Gujarat High Court
Sufi International Pvt Ltd vs Accurate Trans Heat Pvt Ltd Thro ... on 24 June, 2024
Author: Ilesh J. Vora
Bench: Ilesh J. Vora
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R/SCR.A/9131/2022 CAV JUDGMENT DATED: 24/06/2024
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CRIMINAL APPLICATION (QUASHING) NO. 9131 of 2022
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE ILESH J. VORA Sd/-
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1 Whether Reporters of Local Papers may be allowed Yes
to see the judgment ?
2 To be referred to the Reporter or not ? Yes
3 Whether their Lordships wish to see the fair copy No
of the judgment ?
4 Whether this case involves a substantial question No
of law as to the interpretation of the Constitution
of India or any order made thereunder ?
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SUFI INTERNATIONAL PVT LTD. & ORS.
Versus
ACCURATE TRANS HEAT PVT LTD THRO KEDARMAL MANGILAL
DARGAD & ANR.
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Appearance:
MS SHAILEE KAPADIA, ADVOCATE FOR MR ARPIT A KAPADIA(3974) for
the Applicant(s) No. 1,2,3
MR AS VAKIL(962) WITH MR JEET KARIA, ADVOCATE for the
Respondent(s) No. 1
MS CM SHAH, APP for the Respondent(s) No. 2
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CORAM:HONOURABLE MR. JUSTICE ILESH J. VORA
Date : 24/06/2024
CAV JUDGMENT
1. By this application, filed under Article 226 and 227 of
the Constitution of India read with Section 482 of Cr.P.C.,
whereby the original accused - Sufi International Private
Limited and its Directors, seek quashing of the Criminal
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Case No.70738 of 2021, filed by the private respondent-
company Accurate Trans Heat Private Limited under
Section 138 of the Negotiable Instruments Act, 1881.
2. This Court has heard learned counsel Ms. Shailee
Kapadia, Mr. Apurva Vakil with Mr. Jeet Karia and Ms. C.M.
Shah for the respective parties.
3. The facts in brief are that, the private respondent-
complainant is in business of whole wheat, sugar, rice and
spices etc. The applicants-accused are exporter of whole
wheat, sugar, rice etc.
By written agreement dated 11.11.2020, the parties
have entered into business transaction and agreed to do
business as per the terms and conditions of the contract.
During the period from 09.07.2020 to 31.03.2021, the
private respondent sold the goods worth Rs.6,25,21,462/-
to the applicants-accused. Against the total sale, the
accused-company paid Rs.4,16,78,837/-. The total
outstanding amount due after deducting TCS was
Rs.2,08,68,924/-.
It is the case of private respondent that, against the
aforesaid due amount, the applicant-accused issued three
cheques amounting Rs.27,82,080/-, Rs.9,78,696/- and
Rs.3,19,140/-, allegedly signed by the accused nos.2 and
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4. The cheques were presented for clearing before the
bank and due to insufficient funds, same returned unpaid.
The demand notice dated 02.06.2021 was served
upon the applicant-accused. In the reply of the notice
dated 10.06.2021, it was stated that, the cheques were
given as a security for payment and not issued to
discharge the outstanding debt and/or liability. It was
further stated in the reply that, the amount mentioned in
the cheques already paid by RTGS mode, however,
inadvertently, at relevant time, the accused could not
obtain the cheques from the private respondent-company.
In such set of circumstances, within stipulated time,
the private respondent company filed a complaint under
Section 138 of the N.I. Act. The Court of Judicial
Magistrate, Surat issued summons to the applicants-
accused.
5. Being aggrieved with the issuance of summons, the
applicants-accused are before this Court by preferring the
present quashing petition.
6. Ms. Shailee Kapadia, learned counsel appearing for
and on behalf of the applicants-accused has made the
following submissions:
(i) That the complaint under Section 138 of N.I. Act is
not maintainable since the cheques were issued by way of
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security and not against outstanding dues. That, the
cheques were given at the time of purchase of goods
against the specific invoices as a security for payment and
thereafter, the payment of the particular invoices raised
by the complainant-company was made through RTGS
mode which was reflected in the ledger accounts
maintained by both the parties. In the ledger account, the
amount of cheques tellied with each entry and therefore,
so far amount mentioned in the cheques are concerned,
no any amount is due as it was paid through RTGS mode.
That, inadvertently, the accused did not ask the
complainant to return the cheques and thus, by retaining
the said cheques, the private respondent taking
disadvantage of situation, presented it for encashment
and thereafter, by resorting criminal machinery, the false
case under the provisions of Section 138 of N.I. Act is
being filed.
(ii) That, the cheques in question issued as a security for
the payment against the particular invoices and when the
payment for the same was done through RTGS mode, the
cheques could not have been utilized towards the other
purchase orders or outstanding dues as alleged in the
complaint.
7. In view of aforesaid contentions, learned counsel Ms.
Shailee Kapadia would urge on behalf of the accused that,
once the payment was made through RTGS mode for
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which the cheques were issued, their exist no legal
recoverable debt and therefore, the proceedings of the
criminal case is being initiated with malafide intention by
suppressing the material facts of transaction and prima-
facie, the ingredients of Section 138 are not made out and
the complaint is not sustainable in law. Thus, the criminal
proceedings under such circumstances would amount to
sheer misuse of the process of law and court and same
deserves to be quashed and set aside.
8. On the other hand, learned counsel Mr. Apurva Vakil
appearing for and on behalf of private respondent-
company vehemently opposed the application and
contended that, the disputed cheques retained by the
company under instructions of the applicants-accused
towards the outstanding dues and therefore, the plea
raised by the applicants-accused that, for the security of
payment, the cheques were issued cannot be accepted.
That, the blank security cheques given by the accused
which are annexed with the documentary list and same
are still in custody of the complainant and till date, it has
not been utilized which fact substantiate that the
questioned cheques were not given for security of the
payment, but, issued for outstanding dues.
In such set of circumstances, it was submitted that,
where there are disputed questions of fact leading to
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triable issue and considering the provision of Section
138/142 of the N.I. Act, wherein the burden is caste on the
accused to prove that the holder of cheque received a
cheque for the discharge in whole or in part, of any debt
or other liability. In the facts of the case, the outstanding
as on 17.04.2021 was Rs.2,08,68,924/- which is not
disputed by the other side. Thus, considering the limited
scope of inquiry by the High Court under Section 482, the
facts which are in nature of defence cannot be examined
at this stage and same should be considered at the stage
of trial because the disputed issue as raised is that, the
cheques in question issued as a security and not in
discharge towards the outstanding dues would be require
to be tried by the trial court after giving opportunity to
both the sides to lead the evidence. To buttress the
contention, reliance has been placed on the judgments
delivered in case of Rathishbabu Unnikrisnan vs. State of
NCT (2022 SCC Online SC 513) and Sunil Todi vs. State of
Gujarat (2021 SCC Online 1174) to contend that, on the
date of drawal of cheques in question, the outstanding
amount of the transaction was Rs.2,08,68,924/- and as per
the agreeable terms and instructions at the behest of the
accused company, the cheques were retained and
presented towards the outstanding dues. Thus, it was
urged that, the ingredients of offence under Section 138
attracted in the facts of present case, as where the
liability subsisting on the date of drawal of the cheque, the
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issue whether cheques given towards security or
otherwise is a question of fact which has to be determined
at the stage of trial and same cannot be determined in a
quashing proceeding under Section 482.
9. It is not in dispute that the respondent-complainant is
in business of whole wheat, sugar etc. The parties by
agreement dated 11.11.2020, have entered into business
transaction and agreed to comply with the terms and
conditions of the agreement. Pursuant to the said
agreement, during 09.07.2020 to 31.03.2021, the total
goods worth Rs.6,25,21,462/- were sold, raising 31
invoices by the complainant. As against the same, the
payment was made to the tune of Rs.4,16,78,437/-.
The complainant in his affidavit-in-reply (page no.47
to 59), has clarified the nature of transaction, the mode of
payment, why and under what circumstances the cheques
were retained and presented for its encashment. It is the
say of the complainant that, as and when purchase order
would be placed, the accused used to sent the cheques
towards the value of the purchase order. Thereafter,
within stipulated time, the accused would make the
payment through RTGS mode. It is further say of the
complainant that, for so many times, the accused
instructed the complainant company to retain the cheques
against the other purchase transactions. Thus, it is
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clarified that, the impugned cheques are such cheques
which were being retained as per the instructions of the
accused for discharge of outstanding amount. In support
of this contention, the ledger accounts maintained by the
company and other documents have been produced. In
such set of circumstances, it is the say of the complainant
that, though the cheques were enclosed with the purchase
order and despite payment being made through RTGS, the
disputed cheques retained by the company for
outstanding amount of Rs.2,08,68,924/-. On this factual
aspect, it is stated that the last payment through bank
was made on 17.04.2021 and thereafter, the accused
stopped the payment through RTGS and the outstanding
amount of the transaction as per books of account was
Rs.2,08,68,924/-. It is stated taht before filing the
complaint, the notice as contemplated under the N.I. Act
was served, wherein it was specifically stated that, the
cheques were encashed and/or presented against the
outstanding dues which was subsisting on the date of
issuance of cheques. The accused in the reply of notice,
stated that, the cheques were issued for security purpose
against the specific invoice and same require to be
returned back by the complainant, but somehow they
could not get it back and thus, where the amount as
mentioned in the cheques was being paid through bank
transfer, the encashment of the cheques in eye of law is
not permissible and no any offence under Section 138 is
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made out.
10. In aforesaid controversy, considering the peculiar
facts and circumstances of the present case, the issue
falls for my consideration as to whether the applicant-
accused have made out a case for quashing of criminal
complaint filed under Section 138 of the N.I. Act?
11. Before adverting to the submissions, so as to
determine the legal issue raised herein, the dictum of law
on the subject settled by the Apex Court in its various
judgments needs to be referred.
(A) Cheque furnished as a security is covered under
the provisions of Section 138 of N.I. Act or not?
(i) In Indus Airways Private Limited vs. Magnum
Aviation Private Limited (2014 12 SCC 539),
wherein before the Apex Court, the issue what
that whether post dated cheques which were
issued by the accused as an advance payment
in respect of purchase order could be
considered to be in discharge of legally
enforceable debt or other liability and whether
the dishonour of cheques amounted to an
offence under Section 138. The Supreme Court
after considering the explanation appended to
Section 138, explains the meaning of the
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expression "debt or other liability" for the
purpose of section 138. The Supreme Court has
interpreted the expression "debt or other
liability". It was held that the expression means
legally enforceable debt or other liability and
therefore, to attract an offence under Section
138, there should be a legally enforceable debt
or other liability subsisting on the date of drawal
of the cheque. In the facts of case before the
Supreme Court, the cheque was issued as an
advance payment for purchase of goods and
subsequently, the order was cancelled and
goods could not supplied. In such
circumstances, the Apex Court held that, the
cheque cannot be held to have been drawn for
an existing debt or liability as the payment by
cheque in the nature of advance payment
indicates that at the time of drawal of cheque
there was no existing liability.
(ii) In Sampelly Satyanarayana Rao vs. Indian
Renewable Energy Development Agency
Limited (2016 10 SCC 458), the Supreme Court,
on the issue of security cheque, after
considering the decision in Indus Airways
(supra), held that, if on the date of cheque a
liability or debt exists or the amount has
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become enforceable, section 138 would stand
attracted and not otherwise. On the factual
aspect, the case before the Supreme Court was
that the case was for repayment of loan
instalment which had fallen due.
(iii) In Sripati Singh vs. State of Jharkhand (2012
SCC Online SC 1002), the issue was whether
cheque issued towards discharge of loan and
presented for recovery could be construed as a
security for transaction or not. The High Court
while allowing the quashing petition held that,
since under the loan agreement, the cheques
were given by way of security, the complaint
could not be maintained. The matter was
carried to the Supreme Court. The Apex Court
after considering its earlier judgments, as
referred above, held that, where in case of loan
transaction, the borrower agrees to repay the
amount in a specified time frame and issues a
cheque as a security to secure the repayment
and the loan is not repaid, the cheque which is
issued as a security would mature for
presentation and the drawee of the cheque
would be entitled to present the same and on
such presentation, if the same is dishonoured,
the complaint under 138 would be maintainable.
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(iv) Recently, in case of Sunil Todi vs. State of
Gujarat (2021 SCC 1174), after referring the
aforementioned decisions, the Supreme Court
has held that, the term "debt" also includes a
sum of money promised to be paid on a future
date by reason of a present obligation and
therefore a post dated cheque issued after the
debt has been incurred would be covered by the
definition of debt. Before the Supreme Court,
the cheques were issued as a security towards
the payment and endorsement to this effect was
made on the reverse of the cheques. While
answering the issue, the Apex Court held that,
the dishonour of cheque furnished as a security
is covered under the provisions of Section 138
as there was legally enforceable liability
subsisting on the date of issuance of cheques
and therefore, the complaint is maintainable
though the cheques issued towards security of
payment.
(B) Scope and limited jurisdiction of High Court
under Section 482:
(i) In HMT Watches Limited vs. M.A. Abida (2015
11 SCC 776) it was held that, whether set of
cheques given towards security or otherwise
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or whether there was an outstanding liability
is a question of fact which has to be
determined at the trial on the basis of
evidence. The rational for this is that a
disputed question of this nature cannot be
resolved in proceedings under Section 482.
(ii) In Womb Laboratories Private Limited vs.
Vijay Ahuja (Criminal Appeal 1382 of 2019,
decided on 11.09.2019-Supreme Court), the
Supreme Court while considering the scope
and limited jurisdiction of High Court under
Section 482, held that, the cheques given by
way of security is a matter of defence and it
was not for discharge of any debt or other
liability is also a matter of defence. The
relevant facts to countenance the defence
will have to prove that such security could be
treated as a debt or other liability of the
accused. That would be triable issue. We say
so because, handing over the cheques by
way of security per se would not extricate the
accused from the discharge of liability arising
from such cheques.
(iii) Recently, in Rathishbabu Unnikrisnan vs.
State (Government of NCT of Delhi) (2022
SCC Online SC 513), after referring the
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judgments (MMTC Limited vs. Medchal
Chemicals and Pharma...., Rangappa vs. Shri
Mohan, Rajeshbhai Muljibhai Patel vs. State of
Gujarat) held that, the burden of proving that
there was on existing debt or liability is to be
discharged by the accused in the trial and in
a petition filed under Section 482, the High
Court merely on the basis of averments in the
petition could not have concluded that there
was no existing debt or liability. The reason
behind is that, the legal presumption of the
cheque having been issued in the discharge
of liability must also receive due weightage.
Thus, where the accused moves court for
quashing even before the trial has
commenced, the approach of the High Court
should be careful enough not to prematurely
extinguish the case by disregarding the legal
presumption which supports the complainant.
It was further held that, when disputed
questions of facts are involved which need to
be adjudicated after the parties adduced
evidence, the complaint under Section 138 of
the N.I. Act ought not to have been quashed
by the High Court by taking recourse to
Section 482 of the Cr.P.C.
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In para-13 of the aforesaid judgment, the
Supreme Court held that, the cheques drawn
wherein discharge of a debt for purchase of
shares. In any case, when there is legal
presumption, it would not be judicious for the
quashing court to carry out a detailed inquiry
on the facts alleged, without first permitting
the trial court to evaluate the evidence of the
parties. The Quashing Court should not take
upon itself the burden of separating the
wheat from the chaff, where the facts are
contested. To say it differently, the quashing
proceedings must not become an expedition
into the merits of the factual dispute, so as to
conclusively vindicate either the complainant
or the defence.
(iv) The parameters for invoking inherent powers
of the High Court to quash the criminal
proceedings under Section 482 have been
spelled out in State of Haryana vs. Bhajan
Lal. Para-103 of the judgment would
necessary to refer which reads thus:
"We also give a note of caution to the
effect 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
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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 to do not confer an
arbitrary jurisdiction on the court to act
according to its whims or caprice."
12. On the facts of on hand, it emerges from the record
that, during the transaction period i.e. from 09.07.2020 to
31.03.2021, the goods worth Rs.6,25,21,462/- sold by the
complainant. Against this, payment by electronic mode
worth Rs.4,16,78,437/- was made. Since 17.04.2021,
despite the cheques given along with the purchase order,
the payment was not made by the accused through RTGS
mode. In such circumstances, it is the case of complainant
that, as instructed by the company, the complainant
company retained total 9 cheques towards the
outstanding dues and accordingly cheques were
presented for encashment and upon dishonour of the
same, the notices served upon the accused wherein a
specific case was put up that the cheques were given
towards the outstanding dues. In the notice reply, the
accused have stated that, the amount of cheques already
been paid through bank transfer and therefore, the
cheques which were given as a security could not have
been encashed against the outstanding amount. Thus, the
entire dispute is based on the books of accounts. It needs
to be noted that, at the time of filing the complaint, the
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complainant submitted 128 documents which are in the
form of invoices, ledger accounts, agreement etc. In the
affidavit-in-reply, it has been specifically contended that,
upon the instructions, the cheques were retained so as to
enable the complainant to recover the outstanding. The
complainant has placed on record five blank cheques,
drawn by the accused, in favour of complainant company
to substantiate the stand taken by the accused that the
questioned cheques were not given as a security. The said
blank cheques were given as a security against the
payment and same still in the custody of the complainat
and they are not presented for encashment.
In such set of circumstances, this Court is of prima-
facie opinion that, at this stage, it is difficult to examine
the disputed question of facts which are in the form of
defences, cannot be examined and therefore, the issue as
to whether the cheques which were sent along with the
purchase order can be considered to be in discharge of an
outstanding amount or not is a subject matter of trial,
because on 17.04.2021, the total outstanding dues was
Rs.2,08,68,924/- and therefore, prima-facie, it can be said
that, there was an outstanding liability subsisting on the
date of issuance of cheques. It is in this background facts,
entertaining the quashing petition at this stage will result
in finality without giving the parties an opportunity to
adduce the evidence as merely on the basis of pleadings
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and the stand taken by the parties and considering the
presumption in favour of the complainant and the burden
of the accused to disprove the fact that on the date of
issuance of cheques, there was no legal debt, legally it
would be required to be determined by the trial court after
evaluation of the evidence.
13. For the reasons recorded above, this Court do not
find substance in the submission made by learned counsel
for the applicants-accused that the ingredients of Section
138 are not made out and the complaint under Section
138 of N.I. Act is not maintainable.
14. Resultantly, no case is made out to exercise
extraordinary jurisdiction and inherent powers of this
Court to quash the Criminal Case No.70738 of 2021
pending on the file of Judicial Magistrate Court at Surat.
15. Accordingly, the petition stands dismissed. Rule is
discharged. Interim relief, if any, stands vacated forthwith.
16. The observations made hereinabove are prima-facie
and tentative in nature and confined to adjudication of this
petition. The trial court shall not get influenced with the
observations made hereinabove while conducting the trial.
Sd/-
(ILESH J. VORA,J)
TAUSIF SAIYED
