Law Web: Whether accused can stop payment of cheque on ground that area of land sold to him is less?

I have gone through the impugned judgment to

ascertain the reasoning of the Magistrate in passing the order of

acquittal. The Magistrate has referred to the evidence of the

accused no.1, wherein, he had stated that an amount of

Rs.4,79,000/ was not paid and the payment was kept pending for

the reason of clearance of title, survey of land, clearance from one

Jayantilal Shah and Arun Mehta, with whom, apparently, the

complainant had a dispute, etc. The Magistrate also referred to

the evidence of the accused no.1, wherein, he stated that during

the survey of the land it was found that it was less by 137 sq.mts.

This fact was just believed by the Magistrate, though no details of

such survey were given by the accused no.1 in his evidence. The

Magistrate also referred to the evidence of Jayantilal Shah as the

second witness for the defence, with whom, the complainant, as

aforesaid, had a dispute. This dispute was regarding the same

land, and the said Jayantilal Shah had written to the accused no.1

informing him of the dispute and advising him not to have a

transaction with the complainant, as the transaction in respect of

the same land was pending between him and the complainant.

The Magistrate then referred to the provisions of Section 54

of the Indian Contract Act, Section 52 of the Transfer of

Property Act, Sections 18 and 19 of the Indian Contract Act and

came to the conclusion that the accused were not liable to pay the

amount of the contract. Apart from the fact that the reference to

the said provisions was absolutely unwarranted and irrelevant in

the light of the controversy that was involved in the matter, the

fact remains that the only basis for the Magistrate's coming to the

conclusion that the accused were not liable to pay the amount,

was that the area of the plot of land in question was indeed less

than what was agreed to be sold. The Magistrate, in that regard,

as aforesaid, only relied on the oral testimony of the accused no.1

to that effect, and did not require any report of any such survey.

The Magistrate was of the view that the complainant had not

specifically denied that the area of the plot of land was less while

giving rejoinder to the reply of the accused to the demand notice

in the complaint etc. What he, however, overlooked is the

assertion of the accused persons, in reply to the demand notice

was itself vague i.e. 'the area is noticed to be much less.' The

Magistrate overlooked that the accused no.1 even did not give the

details as to when and by whom the survey of the land was taken.

The Magistrate did not bother to think that the alleged survey

was, admittedly, not taken in the presence of the complainant.

Such oral evidence of the accused no.1 could not have been relied

upon to hold that the area was indeed less. Once that itself was

not established, there was no question of judging by reference to

the provisions of the Indian Contract Act as to whether the

accused were liable to pay the amount of the cheques in question

or not. The Magistrate overlooked that the accused had not

approached any civil court for avoidance of the contract or any

other appropriate relief, where the dispute could have been

properly adjudicated upon, but were merely content with holding

back the part of the payment. The Magistrate overlooked that

after the Agreement, Conveyance was effected and the property

was actually conveyed to the accused and was in their possession.

Moreover, as aforesaid, the Agreement at Exh.D1 clearly indicates

that the accused had agreed to purchase the property on 'as it is

whe re it is condition.' The evidence of the accused no.1 was

clearly, contrary to the terms of the written agreements /

instruments and could not have been relied upon.

16 The reasoning of the Magistrate and the approach

adopted by him was not in accordance with law. Here, there was

a completed and clear transaction between the complainant and

the accused, and cheques had been issued by the accused in

favour of the complainant towards the payment of the balance

consideration in respect of the land purchased by them from the

complainant. The object of Section 138 of N.I.Act is to lend

credibility to the cheque transaction by bringing them on par with

transactions in cash. Even assuming that the accused had a right

to recover the amount of compensation paid to the complainant,

on the basis of some mistake or misrepresentation, still, the

accused were not entitled to withhold the payment of the cheque

which was agreed to be done when the Conveyance was effected.

The accused had got the property conveyed in their name by a

registered Conveyance Deed and it was not open for them,

thereafter, to stop the payment of the cheque, which had been

issued towards the balance consideration, which was, as per the

notion of the parties at the time when the Conveyance was

effected, payable to the complainant.

17 Moreover, on facts, the stand of the accused persons

does not appear to be sincere, or at any rate, supported by

satisfactory evidence. In the first place, as aforesaid, that the area

of the plot of land in question is less, itself has not been

established. Secondly, the accused were not interested in

approaching a civil court, where the issues (i) whether the

contract was voidable and the accused could avoid it, (ii) whether

there had been a fraud, misrepresentation or mistake, and (iii)

whether the accused were liable to recover some amount from the

complainant, and if so, how much, could have been properly and

fully adjudicated.

18 This was a case where the cheques had been clearly

issued for the payment of what was agreed to be due and payable,

and that the payment would be received by the complainant on a

future date, was only an arrangement arrived at by the parties, by

mutual consent. It was, infact, not necessary for the Magistrate to

have gone into the finer aspects of the matter in the prosecution in

respect of an offence punishable under Section 138 of the N.I.Act,

when, as per the notion of the parties, when the cheques were

given and when the transaction was completed, the accused were

liable to pay the amount. There is no dispute that as per the

notion of the accused themselves, at that time, the amount was

due and payable to the complainant; and their claim is only that

the subsequent revelation made them realize that, that amount

should not be paid to the complainant. If that was so, the proper

course for the accused persons would not be to stop the payment

of the cheques, but to raise the issue directly by approaching the

civil court and claiming refund of the excess amount, if any, paid

to the complainant.

19 The order of acquittal, as recorded by the Magistrate,

is not proper and legal. The accusation against the respondents

had been proved and they were liable to be convicted.

IN THE HIGH COURT OF JUDICATURE AT BOMBAY

CRIMINAL APPELLATE JURISDICTION

CRIMINAL APPEAL NO.116 OF 2006

PRADEEP KASHIRAM KADAM V/s. K.A.VERGHESE AND OTHERS

CORAM : ABHAY M. THIPSAY, J.

DATE : 24th JUNE 2015.

Citation: 2016 ALLMR(CRI) 4838

1 The appellant is the original complainant. He had

prosecuted respondent nos.1, 2 and 3 herein, on the allegation

that they had committed an offence punishable under Section 138

of the Negotiable Instruments Act ('N.I.Act' hereinafter). The

Metropolitan Magistrate, 44th Court, Andheri, Mumbai, after

holding a trial found the said respondents not guilty and passed

an order of acquittal. Being aggrieved by the said order of

acquittal, the appellant, after obtaining special leave of this court,

has filed the present appeal, challenging the order of acquittal.

2 For the sake of convenience and clarity, the appellant

shall hereinafter be referred to as 'the complainant' and the

respondent nos.1, 2 and 3 as 'the accused'.

3 The case of the complainant, as made out from the

complaint filed by him, was in brief, as follows :

That, by an Agreement for Sale dated 6th July 1994,

the complainant had agreed to sell, transfer and convey all his

rights, title and interest in respect of a certain immovable property

to the accused persons, who were, at the material time, carrying

on business of builders and developers in the name and style of

M/s.Kalpana Constructions. That, the accused persons made the

part payment towards the purchase of the said property and

requested the complainant to complete the transaction by

executing the Conveyance in favour of the accused persons. That,

the complainant agreed to convey the property to the accused

persons, but required payment of a sum of Rs.4,79,000/, which

was the balance consideration, to be paid by the accused to the

complainant by August 1996. The three accused executed, by way

of security for payment, an Indemnity bond cum Declaration, on

nd November 1996, and relying on the representations of the

accused, the complainant conveyed the property to the accused

persons by executing a Conveyance Deed, though the full amount

of consideration had not been received by him from the accused.

That, the accused did not make the payment of the balance

amount within the stipulated time, but issued two cheques – one

in the sum of Rs.4,79,000/ and the other in the sum of

Rs.1,00,000/, being the amount due and payable towards the

balance of the purchase price and the interest on delayed

payment, respectively. When the said cheques were deposited by

the complainant, they were dishonoured with the banker's remark

'payment stopped by the drawer'. That, the complainant then

made a demand in respect of the amount of the said cheques as

contemplated under Section 138 of the N.I.Act. The accused

persons received the demand notice, but failed to comply with the

requirement and raised certain false and frivolous contentions. It

is, thereafter, that the complainant filed a complaint in the court

of the Magistrate, pursuant to which, the accused, as aforesaid,

came to be prosecuted.

4 I have heard Mr.Jitendra G. Damani, the learned

counsel for the appellants. I have heard Mr.P.M.Havnur, the

learned counsel for the accused nos.1, 2 and 3. I have heard

Mrs.M.R.Tidke, the learned APP for the State – Respondent no.4.

With the assistance of the learned counsel, I have gone through

the record and proceedings before the Magistrate. I have gone

through the evidence and the impugned judgment carefully.

5 The complainant examined himself as a witness during

the trial. He also examined one Girish Shah – an employee of the

bank – through whom the statement of accounts of M/s.Kalpana

Constructions was got produced. The accused no.1 examined

himself as a defence witness and also examined one Jayantilal

Shah as the second witness for the defence.

6 That, the cheques in question had been signed by the

accused no.1 is not in dispute, and that, the cheques had been

signed and issued by him on behalf of all the accused, is also not

in dispute. That, they had been issued in favour of the

complainant is also not in dispute. That, they had been issued

towards the transaction of the purchase of the property in

question is also not in dispute. That, the cheques in question were

dishonoured as the bankers of the accused persons were

instructed not to make the payment of the said cheques, is also

not in dispute. That, there was no sufficient balance in drawer's

account, so as to honour the cheques, is also not in dispute. That,

a demand notice was received by each of the accused is also not in

dispute, and obviously, that the amount in respect of the said

cheques has not been paid is also not in dispute. The accused

persons during the trial had come up with a case that they had

valid and proper justification for not paying the amounts of

cheques in question. The same contention has been taken before

this court also.

7 Though apparently, a number of grounds were urged

as and by way of justification for not making the payment of the

said cheques, before the trial court, only one of them is specifically

and emphatically put forward before this court, viz., 'that the area

of the plot of land, which was sold by the complainant to the

accused, was less than what was mentioned in the Agreement for

Sale and the Conveyance Deed.' It is contended that the

consideration was fixed on the basis that the plot of land was of a

particular area, but since it was revealed that it comprised of a

lesser area, the complainant was not entitled to have the agreed

consideration, and that, the price of the land was liable to be

reduced proportionately. Thus, in short, the contention is that,

since the area of the plot of land in question was less than what

was believed to be at the time of entering into the Agreement for

Sale and effecting Conveyance, the accused persons were entitled

to have a reduction in the purchase price to be paid by them to the

complainant, and were, therefore, justified in withholding the

payment of the balance amount for which the cheques had been

issued.

8 Mr.Damani, the learned counsel for the complainant,

submitted that, the stand taken by the accused persons was a

thoroughly dishonest one. He submitted that the Agreement for

Sale was entered into on 6th July 1994. That, the Conveyance

Deed was executed on 19th August 1995, and that, till that time

the accused persons had not raised any grievance about the area

of the land agreed to be sold being less than mentioned in the Sale

Deed. The same area was mentioned in the Conveyance Deed

also. Mr.Damani also pointed out that even thereafter the accused

persons had, on 2nd November 1996, executed an Indemnity bond

cum Declaration, but at that time also, there was no reference to

the area of the plot of land to be less than that mentioned in the

Agreement and the Conveyance. Mr.Damani lastly contended

that, the contention that the area of the plot of land was less than

that agreed to be sold, was false, and there was nothing to support

such assertion.

9 Mr.Havnur, the learned counsel for the accused

persons, on the other hand, attempted to show that the area of the

plot of land that was conveyed to the accused was indeed less.

According to him, the accused persons, after the Conveyance was

effected, got the area of the plot of land measured and found the

same to be less by 137 square yards. He, therefore, submitted that

under these circumstances, the complainant was not entitled to

have the cheques, which were given for the payment of the

balance consideration, encashed.

10 It is not possible to accept the contention advanced on

behalf of the accused for a number of reasons.

11 In the first place, the cheques had been issued towards

the balance of amount of consideration that was to be paid by the

accused to the complainant. Inspite of the fact that full

consideration was not paid, the accused got the Conveyance

executed and got the property transferred into their name only on

the basis that the balance would be paid. It was, therefore, not

open for them to say, after having got the property transferred in

their name on the assurance that the balance consideration would

be paid, and only after the cheques issued for the payment thereof

were dishonoured, that they will not pay the same.

Secondly, the property has been described in the

Agreement as “the piece or parcel of land admeasuring about 569.1

sq.yds. equivalent to 472.26 sq.metres or thereabout and bearing

Survey No.42, Hissa No.19, (Part) and C.T.S.No.308-B situate

lying and being at Jeevan Vikas Kendra Marg, Koldongri, Vile

Parle (East), Bombay 400 057.” The property has been described

in the Schedule in greater details, and is described by the

boundaries thereof. It is stated to be “bounded as follows : that is

to say : on or towards the North : by an 18 ft. means of access

and forming land in part of Survey No.42 Hissa No.20 : on or

towards the South by land in Survey No.28, Hissa No.1 (Part) on

or towards the East by the land in Survey No.20, Hissa No.22 and

on or towards the West by Plot No.1 of the sanctioned and

approved lay out and sub-division and bearing Survey No.42, Hissa

No.19(Part) Survey No.28, Hissa No.4 and shown delineated on the

Plan thereof hereto annexed.” A plan of the property is also

annexed to the Agreement to Sale.

12 It is not the case of the accused persons that this

description of the property by its Survey number, Hissa

number, C.T.S. number etc., as given in the Agreement, is

wrong. It is also not the case of the accused persons that the

boundaries of the plot of land in question has been wrongly

shown or described in the Agreement. Even in the Conveyance,

the property is described in the same manner. In the schedule

thereto, the property is described in the same manner, as has been

described in the Schedule to the Agreement to Sale. All the

boundaries of the plot of land in question, have also been

described in the same manner. The question is 'when the

particular plot of land is described by Survey number and C.T.S.

number and when the boundaries thereof are well defined can the

purchaser raise a plea that he is not liable to pay the agreed

consideration, but is entitled to have it reduced, because on actual

measurement, the area of the property is found to be less than that

mentioned in the Agreement and / or Conveyance Deed, though the

other description of the property – particularly that of the

boundaries thereof – is correct.' In my opinion, when the

boundaries of the property are well defined and when a particular

consideration is fixed for the property, described by its boundaries,

it would not be open for the purchaser to raise such a plea unless

the purchaser can establish fraud or misrepresentation, as defined

in Sections 17 and 18 of the Contract Act. The accused persons

had gone ahead with the Conveyance by agreeing to pay the

balance consideration. They had indemnified the complainant

against any possible loss or damage due to the nonpayment of the

consideration amount. Moreover, they had not taken any steps to

avoid the contract. After having got the property transferred in

their name by assurance of paying the balance amount due and

payable, they are simply content on avoiding the payment thereof.

13 However, that is also not the real point that needs

determination. The cheques had already been issued by the

accused persons. Infact, the date of the cheque was got extended

by the accused persons by making a request to the complainant

and by agreeing to pay an additional sum of Rs.1,00,000/ (for

which a separate cheque came to be issued) as a consideration for

the complainant granting further time to the accused persons to

pay the balance consideration. Thus, the transaction of sale, and

even the Conveyance was already complete on a given date and

the amount agreed to be paid towards the purchase price of the

plot of land, had already fallen due. The accused persons were

supposed to pay the entire consideration at that time itself, but it

is because of their own inability to pay the entire consideration at

the time when the transaction was completed, that time was

granted by the complainant to them to make the payment. The

transaction was complete at that stage itself and further time that

was given to the accused persons to pay the balance consideration

was only an arrangement arrived at by and between the parties.

Had the full consideration been paid at that time, the complainant

would have got the agreed amount. When such is the position,

the accused persons were not entitled to withhold the payment of

the cheques, even if it is assumed just for the sake of argument,

that they later found the area of the plot of land to be less than

mentioned in the Agreement and / or Conveyance. It is because,

there was no such discovery viz., of the area being less at the time

when the payment of the consideration was to be made. All that

can be said in that regard is that in such a case, the accused could

have taken appropriate legal proceedings against the complainant

for avoidance of the contract on the ground of fraud, or

misrepresentation, or recovery of the excess amount paid to the

complainant, on the basis of a mistake.

14 Apart from this, there does not seem to be any

satisfactory evidence for showing that the area of the plot of land on

measurement was found to be less. Moreover, when did the accused

realize this, is not clear. In the reply to the demand notice

submitted by the accused persons, a number of reasons for

stopping the payment of the cheques have been mentioned, and

one of them is that the area of the land was noticed to be 'much

less' than what was supposed to have been handed over to the

accused persons. There is such a vague assertion, but how much

area was less has not been specified. It appears from the reply

that the accused persons wanted some encroachment upon the

land by one Jalusha Housing Society to be removed, and to get

'the deficit area recovered from Jalusha Housing Society.' Thus,

the dispute in reality does not appear to be a plain dispute about

the area being less, but apparently accused had some grievance

about the encroachment on the said land. Such grievance,

obviously, could not be raised by the accused persons after the

Agreement was completed and the property was conveyed by

executing Conveyance Deed, particularly because, the Agreement

at Exh.D1 clearly indicates that the accused had agreed to

purchase the property on 'as it is where it is condition.'

15 I have gone through the impugned judgment to