Gujarat High Court
Prashant Janardan Agrawal vs State Of Gujarat on 4 April, 2025
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/CRIMINAL MISC.APPLICATION (FOR QUASHING & SET ASIDE
FIR/ORDER) NO. 8235 of 2016
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PRASHANT JANARDAN AGRAWAL & ANR.
Versus
STATE OF GUJARAT & ANR.
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Appearance:
MR RR MARSHALL, SR. ADVOCATE with DR.ABHISST K THAKER(7010)
for the Applicant(s) No. 1,2
ADITYA A CHOKSI(7835) for the Respondent(s) No. 2
MR AJAYKUMAR CHOKSI(1853) for the Respondent(s) No. 2
MR MANAN MEHTA, ADDL. PUBLIC PROSECUTOR for the Respondent(s)
No. 1
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CORAM:Hon'ble MR. JUSTICE J. C. DOSHI
Date : 04/04/2025
ORAL ORDER
1. By way of this application under Section 482 of the Code of
Criminal Procedure, 1973 (hereinafter referred to as "the Code"),
the petitioners have prayed for quashing and setting aside
issuance of Summary Criminal Case No.1199 of 2014 pending
before the learned CJM, Surendranagar as well as all other
consequential proceedings arising out of the aforesaid criminal
case qua the petitioners herein.
2. Brief facts of the case are as under:-
2.1 The petitioners no. 2 is into the business of manufacture
and export of fabrics and garments since last more than two
decades and petitioners No. 1 is the managing Director of
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petitioners no. 2. It is submitted that the petitioners no. 2 hase
performed considerably well and it's turnover was Rs.3532
crores for FY 2014-15. It is submitted that the petitioners have
never defaulted any of the transactions till date.
2.2 The petitioners no. 2 had entered into transactions with
the complainant- company since the year 2012 and the
petitioners used to purchase cotton bells from the complainant-
company. It is submitted that the transactions between the
petitioners and the complainant-company between 26.11.2012
to 25.03.2014 have been to the tune of Rs.8,34,99,922/- and the
petitioners have already made the payments regularly to the
tune of Rs.8,34,41,869/-. This clearly shows that the
outstanding amount of the petitioners with the complainant
since 25.3.2014 is only of Rs.58,053/- which the petitioners are
ready to pay to the complainant.
2.3 The petitioners had given the questioned cheque as Post
Dated Cheque to the complainant-company in the month of
August, 2013 to safeguard the repayment of the complainant -
company with understanding to hand it over back to the
Petitioner No. 2 on due payment of outstanding amount against
that cheque by other mode of payment. Accordingly, the
petitioners no. 2 had cleared the outstanding amount of the
complainant including the amount for which the cheque was
issued by issuing Letter of Credit in the month of October, 2013.
It was the understanding between the parties that the
complainant would return the cheque to the petitioners as the
outstanding amount was cleared. Considering the relations with
complainant- company, the petitioners had not insisted for the
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return of the cheque but instead the complainant had inserted
the date of 18.06.2014 which is very much evident from the fact
that all the details of the cheque are printed but the date is
manually inserted with a pen. It is submitted that the said
cheque was deposited only with a view to extract extra money
from the petitioners but however, said cheque was dishonoured
on the same day.
2.4 That the malafide intention of the complainant became
more clear when on the very next day, the respondent no.2-
complainant had sent a legal notice u/s. 138 of NI Act to the
petitioners through their advocate, wherein, the respondent
no.2- complainant had resorted to false averments and
suppressing the material facts with regard to the payments made
by the petitioners to the complainant prior to depositing the
impugned cheque. The petitioners respectfully submit that the
petitioners relied to the notice dated 20.06.2014 sent by the
complainant to the petitioners vide reply dated 09.07.2014. It is
submitted that the petitioners had very well clarified that the
outstanding amount of the respondent no.2- complainant was
already cleared including the amount for which the impugned
cheque was issued and got dishonoured.
2.5 Thereafter, the respondent no.2-complainant has filed
impugned complaint with the malafide intention of extorting
money from the petitioners. It is pertinent to note that the
averments made in the complaint are completely false and
vexatious. It is submitted that the respondent no.2-complainant
has also added the interest amount to the outstanding amount
which is not permissible under the purview of the Negotiable
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Instruments Act.
3. Learned Senior Counsel Mr. R R Marshall assisted by
Learned Advocate Dr. Abhisst Thaker appearing for the
petitioners after taking this court through the complaint filed
under Section 138 of the Negotiable Instruments Act, 1881 (in
short "the Act") would submit that the complainant has failed to
prove that the cheque in question was issued towards the
existing liability of Rs. 18,93,195/-. Learned Senior Counsel Mr.
RR Marshall took this court through the complaint and submit
that in a complaint, the complainant has nowhere mentioned
that how the amount of Rs.18,93,195/- is outstanding against
the accused. He would further submit that pure business
transactions arose between the complainant and the accused
and it runs in accordance with the oral terms and agreements
made between the parties. He would further submit that as per
Annexure B, an agreement was entered into between the parties
which commenced from 30th March 2012 and ended on 25th
March 2013, which indicates that there is a total transaction of
Rs.83,49,000/- between the parties and out of which only Rs.
58,053/- is outstanding. But the complainant without
mentioning the transaction between the parties straightway
misused the blank cheques and filled Rs.18,93,195/- in the
cheque and thereafter got it dishonoured and the complainant
has filed the complaint. He would further submit that the
learned trial Court has issued summons without examining that
whether prima facie proves that the cheque is issued towards
existing liability or not.
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3.1 Learned Senior Counsel would further submit that the
complainant in his affidavit-in-reply came out with the case that
disputed cheque or the questioned cheque was issued towards
debit note dated 13-12-2013. However, no such case was
pleaded in the complaint and therefore, raising a case that
amount of Rs.16,84,318/- is outstanding towards the debit note
is apparently an afterthought. He would further submit that the
said amount still is mismatching with the amount of cheque and
therefore, another debit note dated 16-04-2014 was made up by
the complainant to match with the amount of the cheque.
Learned Senior Counsel Mr. Marshall after narrating the
aforesaid facts would submit that since there was no subsisting
liability at the time of issuance of post dated cheque, which was
given towards the security, the same has been misused by the
complainant.
3.2 Learned Senior Counsel Mr. Marshall would further submit
that by tendering the account statement at Annexure B, the
accused petitioners has discharged the burden under Section
139 of the NI Act and in that circumstances, now the
complainant was required to establish before the court that
cheque is issued towards the legally enforceable debt but in the
present case, the complainant failed to establish that the cheque
was issued towards the legally enforceable debt. Yet, the learned
trial Court issued process and thus, the learned trial Court fell
in error.
3.3 Learned Senior Counsel Mr. Marshall would further submit
that it would be envisioned that Rs. 58,053/- is outstanding
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against the petitioners accused which is established, at the
most, civil liability and not the criminal liability.
3.4 Learned Senior Counsel Mr. Marshall referred to the
judgment in the case of Indus Airways Private Limited Versus
Magnum Aviation Private Limited, 2014 (12) SCC 539 more
particularly para 13 and 19 reads as under:
"13. The explanation appended to Sec. 138 explains the
meaning of the expression 'debt or other liability' for
the purpose of Sec. 138. This expression means a
legally enforceable debt or other liability. Sec. 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 Sec. 138, there should
be legally enforceable 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 nonfor bringing an
offence under Sec. 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, in our considered
view, 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.
19. The above reasoning of the Delhi High Court is
clearly flawed inasmuch as it failed to keep in mind the
fine distinction between civil liability and criminal
liability under Sec. 138 of the N.I. Act. If at the time of
entering into a contract, it is one of the conditions of
the contract that the purchaser has to pay the amount
in advance and there is breach of such condition then
purchaser may have to make good the loss that might
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have occasioned to the seller but that does not create a
criminal liability under Sec. 138. For a criminal liability
to be made out under Sec. 138, there should be legally
enforceable debt or other liability subsisting on the
date of drawal of the cheque. We are unable to accept
the view of the Delhi High Court that the issuance of
cheque towards advance payment at the time of signing
such contract has to be considered as subsisting
liability and dishonour of such cheque amounts to an
offence under Sec. 138 of the N.I. Act. The Delhi High
Court has traveled beyond the scope of Sec. 138 of the
N.I. Act by holding that the purpose of enacting Section
138 of the N.I. Act would stand defeated if after placing
orders and giving advance payments, the instructions
for stop payments are issued and orders are cancelled.
In what we have discussed above, 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 by the supplier, in our
considered view, the cheque cannot be said to have
been drawn for an existing debt or liability."
3.5 In addition to the above, learned Senior Counsel Mr.
Marshall also referred to and relied upon the judgement of this
court in case of Arvind Maneklal Tailor Versus State Of Gujarat,
2000 (3) GLR 2206, more particularly para 8.1 thereof, which
reads as under:
"8.1 No doubt, the Trial Court has in its judgment
(delivered in Gujarati) has very often used the phrase to
the effect that the cheque does not represent the "legal
dues" of the drawer to the drawee. However, there
cannot be any controversy that the entire factual
evidence is based upon not the issue as to whether
there is any debt or not, but on the defence of the
accused that after the issuance of the cheques, but
before due date, there was a change of circumstances
and change in the obligations between the parties
whereby the extent of the debt and the quantum thereof
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was substantially altered, and that on the due date the
debt if any of the drawer to the drawee was of a far
smaller figure. Obviously it was neither the function of
the criminal court nor necessary to decide the legal
issue as to what was the precise extent of the debt. If
the evidence in rebuttal which is found acceptable by
the court justifies a conclusion that the cheque which
was dishonoured, did not represent either the entire
debt or part of the debt on the due date, Sec. 138 would
not furnish a cause of action for the criminal
prosecution and/or conviction. It is in the context of
this limited controversy that the evidence in rebuttal led
by the accused has been examined and found to be
acceptable by the court. "
3.6 Learned Senior Counsel Mr. Marshall having referred to
the above said judgement would submit that since the
complainant failed to prove the legally enforceable debt existed
on the date of issuance of the cheque, the complainant failed to
bring the offence under Section 138 of the NI Act. He would
further submit that since the complaint itself is silent on the
issue of transaction and by producing Annexure B account
statement, the petitioners accused have established no existing
liability or legally enforceable debt as on date of cheque equal to
the amount mentioned in the questioned cheque lying with the
complainant proves that cheque is misuse of or abuse of process
of law and therefore Learned Senior Counsel Mr. Marshall would
submit that this court be pleased to allow this petition and to
quash the FIR.
4. Per Contra, Learned Advocate Mr. Aditya Choksi appearing
for the Respondent No. 2 would submit that the petitioners have
replied the statutory notice issued by the complainant
Respondent No.2. Referring reply to the notice, learned advocate
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Mr. Choksi would further submit that the notice has been
replied by the Bombay Rayon Fashion Ltd. but not by the
signatory of the cheque i.e. the petitioners No.1. He would
further submit that perusal of the reply of the notice at
Annexure E does not indicate whisper of words that the only
amount of Rs 59,053/- is outstanding. He would further submit
that rather reply was general and vague. The petitioners who
have raised contention in this petition have not raised such
contention in reply to the notice and therefore present petition is
bereft of merit. He would further submit that at the time of
dealing with the quashing petition, ordinarily the court should
proceed on the basis of averments made in the complaint. The
defence which is raised by the petitioners accused cannot be
considered at the stage of quashing petition.
4.1 Learned advocate Mr. Choksi would further submit that
whether the account is settled, whether the amount of Rs
53,059/- is outstanding or whether any legally enforceable debt
was existed at the time of issuance of the cheque are the
questions to be decided during the trial and it cannot be dealt
with and addressed by the court while dealing with the quashing
petition.
4.2 Learned advocate Mr. Choksi referring to Annexure B
would submit that it is a ledger maintained by the Bombay
Rayon Fashion Limited in its own office. It is yet to be tested
during trial and its evidentiary value can be ascertained during
the trial only. At this stage, merely a copy of the account
statement extracted from the computer of Bombay Rayon
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Fashion Limited cannot be treated as a gospel truth to believe
that no legally enforceable debt or subsisting liability stated in
the cheque was not existed. He would further submit that the
debit note along with account statements are produced at
Annexure R1. He would further submit that even the document
which is placed on record by the respondent - complainant is
also required to be proved during the trial. He would submit
that in the present case, two account statements are placed on
record whereby one was submitted by the complainant and
another by the accused persons and both are required to be
tested during trial and therefore their evidentiary value would be
ascertained. He would further submit that by placing account
statement abstracted from its own office, the petitioners cannot
say that they have discharge the burden envisaged under
Section 139 of the NI Act. Therefore, he would submit that the
contention which is raised by the petitioners to quash the
process/summons issued in the criminal case as well as
criminal case cannot be entertained at this stage and this
contention can be tested during the trial. He would further
submit that whether the cheque in question is issued towards
the security or towards the existing liability or whether the dues
are paid or not are the questions which can be dealt with during
the trial.
4.3 To buttress his submission, learned Advocate Mr. Choksi
has relied upon the following judgments:
(1) Rathish Babu Unnikrishnan Vs. State (Govt of NCT of Delhi)
and nother, 2022 SCC Online SC 513
(2) Sampelly Satyanarayana Rao Versus Indian Renewable
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Energy Development Agency Limited, 2016 (10) SCC 458
(3) Sripati Singh (Since deceased) through his son Gaurav Singh
Vs. State of Jharkhand and another, (2022) 18 SCC 614.
4.4 Upon above submission, learned advocate Mr. Choksi
requests to dismiss the petition.
5. Learned APP would submit that it is a dispute between the
private parties and therefore while adopting the argument of
Learned Advocate Mr. Choksi, he would submit to dismiss the
petition.
6. I have heard Learned Advocates for both the sides and also
perused the record.
7. It is to be noted that in a Criminal Case No. 1199 of 2014,
whereby learned CJM. Surendranagar had issued process under
Section 138 of the NI Act against the petitioners, the
complainant is pleaded his case in Para 4 and 5 of the complaint
which reads as under:-
"In December 2013 both of accused were liable to pay
Rs.16,84,318/- to complainant and as per business
transactions and oral terms and agreements made
between both of accused and complainant both of
accused are liable to pay also running interest 2% per
month on Rs. 16,84,318/- so both of accused are liable
to pay interest amount of six months to complainant
i.e. Rs.2,02,118/- and both of accused are also liable to
pay another Rs.15,750/- as DB closing balance as per
business transactions and oral terms and agreements
made between both of accused and complainant so
both of accused are liable to pay total outstanding
amount i.e. Rs.19,02,186/- to complainant at
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Surendranagar.
[5] In respect of aforesaid liability regarding cotton
products of goods purchased by both of accused and
both of accused are liable to pay total outstanding
amount i.e. Rs.19,02,186/- to complainant at
Surendranagar, so looking to the above total
outstanding amount of Rs.19,02,186/- both of accused
have issued below mentioned one cheque which is
mentioned as below as a part payment of outstanding
amount of complainant. :-
Sr No Bank name and Cheque No. Cheque date Amount
Branch
1 Axis Bank, Indore 069304 18/06/2014 Rs.18,93,195/-
(MP)
Total Rs.18,93,195/-
8. Above mentioned cheque is signed by accused No.2 in
favour of complainant and send above mentioned cheque at
Surendranagar in the knowledge of both of accused.
9. The complainant came out with the case that business
transaction and oral terms and conditions of the agreement were
existed between the complainant and accused. The accused was
liable to pay running interest at 2% per annum on the
outstanding liability of Rs. 16,84,318/-. The total interest which
accumulated upon the outstanding amount is Rs.2,02,118/-. It
is also claimed that both the accused were liable to pay another
Rs.15,750/- as per the business transaction and oral terms and
conditions of the agreement. In total, the complainant claimed
that Rs. 19,02,186/- was outstanding against the accused
persons. It is also averred that cheque of Rs.18,93,195/- was
issued by the accused towards the payment of outstanding
liability. It is not the case of the accused that cheque has not
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been issued from the account maintained or drawn by the
accused nor it is the case of the accused that cheque has not
been signed by the authorised signatory. Even it is not the case
of the accused that cheque was returned unpaid despite there
was sufficient balance in his account. The claim of the
complainant is sequel of the demand placed at Annexure D. A
clear demand was made by the complainant by issuing notice
under Section 138 of the NI Act. It is not the case of the accused
that the notice has not been served to him. It is interesting to see
the reply filed by the accused petitioners at Annexure E which
reads as under:-
"This has reference to your notice dated June 20, 2014
about dishonor of cheque issued to your client Purav
Cotton Industries. On verification of our record, it is
observed that the cheque number mentioned in your
letter was pertaining to cheque issued to your client in
the month of August, 2013. The. details of the said
cheque are -
Cheque no: 069304
Date: 28/8/2013
Amount : Rs. 18.93,195/-
The said cheque was returned uncleared when
deposited. The Company had cleared the complete
outstanding of your client by opening Letter of Credit
(L/c) in the months of October, 2013 & December,
2013. Accordingly your outstanding was cleared by
December, 2013 including the amount for which
cheque was issued and got dishonoured with
understanding that your client would returned the said
cheque. But your client did not return the said cheque.
Pursuant to new RBI regulation, validity of cheque is
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only three months. It is noticed that in the month of
June, 2014 your client had deposited the said cheque
again intentionally to issue the notice under section
138 of the Negotiable Instrument Act, 1881."
10. The plain reading of the reply indicates that it is the case of
the accused that outstanding amount was cleared by the
accused by December 2013 including the amount of which the
cheque was issued and with a clear understanding that the
complainant would return the said cheque leaf. The reply does
not manifest that Rs. 59,053/- is outstanding on closing ledger
account. The petitioners who came out with the case that no
liability was existing on the date of cheque in the petition, failed
to put the defence in the reply to the notice. The defence taken in
the reply indicates that the cheque was issued towards the
amount mentioned in the cheque. However, according to the
accused, they have already paid the amount which is mentioned
in leaf of cheque. This is purely a defence of the accused. and it
can be appreciated only during trial. A strange argument was
made that by producing the account statement, the petitioners
accused have discharged reverse burden under Section 139 of
the NI Act and now onus is on the complainant to prove legally
enforceable date. To be noted that in order to discharge
presumption under Section 139 of the NI, the evidence is
required to be led. Otherwise, the presumption would run in
favour of the holder of the cheque. Section 139 of the NI reads as
under:-
"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
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nature referred to in section 138 for the discharge, in
whole or in part, of any debt or other liability."
11. In Lakshmi Dyechem v State of Gujarat 2012(12) JT 65,
the Hon Apex Court has held that presumption under Section
139 of the Act is a rebuttal presumption and the accused issuing
the cheque is at liberty to prove to the contrary.
12. In Mandvi Cooperative Bank Vs. Nimesh B. Thakore
reported in 2010(3) SCC 83, it is held by the Hon Apex Court
that a rebuttal presumption is created under Section 139 of the
NI Act that cheque was issued by the drawer in discharge of any
debt or liability owned by him or its holder. Therefore, the
presumption available under Section 139 of the NI Act in favour
of the holder in cheque can be rebutted by the accused by
adducing evidence. The burden of proof is on the accused and
the evidence which is available on record will have to be tested
bearing in mind the facts regarding the burden of proof. The
rebuttal burden envisaged under Section 139 of the Act can be
discharged by placing a photocopy of the account maintained by
the petitioners accused in a proceedings under Section 482 of
the Criminal Procedural Code.
13. The ledger account which the petitioners has produced at
Annexure B has to be proved in accordance with the provisions
of the Evidence Act to discharge the rebuttable burden under
Section 139 of the NI Act in a trial. Merely stating/producing
copy of ledger maintained by the petitioners without passing
through test of trial cannot be treated as evidence sufficient to
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discharge reverse burden.
14. In Sampelly Satyanarayana Rao (Supra), the Hon'ble Apex
Court after referring series of judgements in Para 16 reads as
under:-
"16. As is clear from the above observations of this
Court, it is well settled that while dealing with a
quashing petition, the Court has ordinarily to proceed
on the basis of averments in the complaint. The defence
of the accused cannot be considered at this stage. The
court considering the prayer for quashing does not
adjudicate upon a disputed question of fact."
15. In HMT Watch (supra), the Hon'ble Supreme Court held as
under:
"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 Section 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
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High Court in its jurisdiction under Section 482 of the
Code of Criminal Procedure when such plea was
controverted by the complainant before it."
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. 685-87, 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.
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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 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."
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12. In Rallis India Ltd. v. Poduru Vidya Bhushan
[(2011) 13 SCC 88], this Court expressed its views on
this point as under: (SCC p. 93, para 12)
"12. At the threshold, the High Court should not have
interfered with the cognizance of the complaints having
been taken by the trial court. The High Court could not
have discharged the respondents of the said liability at
the threshold. Unless the parties are given opportunity
to lead evidence, it is not possible to come to a definite
conclusion as to what was the date when the earlier
partnership was dissolved and since what date the
respondents ceased to be the partners of the firm."
16. In Rathish Babu Unnikrishnan (supra), the Hon'ble Apex
Court held that when facts are disputed, the truth should be
allowed to emerge by weighing the evidence. The relevant para
reads as under:-
"When disputed questions of facts are involved which
need to be adjudicated after the parties adduce
evidence, the complaint under Section 138 of the NI Act
ought not to have been quashed by the High Court by
taking recourse to Section 482 CrPC. Though, the
Court has the power to quash the criminal complaint
filed under Section 138 of the NI Act on the legal issues
like limitation, etc. criminal complaint filed under
Section 138 of the NI Act against Yogeshbhai ought not
to have been quashed merely on the ground that there
are inter se disputes between Appellant 3 and
Respondent 2. Without keeping in view the statutory
presumption raised under Section 139 of the NI Act, the
High Court, in our view, committed a serious error in
quashing the criminal complaint in CC No. 367 of 2016
filed under Section 138 of the NI Act."
17. One more argument is canvassed by learned Senior
Counsel Mr. Marshall that cheque in question was issued as a
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security towards the financial transaction. However, in reply to
the notice at Annexure E, no such contention is raised but
rather in the reply, it is stated that cheque was issued towards
the amount stated therein. Therefore, at this juncture it cannot
be believed that cheque was given towards the security. Whether
the cheque in question is issued towards security or otherwise
cannot be judged from the bare face of the petition under Section
482 of the Criminal Procedural Code.
18. In the case of Sripati Singh (supra), the Hon'ble Apex Court
addressed the issue and said that in every circumstance the
cheque in question cannot be treated as a security. Para 21 and
22 are relevant which reads as under:
"21. A cheque issued as security pursuant to a
financial transaction cannot be considered as a
worthless piece of paper under every circumstance.
'Security' in its true sense is the state of being safe and
the security given for a loan is something given as a
pledge of payment. It is given, deposited or pledged to
make certain the fulfilment of an obligation to which
the parties to the transaction are bound. If in a
transaction, a loan is advanced and the borrower
agrees to repay the amount in a specified timeframe
and issues a cheque as security to secure such
repayment; if the loan amount is not repaid in any
other form before the due date or if there is no other
understanding or agreement between the parties to
defer the payment of amount, the cheque which is
issued as security would mature for presentation and
the drawee of the cheque would be entitled to present
the same. On such presentation, if the same is
dishonoured, the consequences contemplated under
Section 138 and the other provisions of N.I. Act would
flow.
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22. When a cheque is issued and is treated as 'security'
towards repayment of an amount with a time period
being stipulated for repayment, all that it ensures is
that such cheque which is issued as 'security' cannot
be presented prior to the loan or the instalment
maturing for repayment towards which such cheque is
issued as security. Further, the borrower would have
the option of repaying the loan amount or such
financial liability in any other form and in that manner
if the amount of loan due and payable has been
discharged within the agreed period, the cheque issued
as security cannot thereafter be presented. Therefore,
the prior discharge of the loan or there being an altered
situation due to which there would be understanding
between the parties is a sine qua non to not present
the cheque which was issued as security. These are
only the defences that would be available to the drawer
of the cheque in a proceedings initiated under Section
138 of the N.I. Act. Therefore, there cannot be a hard
and fast rule that a cheque which is issued as security
can never be presented by the drawee of the cheque. If
such is the understanding a cheque would also be
reduced to an 'on demand promissory note' and in all
circumstances, it would only be a civil litigation to
recover the amount, which is not the intention of the
statute. When a cheque is issued even though as
'security' the consequence flowing therefrom is also
known to the drawer of the cheque and in the
circumstance stated above if the cheque is presented
and dishonoured, the holder of the cheque/drawee
would have the option of initiating the civil proceedings
for recovery or the criminal proceedings for
punishment in the fact situation, but in any event, it is
not for the drawer of the cheque to dictate terms with
regard to the nature of litigation.
19. Whether the cheque in question is issued towards security
or not while considering the judgement of Indus Airways (supra)
in Para 11 in case of Sampelly Satyanarayan (supra), the
Hon'ble Apex Court held as under:-
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"11. 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 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."
20. Now coming back to the case on hand, what could be
noticed from the averment made in the complaint, that the
learned Trial Court has not committed any mistake in issuing
process as essential ingredients of the offence under Section 138
of the NI Act prima facie established as the cheque was issued
from the account of the petitioners for discharge in whole or in
part in cheque or other liability which presupposes the legally
enforceable debt and cheque so issued was returned due to
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insufficient of funds. The issue which was raised by the
petitioners in the petition is purely a defence of the petitioners
accused and it can be tested, examined and weighed during the
trial and it is disputed question of fact.
21. At the cost of repetition, it can be held that by placing the
papers from the extracts of the account of the petitioners, the
petitioners accused cannot claim that they have discharged the
burden under Section 139 of the NI Act and proved non-
existence of the legal liability on the date of issuance of the
cheque. Again, it is to be noted that what has been claimed by
the petitioners in the petition is not reflecting in their reply to the
statutory notice which is first point of defence and therefore,
looking to this, the petition is found to be bereft of merits.
22. Learned Senior Counsel Mr. Marshall has also raised the
question that the debit notes are first time brought to the picture
in the affidavit in reply. However, the same can also be weighed
during the trial. In the aforesaid circumstances, this court is
unable to accept the submission canvassed by Learned Senior
Counsel Mr. RR Marshall.
23. In Rathish Babu (supra), the Hon'ble Apex Court has held
as under:
"16. The proposition of law as set out above makes it
abundantly clear that the Court should be slow to grant
the relief of quashing a complaint at a pre-trial stage,
when the factual controversy is in the realm of
possibility particularly because of the legal
presumption, as in this matter. What is also of note is
that the factual defence without having to adduce any
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evidence need to be of an unimpeachable quality, so as
to altogether disprove the allegations made in the
complaint.
17. The consequences of scuttling the criminal process
at a pre-trial stage can be grave and irreparable.
Quashing proceedings at preliminary stages will result
in finality without the parties having had an opportunity
to adduce evidence and the consequence then is that
the proper forum i.e., the trial Court is ousted from
weighing the material evidence. If this is allowed, the
accused may be given an un-merited advantage in the
criminal process. Also because of the legal presumption,
when the cheque and the signature are not disputed by
the appellant, the balance of convenience at this stage is
in favour of the complainant/prosecution, as the
accused will have due opportunity to adduce defence
evidence during the trial, to rebut the presumption.
18. Situated thus, to non-suit the complainant, at the
stage of the summoning order, when the factual
controversy is yet to be canvassed and considered by
the trial court will not in our opinion be judicious.
Based upon a prima facie impression, an element of
criminality cannot entirely be ruled out here subject to
the determination by the trial Court. Therefore, when
the proceedings are at a nascent stage, scuttling of the
criminal process is not merited."
24. Considering the aforesaid observations, the authorities
cited by learned Senior Counsel Mr. Marshall does not render
any assistance to his case.
25. Seen thus and applying the aforesaid ratio to the facts of
the present case, this court is of the considered opinion that no
material in petition is sufficient to scuttle issuance of process
and criminal complaint at pre-trial stage. Issues raised in the
petition deserve to be decided by leading and weighing evidence
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during trial. No reason arise to exercise inherent powers to stop
the questioned criminal complaint.
26. Consequent to above reason, the petition being bereft of
merits, I dismissed. Notice discharged. Interim relief, if any,
granted earlier stands vacated.
(J. C. DOSHI,J)
SHEKHAR P. BARVE
