Mr. Manish Mehrotra vs State Of U.P. And Another
2018 Latest Caselaw 559 ALL

HIGH COURT OF JUDICATURE AT ALLAHABAD
 
 

Court No. - 15
 

 
Case :- APPLICATION U/S 482 No. - 4409 of 2013
 

 
Applicant :- Mr. Manish Mehrotra
 
Opposite Party :- State Of U.P. And Another
 
Counsel for Applicant :- Brijesh Sahai
 
Counsel for Opposite Party :- Govt. Advocate,Anand Mani Tripathi,S. Shekhar
 

 
Hon'ble Umesh Chandra Srivastava,J.

Heard Sri Bhavya Sahai and Brijesh Sahai, learned counsel for the applicant, learned counsel for opposite party no. 2 along with learned A.G.A. for the State and perused the record.

Applicant has filed this application under Section 482 Cr.P.C. with prayer seeking quashing of proceedings of Complaint Case No. 716 of 2012 (M/s. Shivalik Infotech Pvt. Limited Vs. M/s Tritech Enterprises), under Section 138/142 Negotiable Instrument Act, P.S. Sehani Gate, District Ghaziabad, pending before Judicial Magistrate, Ghaziabad.

Brief facts relevant for the disposal of application are that opposite party no. 2 is the Company engaged in the business of sale of computer and computer parts. Sri Kunal Garg is the Director of Company. Applicant is the proprietor of M/S Tritech Enterprises, who is also engaged in the business of computer. With regard to business carried out between the above mentioned parties, applicant had issued cheque nos. 153255, dated 10.02.2012 for Rs.5,99,037/- and 153256, dated 10.02.2012 for Rs.16,99,115/- in favour of opposite party no. 2-Company and assured that cheques on being presented for encashment would be positively en-cashed. Opposite party no. 2 deposited the aforesaid cheques with its banker for encashment which were returned unpaid with remarks 'stop payment'. After receiving information regarding dishonoring of the cheques, opposite party no. 2 served a demand notice to applicant calling upon him to pay the amount of cheque within fifteen days from the date of service. Despite the said notice being served upon applicant, he did not make the payment of cheques, hence complaint for the offence under Section 138 of Negotiable Instrument Act, was filed against him in which applicant has been summoned to face trial. It is against the summoning order of the, the present application has been filed for quashing the proceedings of the complaint.

Learned counsel for the applicant submitted that issuance of cheques by applicant in favour of opposite party no. 2 and service of demand notice upon applicant is not denied. They have submitted that cheques in question were not issued in respect of any debt or liability, they were issued as security to business being carried out between the parties. They further submitted that at the time when the cheques were issued no liability of the applicant was fixed therefore, applicant instructed its banker to stop the payment of cheques and informed about the same to opposite party no. 2 also giving notice and asking not to present the cheques for encashment till the liability is settled. They further submitted that despite there being notice to opposite party no. 2 that applicant had issued instruction to the bank to stop payment the opposite party no. 2 presented the cheques for encashment. The cheques were not dishonored due to insufficiency of funds in account but on account of instruction issued to bank, hence no offence under Section 138, N.I. Act is made out.

They further submitted that where a cheque is issued not against any liability but as security, if cheque on being presented for encashment is returned unpaid with the remark "stop payment" that would not amount to an offence under Section 138 N.I. Act, dishonoring of cheque would amount to offence under Section 138 N. I. Act only when the cheque is dis-honored on account of insufficiency of fund in account.

Learned counsel for the applicant further submitted that date and amount in cheque are not in the hand writing of the drawer, it is in different hand writing and this supports the applicant's contention that cheques were issued as security, and not in respect of any debt or liability. They further submitted that applicant is denying the liability from the day one he received the demand notice. In reply to the notice sent to opposite party no. 2, he has clearly mentioned that applicant's liability is not yet fixed and he called upon opposite party no. 2 to sit across a table to settle account tofix the liability. They further submitted that opposite party no. 2 despite having received reply to demand notice preferred not to sit across the table for settling the account and presented the cheque whch shows its malafide.

Learned counsel for the applicant further submitted that presumption given under Section 139 N.I. Act is rebutable and if it is established from record that cheque is given as security and not in respect of any debt or liability, no offence under Section 138 N.I. Act would be made out and in that event proceedings initiated in respect of dishonoring of the cheque would be abuse of process of the court.

In support they have relied upon a judgment of Hon'ble Apex Court in the case of Laxmi Dyechem Vs. State of Gujarat & others, (2012) 13 SCC 375. In paragraph 8 of the said judgment, Hon'ble Apex Court has held that 'presumption under Section 139 N.I. Act in respect of cheque is not absolute, it is rebutable and if the drawer of the cheque succeeds to prove that there is no debt or liability in respect of which cheque is said to have been issued, he can not be punished for the offence under Section 138 N.I. Act.

Per contra, learned A.G.A. and learned counsel appearing for opposite party no. 2 submitted that it is incorrect to say that if after issuance of a cheque, drawer of the cheque issues instruction of stop payment to the bank and also informed about the same to drawee or holder of the cheque in due course and even thereafter drawee of the cheque presents the cheque for encashment and it is dishonored not on account of insufficiency of fund, but due to instruction of non-payment issued to the bank, Section 138 N.I. Act could not be attracted.

This issue has been dealt with by the Hon'ble Apex Court in M/S Modi Cements Ltd. Vs. Kuchil Kumar Nandi, 1998 (1) CLR 598 and has ehdl in paragraph 16 of the judgment as under:

"16. We see great force in the above submission because once the cheque is issued by the drawer, a presumption under Section 139 must follow and merely because the drawer issues a notice to the drawee or to the Bank for stoppage of the payment it will not preclude an action under Section 138 of the Act by the drawee or the holder of a cheque in due course. The object of Chapter XVII, which is entitled as "OF PENALTIES IN CASE OF DISHONOUR OF CERTAIN CHEQUES FOR INSUFFICIENCY OF FUNDS IN THE ACCOUNTS" and contains Sections 138 to 142, is to promote the efficacy of banking operations and to ensure credibility in transacting business through cheques. It is for this reason we are of the considered view that the observations of this Court in Electronics Trade & Technology Development Corporation Ltd., Secunderabad (supra) in paragraph 6 to the effect "Suppose after the cheque is issued to the payee or to the holder in due course and before it is presented for encashment, notice is issued to him not to present the same for encashment and yet the payee or holder in due course presents the cheque to the bank for payment and when it is returned on instructions, Section 138 does not get attracted", does not fit in with the object and purpose for which the above chapter has been brought on the Statute Book."

Learned A.G.A. and learned counsel appearing for opposite party no. 2 have further submitted that whether cheque has been issued against any debt or liability, or as security is a question of fact which the High Court cannot decide in proceediong under Section 482 Cr.P.C. This question can be decided by the trial court during trial only . The High Court cannot quash the proceedings initiated on dishonoring of a cheque on the reason that cheque was not dishonored on account of insufficiency of fund but for the instruction of non payment issued to the bank.

Having heard the respective submissions of learned counsel of both sides and considering the facts and circumstances of the case, the factual position that has been so emerging is that applicant has not denied the issuance of cheques in favour of opposite party no. 2. He has also not denied the receipt of demand notice and that he did not comply with the notice within the stipulated period of time. The question for consideration in this application before this Court is that if the cheque is not dishonored on account of insufficiency of fund, but on account of instruction of stop payment issued to bank with notice to drawee of the cheque, Section 138 N.I. Act would be attracted or not?

The Hon'ble Apex Court in the case of Laxmi Dyechem Vs. State of Gujarat & others, (2012) 13 SCC 375 in paragraphs 28 and 29 of the said judgment has held as under:

"28 What is wished to be emphasised is that matters arising out of "stop-payment" instruction to the bank although would constitute an offence under Section 138 of the NI Act since this is no longer res integra, the same is an offence subject to the provision of Section 139 of the Act and hence, where the accused fails to discharge his burden of rebuttal by proving that the cheque could be held to be a cheque only for discharge of a lawful debt, the offence would be made out. Therefore, the cases arising out of stop-payment situation where the drawer of cheques has sufficient funds in his account and yet stops payment for bona fide reasons, the same cannot be put on a par with other variety of cases where the cheque has bounced on account of insufficiency of funds or where it exceeds the amount arranged to be paid from that account, since Section 138 cannot be applied in isolation ignoring Section 139 which envisages a right of rebuttal before an offence could be made out under Section 138 of the Act as the legislature already incorporates the expression "unless the contrary is proved" which means that the presumption of law shall stand and unless it is rebutted or disproved, the holder of a cheque shall be presumed to have received the cheque of the nature referred to in Section 138 of the NI Act, for the discharge of a debt or other liability. Hence, unless the contrary is proved, the presumption shall be made that the holder of a negotiable instrument is holder in due course.

29. Thus, although a petition under Section 482 Cr.P.C. may not be entertained by the High Court for quashing such proceedings, yet the judicious use of discretion by the trial Judge whether to proceed in the matter or not would be enormous in view of Section 139 of the NI Act and if the drawer of the cheque discharges the burden even at the stage of enquiry that he had bona fide reasons to stop the payment and not make the said payment even within the statutory time of 15 days provided under the NI Act, the trial court might be justified in refusing to issue summons to the drawer of the cheque by holding that ingredients to constitute offence under Section 138 of the NI Act are missing where the account-holder has sufficient funds to discharge the debt. Thus the category of "stop-payment cheques" would be a category which is subject to rebuttal and hence would be an offence only if the drawer of the cheque fails to discharge the burden of rebuttal."

The Hon'ble Apex Court in the case of M.M.T.C. Ltd. & another Vs. Medchi Chemicals and Pharma (P) Ltd. & another, 2002 (1) R.C.R. (Criminal) 318 has further held as under:

"even though cheque was dishonored by reason of stop-payment instructions by virtue of Section 139 the court has to presume that the cheque was received by the holder for the discharge, in whole or in part, of any debt or liability. Of course this is a rebuttable presumption. The accused can thus show that the 'stop-payment' instructions were not issued because of insufficiency or paucity of funds. If the accused shows that in his account there were sufficient funds to clear the amount of the cheque at the time of presentation of the cheque for encashment at the drawer bank and that the stop-payment notice had been issued because of other valid causes including that there was no existing debt or liability at the time of presentation of cheque for encashment, then offence under Section 138 would not be made out. The important thing is that the burden of so proving would be on the accused. Thus the court cannot quash proceedings on this ground."

In the case of Pulsive Technologies P. Ltd. Vs. State of Gujarat & others in Criminal Appeal No. 1808 of 2014 (Arising out of Special Leave Petition (Crl.) No. 9901 of 2011) with Criminal Appeal No. 1807 of 2014 (Arising out of Special Leave Petition (Crl.) No. 9915 of 2011) decided on 22.8.2014, the Hon'ble Apex Court in paragraph 13 has held as under:

"13. We find that the High Court has relied on M.M.T.C. Ltd. and Modi Cements and yet drawn a wrong conclusion that inasmuch as cheque was dishonored because of "stop-payment" instructions, offence punishable under Section 138 of the NI Act is not made out. The High Court observed that "stop payment" instructions were given because the complainant had failed to discharge its obligations as per agreement by not repairing/replacing the damaged UPS system. Whether complainant had failed to discharge its obligations or not could not have been decided by the High Court conclusively at this stage. The High Court was dealing with a petition filed under Section 482 of the Code for quashing the complaint. On factual issue, as to whether the complainant had discharged its obligations or not, the High Court could not have given its final verdict at this stage. It is matter of evidence. This is exactly what this Court said in M.M.T.C. Ltd. Though the High Court referred to M.M.T.C. Ltd., it failed to note the most vital caution sounded therein."

In view of what has been stated above, it is concluded that though presumption under Section 139 is rebuttable but merely on the reason that cheque was not dishonored on account of insufficiency of fund but it was dishonored due to instruction of non-payment issued to the bank with its notice to drawee or holder in due course of the cheque also, Section 138 would be attracted. It is further concluded that if accused contends that he has no liability or the liability is not to the extent of amount in cheque, he can raise this plea before the trial court, and if he raises any such plea and satisfies the court that cheque is not issued in respect of any debt or liability, Section 138 NI Act would not be attracted and he would be acquitted. But in no case, merely on the reason that cheque is dishonored on account of instruction of non-payment with its notice to drawer or holder in due course of the cheque, the High Court cannot quash proceeding under Section 482 Cr.P.C. as factual aspect of case cannot be looked into in 482 criminal proceeding.

In the result, I do not see any force in the application.

Accordingly, application is dismissed.

Order Date :- 16.5.2018

RCT/-