Narpat Motisingh Purohit vs State Of Gujarat
2021 Latest Caselaw 17930 Guj

    R/SCR.A/1355/2020                           JUDGMENT DATED: 01/12/2021




      IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

    R/SPECIAL CRIMINAL APPLICATION NO. 1355 of 2020

                                   With

CRIMINAL MISC. APPLICATION (FOR STAY) NO. 1 of 2021

                                     In

    R/SPECIAL CRIMINAL APPLICATION NO. 1355 of 2020

FOR APPROVAL AND SIGNATURE:


HONOURABLE MS. JUSTICE GITA GOPI

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1     Whether Reporters of Local Papers may be
      allowed to see the judgment ?

2     To be referred to the Reporter or not ?

3     Whether their Lordships wish to see the fair copy
      of the judgment ?

4     Whether this case involves a substantial question
      of law as to the interpretation of the Constitution
      of India or any order made thereunder ?

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                        NARPAT MOTISINGH PUROHIT
                                 Versus
                            STATE OF GUJARAT
=============================================
Appearance:
HARSH V GAJJAR(7828) for the Applicant(s) No. 1
MR UMANG S OZA(10966) for the Applicant(s) No. 1
MR MANISH J PATEL(2131) for the Respondent(s) No. 2
MR PRANAV TRIVEDI APP for the Respondent(s) No. 1
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CORAM:HONOURABLE MS. JUSTICE GITA GOPI

                            Date : 01/12/2021

                            ORAL JUDGMENT

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1. The petitioner before this Court under Section 482 of the Code of Criminal Procedure, 1973 (for short "the Cr.P.C.") has prayed for quashing and setting aside the Criminal Case No.7214/2019, wherein he has been made an accused in proceedings under Section 138 of the Negotiable Instruments Act, 1881 (hereinafter referred to as the 'N.I. Act' for short) before the learned Judicial Magistrate, First Class, Vadodara. The petitioner challenges the issuance of summons dated 22.02.2019 and all the consequential proceedings initiated in pursuance thereof, contending that the same are illegal, untenable unsustainable, malafide and not maintainable in the eyes of law.

2. The petitioner states that he had purchased the vehicle being Maruti Swift bearing Registration No.GJ-06- FK-4360, availing the financial assistance from respondent no.2 - Shriram Transport Finance Company Ltd. by Hire Purchase Agreement in the year 2013. The value of the car was Rs.6,29,263/-, out of which the financial assistance availed by the petitioner was Rs.4,90,000/-, which the petitioner was to pay to respondent no.2 in 48 equal monthly installments along with interest of Rs.2,45,082/-. The petitioner states that seven cheques in the form of security were issued while entering into the Hire Purchase Agreement in the year 2013. It is stated that it was specifically agreed upon that,

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the cheques would be treated as security.

2.1 The petitioner further states that in pursuance of the Hire Purchase Agreement, he had paid Rs.5,35,830/- against the total amount of Rs.7,35,082/- and Rs.1,99,252/- was the outstanding amount as on December, 2018. It is stated that respondent no.2 had not issued few receipts against the payments made and as per their accounts, the outstanding total sum was Rs.4,13,350/-. The petitioner states that because of the financial crisis, he could not pay few of the installments due to which the respondent no.2 seized the car in order to release the outstanding dues on 28.12.2018 by issuing a Seizing Authority Letter.

2.2 The petitioner further states that the office of the respondent no.2 in Vadodara region got closed in the year 2015 due to some unavoidable circumstances, therefore, one "Rajshri Credit Corporation" has been acting as a franchise holder on behalf of respondent no.2 and the petitioner was informed about this fact by letter dated 21.08.2015, whereby he was instructed to pay all the installments to Rajshri Credit Corporation. The petitioner, thus states that certain cash payments were made by him to the said Corporation on several dates and for that receipts were issued to him and the said payment was towards the Hire Purchase Agreement in respect of the said vehicle.

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2.3 The petitioner states that while entering into Hire Purchase Agreement, he was not provided with copy of the same and thus he has no custody of the agreement. The petitioner alleges that respondent no.2 very conveniently did not produce copy of the Hire Purchase Agreement in the criminal complaint before the Judicial Magistrate, which is under Section 138 of the N.I. Act.

2.4 The petitioner contends that since the vehicle was seized by respondent no.2 on 28.12.2018 and subsequently sold to third party namely Kirtiji Ranchhodji Solanki and the sale proceeds had been realized and therefore under that circumstances, the Hire Purchase Agreement comes to an end between petitioner and respondent no.2; in spite of that fact, it is alleged that criminal case is filed against him. It is stated that respondent no.2 has misused cheques issued towards security, by depositing Cheque No.477285 on 13.12.2018 and since it got bounced on 17.12.2018, the respondent no.2 issued notice dated 08.01.2019 which was received by the petitioner on 21.01.2019. It is stated that cheque was towards security and when at a later date the ownership and possession of the vehicle has changed hands at the behest of respondent no.2, no criminal proceedings is maintainable under Section 138 of the N.I. Act.

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3. Mr. Harsh V.Gajjar, learned advocate for the petitioner submits that since the vehicle, which was under the Hire Purchase Agreement, was seized on 28.12.2018, the agreement ipso facto stands terminated and therefore there would not be any legally enforceable debt for respondent no.2 to present any cheque before the Bank given by way of security. Mr. Gajjar, therefore, submitted that any criminal proceeding for dishonour of Cheque No.477285 would not be towards any legally enforceable debt prior to the complaint dated 22.02.2019. The possession of the vehicle was taken away from the petitioner and the said vehicle was sold to Kirtiji Ranchhodji Solanki and the sale proceeds were adjusted towards the outstanding debt.

3.1 Mr. Gajjar further submits that the complaint has been filed by some power of attorney holder, since the said person has no knowledge of the transaction undertaken by the petitioner and the respondent no.2, the complaint would not be maintainable.

3.2 Mr. Gajjar to fortify his submissions, has relied on the judgments; (i) Rajkumar Sharma Vs. Shriram Finance Co. Ltd., reported in 2015 (4) Banking Cases 38: [2015 (2) RCR (Cr.) 915] (ii) Shriram Transport Finance Co. Ltd. Vs. Akhilabanu, rendered in Criminal Appeal No.2722/2009 on 11.02.2015 (iii) Sudha Beevi Vs. State of Kerala, reported in (2004)

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Cr. L.J. 3418.

4. Countering the arguments, Mr.Manish J.Patel, learned advocate for the respondent no.2 vehemently contended that, petitioner would have no right to agitate any of the contentions raised in the present proceedings, where the complaint is challenged under Section 482 Cr.P.C. Mr. Patel stated that petitioner had opportunity to reply to the statutory legal notice which was issued in view of provision of Section 138 of N.I. Act, which the petitioner has failed to do so. The petitioner does not deny the signatures on the cheques. No claim has been made prior, that the said cheques were taken as security to the transactions.

4.1 Mr. Patel submitted that the petitioner has not denied his signature on the cheque, nor has denied of drawing the cheque and all the contentions raised herein are the defences, which would be available to him during the trial, thus, stated that the present petition be rejected.

5. The Criminal Case No.7214/2019 is before the Judicial Magistrate, First Class at Vadodara. The respondent no.2 - Shriram Transport Finance Company Ltd. filed the complaint through Harpal Hitendrasinh Gohel, and respondent no.2 states that it is a company incorporated under Indian Companies Act, 1956 having its registered office at Chennai and having branch offices

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all over the Country, out of which one branch is located at Vadodara. Shriram Transport Finance Company Ltd. is a non-banking financial institution, which includes the business of Hire Purchase Financing of vehicles.

5.1 The respondent Company stated in the complaint that the accused had approached the office for demand of financial assistance to purchase a vehicle. The respondent Company had disclosed the terms and conditions to provide the financial assistance and thereafter had entered into an agreement vide Loan Agreement No.BARF1O301080001 for vehicle bearing Registration No.GJ06FK4360. The respondent Company alleged before the Judicial Magistrate that the accused had committed default in payment of periodical installment, therefore demand notices in the form of reminder letters were issued to the accused and on receipt of the same, accused had approached the branch office of complainant and provided cheque towards partial payment of due amount. At the time of issuance of cheque, the accused had assured the office of the complainant - Company that the same is good for value and will be honoured as and when presented.

5.2 In the said complaint dated 22.01.2019, it is stated by the respondent no.2 - Company that, under instructions of the accused, the complainant - Company had presented Cheque No.477285 of State Bank of India

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Ramakaka Temple Road Branch, dated 13.12.2018 for the amount of Rs.8,34,941/-, for clearance in the account maintained with Axis Bank, Sayajigunj Branch and the same came to be returned unpaid with remarks/reason "Funds Insufficient" vide return memo dated 17.12.2018, which was received by the complainant - Company on 19.12.2018. The complainant before the learned Magistrate further urged that it had persuaded the accused and had made a call to inform that the cheque has been returned by the Bank because of fund insufficiency and despite assurance, neither the petitioner turned-up to ensure the payment nor picked up phones. Thus, from the doubtful behaviour of the accused, the Company came to a conclusion that accused had dishonesty in his mind for deceiving and cheating the Company and the entire behaviour amounted to be offence under Section 420 of IPC as well.

6. The whole of the averments in the complaint by the respondent Company does not disclose the fact that on 28.12.2018, the vehicle being New Swift VDI, Registration No.GJ-06-FK-4360, Engine No.D13A327458, Chasis No.MA3FHEB1S00344639, was seized by the complaint - Company - Shriram Transport Finance Company Ltd. One Mr. Javed Daudmiya Sandhi was authorized to repossess the said vehicle from the borrower due to his default of repayment of loan and the authority letter suggests that the said person was

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authorized to repossess the vehicle from anyone or from anywhere. Mr. Gajjar stated that such fact was not disclosed which was a material suppression, as the said act of the respondent - Company itself suggests that there was end to the Hire Purchase Agreement and the accused would not be bound by any of the terms and conditions thereafter.

6.1 Documents on record placed by the petitioner itself shows that the vehicle on being repossessed by the financial Company was sold to one Mr. Kirtiji Ranchhodji Solanki. The said documents on record have not been denied by respondent no.2. The abstract of the Statement of Account shows the transactions of the cheques towards payment of the installments.

7. In the case of Indus Airways Private Limited Ors. Vs. Magnum Aviation Private Limited & Anr., reported in (2014) 12 SCC 539, the Hon'ble Supreme Court while considering the expression "debt or other liability", held as under:

"The explanation appended to Section 138 of the NI Act explains the meaning of the expression "debt or other liability" for the purpose of Section 138. This expression means a legally enforceable debt or other liability. Section 138 treats dishonoured cheque as an offence, if the cheque has been issued in discharge of any debt or other liability. The explanation leaves no manner of doubt that to attract an offence under Section 138, there should be legally enforceable

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debt or other liability subsisting on the date of drawal of the cheque. In other words, drawal of the cheque in discharge of existing or past adjudicated liability is sine qua non for bringing an offence under Section 138. If a cheque is issued as an advance payment for purchase of the goods and for any reason purchase order is not carried to its logical conclusion either because of its cancellation or otherwise, and material or goods for which purchase order was placed is not supplied, the cheque cannot be held to have been drawn for an exiting debt or liability. The payment by cheque in the nature of advance payment indicates that at the time of drawal of cheque, there was no existing liability.

If at the time of entering into a contract, it is one of the conditions of the contract that the appellant purchaser had to pay the amount in advance and there is breach of such condition then the appellant purchaser may have to make good the loss that might have occasioned to the seller but that does not create a criminal liability under Section 138. For a criminal liability to be made out under Section 138, there should be legally enforceable debt or other liability subsisting on the date of drawal of the cheque."

7.1 In the case of Rajkumar Sharma Vs. Shriram Finance Co. Ltd. (supra), Chhattisgarh High Court has referred to the facts of the case, observing that petitioner therein had entered into Hire Purchase Agreement with respondent - Shriram Transport Finance Company Ltd. and had obtained loan for the purchase of a Truck. As per the agreement, the petitioner had to make installments and petitioner had also given postdated Cheques by way of security, so that the same could be utilized by the company in the event, if any defaults in paying the

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monthly installments. It has been observed that, in the month of January 2008, the Company on account of an alleged default on the part of the petitioner in paying the installments, suddenly without any intimation/notice, forcefully seized the vehicle and the Company did not give any information of the seizure of the vehicle to the petitioner. It was further observed that as per the letter issued by the respondent Company, the vehicle was further sold and Company had realized the value of the said vehicle towards meeting the loan repayment. Thereafter, respondent Company deposited the cheque for clearance, which was returned with reasons assigned as 'insufficiency of funds'. The Court in the said judgment, made observations in paragraph nos.9, 10 and 11 as under:

"9. In light of the aforesaid decisions rendered by the different High Courts and in respectful agreement to the ratio laid down in these judgments, in the instant case also, as is evident from the document (Annexure A-3) filed by the Petitioner issued by the Respondent, the Respondent has taken repossession of the vehicle and has also further sold it and realized the sale proceeds and, under the said circumstances, I am of the opinion that the hire-purchase agreement entered into between the Petitioner and the Respondent gets determined ipso facto.

10. Section 138 of the N.I. Act treats dishonoured cheque as an offence, if the cheque has been issued in discharge of any debt or other liability. The Explanation leaves no manner of doubt that to attract an offence u/s 138, there should be legally enforceable debt or other liability subsisting on the date of drawal of the

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cheque. The very fact that the Respondent has taken repossession of the vehicle and has also sold the said vehicle and the sale value of the said vehicle has also been adjusted for meeting the loan repayment, the agreement on the basis of which the postdated cheques were issued cannot be put for clearance for the reason that the Respondent by virtue of the two acts on their part; firstly, of taking possession of the vehicle and, secondly, of sale/auctioning the said vehicle, stood determined. Therefore, the cheques which have been subsequently put for clearance and got dishonoured would not fall within the ambit of legally enforceable debt or other liability.

11. For the foregoing reasons, the Petition u/s 482 of CrPC is allowed and the complaint case initiated by the Respondent against the Petitioner deserves to be and is hereby quashed."

8. Here, in the instant case, prior to the filing of the criminal complaint before the concerned Judicial Magistrate, the financial institution, Shriram Transport Finance Company Ltd., had admittedly got repossession of the vehicle, therefore, the agreement entered into between the parties would get determined ipso facto by such repossession.

8.1 The Kerala High Court in case of Sudha Beevi Vs. State of Kerala (supra), raised a short question to the effect that, whether postdated Cheques issued by the hirer at the time of execution of the agreement continue to remain as valid instruments supported by consideration once the agreement gets "determined ipso facto"? While giving the meaning of consideration, it was observed that consideration is sine quo non for any

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legally enforceable contract. The facts of the case, as observed in the case of Sudha Beevi (supra) revealed that Cheque was presented for encashment after the vehicle was seized by the complainant. It is was observed that, going by the terms of agreement, it stood "determined ipso facto" on default of the hirer to pay the installments and also on seizure of the vehicle by the owner. The remedy available to the owner would be in accordance to the terms and conditions decided. Thus, the Court thereby laid down that once financial institution/owner exercised option of seizure of the vehicle, the postdated Cheques obtained from the hirer cannot be presented for encashment after the seizure. Though, the owner has to take recourse to other legal remedies for recovery of the balance amount, if any, when the vehicle is sold subsequently, the owner can recover the balance amount after adjusting the sale proceeds of the vehicle.

8.2 Section 138 attracts the penal provision for "debts or other liabilities", which may not be legally enforceable debts or other liabilities if the instrument by way of cheque is not supported by consideration. Section 43 of the N.I. Act deals with a negotiable instrument made without consideration. If a negotiable instrument is made or drawn without consideration it creates no obligation of payment between the parties to the transaction. Similarly, if the consideration for which the instrument was made or drawn has failed subsequently,

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then also the instrument creates no obligation at all. Relevant portion of Section 43 is reproduced herein for ready reference:

" 43. Negotiable instrument made, etc., without consideration. - A negotiable instrument made, drawn, accepted, indorsed, or transferred without consideration, or for a consideration which fails, creates no obligation of payment between the parties to the transaction....."

8.3 After repossession of the vehicle, Shriram Transport Finance Company Ltd. had sold the vehicle and the sale proceeds admittedly would be no doubt adjusted towards loan repayment, the complainant/owner has already initiated steps to recover the liability from the hirer.

8.4 The basic ingredients for a complaint under Section 138 of the N.I. Act, would be that the cheque ought to have been issued for discharge in whole and in part of any debt or other liabilities, which are legally enforceable. The said fact does not get establish in view of act of finance Company, since the vehicle was repossessed on 28.12.2018 and was subsequently sold to third party. The Hire Purchase Agreement between the owner and the hirer stood determined by act of parties, the cheques accepted by the owner in advance for repayment of the hire would become instruments without consideration as the consideration has failed. In such

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circumstances, the remedy available to the owner is to realise the balance hire due from the hirer or to sue for damages for the breach of the agreement.

8.5 It is stated by advocate Mr. Gajjar that the complainant Company had failed to produce the copy of the Hire Purchase Loan Agreement. It was necessary for the complainant Company to have produced the original Hire Purchase Agreement for the perusal of the trial Court Judge. The complainant - Company, however, had disclosed before the Judicial Magistrate, First Class, Vadodara, in the complaint that, the Company is a Non- Banking Financial Institution and its business was Hire Purchase of vehicle, which suggests that the agreement entered into would have been a Hire Purchase Agreement and the terms and conditions has been decided. The act of repossessing the vehicle has determined the agreement and therefore, the cheque in the hands of the Company would be an instrument without consideration. The cheque, which were accepted by the Company towards advance of repayment would become an instrument for which consideration has failed, therefore any demand of cheque money by way of legal notice as provided under Section 138 of the N.I. Act, would lose its shine, as would not be for legally enforceable debts or liability.

9. Here, in this case, the cheque dated 13.12.2018

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was presented, which came to be dishonoured because of funds insufficiency and the dishonoured memo was received by the Company on 19.12.2018. Thereafter, on 28.12.2018, the vehicle was repossessed by Shriram Transport Finance Company Ltd. - respondent no.2, the notice demanding payment was served on 08.01.2019 and thereafter the complaint was filed on 22.02.2019. The complainant by suppressing the fact of repossession of vehicle before the Judicial Magistrate had prayed for relief. The learned Magistrate thus, relying on the facts pleaded, had issued summons. It appears that respondent no.2 - Shriram Transport Finance Company Ltd., has misguided the Court. Had the facts been disclosed, the learned Judge would not have even taken the cognizance of the matter. In view of the fact that vehicle was seized and was sold thereafter, the agreement between the complainant and accused stood terminated and there was no legally enforceable debt when the complaint was filed before the learned Magistrate. On repossession of vehicle, the agreement stood terminated, therefore cheques in the hands of financial institution becomes instrument for which consideration has failed, even being presented and dishonoured, no offence under Section 138 of the N.I. Act would be attracted.

10. Thus, in view of the above discussions and observations and taking into consideration the facts and circumstances of the case, petition is allowed. The

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proceedings of Criminal Case No.7214/2019 before the learned Judicial Magistrate, First Class, Vadodara, Summons dated 22.02.2019 and all the consequential proceedings initiated in pursuance thereof are quashed and set aside qua the present petitioner.

10.1 In view of the order passed in the main matter, Criminal Misc. Application No.1 of 2021 stands disposed of.

Direct service is permitted.

(GITA GOPI, J.) Pankaj