On 30th July, a bench of the Delhi High Court consisting of Justice Asha Menon stated that merely because the metropolitan magistrate had taken cognizance of an offence under Section 138 of the Negotiable Instrument Act does not mean a decree against the defendant should follow as cognizance leads to trial and the accused can also get acquitted.

Facts of the case:

The petitioner filed the present suit for recovery of Rs.1,65,75,000/- under Order XXXVII of the Code of Civil Procedure, 1908. The petitioner averred in the plaint that the respondent/defendant was known to him for a long period of 20 years and had family relations with each other and were close friends and on the basis of which the petitioner gave some friendly loans to the respondent. The petitioner claimed that he used to raise bills for his fees and expenses which were paid by the Managing Director and other Directors from their personal accounts as also from the account of the respondent. The further case of the petitioner is that six cheques were issued by the respondent for repayment to the petitioner. Those cheques were dishonoured on presentation due to funds being insufficient and the petitioner filed a criminal case under Section 138 of the Negotiable Instruments Act, 1881.

The present petition has been filed against two orders of the learned Trial Court dated 18th January, 2020 and 24th January, 2020. The order dated 18th January, 2020 has been challenged on the ground that the learned Trial Court allowed the respondent to place on record photocopies of the immovable property furnished as security

Contention of the Petitioner:

Mr. Vivek Kumar Tandon, learned counsel for the petitioner has submitted the following contention:

  1. It was submitted that the learned Trial Court had wrongly granted leave to defend to the respondent in a case where the respondent had raised no triable issues.
  2. It was further submitted that the learned Trial Court had proceeded in a wrong direction as the loan transactions between the petitioner and the respondent were different transactions and had nothing to do with the payment of Rs.1.50 crores, which was towards the legal fees of the petitioner and for which the invoice had been raised.
  3. It was urged that as regards the cheques in respect of which proceedings under Section 138 of the N.I. Act are still pending, the signatures thereon have not been disputed.
  4. It was also was urged that as cognizance had been taken, and Notice under Section 251 Cr. P.C. served, a presumption had to be drawn against the respondent and the suit ought to have been decreed under Order XXXVII CPC. Instead, unconditional leave to defend was granted.

Contention of the respondent:

Mr. Sanchit Garga, learned counsel for the respondent submitted the following contention:

  1. It was submitted that the learned Trial Court had rightly granted leave to defend the suit as it was replete with incorrect facts.
  2. It was argued that a single invoice for a sum of Rs.1.5 crores had been raised apparently, towards fees for legal opinion and assistance. However, the petitioner in the plaint had himself referred to business transactions, namely, loans of vast amounts being given to the respondent and the receipt of interest @ 18% per annum.
  3. It was submitted that the cheque book was issued in the year 2013 and the six cheques were clearly lying in the possession of the petitioner for several years is indicative of the fact that they were given, not towards any legal liability but only as security.
  4. It was contended that as regards the judgments relied upon by the learned counsel for the petitioner/plaintiff, it was submitted that they are all related to delivery of goods and were not applicable to the facts of the present case.

Observation and judgement of the court:

The Hon’ble bench of the court made the following observation:

  1. With regard to the submissions made by the learned counsel for the petitioner, that, on taking cognizance of an offence by the learned MM under Section 138 of the N.I. Act automatically a decree against the respondent should follow, cannot be accepted, as cognizance leads to trial and the accused can also get acquitted.
  2. The learned Trial Court was right in observing that the defence taken was not moonshine and disclosed triable issues which required inquiry. Leave to defend had to be granted in the light of these varying stands taken by the petitioner in different proceedings.
  3. The judgments relied upon by the petitioner have no relevance to the facts of the present case and do not require detailed discussions.
  4. Though in the impugned order, it has not been so recorded that any condition was attached to the grant of leave to defend, however, in the light of the previous orders of this Court the leave to defend granted to the respondent is not unconditional and does not work to the disadvantage of the petitioner.

The court thus reiterated that the respondent is bound by the earlier orders of the Court that the said FDR shall not be encumbered in any fashion and nor shall the Registry release the FDR to the respondent till further orders of the court.

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