Cheque; Nikhil P. Gandhi Vs. State of Gujarat [Gujarat High Court, 15-06-2016]

Negotiable Instruments Act, 1881 – Section 138 – blank cheque or postdated cheque – It is possible for the drawer of a cheque to give a blank cheque signed by him to the payee and consent either impliedly or expressly to the said cheque being filled up at a subsequent point in time and present the same for payment by the drawee – Whenever a blank cheque or postdated cheque is issued, a trust is reposed that the cheque will be filled in or used according to the understanding or agreement between the parties. If there is a prima facie reason to believe that the said trust is not honoured, then the continuation of prosecution under Section 138 of the N.I. Act would be the abuse of the process of law. It is in the interest of justice that the parties in such cases are left to the civil remedy.




Date : 15/06/2016



1. Since the issues raised, in all the captioned applications, are more or less the same, and the relief prayed for is also to quash the selfsame criminal case, those were heard analogously are being disposed of by this common judgment and order.

2. The facts of this case may be summarized as under:

2.1 The complainant M/s. Sharda Steel Corporation is a partnership firm registered under the Partnership Act. The complainant firm is engaged in the business of supply of Steel, Cement, etc. Shri Bharat B. Shah is one of the partners of the firm. One Shri Chimanlal B. Shah is an authorized person so far as the business of the partnership firm is concerned. Both Shri Bharat B. Shah and Shri Chimanlal B. Shah are brothers.

2.2 The Gujarat Pipavav Port Limited (original accused No.1) is a company incorporated under the Companies Act. The accused Nos.2 to 19 shown in the complaint are the Directors and other Office Bearers of the company.

2.3 Sometime in the decade of early 90’s, the company started constructing a Jetty at the Pipavav Port. An agreement was entered into between the complainant firm and the accused company for supply of Steel, Cement, etc for the purpose of the construction of the Port.

2.4 At the relevant point of time i.e. the applicant of the Criminal Miscellaneous Application No.968 of 2014, in his capacity, as the Managing Director and Vice President of the company issued a blank signed cheque in favour of the complainant firm as a security.

2.5 In the course of the business transactions, a dispute arose between the accused company and the complainant firm. The complainant firm preferred three Special Civil Suits Nos.35 of 2000, 36 of 2000 and 37 of 2000 in the Court of the Civil Judge, Senior Division, Amreli, for recovery of a certain amount raised through bills. The Civil Suits are still pending as on date. In the year 2008 with the consent of the parties, the learned Civil Judge passed an order in the Special Civil Suit No.36 of 2000 appointing M/s. Chhajed & Doshi Company, Chartered Accountants, having its Head Office at Mumbai, as a mediator for the purpose of settling the accounts.

2.6 M/s. Chhajed & Doshi Company submitted its report dated 28th April 2009, according to which, the accused company owes a sum of Rs.15,82,23,865/­ (Rupees Fifteen Crore Eighty Two Lac Twenty Three Thousand Eight Hundred Fifty Five only) to the complainant firm.

2.7 The complainant firm, thereafter, started demanding the amount from the accused company. There was lot of correspondence between the complainant and the accused company between 2010 and 2013 in that regard. Ultimately, the complainant thought fit to fill up the blank signed cheque, which was drawn by the then Managing Director on behalf of the company as a security. The cheque was filled up on 28 th March 2013 for the amount of Rs.15,82,23,858/­ drawn in favour of the Sharda Steel Corporation. The complainant negotiated the cheque in question through its banker Dena Bank which was dishonoured with an endorsement of “account closed”.

2.8 The complainant, thereafter, issued a statutory notice dated 23rd April 2013, and called upon the company to make good the amount mentioned in the cheque. The drawer of the cheque, namely, Mr. Nikhil P. Gandhi (original accused No.2) gave a reply dated 6th May 2013 denying his liability. The complainant, thereafter, proceeded to file a complaint in the Court of the learned Chief Judicial Magistrate at Mahuva. The complaint came to be registered as the Criminal Inquiry Case No.20 of 2013. After recording of the verification of the complainant, the Court thought fit to order a Magisterial inquiry under Section 202 of the Code of Criminal, 1973. On completion of the Magisterial inquiry, the Chief Judicial Magistrate, Mahuva thought fit to issue process against the company and the Directors named in the complaint for the offence under

Section 138 of the Negotiable Instruments Act.

On process being issued, the case came to be ultimately registered as the Criminal Case No.1710 of 2013.

2.9 Hence, these applications by the company and the Directors for quashing of the criminal proceedings initiated for the offence punishable under Section 138 of the Negotiable Instruments Act.

3. At the outset, I may state that the learned counsel appearing for the complainant very fairly made a statement that the criminal proceedings may be quashed so far as the following applicants of the Criminal Miscellaneous Application No.1067 of 2014 and Criminal Miscellaneous Application No.1756 of 2014 are concerned. A pursis in writing duly signed by the advocates on record was tendered before this Court. The details are as under:

“Criminal Miscellaneous Application No.1067 of 2014

1. Christian Moller Laursen (petitioner No.1 and original accused No.5)

2. Luis Miranda (petitioner No.3 and original accused No.8)”

“Criminal Miscellaneous Application No.1756 of 2014

1. Mr. Sunil Chawla (petitioner No.1 and original accused No.11)

2. Mr. Anup Sheth (petitioner No.2 and original accused No.10)

3. Dinesh Kumar Lal (petitioner No.3 and original accused No.7).”

4. The aforesaid concession at the end of the complainant was given on the ground that at the time when the offence is alleged to have been committed, they were no way concerned with the day­to­day affairs and management of the company.

5. However, so far as the company and the other accused are concerned, it was argued that the proceedings may not be quashed.

6. I heard Mr. Nephde, the learned senior advocate, Mr. Mahendra R. Anand, the learned senior advocate, and Mr. Mihir Thakore, the learned senior advocate and Mr. S.I. Nanavati, the learned senior advocate appearing for the company and the Directors. I also heard Mr. Abad Ponda, the learned senior advocate who appeared on behalf of the complainant.

7. It is not in dispute that a signed blank cheque leaf was given to the complainant sometime in the year 1994­95. Except the signature of the then Managing Director Shri Gandhi, the other parts of the body were blank.

8 Let me take note of some of the admissions in the complaint itself.

“4) For and on behalf of accused No.1 Company, the accused No.2 had given cheque as security. In the year 2000 some cheques had arisen between the complainant firm and the accused No.2 and the accused No.1 Company did not pay legitimate amount of the complainant firm, therefore, the complainant has filed SPL. Civil Suit No.35 of 2000, 36/2000 and 37/2000 in the Civil Court at Amreli for recovery of dues, wherein the Court granted exparte interim injunction below Ex. 5 in SPL. Civil Suit No.36 of 2000.”

“9) The accused were not releasing payment of legitimate dues of complainant and were passing time. It is respectfully submitted that the cheque No.839170 of Dena Bank, Industrial Finance Branch, Mumbai was given by accused as security to the complainant. The partner of complainant firm wrote a detailed letter dated 9­2­2013 to the accused and requested the accused to make payment of legitimate dues else the complainant intend to present aforesaid cheque to the banker of accused for its clearing for Rs.15,82,23,858/­ in favor of the complainant. Still, however, the accused did not make payment of dues to complainant, hence, the complainant filled up necessary details in the said cheque and deposited aforesaid cheque in the bank on 28­3­2013 for realization of its proceeds.”

9. Let me also take note of the averments made in the statutory notice issued by the complainant under Section 138 of the Act:

“3. That in consideration and on account of the just and legally enforceable debt i.e. towards the price for the sale, supply and delivery of cement and iron and other materials to you No.1 by our clients, You No.1 through You No.2 have issued to our clients cheques signed in blank including cheque No.839170 drawn on Dena Bank, Industrial Finance Branch, Bombay­400 005. The said cheques were given by way of security towards payment of the price of the said goods sold and delivered by our clients to You No.1 from the office of our clients from Mahuva. Thye said cheques were signed by You No.2 as Director and on behalf of You No.1.”

10. In the reply to the statutory notice issued by the complainant, the following was informed by the drawer of the cheque, namely, Shri Gandhi.

“2.1 That the Management of Gujarat Pipavav Port Limited (hereinafter referred to as “GPPL Company”, for short) has been changed with effect from 30.5.2005 and the said GPPL Company was taken over by A.P. Moller Group upon purchase of shares and execution of Transfer Agreement and since then, GPPL Company is run and managed by said A.P. Moller Group and our clients i.e. Mr. Nikhil P. Gandhi and Mr. Sunil Tandon have ceased to be the Director and the Managing Director respectively of the said GPPL Company. Please note that Mr. Sunilt Tandon has already resigned as Managing Director of GPPL Company as back as in October, 2001 and Mr. Nikhil P. Gandhi has already resigned as Director of GPPL Company with effect from 13.4.2005 and their resignations were duly accepted and acted upon by GPPL Company.

2.2 You may also be pleased to note that a similar notice (as aforesaid) was issued by your client on 5.1.2010 to GPPL Company and GPPL Company has elaborately replied on 8.4.2010 negating all the allegations including the allegations of issuance of blank cheque in favour of your client. Therefore, your aforesaid notice dated 23.4.2013 is nothing but malicious abuse of process of law actuated with the motive of threatening our clients for the payment of illegal claim of your client for which Civil Suits have been already filed by your client in the year 2000, which are presently pending for adjudication before Civil Court at Amreli. In the said Civil Suits (especially Special Civil Suit No.36 of 2000 pending in the Civil Court at Amreli), the erstwhile Management of the GPPL Company has already filed its Written Statement wherein the company has specifically negated all the claims of your client. On the contrary, the company has filed a Courter Claim against your client. Moreover, there is serious dispute raised by the GPPL Company for the “accommodation bills” issued by your client upon GPPL Company. The said “accommodation bills” are to the extent of Rs.4.36 crores (approximately) for which your client has not made any actual supply of material to GPPL Company and the dispute is pending for adjudication in the Civil Court at Amreli..

2.3 Our clients have further instructed us to state that Mr. Sunil Tandon has ceased to be the Managing Director of GPPL Company with effect from October 2001 and Mr. Nikhil P. Gandhi has ceased to be the Director of GPPL Company with effect from 13.4.2005. It is pertinent to note here that the date mentioned in the cheque No.839170 (which is dishonoured) is 25.3.2013. Under Section 118 of the Negotiable Instruments Act, 1881, there is a lawful presumption under Clause (b) of Section 118 that “Every Negotiable Instrument bearing a date was made or drawn on such date.” Undisputedly, on 25.3.2013, Mr. Nikhil P. Gandhi was not the Director of GPPL Company and he cannot sign the negotiable instrument (cheque) as the Director of GPPL Company for the simple reason that he has already resigned as Director of GPPL Company and h is resignation was duly accepted and acted upon with effect from 13.4.2005 by GPPL Company. It is under these circumstances, either the signature of Mr. Nikhil Gandhi is forged by your client or the negotiable instrument (cheque) is not negotiable under the provisions of the Negotiable Instruments Act, 1881 being time barred, has been misused by your client by writing the date on which the instrument. Our clients have further instructed us to state that even the Account from which the said cheque was alleged to have been issued was also closed long back by the new Management of GPPL Company. Therefore, your client ought not to have utilized the said cheque for the simple reason that the dispute between the parties is still pending before the Civil Court, claims and counter claims are yet to be adjudicated, liabilities of any of the parties have still to be determined by the Civil Court and, therefore, there is not question of issuance of a cheque dated 25.3.2013 of the alleged amount by our client in favour of your client. Your client, with mala fide intention and ulterior motive to abuse the process of law, has filled up the cheque in question and deposited the said cheque in his bank account knowing fully well that the signatory to such cheque has no authority under the law to sign and/or issue such cheque in favour of your client. It is under these circumstances that the action of your client is nothing but malicious, abuse of process of law actuated with the motive of threatening the present and past Directors and other officers of GPPL Company for unlawful claim of your client in the pending Civil Suits.”

11. Thus, the picture that emerges from the materials on record and certain admissions on the part of the complainant is as under:

(a) For the purpose of construction of a Port by the accused company, materials like Steel, Cement, etc, were purchased from the complainant.

(b) The agreement in this regard was entered into sometime in 90’s i.e. 1994­95. It is evident from the cheque in question that the same is of a cheque­book issued in the decade of 1990’s.

(c) Indisputably, the cheque in question was a blank signed cheque.

(d) The cheque came to be deposited after filling up other details by the complainant on 25th March 2013 i.e. almost after a period of seventeen years from the date of handing over of the blank cheque. The Special Civil Suits are still pending for the adjudication. The amount which was filled up in the cheque was on the basis of the report of the M/s.Chhajed & Doshi, Chartered Accountants, having its Head Office at Mumbai. Many objections have been raised by the accused company as regards the report of M/s.Chhajed & Doshi, Chartered Accountants.

(e) The entire management of the accused company got changed with effect from 30th May 2005 and was taken over by the A.P. Moller Group upon purchase of the shares and execution of the Transfer Agreement. This fact has been admitted in para – 2 of the complaint itself.

(f) No sooner the management of the entire company was taken over by the A.P. Moller Group, the bank account on which the cheque was drawn was closed and a new account was opened by the new management.

(g) The drawer of the cheque, namely, Mr. Nikhil P. Gandhi, ceased to be the Managing Director of the company with effect from 13th April 2005. The other details are as under:

“(i) Blank Cheque given by Nikhil Gandhi : Prior to 2000

(ii) Date of Retirement of Nikhil Gandhi: 13­4­2005

(iii) Closure of Bank A/c: 17­7­2008

(iv) Date of Cheque drawn by Nikhil Gandhi : 25­3­2013 CRIMINAL MISCELLANEOUS APPLICATION NO.1754 OF 2014 Petitioner No.: Gujarat Pipavav Port Ltd Petitioner No.2: Prakash Tulsiani (Managing Director) Date of Appointment : 28­1­2009 CRIMINAL MISCELLANEOUS APPLICATION NO.1755 OF 2014 Petitioner No.1 – Mr. Pravain K Laheri (Non­Executive Director) Date of Appointment : 29­8­2008 – till date.

Petitioner No.2 – Pradeep Srikrishna Mallick (Non­Executive Director) Date of appointment : 4­9­2012.

Petitioner No.3 – Rabinda Gaitonde (Chief Operating Officer) Date of appointment : 11­2­2008 – till date.

Petitioner No.4 – Hariharan Iyer (Chief Financial Officer) Date of appointment : 1­5­2009 – till date.

Petitioner No.5 – C.S. Venkiterswaran (Financial Controller) Date of appointment : 26­11­2001 to 6­3­2009 CRIMINAL MISCELLANEOUS APPLICATION NO.1756 of 2014 Petitioner No.1 – Mr. Sunil Chawla (Nominee Director) Date of Appointment : 22­9­2006 Date of Retirement : 15­12­2009.

Petitioner No.2 – Anoop Kishore Sheth (None­Executive Director) Date of Appointment : 17­3­2008 Date of Retirement : 17­12­2009 Petitioner No.3 : Dinesh Lal (Additional Director) Date of Appointment : 1­6­2004 was Director on date of complaint – now retired.

CRIMINAL MISCELLANEOUS APPLICATION NO.1067 of 2014 Petitioner No.1 – Christian Moller Laursen (Nominee Director) Date of appointment : 13­5­2005 Date of retirement : 4­9­2012 Petitioner No.2 – Per Jorgensen (Non­Executive Director) Date of Appointment : 29­8­2008 Date of Retirement: 1­6­2013.”