtor, subject matter of present application, came to be passed on 14.02.2019 and the Corporate Debtor was admitted to Corporate Insolvency Resolution Process under Section 9 of the Insolvency and Bankruptcy Code,2016 from 21.12.2021 and the Corporate Debtor was resolved pursuant to order of this Bench dated 17.02.2023. The Hon’ble NCLAT in its order in the matter of The Directorate of Enforcement V/s. Shri. Manoj Kumar Agarwal (supra) has held that the Enforcement Directorate cannot hold or encumber the property of Corporate Debtor upon commencement of CIRP in its case. This the Hon’ble Apex Court in the matter of Essar Steel India Ltd. v. Satish Kumar Gupta, (2020) 8 SCC 531 held that “hydra head popping up” should be prevented and emphasized that the prospective resolution Applicant, who successfully takes over the business of the Corporate Debtor, should be protected from any past claim from resurging and thereby throwing the resolution applicant into uncertainty. This prompted the legislation to insert Section 32A in the Code. 

4.3.This Bench held at para 17(e) of the order dated 17.02.2023 that “In so far as attachment of Corporate Debtor assets by the Enforcement Directorate is concerned, these assets are protected by the provisions contained u/s 32A (1) & 32A (2) of the Code, which provides for immunity to such assets and offence(s) after the resolution of Corporate Debtor provided such assets have been acquired prior to commencement of Corporate Insolvency Resolution Process. Accordingly, the Enforcement Directorate shall release the attachment on such assets, which have been acquired prior to commencement of Corporate Insolvency Resolution Process. The Enforcement Directorate shall also discharge the Corporate Debtor from the offences alleged to have been commissioned prior to commencement of Corporate Insolvency Resolution Process”. 

4.4.The aforesaid directions at para 17(e) of the order dated 17.02.2023 were given in view of specific mandate contained in the Section 32A(2) of the Insolvency and Bankruptcy Code,2016 which provided immunity to the properties of the Corporate Debtor forming part of Resolution Plan approved under 31 of Insolvency and Bankruptcy Code,2016 BC from any action by any Authority. Accordingly, we hold that the attachment of assets of Corporate Debtor consisting of bank accounts aggregating to a total Rs. 3,55,298/- and subject flats/resolution units aggregating to a total of Rs. 32,47,55,298/- under provisional attachment Order (PAO) No. 2019 in File No. ECIR NO. 01/MBZO-II/2018 dated 14.02.2019, as forming a part order dated 05.08.2019 in original complaint (O.C.) No.1104 of 2019 cannot continue after admission of Corporate Debtor into CIRP i.e. 21.12.2021. Further, it is held the Respondents shall release the assets of the Corporate Debtor forthwith in terms of Section 32A of the Insolvency and Bankruptcy Code,2016 as such assets are covered under Resolution Plan approved by this Bench under Section 31 of the Insolvency and Bankruptcy Code,2016 vide order dated 17.02.2023. 

4.5.In view of above the IA-383/2022 is allowed with consequential relief.

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Amrit Sandhu Costar Vs State & Anr. - The proviso attached to section 138 clearly laid down that “debt or other liability” means a legally enforceable debt or other liability.

 HC Delhi (06.09.2022) In Amrit Sandhu Costar  Vs State & Anr. [CRL.M.C. 556/2019 & CRL.M.A. 2314/2019] held that;

• The proviso attached to section 138 clearly laid down that “debt or other liability” means a legally enforceable debt or other liability.

• The accused cannot be prosecuted for offence under section 138 of the Negotiable Instruments Act, 1881 for issuance of cheque for time barred liability or debt.

Excerpts of the order; 

# 1. The present petition is filed under section 482 Code of Criminal Procedure, 1973 (hereinafter referred to as “the Code”) for quashing the criminal complaint titled as Atamjit Singh V Amrit Sandhu Coster & another bearing CC no 6437 of 2017 and the summoning order dated 03.06.2017 (hereinafter referred to as “the impugned order”) passed by the court of Ms. Colette Rashmi Kujur, Metropolitan Magistrate-10, South East, Saket (hereinafter referred to as “the trial court”).

# 2. The factual background necessary to mention for disposal of present petition is that the respondent no.2/ complainant (hereinafter referred to as “the respondent no 2”) has filed a complaint under section 138 of the Negotiable Instruments Act, 1881 titled as Atamjit Singh V Amrit Sandhu Coster & another bearing CC No.6437 of 2017 on allegations that the petitioner (arrayed as the accused no 1 in complaint) and her sister namely Jasween Sandhu (arrayed as the accused no 2 in complaint and is petitioner in Crl.M.C. bearing no 437/2019) issued a cheque bearing no. 329623 dated 06.03.2017 amounting to Rs 20,00,000.00 (Rupees Twenty Lacs Only) drawn on Syndicate Bank, Branch West Punjabi Bagh, Central Market, New Delhi-110026 (hereinafter referred to as “the cheque in question”) towards discharge the their liability as detailed in complaint. The respondent no 2 presented said cheque for encashment on 06.04.2017 at HDFC Bank, Branch G.K.-l but was dishonored due to “Payment Stopped by Drawer” as intimated vide return memo dated 11.04.2017. The petitioner and Jasween Sandhu did not pay cheque amount despite notice dated 10.05.2017. The respondent being aggrieved filed the present complaint.

# 3. The trial court vide impugned order summoned the petitioner and Jasween Sandhu. The impugned order is reproduced as under:-

• 03.06.2017

Present: Complainant .along with Sh. Sanjay Kothiyal, Adv.

Heard. Record perused.

Cognizance of offence u/s 138 Nl Act taken.

PSE has been led by the complainant.

Vide a separate statement of the complainant, PSE has been closed.

Heard on issuance of process.

• In view of the submissions made and documents tendered, this Court is satisfied that there is sufficient material on record to proceed against all the accused. Let summons be Issued against all the accused vide PF/RG/AD/Courier returnable on 09.08.2017. Pf be filed within 02 weeks.

# 4. The petitioner being aggrieved filed the present petition and challenged the impugned order. The petitioner pleaded that the present petition is filed with an ulterior motive to coerce the petitioner to settle the criminal case initiated by her for the offence of cheating stated to be committed by respondent no 2 vide FIR bearing no 734 of 2015 registered at PS Hauz Khas and proceedings under sections 82 and 83 of the Code have already been initiated against the petitioner. There is no legally enforceable liability is due against the petitioner towards the respondent no 2.

 

# 4.1 The petitioner at present is residing in USA. The respondent no 2 was introduced with the petitioner by a close family friend namely Harpreet Singh and the respondent no 2 represented himself as sole proprietor of M/s Ace Trading Company and is engaged in the business of development of restaurants and food courts for his clients. The respondent no 2 after winning trust and confidence of the petitioner lured her to invest in the business of restaurant and food court business and the respondent no 2 would be developing food court at Ground Floor of Building No. 8, DLF Cyber City, Phase - II, Sector 24, Gurgaon, Haryana for the petitioner for a total cost of Rs. 40 lacs and the respondent no 2 would be paying Rs. 1 lacs per month till the time the food court is developed at the aforesaid address. The respondent no 2 also promised to hand over fully developed food court to the petitioner within six month and the petitioner would get monthly net profit of 3/4 lacs. The petitioner paid Rs. 40 lacs to the respondent no 2 through cheques and in cash. The respondent No 2 started to pay Rs. 1 lac per month to the petitioner with effect from August, 2011 and continue to pay till December, 2011.

# 4.2 The petitioner went back to USA and remained there from 13th December, 2011 to 12th January, 2012 and found that food court was being operated by someone else. It was revealed to the petitioner that the food court which was stated to be developed for the petitioner was in fact being developed for another person by the respondent no 2. The respondent no 2 expressed his inability to hand over the food court to the petitioner and also to return the money advanced by the petitioner and to give assured return as agreed. However, the respondent no 2 started to pay Rs. 60,000/- pm with effect from 01.01.2012 to the petitioner. The respondent no 2 at the insistence of the petitioner acknowledged Rs. 40 Lacs paid by her and entered in two Assured Return Agreements. The respondent no 2 was found to be missing and as such the petitioner filed a police complaint dated 08.12.2014 at P S Hauz Khas and another complaint on 05.01.2015 to Deputy Commissioner of police. Thereafter the petitioner filed a complaint under section 200 of the Code along with an application under section 156 (3) of the Code wherein vide order dated 06.07.2015, the court directed for registration of FIR. Accordingly FIR bearing no 734/2015 was registered. The applications filed for grant of anticipatory bail filed by the respondent no 2 before Sessions Court, this Court and the Supreme Court have already been dismissed. The respondent no 2 vide order dated 12.05.2017 was directed to join the investigation and to pay Rs. 15 lacs to the petitioner but the respondent no 2 did not comply these.

# 4.3 The petitioner came to know about pendency of present complaint when the respondent no 2 filed an application in pending proceedings qua FIR No 734/2015 wherein it was disclosed that non bailable warrants had been issued against the petitioner. The complaint did not disclose any cause of action against the petitioner in absence of any legally enforceable debt towards the petitioner. The petitioner handed over cheque in question to the respondent no 2 for development of food court along with the cheque bearing no 329612 dated 21.03.2011. The respondent no 2 was given Rs 15 Lacs in lieu of cheque in question. The respondent no 2 did not return back the cheque in question as having lost the cheque in question and due to this a stop payment request was made by the petitioner to the bank vide communication dated 04.08.2011.

# 5. The petitioner challenged impugned order on the grounds that the present complainant is perverse and is abuse of process of law and is filed to coerce the petitioner to settle criminal case initiated by her vide FIR bearing no 734/2015 registered at PS Hauz Khas. The complaint does not disclose any debt or liability against the petitioner. There was no occasion for the petitioner to issue the cheque in question to the respondent no 2 in the year 2017 when his whereabouts could not even be traced by the police and non bailable warrant issued against him by the court of Metropolitan Magistrate could not be executed and proceedings under section 82/83 were ordered to be issued against the petitioner. The petitioner handed over cheque in question to the respondent no 2 in the year 2011 towards the development of food court along with the cheque bearing No 329612 dated 21.03.2011. The petitioner had also given Rs. 15 lacs to the respondent no 2 as the respondent no 2 disclosed having lost the cheque in question and due to this reason a request for stop payment was made to the bank vide communication dated 04.08.2011 by the petitioner. The trial court has failed to appreciate that the present complaint is having full of inconsistencies. The period of limitation for enforcing/recovering any debt expired in the year 2014 and any cheque issued after the expiry of the period of limitation cannot be said to have been issued towards any debt or other liability. The trial court has failed to appreciate that the cheque in question was issued by the petitioner on 06.03.2017 on the basis of liabilities incurred in the year 2011. The cheque in question was not given towards discharge of a legally enforceable debt or liability. It was prayed that present complaint along with impugned order be set aside.

# 6. Section 138 of the Negotiable Instruments Act, 1881 deals with dishonour of cheque. It reads as under:-

• 138 Dishonour of cheque for insufficiency, etc., of funds in the account. —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.

7. The Supreme Court in the case of Kusum Ingots & Alloys Ltd. V Pennar Peterson Securities Ltd. & others, (2000) 2 SCC 745 has laid down the following ingredients for taking cognizance under Section 138 of the NI Act:-

• (i) a person must have drawn a cheque on an account maintained by him in a bank for payment of a certain amount of money to another person from out of that account for the discharge of any debt or other liability;

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

• (iii) that cheque is returned by the bank unpaid, either because of the amount of money standing to the credit of the 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 the bank;

• (iv) the payee or the holder in due course of the cheque 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 15 days of the receipt of information by him from the bank regarding the return of the cheque as unpaid;

• (v) the drawer of such cheque fails to make payment of the said amount of money to the payee or the holder in due course of the cheque within 15 days of the receipt of the said notice;"

The Supreme Court in Jugesh Sehgal V Shamsher Singh Gogi, (2009) 14 SCC 683 observed that above ingredients being cumulative, it is only when all the aforementioned ingredients are satisfied that the person who had drawn the cheque can be deemed to have committed an offence under Section 138 of the Act.

# 8. The counsel for the petitioner argued that the trial court vide impugned order took cognizance wrongfully for offence punishable under section 138 of the Negotiable Instruments Act, 1988 and ordered for issuance of summon. The trial court did not appreciate that the present complaint does not disclose any legally enforceable debt or liability against the petitioner. The counsel for the petitioner relied on Prajan Kumar Jain V Ravi Malhotra,2009 (113) DRJ 275; Vijay Polymers Pvt. Ltd. & another V M/s Vinnay Aggarwal, 2009 V AD (Delhi ) 70;Sasseriyil Joseph V Devassia, 2001Crl L J 24 and Jage Ram Karan Singh and another V State and another,265 (2019) Delhi Law Times 374.

# 9. The counsel for the respondent no 2 justified the impugned order and argued that the petitioner and her sister Jasween Sandhu issued the cheque in question in favour of the respondent no 2 towards discharge of legally enforceable liability and such the petitioner was rightly summoned by the trial court.

# 10. The legal issue which needs judicial consideration is that whether the petitioner issued the cheque in question towards the discharge of legally enforceable liability or debt which is an essential ingredient for invoking section 138 of the Negotiable Instrument Act, 1881.

# 11. It is necessary to mention facts as narrated in the complaint to decide above legal issue. The respondent no 2 in complaint alleged that he is having rich experience in the property management work and provided consultancy services to the petitioner and her sister Jasween Sandhu i.e. the accused no. 2 who wanted to invest the money. The petitioner had met the respondent no 2 through common friend Annie Manchanda, and sought help of the respondent no 2 in procuring properties in Gurgoan which could yield high rentals and returns to her. The petitioner was also willing to pay charges to the respondent no 2 for his services. The petitioner had availed services and expertise of the respondent no 2 with respect to sale and purchase of various properties for herself and her sister, Jasween Sandhu (accused no. 2) and started to get excellent returns on the investment. The petitioner also made the respondent no 2 to undertake massive renovation work in the property bearing no D-8/4, Ground Floor DLF, Phase-V, Gurgoan for which the petitioner and Jasween Sandhu in total owe Rs. 20,10,000.00. The petitioner and Jasween Sandhu also executed Assured Return Agreements dated 16.09.2011 with M/s. Cyberwalk Tech Park Pvt Ltd (the Developer of Land) and M/s. Gyan Marketing Associates Pvt Ltd (the Confirming Party) brokered by the respondent no 2. The petitioner due to successful execution of deal owed Rs. 3,50,000.00 towards the respondent no 2 and Jasween Sandhu owed Rs. 4,60,000.00 as the Consultancy charges. The respondent no 2 also undertook renovation work in other properties of the petitioner and incurred total expenditure of Rs. 2,50,000.00. The petitioner through the respondent no 2 brokered deal of sale of other properties/plots for which the petitioner incurred total commission/consultancy fees of Rs. 20,10,000.00 towards the respondent no 2.

 

# 11.1 The petitioner and Jasween Sandhu in discharge of their liability handed over a cheque bearing no. 329623 dated 06.03.2017 amounting to Rs. 20,00,000 drawn on Syndicate Bank, Branch West Punjabi Bagh, Central Market, New Delhi-110026 i.e. cheque in question to discharge their legally enforceable debt to the respondent no 2 with assurance of encashment on presentation in order. However said cheque got dishonoured on presentation due to Payment Stopped by Drawer as intimated vide Return Memo dated 11.04.2017. The petitioner and Jasween Sandhu did not pay cheque amount despite legal notice dated 10.05.2017. Hence present complaint.

# 12. The legal issue pertaining to the liability of accused under section 138 of the Negotiable Instruments Act, 1881 in time barred debt was considered and discussed by different High Courts. The Kerala High Court in Sasseriyil Joseph V Devassia considered the question whether the respondent who issued the cheque in question in discharge of a time barred debt is liable under Section 138 of the Negotiable Instruments Act, 1881. It was observed by the learned Single Judge as under:-

• Thus, Section 138 is attracted only if the cheque is issued for the discharge of a legally enforceable debt or other liability. In this case, admittedly, the cheque in question was issued in discharge of a time barred debt. It cannot be said that a time barred debt is a legally enforceable debt. In this connection, it is also relevant to note the decision of the Andhra Pradesh High Court reported in Girdhari Lal Rathi v. P.T.V. Ramanujachari 1997 (2) Crimes 658. It has been held in that case that if a cheque is issued for a time barred debt and it is dishonoured, the accused cannot be convicted under Section 138 of the Negotiable Instruments Act simply on the ground that the debt was not legally recoverable. I am fully in agreement with the view expressed by the learned Judge in the decision referred to above.

The Judgment rendered by Kerala High Court in Sasseriyil Joseph's case was challenged before the Supreme Court in Special Leave to Appeal (Crl.) No.1785/2001 which was decided by the Supreme Court vide Judgment dated:10-09-2001 and view of Kerala High Court was affirmed by holding that the cheque in question having been issued by the accused for due which was barred by limitation the penal provision under Section 138 of the Negotiable Instruments Act is not attracted in the case.

# 13. In Vijay Polymers Pvt. Ltd. & another V M/s Vinnay Aggarwal decided by another Coordinate Bench of this court, issue for consideration was whether the complaint filed under Section 138 of the Negotiable Instruments Act, 1881 was not maintainable in law in as much as same was based upon the dishonour of a cheque which was issued by accused in lieu of a debt which was not legally recoverable at the time of issuance of the said cheque. The learned Single Judge after relying on Sasseriyil Joseph V Devassia decided by the Supreme Court and referring Ashwini Satish Bhat V Shri Jeevan DivakarLolienkar& another, 2000(5) Bom CR 9 decided by Bombay High Court allowed the petition which was filed to impugn summoning order which was passed on basis of a cheque issued for time barred liability and also observed that for analyzing the limitation of a civil liability beyond a period of three years, the acknowledgement, if any, must be there before period of limitation is over, which is not the case of the complainant. Another Coordinate Bench of this court in Prajan Kumar Jain V Ravi Malhotra after relying on Vijay Polymers Pvt. Ltd. & another V M/s Vinnay Aggarwal observed that cheques which are stated to be subject matter of the complaint were issued for the discharge of a liability of a debt arising out of the agreement dated 14.6.2000 which had become time barred and as such debt was not a legally enforceable debt within the meaning of Section 138 Explanation of the NI Act. Accordingly, the complaint and all proceedings emanating there from were ordered to be quashed. In Jage Ram Karan Singh and another V State and another, the learned Single Judge of this court observed as under:-

• Therefore, I do not agree with the contention raised by the learned counsel for the petitioners that the Appellate Court has misinterpreted Section 139 of the NI Act. The Appellate Court has rightly held that the alleged responsibility of the respondent No.2, if any, had already become time-barred as on the date of the issuance of cheque and, therefore, the same cannot be said to be in discharge of a legally enforceable debt or liability.

# 13.1 Another Coordinate Bench of this court in MRB Promoters Pvt. Ltd. & others V Splendor Land base Limited, Crl.M.C. no 3744/2016 decided on 03rd July, 2017 considered plea of the accused that the claim of the complainant is barred by law of limitation after placing reliance on Vijay Polymers Pvt. Ltd. & another V Vinay Aggarwal, Prajan Kumar Jain V Ravi Malhotra and Smt. Ashwini Satish Bhat V Shri Divakar Lolinenkar as referred hereinabove. The learned Single Judge in this case took different view by considering that the accused in reply to notice stated that the cheques were given to the complainant in good faith in furtherance of bona fide intent and the accused always intended to repay which can be determined during the trial.

# 14. The Punjab & Haryana High Court in Sultan Singh V Tej Partap, 2022(1) RCR (Criminal) 712 deliberated issue whether issuance of a cheque for repayment of a time barred debt would amount to a written promise to pay the said debt within the meaning of section 25(3) of the Indian Contract Act, 1872 and would the said promise, by itself, create any “legally enforceable debt”, as stated in section 138 of the Negotiable Instruments Act, 1881. The court after considering the relevant provisions as well as the judgments of various Courts on held that the issuance of a cheque in repayment of a time barred debt amounts to a written promise to pay the said debt within the meaning of section 25(3) of the India Contract Act, 1872 and the said promise by itself would create a legally enforceable debt or liability, as contemplated by section 138 of the Negotiable Instruments Act. The court also referred Shapoor Freedom Mazda V Durga Prosad Chamaria, AIR 1961 SC 1236 wherein the Supreme Court while discussing „acknowledgement‟ of debt in terms of section 19 of Limitation Act, held that an admission as regards liability may be in any form and may be „express‟ or „implied,‟ and that acknowledgment requires to be construed liberally.The Punjab & Haryana High Court again in Sumit Singla V Kala Mandir Sarees and Jewellers, CRM-M-34617-2022 (O&M) decided on 17th August, 2022 took contrary view after referring and considering Prajan Kumar Jain V Ravi Malhotra after relying on Vijay Polymers Pvt. Ltd. & another V M/s Vinnay Aggarwal. It was observed that the petitioner/accused has raised an issue as regards his liability in respect of the dishonoured cheque, it needs to be mentioned that section 118 and 139 of the Negotiable Instrument Act,1881 embody some presumptions in favour of holder of cheque particularly as regard to existence of debt or liability which are rebuttable and can be rebutted by way of leading. It was further observed that trial Court would be able to take evidence and not the High Court. The learned Single Judge placed reliance on S. Natarajan V Sama Dharman, Criminal Appeal No. 1524 of 2014 decided by the Supreme Court by observing that whether the debt was time barred or not can be decided only after the evidence is adduced being a mixed question of law and fact.

# 15. The High Court of Karnataka in The Bidar Urban Co-operative Bank Ltd. V Mr. Gidrsh, Criminal Appeal No.200057/2016 decided on 17th December, 2020 observed that the complainant has failed to establish existence of legally recoverable debt. The trial court has rightly held that mere issuance of cheque without corresponding legally recoverable debt is not an offence. The trial court rightly acquitted the accused.

# 16. It is appearing from perusal of complaint that the respondent no 2 entered into Assured Return Agreements (Mark „A‟ and „Mark‟) with the petitioner and Jasween Sandhu on 16th September, 2011 and all transactions took place between the petitioner and the Jasween Sandhu in years 2011 as reflected from documents Ex. CW1/B1-B4 and as such whatever was due towards the respondent no 2 from the petitioner and Jasween Sandhu was in year 2011. The cheque in question Ex. CW1/B was issued on 06.03.2017 which was got dishonoured as payment was stopped by the petitioner as reflected from Ex. CW1/C1. During the period with effect from 2011 till 06.03.2017 i.e. day on which cheque was issued, there is no acknowledgement on behalf of either the petitioner or Jasween Sandhu within meaning of section 18 of the Limitation Act, 1963. The language of section 138 of the Negotiable Instruments Act, 1881 is clear and does not mandate any other interpretation except what is clear mentioned in the section. The proviso attached to section 138 clearly laid down that “debt or other liability” means a legally enforceable debt or other liability. I am in agreement with the view taken by Coordinate Benches of this court, Kerala High Court, Bombay High Court and High Court of Karnataka. The accused cannot be prosecuted for offence under section 138 of the Negotiable Instruments Act, 1881 for issuance of cheque for time barred liability or debt.

# 17. The trial court took cognizance vide impugned order. Section 190 empowers a Magistrate to take cognizance of an offence in certain circumstances. Sub-section (1) reads as under:- 

• Cognizance of offences by Magistrates.-

• 1) Subject to the provisions of this Chapter, any Magistrate of the first class, and any Magistrate of the second class specially empowered in this behalf under Sub-section (2), may take cognizance of any offence-

• (a) upon receiving a complaint of facts which constitute such offence;

• (b) upon a police report of such facts;

• (c) upon information received from any person other than a police officer, or upon his own knowledge, that such offence has been committed.

# 18. Cognizance is a stage when a Magistrate applies his mind to the suspected commission of an offence. The magistrate has to apply his mind to the facts stated in the police report or complaint before taking cognizance for coming to the conclusion that there is sufficient material to proceed with the case. It cannot be taken in a mechanical or cryptic manner. It is not only against the settled judicial norms but also reflects lack of application of judicial mind to the facts of the case. However a Magistrate is not required to consider the defence of the proposed accused or to evaluate the merits of the material collected during investigation at time of taking cognizance. It is not necessary to pass a detailed order giving detailed reasons while taking cognizance. The Supreme Court in Fakhruddin Ahmad V State of Uttaranchal, (2008) 17 SCC 157 also held as under:- 

• Nevertheless, it is well settled that before a Magistrate can be said to have taken cognizance of an offence, it is imperative that he must have taken notice of the accusations and applied his mind to the allegations made in the complaint or in the police report or the information received from a source other than a police report, as the case may be, and the material filed therewith. It needs little emphasis that it is only when the Magistrate applies his mind and is satisfied that the allegations, if proved, would constitute an offence and decides to initiate proceedings against the alleged offender, that it can be positively stated that he has taken cognizance of the offence. Cognizance is in regard to the offence and not the offender.

# 19. In the present case, the respondent no 2 in complaint admitted that the petitioner incurred liability towards the respondent no 2 in year 2011 but cheque in question was issued in year 2017 which clearly reflects that the cheque in question was issued towards discharge of time barred liability.

# 20. The Supreme Court continuously observed that the extraordinary power Under Section 482 Code of Criminal Procedure should be exercised sparingly and with great care and caution and can be used to prevent abuse of the process of the court or to secure ends of justice and the exercise of inherent powers entirely depends on facts and circumstances of each case. Section 482 saves the inherent power of the High Court and reads as follows:-

• Saving of inherent powers of High Court. Nothing in this Code shall be deemed to limit or affect the inherent powers of the High Court to make such orders as may be necessary to give effect to any order under this Code, or to prevent abuse of the process of any Court or otherwise to secure the ends of justice.

# 21. The impugned order cannot be legally sustained qua the petitioner and as such the petition is allowed and impugned order is set aside qua the petitioner. The criminal complaint bearing CC No. 6437 of 2017 titled as Atamjit Singh V. Mrs Amrit Sandhu Coster& another also stand dismissed qua the petitioner.

# 22. The present petition alongwith pending applications, if any, stands disposed of.

 

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