Sh. Pawan Jagannath Sharma S/O Sh. ... vs M/S Shriram Transport Finance ...
2021 Latest Caselaw 3688 Guj

   R/CR.MA/3514/2021                          ORDER DATED: 03/03/2021




          IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
           R/CRIMINAL MISC.APPLICATION NO. 3514 of 2021
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  SH. PAWAN JAGANNATH SHARMA S/O SH. JAGANNATH SHARMA
                          Versus
M/S SHRIRAM TRANSPORT FINANCE COMPANY LTD. THRO SANJAY R
                        SOLANKI
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Appearance:
MR DEEPAK M SHAH(746) for the Applicant(s) No. 1
MR RAJAN D SHAH(3101) for the Applicant(s) No. 1
for the Respondent(s) No. 1
MR. MANAN MEHTA, APP for the Respondent(s) No. 2
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 CORAM: HONOURABLE MR. JUSTICE B.N. KARIA
                   Date : 03/03/2021
                    ORAL ORDER

By way of present application, applicant has prayed to

quash and set aside the impugned order dated 08.04.2019

passed by learned Senior Civil Judge & A.C.J.M., Surat

summoning the applicant in the Criminal Complaint No.14874

of 2019 filed by the respondent No.1 and quash the Criminal

Complaint No.14874 of 2019.

The brief facts of the case are as under:

That applicant had entered into a Loan Agreement

No.TSLVAPI0000127 with respondent No.1 and as per the

terms of the agreement, the respondent No.1 had disbursed a

loan amounting Rs.8,50,000/­ to the applicant who had agreed

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to repay the amount with interest to respondent No.1. As per

say of the applicant he is a small time transporter and had

used the amount to purchase vehicle Tata LPT 1613 Turbo

FBT­Lp make which was allotted Registration No.GJ­15­UU­

0218. That applicant had been regularly paying all the

installments, however, due to unforeseen and inevitable

circumstances, he was able to pay few installments only after

the due date, nevertheless, there was no default in payment of

installments on the part of applicant. That unfortunately, said

vehicle bearing Registration No. GJ­15­UU­0218 met with a

very serious accident and totally collapsed. That respondent

No.1 without giving an opportunity to even raise a claim with

the Insurance Company, took the vehicle/salvage from the

garage itself; upon which the applicant went to the Branch

Office of respondent No.1 at Vapi, Valsad and requested them

to let the surveyor of the Insurance Company inspect the

vehicle, so that the applicant would be able to repay the

amount of loan to respondent No.1, but the officials of

respondent No.1 told the applicant that they themselves would

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take care of the Insurance formalities and recover his money

by selling the salvage and that the applicant need not worry

about the same. That insurance claimed by the applicant also

failed due to unavailability of the salvage with the applicant.

That on 16.03.2016, Shri. Subhash B. Patel, who is a guarantor

in two other loan agreements informed the applicant that he

had received copy of loan an Arbitral Award dated 28.01.2016

passed by learned Arbitrator Sh. Raguvir G. Chaudhary in

Arbitration Case No.86 of 2015. Upon perusal of the said

award, it transpired to the applicant that respondent no.1 had

invoked the arbitration clause of the loan agreement without

giving proper notice of the appointment of arbitrator to the

applicant and learned arbitrator, without giving proper notice

of the arbitral proceedings to the applicant passed an arbitral

award dated 28.01.2016 in favour of respondent No.1 and

against applicant fixing his liability to pay sum of

Rs.46,24,297/­ along with future interest @ 12% p.a. from the

date of institution of the claim petition to the date of

realization of the amount. That being aggrieved by the passing

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of the said arbitral award, applicant preferred an application

bearing No. CMADC/421/16 under Section 34 of the

Arbitration and Conciliation Act, 1996 read with Section 151

of the Code of Civil Procedure, 1908 for setting aside the

arbitration award dated 28.01.2016 passed by Sh. Raghuvir G.

Chaudhary, learned arbitrator before the City Civil Court at

Ahmedabad, which is pending for adjudication at the City Civil

and Sessions Court at Ahmedabad. That during pendency of

the aforesaid application under Section 34 of the Arbitration

and Conciliation Act, 1996 read with Section 151 of the Code

of Civil Procedure, 1908, applicant was startled to receive

legal Notice dated 24.02.2019 from counsel of respondent

No.1 informing the applicant of the dishonour of the said

cheque dated 28.12.2019 due to the bank account blocked,

and seeking payment of a sum of Rs. 15 Lakhs from the

applicant within 15 days from the receipt of the legal notice.

That applicant got a reply dated 27.03.2019 served through his

counsel to the counsel of respondent No.1 thereby clarifying

that the aforesaid legal notice was totally baselless and

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uncalled for, and that the applicant had neither handed over

the said cheque to respondent No.1 nor had instructed them to

present said cheque. That the respondent No.1 mislead the

learned Court of Additional Sr. Civil Judge & A.C.J.M, Surat

and got summoning order issued against the applicant. That

being aggrieved by the aforesaid order dated 08.04.2019

passed by learned Court of Additional Senior Civil Judge &

A.C.J.M., Surat summoning the applicant in the Criminal

Complaint No.14874 of 2019 filed by the respondent No.1,

applicant has preferred the present application for seeking

quashing of the said order 08.04.2019 and the Criminal

Complaint bearing No.14874 of 2019.

Heard learned advocate for the applicant.

It is submitted by learned advocate for the applicant that

vide order dated 08.04.2019 passed by learned Court of

Additional Senior Civil Judge & A.C.J.M., Surat summoning

the applicant in the Criminal Complaint No.14874 of 2019

filed by respondent No.1 is illegal, improper and incorrect and

gross abuse of the process of law. That having received the

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reply dated 27.03.2019 to the aforesaid legal notice dated

24.02.2019, respondent No.1 mislead the learned Court of

Additional Senior Civil Judge & A.C.J.M., Surat and got

summoning order issued against the applicant. It is further

submitted that when the issue as to liability of the applicant

towards the respondent No.1 is still pending for adjudication,

there is no legally enforceable debt towards respondent No.1

and as such there was no reason for the applicant to handover

the impugned cheque or instruct the respondent No.1 to

present the impugned cheque towards part payment. That

learned Trial Court has arbitrarily and erroneously exercised

its jurisdiction vested with it by summoning the applicant in

the said criminal complaint No.14874 of 2019. That learned

Trial Court erred in issuing summons to the applicant despite

the fact that no copy of the loan agreement was filed by the

respondent No.1 alongwith the complaint case. That applicant

had neither handed over any chque bearing number 302552

dated 28.12.2018 on such date; nor given any instructions to

respondent No.1 to present the said cheque in their bank

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account. That applicant had also not filled in any particulars of

the said cheque. That said blank cheque was handed over by

the applicant to respondent no.1 only as a security at the time

of execution of the loan agreement No. TSLVAPI0000127 and

not on 28.12.2018. That there is no probability/likelihood of

the applicant issuing a cheque towards any payment/ part­

payment in favour of respondent No.1 during pendency of the

above said application under Section 34 of the Arbitration and

Conciliation Act, 1996 and the aforesaid execution petitions.

That impugned cheque was no more acceptable in the banks

and is an old cheque which was handed over by the applicant

to respondent No.1 only as a security. The applicant has

subsequently even obtained new cheque books which comply

the bank norms and rules, and there is no reason why the

applicant would issue an old cheque and that too of a closed

account to respondent No.1. That dispute between respondent

no.1 and the applicant is purely of civil nature, but the

respondent had got the criminal Complaint No.14874 of 2019

initiated against the applicant only to give a criminal colour to

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the transactions between the applicant and respondent No.1

and to create pressure on the applicant to pay the amount

mentioned in the said cheque. That there never arose any

reason, instance or cause for the applicant to issue the

impugned cheque in favour of respondent No.1. That there is

no legally recoverable debt against which the applicant would

have issued the impugned cheque to respondent No.1. That

only dispute of payment which exists between the applicant

and respondent no.1 is already pending for adjudication in the

City Civil Court at Ahmedabad and as such applicant had no

reason to issue the aforesaid cheque to respondent No.1. That

learned Trial Court has acted in the exercise of its jurisdiction

with material irregularity. Hence, it is requested by learned

advocate for the applicant to allow present application.

As the issue involved in this petition of issuing cheque by

the applicant for security purpose is squarely covered by the

Hon'ble Apex Court in various cases, this Court deems it fit not

to issue notice to the respondents or to admit this petition,

decided it to dispose of finally at this stage of admission itself.

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This Court would like to refer the judgment of Hon'ble

Apex Court in case of "Sampelly Satyanarayana Rao v.

Indian Renewable Energy Development Agency Limited"

reported in "2016 Law Suit (SC) 891", wherein Hon'ble Apex

Court has questioned for consideration was whether in the

facts of the present case, the dishonour of a post­dated cheque

given for repayment of loan installment which is also described

as "security" in the loan agreement is covered by Section 138

of the Negotiable Instruments Act, 1881. Hon'ble Apex Court

has referred the case of "Indus Airways Private Limited versus

Magnum Aviation Private Limited reported in 2014 12 SCC

539, wherein a contrary view was taken in the similar facts of

the case holding that while the purchaser may be liable for

breach of the contract, when a contract provides that the

purchaser has to pay in advance and cheque towards advance

payment is dishonoured, it will not give rise to criminal

liability under Section 138 of the Act. Issuance of cheque

towards advance payment could not be considered as

discharge of any subsisting liability.

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The Hon'ble Supreme Court in case of Sampelly

Satyanarayana Rao (Supra) has observed as under:

10. We have given due consideration to the submission advanced on behalf of the appellant as well as the observations of this Court in Indus Airways (supra) with reference to the explanation to Section 138 of the Act and the expression "for discharge of any debt or other liability" occurring in Section 138 of the Act. We are of the view that the question whether a post­dated cheque is for "discharge of debt or liability" depends on the nature of the transaction. If on the date of the cheque liability or debt exists or the amount has become legally recoverable, the Section is attracted and not otherwise.

11. Reference to the facts of the present case clearly shows that though the word "security" is used in clause 3.1(iii) of the agreement, the said expression refers to the cheques being towards repayment of installments. The repayment becomes due under the agreement, the moment the loan is advanced and the installment falls due. It is undisputed that the loan was duly disbursed on 28th February, 2002 which was prior to the date of the cheques. Once the loan was disbursed and installments have fallen due on the date of the cheque as per the agreement, dishonour of such cheques would fall under Section 138 of the Act. The cheques undoubtedly represent the outstanding liability.

12. Judgment in Indus Airways (supra) is clearly distinguishable.

As already noted, it was held therein that liability arising out of claim for breach of contract under Section 138, which arises on account of dishonour of cheque issued was not by itself at par with criminal liability towards discharge of acknowledged and admitted debt under a loan transaction. Dishonour of cheque issued for

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discharge of later liability is clearly covered by the statute in question. Admittedly, on the date of the cheque there was a debt/liability in presenti in terms of the loan agreement, as against the case of Indus Airways (supra) where the purchase order had been cancelled and cheque issued towards advance payment for the purchase order was dishonoured. In that case, it was found that the cheque had not been issued for discharge of liability but as advance for the purchase order which was cancelled. Keeping in mind this fine but real distinction, the said judgment cannot be applied to a case of present nature where the cheque was for repayment of loan installment which had fallen due though such deposit of cheques towards repayment of installments was also described as "security" in the loan agreement. In applying the judgment in Indus Airways (supra), one cannot lose sight of the difference between a transaction of purchase order which is cancelled and that of a loan transaction where loan has actually been advanced and its repayment is due on the date of the cheque.

13. Crucial question to determine applicability of Section 138 of the Act is whether the cheque represents discharge of existing enforceable debt or liability or whether it represents advance payment without there being subsisting debt or liability. While approving the views of different High Courts noted earlier, this is the underlying principle as can be discerned from discussion of the said cases in the judgment of this Court.

14. In Balaji Seafoods (supra), the High Court noted that the cheque was not handed over with the intention of discharging the subsisting liability or debt. There is, thus, no similarity in the facts of that case simply because in that case also loan was advanced. It was noticed specifically therein - as was the admitted case of the parties

R/CR.MA/3514/2021 ORDER DATED: 03/03/2021

- that the cheque was issued as "security" for the advance and was not intended to be in discharge of the liability, as in the present case.

15. In HMT Watches Ltd. versus M.A. Abida[8], relied upon on behalf of the respondent, this Court dealt with the contention that the proceedings under Section 138 were liable to be quashed as the cheques were given as "security" as per defence of the accused. Negativing the contention, this Court held :­ "10. Having heard the learned counsel for the parties, we are of the view that the accused (Respondent 1) challenged the proceedings of criminal complaint cases before the High Court, taking factual defences. Whether the cheques were given as security or not, or whether there was outstanding liability or not is a question of fact which could have been determined only by the trial court after recording evidence of the parties. In our opinion, the High Court should not have expressed its view on the disputed questions of fact in a petition under Seciton 482 of the Code of Criminal Procedure, to come to a conclusion that the offence is not made out. The High Court has erred in law in going into the factual aspects of the matter which were not admitted between the parties. The High Court further erred in observing that Section 138(b) of the NI Act stood uncomplied with, even though Respondent 1 (accused) had admitted that he replied to the notice issued by the complainant. Also, the fact, as to whether the signatory of demand notice was authorised by the complainant company or not, could not have been examined by the High Court in its jurisdiction under Section 482 of the Code of Criminal Procedure when such plea was controverted by the complainant before it.

R/CR.MA/3514/2021 ORDER DATED: 03/03/2021

11. In Suryalakshmi Cotton Mills Ltd. v. Rajvir Industries Ltd. [(2008) 13 SCC 678], this Court has made the following observations explaining the parameters of jurisdiction of the High Court in exercising its jurisdiction under Section 482 of the Code of Criminal Procedure: (SCC pp. 685­87, paras 17 &

22) "17. The parameters of jurisdiction of the High Court in exercising its jurisdiction under Section 482 of the Code of Criminal Procedure is now well settled. Although it is of wide amplitude, a great deal of caution is also required in its exercise. What is required is application of the well­ known legal principles involved in the matter.

22. Ordinarily, a defence of an accused although appears to be plausible should not be taken into consideration for exercise of the said jurisdiction. Yet again, the High Court at that stage would not ordinarily enter into a disputed question of fact. It, however, does not mean that documents of unimpeachable character should not be taken into consideration at any cost for the purpose of finding out as to whether continuance of the criminal proceedings would amount to an abuse of process of court or that the complaint petition is filed for causing mere harassment to the accused. While we are not oblivious of the fact that although a large number of disputes should ordinarily be determined only by the civil courts, but criminal cases are filed only for achieving the ultimate goal, namely, to force the accused to pay the amount due to the complainant immediately.

The courts on the one hand should not encourage such a practice; but, on the other, cannot also travel beyond its

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jurisdiction to interfere with the proceeding which is otherwise genuine. The courts cannot also lose sight of the fact that in certain matters, both civil proceedings and criminal proceedings would be maintainable."

This court in case of "Deepak Shyamsunder Agrawal v.

State of Gujarat and another" reported in 2017 Law Suit

(Guj) 343, in para 15, has held as under:

"Considering the above stated legal settled principles of law, while dealing with a quashing petition, the Court has ordinarily to proceed with all the averments in the complaint, defence of the accused cannot be considered at this stage. The Court considering the prayer for quashing, does not adjudicate upon the disputed questions of fact. Therefore, the question has to be answered in favour of the respondent no.2 and against the applicant. Accordingly, this court did not find any merits in this petition, thereofre, the same is dismissed. Ad interim relief stands vacated. Rule nisi discharged with no order as to costs."

This court in case of Patel Bachubhai Ramjbhai

owner/partner of Gopi Dairy Pvt v. Parsottambbai P Rami

and two others reported in 2016 Law Suit (Guj) 1372, has

observed as under:

"The issue raised by the learned advocate Mr. MIG Mansuri that the cheque in dispute was never signed by the petitioner and it was

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possessed by the respondent having no signature of the petitioner as it was a blank cheque, and therefore, the complaint itself is not maintainable in the eyes of law. Raising dispute of blank cheque without signature of the petitioner, allegedly in the possession of both the respondents is a question of fact which requires evidence before the trial Court. At this juncture, this Court cannot come to the conclusion that the cheque in question was not signed by the petitioner and was illegally within the possession of both the respondents. On this issue, learned advocate Mr. Mansuri has placed reliance upon decision of this Court rendered in Criminal Misc. Application No. 968 of 2014 and allied cases wherein it was evident from the facts that the cheque in dispute was issued by the Managing Director & Vice President of the Company was a blank signed cheque in favour of the complainant­firm as security. Ultimately, the complainant thought fit to fill up the blank signed cheque which was drawn by the M.D on behalf of the Company as security. These facts are revealed from para 2.4 to 2.7 of the said decision. Here, this is not a position, as argued by the learned advocate for the petitioner that disputed cheque was a blank signed cheque and was illegally in possession of the respondents or misused by them. The question requires consideration by recording evidence of the parties, and therefore, judgment relied upon by learned advocate Mr. Mansuri would not be applicable at this stage. Hence, on all counts, petition requires to be rejected, holding that prosecution can be based upon second or successive dishonour of the cheque, which is also permissible so long as it satisfies the requirements stipulated under the provisions of Section 138 of the Negotiable Instruments Act"

In a similar fact, this Court in case of "Sunilbhai

Dhirubhai Patel and another v. State of Gujarat and others"

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reported in 2017 Law Suit (Guj.) 1732 has observed as

under:

11. In the present case, as stated herein above, it is an admitted position that the accused were aware that they are paying the post­ dated cheques to the complainant and those amounts which he had already paid to the original land owner, which in my opinion, would be debt / liability in praesenti. The petitioner firm was aware that if the cheques are dishonoured, a right was given to the holder in due course to take all legal recourses available under the various proceedings. Since the complainant is a Banakhat holder would be entitled to file civil suit for specific performance / damages etc., that does not mean that he cannot file any complaint under Section 138 of the Act, when the case would fall under Explanation to Section 138 of the Act. Even otherwise, the Hon'ble Supreme Court in the case of HMT Watches Limited v. M. A. Abida and another, (2015) 11 SCC 776 while dealing with the provisions of Sections 139 and 140, has held that presumption would be in favour of holder and the defences which have been raised in the present petition would not be available if the proceedings are initiated under Section 138 of the Act.

This Court in case of Chintan Jayant Manjaratkar v.

Rashidkhan Rasulkhan Pathan and others" reported in 2019

Law Suit (Guj) 298, has held as under:

12. It is settled law that for considering the petition under Section 482 of the Code, it is necessary to consider as to whether the allegations in the complaint prima facie make out a case or not and

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the Court is not to scrutinize the allegations for the purpose of deciding whether such allegations are likely to be upheld in trial. It is also well settled that though the High Court possesses inherent powers under Section 482 of the Code, these powers are meant to do real and substantial justice, for the administration of which alone it exists or to prevent abuse of the process of the court. The Supreme Court, time and again, has observed that extraordinary power should be exercised sparingly and with great care and caution. The High Court would be justified in exercising the said power when it is imperative to exercise the same in order to prevent injustice.

13. The High Court, in the exercise of its jurisdiction under Section 482 of the Code of Criminal Procedure, is required to examine whether the averments in the complaint constitute the ingredients necessary for an offence alleged under the Penal Code. If the averments taken on their face do not constitute the ingredients necessary for the offence, the criminal proceedings may be quashed under Section 482. A criminal proceeding can be quashed where the allegations made in the complaint do not disclose the commission of an offence under the Penal Code. The complaint must be examined as a whole, without evaluating the merits of the allegations. Though the law does not require that the complaint reproduce the legal ingredients of the offence verbatim, the complaint must contain the basic facts necessary for making out an offence under the Penal Code.

14. A court exercising its inherent jurisdiction must examine if on their face, the averments made in the complaint constitute the ingredients necessary for the offence.

16. Considering the facts and circumstances of the case, it is clearly found that the applicant and his father issued different

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cheques to the complainant and accordingly, the complainant lodged different complaints and he has also initiated civil proceedings. This shows that there is prima facie liability of payment on the part of the applicant. In view of the material placed in the matter, it clearly appears that this is not a fit case wherein inherent powers under Section 482 of the Code of Criminal Procedure could be exercised.

Considering the facts of the present case, question of

issuance of cheque towards security purpose or not can only be

considered after recording evidence by the prosecution before

the learned Trial Court. The dispute of legal debt of the

complainant would be also a question of facts, which can be

considered by the trial court after recording evidence and

examination/cross examination of the complainant. Another

question of failing to prove by the complainant not making

payment of outstanding amount by the accused would be

covered as disputed question of facts which can only be

proved or disproved after recording evidence. The contents of

the issues raised by learned advocate for the applicant may be

considered by the trial court while recording evidence of the

either side.

All these disputed questions of facts or questions cannot

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be considered in a petition under Section 482 of the Cr.P.C.

Issuing cheque by way of security purpose may be decided

after giving an opportunity to the accused person before the

trial Court. The applicant/accused has not denied in his reply

through advocate that the cheque was not signed by him and

given to the complainant. Here, the factual questions raised by

the applicant are in a nature of defence to the complaint under

Section 138(a) of the Negotiable Instruments Act. This is a

case wherein the disputed questions of fact are involved. Under

these circumstances, when a disputed question of fact is

involved and there is prima facie material showing that the

cheques were issued by the accused to the complainant with

his signature and there was monetary transaction between

them, then in such case, inherent powers under Section 482 of

the Code of Criminal Procedure cannot be exercised.

This court is of the considered view that the High Court

should not have interfered with the cognizance of the

complaints having been taken by the trial court and High Court

should not discharge the accused from his liability at the

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threshold. Unless the parties are given opportunity to lead

evidence, it is not possible to come to a definite conclusion as

to what purpose the cheque under question was issued.

Admittedly, cheque was under the signature of the

present applicant given to the complainant. The purpose of

alleged security, as argued by learned advocate for the

applicant, can be decided before the trial Court on recording

evidence.

Therefore, present application is dismissed at the stage of

admission without issuing any notice to the other side.

As a parting note, it needs to mention here that this Court

has not gone into the merits of the matter and only gone into

the aspect of its entertainibility for quashing the impugned

complaint qua the applicant herein, and therefore, the

applicant would at liberty to raise all the available contentions

before the trial Court, which shall be gone into and dealt with

by the concerned court on merits and in accordance with law.

(B.N. KARIA, J) SUYASH