Gujarat High Court
Indcon Projects & Equipment Ltd. Thro' ... vs Oswal Infrastructure Ltd on 24 June, 2025
NEUTRAL CITATION
R/SCR.A/9301/2017 ORDER DATED: 24/06/2025
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CRIMINAL APPLICATION (QUASHING) NO. 9301 of 2017
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INDCON PROJECTS & EQUIPMENT LTD. THRO' ARUNI MISRA & ANR.
Versus
OSWAL INFRASTRUCTURE LTD. & ANR.
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Appearance:
MR.ADITYA J PANDYA(6991) for the Applicant(s) No. 1,2
MS SAKSHI RAHEJA for MR HARDIK C DAVE(8204) for the Respondent No.
1
MR TIRTHRAJ PANDYA, APP for the Respondent(s) No. 2
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CORAM:HONOURABLE MR. JUSTICE J. C. DOSHI
Date : 24/06/2025
ORAL ORDER
1. By way of this petition under Article 226 of the Constitution of India r/w section 482 of the Code of Criminal Procedure, 1973, the petitioners have prayed to quash and set aside the order of issuance of process dated 9/8/16 passed below Exh.1 in Criminal Case No. 790 of 2016 pending before the Id. Addl. Chief Metropolitan Magistrate (Negotiable Instruments) Court No. 36, Ahmedabad and further to quash and set aside the Criminal Case No. 790 of 2016 pending before the Id. Addl. Chief Metropolitan Magistrate (Negotiable Instruments) Court No. 36, Ahmedabad.
2. Brief facts of the case are as under:-
2.1 The parties to the present petition are referred to as per their original status i.e. petitioners as accused no. 1 and 2 respectively while respondent no. 1 as complainant.Page 1 of 21 Uploaded by SHEKHAR P. BARVE(HC00200) on Tue Jul 01 2025 Downloaded on : Tue Jul 01 21:43:59 IST 2025
NEUTRAL CITATION R/SCR.A/9301/2017 ORDER DATED: 24/06/2025 undefined 2.2 As per the case of complainant, it had issued a Letter of Intent bearing no. OIL-044/LoI/14- 15/PUR/CIL-025 showing its intention to purchase Export Oil Skid Packages as per the specification mentioned in the Letter of Intent. The said letter of intent also contained various terms and conditions subject to which goods were intended to be ordered.
2.3 The complainant has also relied upon various email communications which shows that since few of the conditions of Purchase Order was not acceptable to the accused, they had written an email dated 01.10.2014 for modification of various conditions of letter of intent.
2.4 The complainant had, vide its email dated 08.10.2014, accepted the amendments suggested by the accused and the letter of intent stood amended accordingly.
2.5 The complainant had, on 10.02.2015, raised VT. OF various purchase orders which resulted in privity of contract between parties. The purchase orders also contained various terms and conditions governing contractual relationship between parties. Accordingly, the accused has started working on supply of the goods ordered.
2.6 The accused had supplied the goods through four different invoices dated 31.03.2015 bearing invoice no. IPEL/104 to 107.
2.7 That none of the conditions of modified letter of intent as well as purchase order provided for submission of performance bank guarantee. Yet, complainant insisted on providing performance bank guarantee which the accused had refused to provide, since the same Page 2 of 21 Uploaded by SHEKHAR P. BARVE(HC00200) on Tue Jul 01 2025 Downloaded on : Tue Jul 01 21:43:59 IST 2025 NEUTRAL CITATION R/SCR.A/9301/2017 ORDER DATED: 24/06/2025 undefined was not falling part of contractual terms and conditions.
2.8 The complainant had started exerting pressure on accused no. 1 and 2 to provide performance bank guarantee. On refusal, the complainant threatened to invoke the Advance Bank Guarantee supplied by the accused to the complainant. It is submitted that the advance bank guarantee could not be invoked as thegoods were already supplied.
2.9 The accused were, therefore, compelled to file a Civil Suit before the Id. Civil Court, Saket Court, New Delhi as Civil Suit No. 67 of 2015 praying for restraining the complainant from encashing the Advance Bank Guarantee. The accused had also obtained injunction whereby the complainant was restrained from invoking the Advance Bank Guarantee.
2.10 Therefore, the complainant came to the accused for settlement of dispute, pursuant to which, a meeting took place between party on 01.04.2015 wherein accused no. 1 was pressurized to give an undated cheque for an amount of Rs. 15,60,000/- towards security and guarantee of workmanship/ mechanical/ pump capacity. The cheque was given despite none of the conditions of contract provided for it, which indicates that cheque is given for security. The minutes of meeting clearly states that the cheque was given purely for security liability existing on the date on which the L.NO. cheque was issued. It is submitted that no liability is in existence even till today.
2.11 The accused had supplied the machinery as per the purchase order. The complainant had opened a letter of credit account with Kotak Mahindra Bank which was to mature on 06.06.2015. However, on maturity, the bank refused to make payment on false pretext of Page 3 of 21 Uploaded by SHEKHAR P. BARVE(HC00200) on Tue Jul 01 2025 Downloaded on : Tue Jul 01 21:43:59 IST 2025 NEUTRAL CITATION R/SCR.A/9301/2017 ORDER DATED: 24/06/2025 undefined some discrepancy in the bills. It is submitted that there was no discrepancy in the bills. It was done by the Bank in connivance with the complainant company. to pressurize the accused company.
2.12 After much follow up and communications, a Sum of Rs. 1,27,75,923/- came to be released by the Bank of complainant by deducting unilaterally an amount of Rs. 15,76,077/- without any proper justification. The accused had written various letters for releasing the balance amount but the same was of no avail.
2.13 The accused no. 1, therefore, instituted a Civil Suit before the Id. Saket Court, Delhi against the complainant for recovery of an amount of Rs. 15,76,077/-.
2.14 As a counterblast to this, the complainant had deposited the cheque given for security purpose and the same came to be dishonoured. The complainant had therefore lodged a complaint under section 138 of the Negotiable Instruments Act. The said complaint came to be registered as Criminal Complaint No. 790 of 2016.
2.15 The Id. Addl. Chief Metropolitan Magistrate (Negotiable Instruments), Court No. 36 was pleased to issue process against the accused no. 1 and 2 i.e. present petitioners vide its order dated 3/8/16. The said order was passed despite the fact that no complaint under section 138 is maintainable in the present facts and circumstances of the case.
2.16 Hence, present petition.
3. Learned advocate Mr. Aditya Pandya for the petitioners in his Page 4 of 21 Uploaded by SHEKHAR P. BARVE(HC00200) on Tue Jul 01 2025 Downloaded on : Tue Jul 01 21:43:59 IST 2025 NEUTRAL CITATION R/SCR.A/9301/2017 ORDER DATED: 24/06/2025 undefined submission argued that the cheque in question is not handed over to the complainant for any subsisting or legally enforceable liability, which subsists on the date of the cheque. He would further submit that the documents on record produced by the complainant itself indicates that the cheque in question was given towards guarantee as per the payment terms. Therefore, he would submit that it could be treated that the cheque in question was granted towards security for liability which may arose on subsequent date. He would further submit that the learned trial Court committed serious error in issuing process without referring any documents on record.
3.1 Highlighting facts of the case, learned advocate Mr. Pandya would submit that the complainant has awarded work for detailed engineering, procurement, manufacturing, inspection, testing and supply and providing service for installation and commissioning of export oil transfer pump skid package for quick production facility to the accused at Barmer, State of Rajasthan as per the terms and conditions of LOI (Letter of Intent). He would further submit that the accused has accepted the purchase order for export oil transfer pump skid package and executed the purchase order along with terms and conditions. The terms and conditions indicate that 10% against approval of design and engineering document and submission of ABG and 90% after dispatch of material and through 60 days Letter of Credit (LOC). He would further submit that as per para 5 of the complaint, the cheque in question was tendered towards guarantee instead of giving performance guarantee under the LOI and therefore, it can be visualized that the cheque in question was not given for any subsisting or existing liability, which is legally enforceable liability. Learned advocate for the petitioners drew the attention of the Court towards page 27 i.e. LOI being part Page 5 of 21 Uploaded by SHEKHAR P. BARVE(HC00200) on Tue Jul 01 2025 Downloaded on : Tue Jul 01 21:43:59 IST 2025 NEUTRAL CITATION R/SCR.A/9301/2017 ORDER DATED: 24/06/2025 undefined of the document of the complainant and also purchase order (page
33) and subsequent minutes drawn between the parties placed on record at page 40 to strengthen his argument that the cheque in question is issued towards the security or performance guarantee. He would further submit that if there is any breach of contract or any act of the accused breaching the contract, civil proceedings u/s 74 of the Contract Act is maintainable to recover the compensation, but the cheque, which was given towards value as a guarantee for workmanship/mechanical/pump capacity cannot be said that it was given for the purpose of discharging subsisting liability or debt. He would further submit that until issue of violation in workmanship/mechanical/pump capacity arises, the issue of violation of guarantee for which the cheque in question was given would not arise.
3.2 In nutshell, learned advocate for the petitioners submits that since the essential ingredients of offence u/s 138 of the NI Act are not satisfied, issuance of process against the petitioners by the learned trial Court is gross error.
3.3 To buttress of his submission, learned advocate Mr. Pandya referred to the judgments in cases of (1) Sampelly Satyanarayana Rao v. Indian Renewable Energy Development Agency Ltd, (2016) 10 SCC 458 (2) Nikhil Gandhi Vs. State of Gujarat and others, 57(4) GLR 2838 and (3) Shanku Vs. State of Gujarat, 2000 (2) GLR 753.
3.4 Upon above submissions, learned advocate Mr. Pandya submits to allow the petition and to quash and set aside order of issuance of process in criminal case as well as to quash and set aside proceedings of criminal case.
Page 6 of 21 Uploaded by SHEKHAR P. BARVE(HC00200) on Tue Jul 01 2025 Downloaded on : Tue Jul 01 21:43:59 IST 2025NEUTRAL CITATION R/SCR.A/9301/2017 ORDER DATED: 24/06/2025 undefined
4. Per contra, learned advocate Ms. Sakshi Raheja appearing for the respondent No.1 referring to judgment in case of Sunil Todi and others Vs. State of Gujarat, 2022(16) SCC 762, more particularly, page 30 to 34 and in case of Rathish Babu Unnikrishnan v. State (Govt. of NCT of Delhi) and Another, 2022 SCC OnLine SC 513, more particularly, para 8.13 and 16 to 19 would submit that whether the cheque in question is issued towards security, whether there is subsisting liability and the cheque in question was issued towards subsisting liability, whether there is any violation of the terms and conditions of the purchase order, all are the questions of fact and cannot be a reason to quash criminal complaint without weighing them in evidence. She would further submit that the Court should slow in quashing the complaint where disputed questions of facts are to be weighed under the scale of the Evidence Act. She would further submit that section 139 of the NI Act operates presumption against accused that the cheque in question has been given towards legally enforceable liability. The accused however got chance to repeat the same presumption by leading evidence, but not by adjudicating the case u/s 482 of the Code of Criminal Procedure, 1973. Therefore, she would submit that since the signature of the petitioners is admitted on the disputed cheque and the petitioners has also accepted that the cheque is returned unpaid, prima facie, ingredients of section 138 of the NI Act are attracted and therefore, the learned trial Court has rightly issued process to the petitioners.
4.1 Upon such submissions, learned advocate Ms. Raheja prays to dismiss the petition.
5. Regard being had to the rival submissions of learned advocates Page 7 of 21 Uploaded by SHEKHAR P. BARVE(HC00200) on Tue Jul 01 2025 Downloaded on : Tue Jul 01 21:43:59 IST 2025 NEUTRAL CITATION R/SCR.A/9301/2017 ORDER DATED: 24/06/2025 undefined for both the sides and giving anxious thoughts and consideration in contrast to the pleadings and documents on record, at the outset, let refer judgment of the Hon'ble Apex Court in case of State Of Orissa Versus Pratima Mohanty Etc.,2022 (16) SCC 706 observed as under:-
"9. While quashing the criminal proceedings the High Court has not at all adverted to itself the aforesaid aspects and has embarked upon an enquiry as to the reliability and genuineness of the evidence collected during the investigation as if the High Court was conducting the minitrial. Therefore, as such the impugned judgment and order passed by the High Court quashing the criminal proceedings against the respondents herein - original accused Nos. 4, 5 and 3 - Smt. Pratima Mohanty, Shri Prakash Chandra Patra and Shri Rajendra Kumar Samal is unsustainable, both, in law and/or facts and the same deserves to be quashed and set aside."
6. At initial stage, where cognizable offence is disclosed in FIR, whether investigation can be thwart by exercising inherent power under section 482 of Cr.P.C., the Hon'ble Apex Court in the case of Skoda Auto Volkswagen India Private Ltd. v/ s. State of Uttar Pradesh [2020 SCC Online SC 958], in para 41 has held as under :-
"41. It is needless to point out that ever since the decision of the Privy Council in King Emperor v. Khwaja Nazir Ahmed AIR 1945 PC 18, the law is well settled that Courts would not thwart any investigation. It is only in cases where no cognizable offence or offence of any kind is disclosed in the first information report that the Court will not permit an investigation to go on. As cautioned by this Court in State of Haryana v. Bhajan Lal 1992 Supp (1) SCC 335, the power of quashing should be exercised very sparingly and with circumspection and that too in the rarest of rare cases. While examining a complaint, the quashing of which is Page 8 of 21 Uploaded by SHEKHAR P. BARVE(HC00200) on Tue Jul 01 2025 Downloaded on : Tue Jul 01 21:43:59 IST 2025 NEUTRAL CITATION R/SCR.A/9301/2017 ORDER DATED: 24/06/2025 undefined sought, the Court cannot embark upon an enquiry as to the reliability or genuineness or otherwise of the allegations made in the FIR or in the complaint. In S.M. Datta v. State of Gujarat (2001) 7 SCC 659 this Court again cautioned that criminal proceedings ought not to be scuttled at the initial stage. Quashing of a complaint should rather be an exception and a rarity than an ordinary rule. In S.M. Datta (supra), this Court held that if a perusal of the first information report leads to disclosure of an offence even broadly, law courts are barred from usurping the jurisdiction of the police, since the two organs of the State operate in two specific spheres of activities and one ought not to tread over the other sphere."
7. In the case of State of Haryana Vs. Bhajanlal & ors., AIR 1992 SC 604, the Hon'ble Apex Court has opined that power of quashing can be exercised very sparingly and that too in rarest of rare case. Relevant observations reads as under:-
"103. We also give a note of caution to the effect that the power of quashing a criminal proceeding should be exercised very sparingly and with circumspection and that too in the rarest of rare cases; that the court will not be justified in embarking upon an enquiry as to the reliability or genuineness or otherwise of the allegations made in the FIR or the complaint and that the extraordinary or inherent powers do not confer an arbitrary jurisdiction on the court to act according to its whims or caprice."
8. After considering ratio laid down as aforesaid, let examine pleadings of the petition. In para 4.5, 4.7 and 4.10 of the petition, the petitioners asseverate as under:-
"4.5. The complainant had, on 10.02.2015, raised various purchase orders which resulted in privity of contract between parties. The purchase orders also contained various terms and conditions governing contractual relationship between parties. Accordingly, the accused has Page 9 of 21 Uploaded by SHEKHAR P. BARVE(HC00200) on Tue Jul 01 2025 Downloaded on : Tue Jul 01 21:43:59 IST 2025 NEUTRAL CITATION R/SCR.A/9301/2017 ORDER DATED: 24/06/2025 undefined started working on supply of the goods ordered.
4.7. It is submitted that none of the conditions of modified letter of intent as well as purchase order provided for submission of performance bank guarantee. However, complainant insisted on providing performance bank guarantee which the accused had refused to provide, since the same was not falling part of contractual terms and conditions. For Indcon Projects & Equipment Ltd.
4.10 Therefore, the complainant came to the accused for settlement of dispute and meeting took place between party on 01.04.2015 wherein accused no. 1 was pressurized to give an undated cheque for an amount of Rs. 15,60,000/- towards security and guarantee of workmanship/ mechanical/ pump capacity. The cheque was given despite none of the conditions of contract provided for it. The minutes of meeting clearly states that the cheque was given purely for security purpose. It is submitted that there liability existing on the date on cheque was issued. It is submitted that liability is in existence even till today."
9. The above pleadings are indicative of the fact that the petitioners, who is accused in the trial under the NI Act did not deny issuance of the cheque nor signature thereof or the complainant being holder in due course. It is also undeniable aspect that the cheque was deposited by the complainant. The cheque in question was presented by the complainant for clearance on 15.9.2015 and it was returned unpaid with the endorsement "exceeding arrangement"
on 16.9.2015. The statutory notice issued on 5.10.2015 demanding cheque amount of Rs.15,60,000/- being unpaid, which admittedly was not paid within the stipulated time period, leading to the complainant to file complaint u/s 138 of the NI Act before the jurisdictional Court. It is equally indubitable that learned Chief Judicial Magistrate, NI Court, after considering the averments made in the complaint and also documents annexed with it and after applying its mind, issued Page 10 of 21 Uploaded by SHEKHAR P. BARVE(HC00200) on Tue Jul 01 2025 Downloaded on : Tue Jul 01 21:43:59 IST 2025 NEUTRAL CITATION R/SCR.A/9301/2017 ORDER DATED: 24/06/2025 undefined process to the petitioners. In background of above aspects, the contention of the petitioners if noticed it is that the cheque in question was not given towards discharging existing or subsisting liability, but it is given towards security for performance guarantee of workmanship / mechanical/pump capacity and hence, the cheque in question does not fall within the purview to call the criminal proceedings u/s 138 of the NI Act.
10. At this juncture, let refer section 139 of the NI Act, which reads as under:-
""139. Presumption in favour of holder.--
It shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque of the nature referred to in section 138 for the discharge, in whole or in part, of any debt or other liability."
11. In Lakshmi Dyechem v State of Gujarat 2012(12) JT 65, the Hon Apex Court has held that presumption under Section 139 of the Act is a rebuttal presumption and the accused issuing the cheque is at liberty to prove to the contrary.
12. In Mandvi Cooperative Bank Vs. Nimesh B. Thakore reported in 2010(3) SCC 83, it is held by the Hon Apex Court that a rebuttal presumption is created under Section 139 of the NI Act that cheque was issued by the drawer in discharge of any debt or liability owned by him or its holder. Therefore, the presumption available under Section 139 of the NI Act in favour of the holder in cheque can be rebutted by the accused by adducing evidence. The burden of proof is on the accused and the evidence which is available on record will have to be tested bearing in mind the facts regarding the burden of Page 11 of 21 Uploaded by SHEKHAR P. BARVE(HC00200) on Tue Jul 01 2025 Downloaded on : Tue Jul 01 21:43:59 IST 2025 NEUTRAL CITATION R/SCR.A/9301/2017 ORDER DATED: 24/06/2025 undefined proof. The rebuttal burden envisaged under Section 139 of the NI Act can be discharged by placing a photocopy of the account maintained by the petitioners accused in a proceedings under Section 482 of the Criminal Procedural Code.
13. This Court in case of M/s Jalaram Jyot Sales Agency & Anr. Vs. State of Gujarat, Special Criminal Application No.2125 of 2018, in para 6.5 held as under:-
"6.5. A plain reading of Section 139 of the Negotiable Instruments Act, 1881 establishes a statutory presumption in favour of the holder of the cheque, to the effect that the cheque was received for the discharge, in whole or in part, of any debt or other legally enforceable liability, unless the contrary is proved. In other words, the burden of proof shifts upon accused to rebut the presumption and to demonstrate that the cheque was not issued in discharge of any debt or liability. Though the presumption under Section 139 is a rebuttable one, it continues to operate in favour of the holder of the cheque until it is successfully rebutted by the accused by leading cogent evidence."
14. It is apposite to refer to the judgment of the Hon'ble Supreme Court in Rohitbhai Jivanlal Patel v. State of Gujarat, AIR 2019 SC 1876, wherein the Hon'ble Court, in paragraph 7 and 7.1, extracted and examined the findings of the High Court as under:
"7. Against the aforementioned judgment and orders of acquittal, the complainant preferred appeals before the High Court of Gujarat, which have been considered and decided together by the impugned common judgment and order dated 08.01.2018. The High Court observed that the presumption under Sections 118 and 139 of the NI Act was required to be drawn that the cheques were issued for consideration and until contrary was proved, such presumption would hold good; that the complainant had proved legally enforceable debt in the oral as also documentary evidence, including the written Page 12 of 21 Uploaded by SHEKHAR P. BARVE(HC00200) on Tue Jul 01 2025 Downloaded on : Tue Jul 01 21:43:59 IST 2025 NEUTRAL CITATION R/SCR.A/9301/2017 ORDER DATED: 24/06/2025 undefined acknowledgment by the accused on stamp paper; and that except bare denial, nothing was brought on record by the accused to dislodge the proof adduced by the complainant.
7.1. The High Court observed that if the transaction in question was not reflected in the accounts and income-tax returns, that would at best hold the assesse or lender liable for action under the income-tax laws but, if the complainant succeeds in showing the lending of amount, the existence of legally enforceable debt cannot be denied. The High Court also observed that the issue regarding washing away of the cheques in rain water was of no significance when the accused had accepted his liability in clear terms. The High Court found that the defence plea of the accused that the money was given as hand loan by his friend Shri Jagdishbhai got falsified by the version of the said Shri Jagdishbhai, who was examined as a witness on behalf of the complainant. The High Court, therefore, set aside the impugned orders and, while convicting the accused-appellant for the offence under Section 138 of the NI Act, sentenced him in the manner noticed hereinbefore. The High Court, inter alia, observed and held as under:
"24. It is necessary at this stage also to refer to the emphasis laid by the learned counsel appearing for the respondent No.2 on the source of the fund which has been lent by the appellant. It has emerged from the detailed examination of the record, as also detailed examination-in-chief as well as cross-examination, that the complainant runs the business. He also maintains the books of account and he has his own factory in the name and style of 'Ashirwad Enterprise' and manufactures plastic. The said factory is situated at Jambusar. Ordinarily, any prudent business person would prefer to transact by cheque while lending money, but it is quite often noticed that the cash transactions in the business would allow huge sum of money as cash, which sometimes are shown in the books of account as cash on hands or otherwise as amount available on books. Assuming that cheque transaction of lending of amount is absent and income-tax returns also do not reflect such amount, that at the best would hold the assessee or lender liable for action under the Income-tax laws. However, otherwise, if he succeeds in showing lending of such amount, both by oral evidence of himself and his friend, on whom even respondent No.2 relies upon and from the writing of the respondent No.2 Page 13 of 21 Uploaded by SHEKHAR P. BARVE(HC00200) on Tue Jul 01 2025 Downloaded on : Tue Jul 01 21:43:59 IST 2025 NEUTRAL CITATION R/SCR.A/9301/2017 ORDER DATED: 24/06/2025 undefined given separately along with seven cheques signed by him, what possible reasons could weigh with the Court to deny the existence of legally enforceable debt in such glaring circumstances.
25. Considering the fact that the complainant maintains his books of account, coupled with the fact that the respondent No.2 had merely refuted on flimsy ground of his having transacted with witness Jagdishbhai and not with the complainant, has failed to discharge the burden which had shifted upon him. It is to be noted that the respondent No.2 has admitted his signature on the impugned cheque. At no point of time, the cheque has been disputed......Once this fact is acknowledged that the signature on the cheque is that of the respondent No. 2-accused, section 139 of the Negotiable Instruments Act would mandate the presumption that the cheque concerns a legally enforceable debt or liability. Of course, this presumption is in the nature of rebuttal and onus is on the accused thereafter to raise a probable defence. 25.1 As can be noted from the chronology of events and the material that has been placed before this Court that the defence raised by the accused is not at all probable. The respondent No.2-accused states that the money was given as a hand loan by his friend Jagdishbhai and not the appellant, also gets falsified completely by the version of Jagdishbhai. It appears that in case of all the seven cheques when notices were given prior to the filing of the complaint, he has chosen not to reply to four of the notices. Either on account of insufficiency of the funds or because he has closed account that the cheques could not be realized. All these circumstances cumulatively lead this Court to conclude that the appellant succeeded in proving the legally enforceable debt and no probable defence for rebutting the statutory presumption is raised by the respondent No.2. 25.2 Initial presumption as contemplated under section 139 of the Negotiable Instruments Act, when the proof of lending of the money and acceptance of the signatures on the cheques, shall need to be raised by the Court in favour of the appellant.
28. .......... Reasonably, when the appellant had proved the legally enforceable debt, not only through his own evidence, but also through the evidence of his friend Jagdishbhai and also other contemporaneous record, more particularly, the Page 14 of 21 Uploaded by SHEKHAR P. BARVE(HC00200) on Tue Jul 01 2025 Downloaded on : Tue Jul 01 21:43:59 IST 2025 NEUTRAL CITATION R/SCR.A/9301/2017 ORDER DATED: 24/06/2025 undefined document at Exhibit 24, which is a writing by which the respondent No.2 clearly indicates and accepts his liability to the tune of Rs. 22.50 lakh. Thus, the burden had shifted upon the respondent No. 2. The presumption which was needed to be drawn by the Court under section 118 of the Negotiable Instruments Act would oblige the Court to presume that the cheque had been issued for consideration and until contrary is proved, such presumption would hold the ground. Except the bare denial, nothing has been found to come on record to dislodge the positive proof that has been adduced by the appellant.
29. In the opinion of this Court, the entire argument that the rainy water could not have washed away the cheques, pales into insignificance and is not argument worth consideration, more particularly, when the respondent-accused in no unclear terms had accepted his liability of his having accepted the amount of Rs. 22.50 lakh from the complainant and it also declared the issuance of seven cheques of particular dates towards such legally enforceable debt. If it was an understanding between the parties qua issuance of fresh cheques, with an ostensible reason of old cheques having washed away, those are the non-issues. This Court cannot be oblivious of the fact that section 138 of the Negotiable Instruments Act has been made a penal provision not only for the cheques to give acceptability in the transaction, but it is the economic blood-line of the country and, therefore, the law makers have made the special rules of evidence by introducing sections 118 and 139 of the Negotiable Instruments Act.
30. The trial Court has committed a serious error by not discharging its obligation of recognizing the evidentiary value and not appreciating the positive evidence which led to the reasonable proof of legally enforceable debt existing on the side of the original complainant."
15. Therefore, applying the ratio laid down in the aforesaid judgments to the facts of the present case, the petitioners accused cannot contend at this juncture that the cheque in question is issued towards security and hence, the case u/s 138 of the NI Act is not Page 15 of 21 Uploaded by SHEKHAR P. BARVE(HC00200) on Tue Jul 01 2025 Downloaded on : Tue Jul 01 21:43:59 IST 2025 NEUTRAL CITATION R/SCR.A/9301/2017 ORDER DATED: 24/06/2025 undefined made out or cannot contend that the cheque in question is not issued towards discharge of any legally enforceable or subsisting liability. These contentions are disputed facts and can be addressed and weighed during trial. To be noted that once the process is issued, presumption u/s 139 of the NI Act starts operating in favour of the complainant and as such, the accused is required to discharge burden by leading evidence. The complaint cannot be quashed until the accused discharges burden envisaged upon.
16. In case of Sampelly Satyanarayana Rao (supra), Paras 14, 13, and 16 reads as under:-
"13. In Balaji Seafoods (supra), the High Court noted that the cheque was not handed over with the intention of discharging the subsisting liability or debt. There is, thus, no similarity in the facts of that case simply because in that case also loan was advanced. It was noticed specifically therein - as was the admitted case of the parties - that the cheque was issued as "security" for the advance and was not intended to be in discharge of the liability, as in the present case.
14. In HMT Watches Ltd. versus M.A. Abida[8], relied upon on behalf of the respondent, this Court dealt with the contention that the proceedings under Section 138 were liable to be quashed as the cheques were given as "security" as per defence of the accused. Negativing the contention, this Court held :-
"10. Having heard the learned counsel for the parties, we are of the view that the accused (Respondent 1) challenged the proceedings of criminal complaint cases before the High Court, taking factual defences. Whether the cheques were given as security or not, or whether there was outstanding liability or not is a question of fact which could have been determined only by the trial court after recording evidence of the parties. In our opinion, the High Court should not have expressed its view on the disputed questions of fact in a petition under Section 482 of the Code of Criminal Procedure, to come to a Page 16 of 21 Uploaded by SHEKHAR P. BARVE(HC00200) on Tue Jul 01 2025 Downloaded on : Tue Jul 01 21:43:59 IST 2025 NEUTRAL CITATION R/SCR.A/9301/2017 ORDER DATED: 24/06/2025 undefined conclusion that the offence is not made out. The High Court has erred in law in going into the factual aspects of the matter which were not admitted between the parties. The High Court further erred in observing that Section 138(b) of the NI Act stood uncomplied with, even though Respondent 1 (accused) had admitted that he replied to the notice issued by the complainant. Also, the fact, as to whether the signatory of demand notice was authorised by the complainant company or not, could not have been examined by the High Court in its jurisdiction under Section 482 of the Code of Criminal Procedure when such plea was controverted by the complainant before it.
11. In Suryalakshmi Cotton Mills Ltd. v. Rajvir Industries Ltd.[(2008) 13 SCC 678], this Court has made the following observations explaining the parameters of jurisdiction of the High Court in exercising its jurisdiction under Section 482 of the Code of Criminal Procedure: (SCC pp. 685-87, paras 17 & 22)
"17. The parameters of jurisdiction of the High Court in exercising its jurisdiction under Section 482 of the Code of Criminal Procedure is now well settled. Although it is of wide amplitude, a great deal of caution is also required in its exercise. What is required is application of the well-known legal principles involved in the matter.
22. Ordinarily, a defence of an accused although appears to be plausible should not be taken into consideration for exercise of the said jurisdiction. Yet again, the High Court at that stage would not ordinarily enter into a disputed question of fact. It, however, does not mean that documents of unimpeachable character should not be taken into consideration at any cost for the purpose of finding out as to whether continuance of the criminal proceedings would amount to an abuse of process of court or that the complaint petition is filed for causing mere harassment to the accused. While we are not oblivious of the fact that although a large number of disputes should ordinarily be determined only by the civil Page 17 of 21 Uploaded by SHEKHAR P. BARVE(HC00200) on Tue Jul 01 2025 Downloaded on : Tue Jul 01 21:43:59 IST 2025 NEUTRAL CITATION R/SCR.A/9301/2017 ORDER DATED: 24/06/2025 undefined courts, but criminal cases are filed only for achieving the ultimate goal, namely, to force the accused to pay the amount due to the complainant immediately. The courts on the one hand should not encourage such a practice; but, on the other, cannot also travel beyond its jurisdiction to interfere with the proceeding which is otherwise genuine. The courts cannot also lose sight of the fact that in certain matters, both civil proceedings and criminal proceedings would be maintainable."
12. In Rallis India Ltd. v. Poduru Vidya Bhushan [(2011) 13 SCC 88], this Court expressed its views on this point as under: (SCC p. 93, para 12) "12. At the threshold, the High Court should not have interfered with the cognizance of the complaints having been taken by the trial court. The High Court could not have discharged the respondents of the said liability at the threshold. Unless the parties are given opportunity to lead evidence, it is not possible to come to a definite conclusion as to what was the date when the earlier partnership was dissolved and since what date the respondents ceased to be the partners of the firm."
17. In the recent judgment rendered in the case of Rathish Babu Unnikrishnan (supra), the Hon'ble Supreme Court, while referring to the ratio laid down in Rajeshbhai Muljibhai Patel v. State of Gujarat, (2020) 3 SCC 794, has categorically held that disputed questions of fact are not required to be adjudicated at the threshold stage. Instead, such issues ought to be considered and decided only after the parties have had the opportunity to lead evidence. The relevant paragraphs of the judgment are reproduced hereinbelow:-
"12. At any rate, whenever facts are disputed the truth should be allowed to emerge by weighing the evidence. On this aspect, we may benefit by referring to the ratio in Rajeshbhai Muljibhai Patel vs. State of Gujarat5 where the following pertinent opinion was given by Justice R. Banumathi: -Page 18 of 21 Uploaded by SHEKHAR P. BARVE(HC00200) on Tue Jul 01 2025 Downloaded on : Tue Jul 01 21:43:59 IST 2025
NEUTRAL CITATION R/SCR.A/9301/2017 ORDER DATED: 24/06/2025 undefined "22. .............. When disputed questions of facts are involved which need to be adjudicated after the parties adduce evidence, the complaint under Section 138 of the NI Act ought not to have been quashed by the High Court by taking recourse to Section 482 CrPC. Though, the Court has the power to quash the criminal complaint filed under Section 138 of the NI Act on the legal issues like limitation, etc. criminal complaint filed under Section 138 of the NI Act against Yogeshbhai ought not to have been quashed (2010) 11 SCC 441 5 (2020) 3 SCC 794 merely on the ground that there are inter se disputes between Appellant 3 and Respondent 2. Without keeping in view the statutory presumption raised under Section 139 of the NI Act, the High Court, in our view, committed a serious error in quashing the criminal complaint in CC No. 367 of 2016 filed under Section 138 of the NI Act."
13. Bearing in mind the principles for exercise of jurisdiction in a proceeding for quashing, let us now turn to the materials in this case. On careful reading of the complaint and the order passed by the Magistrate, what is discernible is that a possible view is taken that the cheques drawn were, in discharge of a debt for purchase of shares. In any case, when there is legal presumption, it would not be judicious for the quashing Court to carry out a detailed enquiry on the facts alleged, without first permitting the trial Court to evaluate the evidence of the parties. The quashing Court should not take upon itself, the burden of separating the wheat from the chaff where facts are contested. To say it differently, the quashing proceedings must not become an expedition into the merits of factual dispute, so as to conclusively vindicate either the complainant or the defence.
14. The parameters for invoking the inherent jurisdiction of the Court to quash the criminal proceedings under S.482 CrPC, have been spelled out by Justice S. Ratnavel Pandian for the two judges' bench in State of Haryana v. Bhajan Lal6, and the suggested precautionary principles serve as good law even today, for invocation of power under Section 482 of the Cr.P.C.
"103. We also give a note of caution to the effect that the power of quashing a criminal proceeding should be exercised very sparingly and with circumspection and that too in the rarest of rare cases; that the court will not be justified in Page 19 of 21 Uploaded by SHEKHAR P. BARVE(HC00200) on Tue Jul 01 2025 Downloaded on : Tue Jul 01 21:43:59 IST 2025 NEUTRAL CITATION R/SCR.A/9301/2017 ORDER DATED: 24/06/2025 undefined embarking upon an enquiry as to the reliability or genuineness or otherwise of the allegations made in the FIR or the complaint and that the extraordinary or inherent powers do not confer an arbitrary jurisdiction on the court to act according to its whim or caprice."
15. In the impugned judgment, the learned Judge had rightly relied upon the opinion of Justice J.S.Khehar for a Division Bench in Rajiv Thapar (supra), which succinctly express the following relevant parameters to be considered by the quashing Court, at the stage of issuing process, committal, or framing of charges, "28. The High Court, in exercise of its jurisdiction under Section 482 CrPC, must make a just and rightful choice. This is not a stage of evaluating the truthfulness or otherwise of the allegations levelled by the prosecution/ complainant against the accused. Likewise, it is not a stage for determining how weighty the defences raised on behalf of the accused are. Even if the accused is successful in showing some suspicion or doubt, in the allegations levelled by the prosecution/ complainant, it would be impermissible to discharge the accused before trial. This is so because it would result in giving finality to the accusations levelled by the prosecution/complainant, without allowing the prosecution or the complainant to adduce evidence to substantiate the same."
16. The proposition of law as set out above makes it abundantly clear that the Court should be slow to grant the relief of quashing a complaint at a pre-trial stage, when the factual controversy is in the realm of possibility particularly because of the legal presumption, as in this matter. What is also of note is that the factual defence without having to adduce any evidence need to be of an unimpeachable quality, so as to altogether disprove the allegations made in the complaint.
17. The consequences of scuttling the criminal process at a pre-trial stage can be grave and irreparable. Quashing proceedings at preliminary stages will result in finality without the parties having had an opportunity to adduce evidence and the consequence then is that the proper forum Page 20 of 21 Uploaded by SHEKHAR P. BARVE(HC00200) on Tue Jul 01 2025 Downloaded on : Tue Jul 01 21:43:59 IST 2025 NEUTRAL CITATION R/SCR.A/9301/2017 ORDER DATED: 24/06/2025 undefined i.e., the trial Court is ousted from weighing the material evidence. If this is allowed, the accused may be given an un- merited advantage in the criminal process. Also because of the legal presumption, when the cheque and the signature are not disputed by the appellant, the balance of convenience at this stage is in favour of the complainant/prosecution, as the accused will have due opportunity to adduce defence evidence during the trial, to rebut the presumption.
18. Situated thus, to non-suit the complainant, at the stage of the summoning order, when the factual controversy is yet to be canvassed and considered by the trial court will not in our opinion be judicious. Based upon a prima facie impression, an element of criminality cannot entirely be ruled out here subject to the determination by the trial Court. Therefore, when the proceedings are at a nascent stage, scuttling of the criminal process is not merited."
18. Considering the application of ratio of above judgments, the judgment cited by learned advocate for the petitioners renders no help to his case.
19. In view of above and for the foregoing reasons, the contention of the petitioners to quash the complaint does not hold the field and the same can at the most be a good defence and can be raised during trial, but upon such finding, the Court cannot quash the complaint.
20. Resultantly, the petition fails and stands dismissed. Notice discharged. Interim relief granted earlier stands vacated.
(J. C. DOSHI,J) SHEKHAR P. BARVE Page 21 of 21 Uploaded by SHEKHAR P. BARVE(HC00200) on Tue Jul 01 2025 Downloaded on : Tue Jul 01 21:43:59 IST 2025