SUPREME COURT HOLDS APPELLANT-ACCUSED LIABLE FOR NON-COMPLIANCE OF SETTLEMENT TERMS AND IMPOSED PENALTY FOR VIOLATION OF COURT ORDERS

A two Judge Bench of the Supreme Court comprising of Justice Vikram Nath, and Rajesh Bindal passed a Judgment dated 03.01.2024 in a recent case of Satish P. Bhatt. Vs The State of Maharashtra and Ors. Special Leave Petition (Crl.) No.7433 of 2019 and observed that the Appellant-Accused failed to comply with the terms of the Undertaking and the Orders of the Trial Court and the Bombay High Court to pay the settlement amount to the Complainant. Thus, the Apex Court upheld the High Court Order dated 23.07.2019, canceling the Suspension of Sentence and the Bail granted to the Accused persons and further imposed a fine of Rs. 5,00,000/- on the Accused and sentenced them to undergo the imprisonment awarded by the Trial Court.

Facts

i) In the present case, one, M/s SBI Global Factors Ltd (Complainant) filed a Complaint under Section 138 of the Negotiable Instruments Act, 1881 (Dishonor of cheque for insufficiency of funds in the account) before the Trial Court in Maharashtra against (i) M/s. Astral Glass Private Limited (AGPL), the Accused No. 1, (ii) Satish P.Bhatt, the Chairman-cum-Managing Director of AGPL, the Accused No. 2 and (iii) Vishwanath Ramakrishna Nayak, the Vice Chair of AGPL, the Accused No.3 for dishonor of Cheques.

ii) The conviction and sentence as recorded by the Trial Court, vide Order dated 26.08.2011, is as follows.

“I) Accused No.2 Mr.Satish Padamanath Bhat, aged 54 years and accused no.3 Mr.Vishwanath Ramakrsishna Nayak, aged 50 years both r/o.Borivali (E), Mumbai-400 066 are hereby convicted vide provisions under Section 255(2) of Cr.P.C. for offence under Section 138 of Negotiable Instruments Act and they are sentenced to suffer Simple Imprisonment for 10 (ten) months each.

II) Both accused shall also to pay in total Rs.1,10,00,000/- (Rupees one crore and ten lakhs only) as compensation to Complainant vide provisions under Section 357(3) of Cr.P.C. within 3 months. In default to suffer further Simple imprisonment for 6 (six) months each.

III) Cash security of Rs.3000/- of accused no.2 shall stand continued till appeal period is over and P.R. bond of accused no.3 stands cancelled….”

iii) Hence, the Trial Court awarded sentence of 10 months with total liability of Rs.5 Crores payable cumulatively in all the three cheque dishonor cases.

iv) Aggrieved by the Ld. Trial Court Order dated 26.08.2011, the Accused No. 2 and 3 and AGPL filed three Appeals before the Ld. Sessions Court by depositing the amount of Rs. 73,50,000/-. The Sessions Court dismissed the Appeals filed by the Accused persons by Common Order dated 30.01.2014 by allowing them one month’s time to surrender, in order to undergo the sentence awarded by Ld. Trial Court.

v) Being aggrieved by the Common Order dated 30.01.2014 passed by the Session Court, the Accused No. 2 and the Accused No. 3-Intervenor and AGPL filed three Revision Petitions before the Hon’ble High Court of Bombay (High Court) seeking setting aside of the said Order.

vi) During the pendency of the Revision Petitions before the High Court, the Accused No. 2 and 3 filed an Undertaking dated 03.07.2018 based on a settlement with the Complainant, thereby, specifying that the Complainant would receive a total of Rs. 4,63,50,000/- by adjusting the amount deposited before the Sessions Court, with the remaining Rs. 3,90,00,000/-to be paid in installments. Further, the Accused No. 2-3 mentioned that the said amount would be paid equally by them.

vii) The High Court, on the same day, passed an Order dated 03.07.2018, based on the Accused No. 2-3’s Undertaking and thereby, granted temporary protection to them by deferring the imprisonment sentence awarded by the Ld. The Trial Court, that was later confirmed by the Sessions Court. Hence, the High Court ordered for the Appellant to be released on bail upon the provision of a personal bond in the amount of Rs. 25,000/-along with one or more sureties in the same amount.  The High Court also fixed the date for reporting compliance on 08.10.2018, and directed that no further extensions will be given for payment of the settled sum amount.

viii) According to the said Undertaking, Rs.2 Crores was to be paid on/before 30.09.2018, in addition to Rs.25 Lakhs which was paid on the date of passing of the Order. The remaining amount of Rs. 1 Crore 65 Lakhs was to be paid on or before 15.03.2019.

ix) However, the Accused No. 2-3 had not paid the amounts so directed by the High Court based on their Undertaking. When the matter was taken up by the High Court on 20.03.2019, the Counsel for the Complainant submitted that out of the settlement amount, Rs.1,69,10,000/- was due. The Accused No. 2-3 requested the High Court that the remaining balance amount would be paid by 20.04.2019.

x) Based on the request of the Accused No. 2-3, the High Court extended the time for payment of Rs.1,69,10,000/- till 20.04.2019 and further ordered that if the said amount is not paid by the extended deadline, the Order granting bail and suspension of sentence would stand canceled forthwith without further reference to Court.

xi) Thereafter, the Appellant filed a Criminal Application in Revision Petition before the High Court on 16.04.2019 stating that the Accused No. 2 had paid his share of Rs.1,95,00,000/- being 50% of Rs.3,90,00,000/- as mentioned in the Order dated 03.07.2018 and, therefore, he may be absolved of the charges and be acquitted.

xii) The Complainant submitted before the High Court that as of date there is still an outstanding amount of Rs. 83,10,000/- out of the settlement amount of Rs. 4,63,50,000/- along with compound interest @ 12% p.a. from 15.03.2019 till actual payment is made and costs against the Accused No. 2-3.

xiii) The High Court, vide, Order dated 23.07.2019, canceled the Order dated 03.07.2018 of Suspension of Sentence and Bail, owing to non-compliance of the Undertaking.

Supreme Court Analysis

Aggrieved by the High Court Order dated 23.07.2019, the Accused No. 2- Appellant herein filed Special Leave Petition (Crl.) No.7433 of 2019 before the Hon’ble Supreme Court. The Apex Court passed a Judgment dated 03.01.2024 and made the following observations:

(1) That the Accused No. 2- Appellant submitted that out of Rs.3,90,00,000/-, his half share amounting to Rs.1,95,00,000/- had been paid, therefore, the Impugned Order of the High Court canceling his bail and suspension of sentence was not warranted and deserves to be set aside.

(2) That the Accused No. 3- Intervenor had submitted before the High Court earlier that the partnership between the Appellant and the Intervenor was in the ratio of 60:40 and that they had actually agreed to pay the settled amount of Rs.4,63,50,000/- in that proportion as per their shares in the Company.

(3) Further, the Intervenor submitted that his share being 40%, the amount liable to be paid by him would be Rs.1,85,00,000/-. As he had paid Rs.73,50,000 that was earlier deposited before the Sessions Court, he was liable to pay a further amount of Rs. 1,11,90,000/-. Moreover, the Intervenor claimed that he had paid the said amount of Rs. 1,11,90,000/- after the High Court Order dated 03.07.2018. Hence, the Intervener claimed that the outstanding amount of Rs. 83,10,000/- was payable by the Appellant, whose total liability was 60% of settled amount of Rs. 4,63,50,000/-

(4) That the Undertaking and the Order dated 03.07.2018 make it clear that both the Intervenor and the Appellant would have to pay the amount equally agreed upon by and between them. It also stipulates that if either of them fails to pay the agreed-upon portion of the settlement, they will be held legally responsible and prosecuted.

(5) That the Complainant is not bound by the settlement reached between the two Directors, i.e. the Intervenor and the Appellant, and such arrangement is solely between the said Accused persons. The Complainant’s agreement or assent was limited to receiving just Rs. 4,63,50,000/-.  The Complainant was not a signatory to the Undertaking which was signed by the two Parties.

(6) The Apex Court thus, was not inclined to go into this question as to who is liable to pay how much amount.

(7) The fact remains that the whole amount agreed upon has not been paid, hence, in accordance with the High Court Order dated 20.03.2019, the Revisionists’ interim protection granted in the form of bail and sentence suspension would be withdrawn without the need for a court hearing.

Conclusion

Thus, based on the aforesaid observations, the Supreme Court observed that the Complainant had consented to accept a far smaller sum than as directed by the Trial Court. Since 2007, the Complainant has been involved in litigation for about sixteen years. However, the amount to be realized by the Complainant in view of the High Court Order dated 03.07.2018 and the Trial Court Order dated 26.08.2011 has not yet been realized. Hence, the High Court Order dated 23.07.2019, canceling the Suspension of Sentence and the Bail granted, was upheld. As a result, the Appeal filed by the Appellant was dismissed with costs of Rs. 5 Lakhs to be paid to the Complainant within four weeks. The Supreme Court further directed the Accused persons to surrender within a period of four weeks to undergo the sentence awarded by the Ld. Trial Court.

Suneel Kumar Jaiswal

Associate 

The Indian Lawyer