Does a decree automatically follows when a Metropolitan Magistrate take cognizance of an offence under S. 138 NI Act? Read on

Delhi High Court: Asha Menon, J., decided a matter concerning dishonour of cheque.

Petitioner had filed a suit for recovery of Rs 1,65, 75,000 under Order XXXVII of the Code of Civil Procedure, 1908.

Background

Managing Director and other Directors of the respondent/defendant persuaded the petitioner/plaintiff to give friendly loans at an interest @18% per annum. Petitioner and his wife gave Rs 18,00,000 from the bank account to Hari Om Anand as the Managing Director of the respondent/defendant.

At the request of Hari Om Anand, the petitioner/plaintiff also started looking after the legal consultation work of the respondent/defendant and the Managing Director and other Directors. Subsequently, the petitioner/plaintiff gave another friendly loan of Rs 3,20,00,000 from his bank account to Hari Om Anand and continued to take care of the legal work.

Further, Petitioner/Plaintiff submitted that 6 cheques were issued by Hari Om Anand. The said cheques were dishonoured on presentation due to insufficient funds. The petitioner/plaintiff filed a criminal case under Section 138 NI Act.

The above was preceded by a notice to which no reply was sent.

In an appearance respondent/defendant offered to furnish a corporate guarantee duly signed by the Managing Director and duly authorized by the Board Resolution relating to immovable properties, for securing the suit amount and the restrain order was filed.

Present petition was filed against two orders of the trial court.

Vide an Order dated 28-7-2020, this Court observed that the trial Court had erred in not securing the amount of Rs 1.5 crores as directed in the order dated 24-12-2019 and ought to have asked the respondent/defendant to submit documents of a property of which the title was clear or a bank certificate recording a no objection to the creation of a second charge on the property to the extent of Rs 1.5 crores ought to have been furnished.

Vide orders dated 4-12-2020, this Court had after noting the letter of the Punjab National Bank, Gymkhana Branch, Meerut, U.P. that a lien had been created in the sum of Rs 1.50 crores, directed that the said amount of Rs 1.50 crores be deposited in an interest-bearing fixed deposit. This FDR had since been deposited in the Registry of this Court as was noted in the orders of this Court dated 5-03-2021 and 8-03-2021

Further, the petitioner’s counsel submitted that trial court had wrongly granted leave to defend the respondent in a case where the respondent/defendant had raised no triable issues.

Adding to the above, it was stated that trial court had proceeded in a wrong direction as the loan transactions between the petitioner/plaintiff and the respondent/defendant were different transactions and had nothing to do with the payment of Rs.1.50 crores, which was towards the legal fees of the petitioner/plaintiff and for which the invoice had been raised.

There was no dispute in that the petitioner/plaintiff had acted as a legal advisor to the respondent/defendant.

There was no document to establish a lawyer-client relationship, no retainership agreement had been filed and therefore, the claim of the petitioner/plaintiff was suspicious that he was entitled to a sum of Rs 1.50 crores towards such legal assistance.

As regards the question whether leave to defend has been rightly granted to the respondent/defendant or not, the facts that prevailed upon before the learned Trial Court were that the petitioner/plaintiff himself has referred to loans having been given to the respondent/defendant by way of bank transfer.

When the respondent/defendant had challenged the claim of the petitioner/plaintiff that he had acted as legal advisor to them and, therefore, the invoice raised was for a fee, this fact too would have to be proved.

In application for leave to defend, the respondent/defendant it was averred that the petitioner/plaintiff had claimed to have been providing legal assistance to the respondent/defendant since the year 2000.

With respect to the submissions made by the counsel for the petitioner/plaintiff, on taking cognizance of an offence by the MM under Section 138 of the N.I. Act automatically a decree against the respondent/defendant should follow, cannot be accepted, as cognizance leads to trial and the accused can also get acquitted.

Secondly, on the one hand, the petitioner/plaintiff claims that the cheques were towards loans which were separate transactions and on the other hand, wants this Court to draw conclusions on that basis, that the signatures on the cheques were admitted and the MM had taken cognizance of the case to decree this suit.

Bench stated that in light of the above submissions, it is indeed a matter of trial as to what was the liability of the respondent/defendant towards the petitioner/plaintiff and towards what transaction or service rendered by the petitioner/plaintiff, that is, as a lender or as a legal advisor, would he be entitled to the suit amount.

High Court held that the Trial Court was right in observing that the defence taken was not moonshine and disclosed triable issues which required inquiry. Leave to defend had to be granted in the light of these varying stands taken by the petitioner/plaintiff in different proceedings.

in the light of the previous orders of this Court and the deposit of the FDR for a sum of Rs.1.5 crores with the Registry of this Court, the leave to defend granted to the respondent/defendant is not unconditional and does not work to the disadvantage of the petitioner/plaintiff.

In view of the above, petition was dismissed. [Sarvesh Bisaria v. Anand Nirog Dham Hospital (P) Ltd., 2021 SCC OnLine Del 3859, decided on 30-7-2021]

Advocates before the Court:

For the Petitioner; Vivek Kumar Tandon, Advocate

For the Respondent: Sanchit Garga, Advocate