Mohal Lal Harbans Lal Bhayana & Co. ... vs Ok Play India Ltd.
1998 Latest Caselaw 779 Del

ORDER

J.B. Goel, J.

1. This is a petition under Section 482 of the Code of Criminal Procedure (for short the Code) for quashing of order of summoning and the complaint under Section 138 of the Negotiable Instruments Act (for short the Act).

2. Briefly the facts as alleged in the complaint are that the petitioner No. 1 is a partnership firm and petitioner Nos. 2 to 4 are its partners. Petitioner No. 1 through petitioner No. 4 in April 1997 had agreed to purchase APC water storage tanks in connection with the construction work at Khel Gaon awarded to them. Goods were supplied against 7 bills mentioned in the complaint for a total value of Rs. 2,00,000/-. Petitioners No. 2 and 3 as partners had issued cheque No. 038540 dated 20.5.97 of Rs. 2.00 lakhs towards discharge of this liability. After delivery was completed, the cheque was presented to their bankers on 28.5.1997 but was returned back on 30.5.1997 with the remark "payment stopped". A notice under Section 138 dated 13.6.1997 sent by registered post was duly served on the petitioners. The payment having not been made, the complaint was filed.

3. The complainant examined one Mr. Pramod Bansal, its Sales Manager as CW-1 who deposed on the aforesaid facts. The learned M.M. took cognizance on 16.3.1998 holding that prima facie case was made out for summoning accused under Section 138 of the Act and accordingly summoned the petitioners for 13.7.1998. Interim bail bonds were submitted and time was given upto on 1.9.1998. The petitioners have filed this petition for quashing the complainant and the proceedings.

4. Learned counsel for the petitioner has contended that the ingredients of Section 138 of the Act have not been fulfillled inasmuch there is no existing debt or liability as the cheque was issued conditionally subject to the goods being accepted on approval by the Department concerned and as the goods were rejected by the Department being not as per ISI and CPWD specifications. The petitioner had to inform the complainant about rejection of goods and to take back their goods and in the circumstances there is no debt or liability. Also that "stoppage of payment" does not attract Section 138 of the Act, the complaint is not maintainable.

5. The main part of Section 138 and Section 139 read as under:-

138. "Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provision of this Act, be punished with imprisonment for a term which may extend to one year, or with fine which may extend to twice the amount of the cheque or with both........"

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 Secion 138 for the discharge, in whole or in part, of any debt or other liability."

Section 138 gets attracted in terms if cheque is dishonoured because of insufficiency of funds or where the amount exceeds the arrangement made with the bank.

6. The scope of the provisions of Section 138 and 139 of the Act came for consideration recently by the Supreme Court in the case of M/s. Modi Cements Ltd. Vs. Shri Kuchil Kumar Nandi . In that case in partial discharge of their liability/debt the respondent drew three cheques in favour of the appellant. The cheques were returned by drawer's bank on 6.9.1994 with the endorsement "Payment stopped" by the drawer' and later on it transpired that vide letter dated 8.8.1994 the drawer had given such instructions. After serving notice complaint was filed and the accused were summoned. Their application for stay was rejected. However, a learned Single Judge of the Calcutta High Court allowed the petition and quashed the complaint inter alia for the reason that the endorsement of the bank 'payment stopped' was not sufficient to entertain the complaint as that was not an ingredient of the offence under Section 138 of the Act. It was held by the Supreme Court that even if the cheque is dishonoured because of 'stop payment' instructions having been issued before presentation of the cheque for payment, Section 138 would get attracted. Upholding the contention it was observed as under :-

"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, under the heading "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."

7. The legal position is thus well settled that Section 138 of the Act is not confined to only two eventualities (1) insufficiency of funds or (2) sufficient funds not being arranged; and the cheque having been dishonoured. It is also attracted where the cheque is dishonoured for other reasons like (1) "referred to drawer", (2) "instructions for stopping payment", and (3) "stamped exceeds arrangement". Where the cheque is dishonoured on account of 'payment stopped' it necessarily means that sufficient funds of the drawer of the cheque were not available in the bank on which cheque was drawn when the cheque is presented. The object of Chapter XVII added by Act No. 66 of 1988 containing Sections 138 to 142 of the Act to promote the efficacy of banking operations to ensure credibility of transactions in business through cheques. Once the cheque is issued by the drawer a presumption under Section 139 must follow and the same consequences would follow where the drawer stops the payemnt after issue of the cheque. Otherwise the very purpose of the enactment would be defeated merely on the ipsi dixit of the drawer of the cheque.

8. In view of this legal position Section 138 of the Act is clearly attracted in this case and the complaint was validly instituted. This contention thus has no force.

9. The second contention of the learned counsel is that the allegations in the complaint do not make out any offence as there is no existing liability/debt payable to the complainant and the complaint is liable to be quashed under Section 482 of the Code to prevent the abuse of process of the court.

10. The scope of the inquiry under Section 202 of the Code and also the scope of power of the High Court at that stage has been considered by the Hon'ble Supreme Court inter alia in Vadilal Panchel Vs. Dattatrya Dulaji, ; Chandra Deo Singh Vs. Prokash Chandra Bose, and Smt. Nagawwa Vs. Veeranna Shivalingappa Konjalgi and Others .

11. After referring to the aforesaid earlier two decisions, in Nagawwa Vs. Veeranna (supra) it was held that :

"It would thus be clear from the two decisions of this Court that the scope of the inquiry under Section 202 of the Code of Criminal Procedure is extremely limited - limited only to the ascertainment of the truth or falsehood of the allegations made in the complaint - (i) on the materials placed by the complainant before the Court; (ii) for the limited purpose of finding out whether a prima facie case for issue of process has been made out; and (iii) for deciding the question purely from the point of view of the complainant without at all adverting to any defense that the accused may have. In fact it is well settled that in proceedings under Section 202 the accused has got absolutely no locus standi and is not entitled to be heard on the question whether the process should be issued against him or not.

................... It is true that in coming to a decision as to whether a process should be issued the Magistrate can take into consideration inherent improbabilities appearing on the face of the complaint or in the evidence led by the complainant in support of the allegations but there appears to be a very thin line of demarcation between a probability of conviction of the accused and established of a prima facie case against him. The Magistrate has been given an undoubted discretion in the matter and the discretion has to be judicially exercised by him. Once the Magistrate has exercised his discretion it is not for the High Court, or even this Court, to substitute its own discretion for that of the Magistrate or to examine the case on merits with a view to find out whether or not the allegations in the complaint, if proved, would ultimately end in conviction of the accused. These considerations, in our opinion, are totally foreign to the scope and ambit of an inquiry under Section 202 of the Code of Criminal Procedure which culminate into an order under Section 204 of the Code."

12. It was further held that where (1) the allegations in the complaint or the statements of the witnesses recorded in support of the same taken at their face value make out actually no case against the accused or the complaint does not disclose the essential ingredients of an offence, or (2) the allegations made in the complaint are patently absurd and inherently improbable so that no prudent person can ever reach the conclusion that there is sufficient ground for proceeding against the accused, the order of the Magistrate in such case can be quashed.

13. The tests therefore are that "Unless the Magistrate finds that the evidence led before him is self -contradictory, or intrinsically untrustworthy, process cannot be refused if that evidence makes out a prima facie case. The test would not be whether there was sufficient ground for conviction. Even though the person charged in the complaint might have a defense, the matter has to be left to be decided by the appropriate forum at the appropriate stage and issue of a process could not be refused. At this stage it is not the province of the Magistrate to enter into a detailed discussion of the merits or demerits of the case nor can the High Court go into this matter in its revisional jurisdiction which is a very limited one. At this stage it is not necessary for the trial court to delve into various aspects and to go into the questions of truthfulness, veracity and correctness of the allegations made in the complaint.

14. On the material before the learned trial court it cannot be said that the material available before it did not disclose the essential ingredients of the offence or that if the averments made in the statement are believed at their face value, no case was made out. The defense sought to be raised cannot be gone into and adjudicated in exercise of revisional jurisdiction.

15. As held in K.M. Mathew Vs. State of Kerala and Anr. it is open to the accused to plead before the Magistrate that the process agianst him ought not to have been issued. The Magistrate may drop the proceedings if he is satisfied on reconsideration of the complaint that there is no offence for which the accused could be tried. The order issuing the process is an interim order and not a judgment. It can be varied or recalled and the proceedings could be dropped if the complaint did not disclose any offence against the accused even though the process has already been issued.

16. In the circumstances, it cannot be said that the complaint did not disclose a cause of action or prima facie case against the petitioners who are accused in the complaint.

17. For the reasons given above, the order summoning the petitioners as accused cannot be said to be suffering from any illegality or impropriety. It calls for no interference by this Court.

18. This petition has no merits and the same is accordingly dismissed in limine.