A Division Bench of Justice K.M. Joseph and Justice Hrishikesh Roy dismissed the present appeal seeking quashing of the complaint at a pre trial stage by observing that in cases where in the Trial Court is yet to decide the case on its merits and try the evidence on record, then ruling out the aspect of criminality is such cases is not appreciated and the power granted to the High Court under Section 482 of Cr.P.C shall be practiced judiciously, the Bench observed.
The challenge in the present appeals were against the judgment and order August 2, 2019 whereby the Delhi High Court dismissed the application under Section 482 of Cr.P.C. seeking quashing of the summoning order dated June 1 , 2018 and the order framing notice dated November 3, 2018 issued against the appellant under Section 138 of the Negotiable Instruments Act , 1881
Brief facts of the case were that a Criminal complaint was instituted by one Satish Gupta. In pursuance of the same the order under Section 251 of the Cr.P.C. was issued against the appellant by the Magistrate’s Court. The appellant, thereafter, approached the High Court under Section 482 of Cr.P.C. However, the Court after considering the submissions from both the sides observed that the grounds proposed by the appellant were “factual defenses” which should not be considered within the ambit of limited inquiry permissible in a petition instituted under Section 482 Cr.P.C. Resultantly, the petition was dismissed, though the accused’s liberty to defend his case before the competent Court was protected in the impugned order.
The Counsel for the appellant contended that without satiating the essential ingredients for the offence under Section 138 of the N.I. Act to the extent that the dishonored cheque received by the complainant was against “ legally enforceable debt or liability” the criminal process cannot be initiated. It was further contended that in the instant case the ingredients required for commission of the offence under Section 138 of the N. I. Act were missing. It was also contended that the cheques issued by the appellant in the favor of the complainant were contingent/ security cheques for buying back the shares of the AAT Academy, the appellant’s company, and therefore the cheques were not to be presented to the bank prematurely for encashment. Meaning to say that the complainant was holding the shares of the appellant’s company at the time of issuing of cheques, thus the complainant was not entitled to receive at that point if time through the encashment of the cheques, issued in his favour.
The complainant on the other hand, contended that when a cheque is issued and is duly signed, then the presumption with respect to a legally enforceable debt will rise in the favor of the cheque holder. The ball therefore falls in the court of the accused to produce necessary evidence to counter the legal presumption. It was further submitted that it was the duty of the Court to raise the legal presumption against the accused when his cheque was dishonored on presentation. Additionally, the Counsel submitted that in cases of share purchase transactions, the customary practice is to first pay the consideration amount and then complete the rest formalities. To support the same, the Counsel produced Section 56 (1) of the Companies Act, 2013 relating to transfer of securities.
The question of law before the Apex Court was whether the trial notice and summons should have been quashed on the basis of factual defenses and the question pertaining to the responsibility of the quashing Court of weighing down the evidence produced by the parties, at a pre- trial stage.
The Top Court observed that in share transactions, time gaps do exist between money out from the buyer and shares reaching to the seller. It was also noted that the burden of proving that there is no existing liability or debt is also to be discharged in the trial. Case of M.M.T.C. Ltd. & Anr. vs. Medchl Chemicals and Pharma (P) Ltd. & Anr was preferred wherein a two judge Bench observed that the burden of proving that there was no existing debt or liability was on the respondents. Thus, they have to discharge in the trial. At this stage, merely on the basis of averments in the petitions filed by them the High Court could not have concluded that there was no existing debt or liability.
It was further observed that in a situation where the accused moves Court for quashing the case even before the trial has commenced, the Court shall follow a careful approach and not prematurely extinguish the case by not considering the legal presumption which supports the complaint. The Court preferred the case of Rangappa vs. Sri Mohan wherein in a three- judge Bench observed that we are in agreement with the respondent claimant that the presumption mandated by Section 139 of the Act does indeed include the existence of a legally enforceable debt or liability. As noted in the citations, this is of course in the nature of a rebuttable presumption and it is open to the accused to raise a defense wherein the existence of a legally enforceable debt or liability can be contested. However, there can be no doubt that there is an initial presumption which favors the complainant.
On the question of principle of quashing, the Top Court opined that on a careful reading of the complaint and the order passed by the Magistrate what can be construed was that a possible view was taken that cheques drawn were in discharge of a debt for purchase of shares. It was noted that in case of legal presumption, it would not be justified on the part of the quashing Court to carry out a detailed enquiry on the facts alleged, without first granting an opportunity to the Trial Court to assess 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. Meaning to say that, the quashing proceedings shall not come into the way of determining the merits of the factual dispute, resulting in favoring the case of either the complainant or of the defense. The Top Court further cited the case of State of Haryana v. Bhajan Lal wherein the principles were stated for invocation of power under Section 482 of Cr.P.C which still proves to be a good law. It was observed 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 whim or caprice.
Thus in the light of observations made above, the Apex Court submitted that it is trite in law that the High Court should be careful while granting the relief of quashing a complaint under Section 482 Cr.P.C., at a pre- trial stage, especially in circumstances wherein the factual dispute is within the scope of possibility particularly because of the legal presumption, as in the instant case. It was also noted that the factual defense wherein no evidence evidence is produced needs to be of unimpeachable quality in order to refute all the allegations made in the complaint. Additionally, it was stated that quashing proceedings at pre- trial stage shall result in finality without giving the opportunities to the parties to produce evidence consequently depriving the Trial Court of the opportunity to try the case.
Therefore, the Court opined that in the instant case wherein the factual controversy was yet to be adjudicated upon and to be considered by the Trial Court, the non- suiting the complainant was not judicious. Relying on a prima facie impression, the criminality aspect cannot be ruled out in its entirety when the same is yet to be tried by the Trial Court, the Court remarked. In the words of the Court, “when the proceedings are at a nascent stage, scuttling of the criminal process is not merited”
Thus, it was observed that the High Court was right in its finding to not grant the relief to the appellant under Section 482 of Cr.P.C . However, the opportunity should be granted to him to defend his case by producing proper evidence to counter the legal presumption raised. It was further observed that the present observations were only confined to the present subject matter in question and shall have no bearing on the proceedings conducted by the Trial Court to decide the case on its merits. The appeals were accordingly dismissed.
Read Order: RATHISH BABU UNNIKRISHAN Vs. THE STATE OF NCT OF DELHI & ANR
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