Gujarat High Court
Arjun Thapar vs Machhar Polymer Private Limited on 15 July, 2025
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Reserved On : 07/07/2025
Pronounced On : 15/07/2025
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CRIMINAL APPLICATION (QUASHING) NO. 7382 of 2015
With
R/SPECIAL CRIMINAL APPLICATION NO. 7383 of 2015
With
R/SPECIAL CRIMINAL APPLICATION NO. 7384 of 2015
With
R/SPECIAL CRIMINAL APPLICATION NO. 7385 of 2015
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE J. C. DOSHI
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Approved for Reporting Yes No
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ARJUN THAPAR & ORS.
Versus
MACHHAR POLYMER PRIVATE LIMITED & ANR.
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Appearance:
ADVOCATE NOTICE SERVED for the Applicant(s) No. 5
MR.D K.PUJ(3836) for the Applicant(s) No. 1,3,4
UNSERVED EXPIRED (N) for the Applicant(s) No. 2
MR RAJENDRA K GOLANI(2125) for the Respondent(s) No. 1
MR CHINTAN DAVE, ADDL. PUBLIC PROSECUTOR for the Respondent(s)
No. 2
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CORAM:HONOURABLE MR. JUSTICE J. C. DOSHI
CAV JUDGMENT
1. Since common questions of law and fact arise in these
batch of petitions, with the consent of learned advocates for the
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respective parties, they are being disposed of by this common
order.
2. By way of this petitions under Section 482 of the Code of
Criminal Procedure, 1973 (hereinafter referred to as "the Code"),
the petitioners have prayed for quashing and setting proceedings
of Criminal Case Nos.6676 of 2014, 6677 of 2014, 6675 of 2014
and 6674 of 2014 as well as all other consequential proceedings
arising out of the aforesaid FIR qua the petitioners herein.
3. Brief facts of the case are as under:-
3.1 The petitioner No.1 is engaged in the business inter-alia of
manufacturing TV tubes and is also supplying the same to
various end consumers, manufacturing television.
3.2 That on account of several financial difficulties confronted
by the petitioner, the petitioners had approached Board for
Industrial and Financial Reconstruction (BIFR) under the
provisions of Sick Industrial Companies (Special Provisions) Act,
1985 and the case of the petitioners was registered on
31.3.2002. The respondent complainant is also aware about the
aforesaid aspect. In view of the settled legal position, the
commencement of the proceedings before BIFR is considered to
have been commenced, from the date of registration of the
reference and accordingly, Section 22 of the said Act would come
into operation the moment it is registered. In view of the specific
bar contained under Section 22, all proceedings against the
Company including execution proceedings and/or recovery
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proceedings and/or alike including recovery suits are not
maintainable. The aforesaid fact was within the knowledge as
aforesaid to the respondent complainant.
3.3 That during the course of proceedings before BIFR, after
appropriate inquiry under Section 16, 17, 18 and 19 of the said
Act, the BIFR has been pleased to declare the petitioners as Sick
Industrial undertaking vide order dated 12.3.2007 and a scheme
is framed and operating agency is also appointed accordingly.
The scheme is in force for the period 1.4.2007 to 31.3.2017.
3.4 That impugned complaint is filed on account of dishonour
of 3 cheques, viz. (i) cheque No.001123 dated 17.10.2013 for an
amount of Rs. 1,50,000/-, (ii) cheque No.001124 dated
19.10.2013 for an amount of Rs.1,50,000/-, and (iii) cheque
No.001125 dated 21.10.2013 for an amount of Rs. 1,50,000/-.
3.5 Said complaints are culminated into Criminal Case No.
6674 of 2014, Criminal Case No. 6675 of 2014, Criminal Case
No. 6676 of 2014 (the impugned complaint) and Criminal Case
No. 6677 of 2014 pending before the Court at Vadodara.
3.6 The petitioners paid the amount of cheque dishonoured
being root cause of criminal complaint, during trial. Yet criminal
complaint continued to proceeding. Hence, present petition.
4. Heard learned advocate Mr. DK Puj appearing for the
petitioners, learned advocate Mr. Rajendra Golani appearing for
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the respondent No.1 as well as learned APP Mr. Chintan Dave
appearing for the state.
5. The short substance of arguments of learned advocate Mr.
DK Puj is as under:-
5.1 That JCT Electronics Limited petitioner and the original
accused has paid substantial amounts by cheque to the
complainant during pendency of the trial.
5.2 That the disputes between the parties have been settled
since the amount in question have already paid.
5.3 That in view of letters produced at Annexure III and
Annexure IV, JCT Electronics Limited has specifically stated that
they are paying the amount as against the settlement in the
Criminal Cases. However, the complainant, instead of accepting
the amount towards the settlement, credited said amount for
some other outstanding in the account and thereby have
breached the provisions of sections 59 to 61 of the Contract Act.
5.4 Referring to the judgment in case of Gurpreet Singh Vs.
Union of India, Manu/SC/4736/2006, more particularly para 5
to 7 and 37 to 40, it is submitted that where several distinct
debts are owing by a debtor i.e. the petitioners to his creditor
i.e. the complainant. In the present case, the debtor has the
right when he makes a payment to appropriate the money to any
of the debts that he pleases, and the creditor is bound if he takes
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the money, to apply it in the manner directed by the debtor.
That in the present case, looking to Annexure III and Annexure
IV, it appears that JCT Electronics Ltd - the debtor has directed
that the payment they are making is towards the settlement
against particular complaint. Thus, creditor i.e. the complainant
is bound to give effect of that payment.
5.5 That JCT Electronics Ltd is since turned sick company the
proceedings was initiated before the BIFR and order of
moratorium was issued for the period commencing from 2007 till
2017 and no one was permitted to make the payment to
unsecured creditor. He refers to the order passed by the BIFR
and submitted that since a specific contention was raised that
for some payment, cheques in advance are issued, the director
may be permitted to issue cheques and pursuant to that,
directors of JCT Electronics Ltd have issued the cheque to fulfill
the debt for which the cheques were earlier given and proceeding
under the NI act was initiated.
5.6 That since the debt was appropriated by paying the
amount by issuing fresh cheques, continuation of the
proceedings under the NI Act would be abuse of process of law.
5.7 Mainly upon above submissions, learned advocate Mr. Puj
requests to allow the petitions and to quash the proceedings
initiated under the NI Act.
6. Per Contra, learned advocate Mr. Golani appearing for the
respondent No.1 would argue as under:-
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6.1 That the company has not filed the petition, which is the
principal accused. In absence of the petition for quashing filed
by the company being a principal accused, the directors, who are
vicariously liable, cannot prefer quashing petition independently.
6.2 That para 14 of the petition indicates total outstanding
amount of Rs.31,77,000/-. The amounts towards the cheques
issued are dishonoured, but the total amount paid is
Rs.24,07,000/- only. Therefore, even if it is believed that the
amount is paid towards the cheques, which are dishonoured, it
is insufficient amount paid towards the cheques dishonoured,
and therefore, complaint initiated under the provisions of the NI
Act cannot be quashed.
6.3 That power of compounding is lying with the company and
it cannot be enforced at the instance of the accused by saying
that he has paid the amount of cheques dishonoured during
trial.
6.4 In support of his submission, judgment in case of
Mainuddin Abdul Sattar Shaikh Vs. Vijay D. Salvi, (2015) 9 SCC
622 and in case of R. Vijayan Vs. Baby and another, (2012) 1
SCC 260 are relied upon.
6.5 Upon such submission, learned advocate Mr. Golani
requests to dismiss the petition.
7. Learned APP, in a private dispute between the parties,
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while adopting the argument of learned advocate for the
complainant, prays to pass necessary orders.
8. Regard being had to the rival submissions of learned
advocates of both the parties and perusing the records, what
could be noticed that by way of this petition, the petitioners, who
are accused in trial under the NI Act, insisted that since they
have paid the amount of the cheques, which were dishonoured
during the pendency of the trial under the NI Act, it should be
treated as settlement between the company and the accused,
which ends trial against the petitioners accused. Further since
the payment of the cheque dishonoured is already paid, The
petitioners cannot be sent to face the trial.
9. In context to arguments canvassed by herein above, it is
relevant to find that when the cause of action arose for filing
complaint u/s 138 of the NI Act.
10. In Sadanandan Bhadran Versus Madhavan Sunilkumar,
1998 (6) SCC 514, the Hon'ble Apex Court referring to sections
138 and 142 of the NI Act in regards to the cause of action arose
for filing of the complaint held and observed as under:-
"5. Chapter XVII of the Act containing the fascicule of
Secs. 138 to 142 was brought into the statute book
with effect from Apr. 1, 1989 by Sec. 4 of the Banking
Public Financial Institutions and Negotiable
Instruments Laws (Amendment) Act, 1988. The
'objects and reasons' clause of the Bill which
introduced the Amending Act indicates that the new
Chapter was incorporated to enhance the
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acceptability of cheques in settlement of liabilities by
making the drawer liable for penalties in case of
bouncing of cheques due to insufficiency of funds in
the accounts or for the reason that it exceeds the
arrangements made by the drawer with adequate
safeguards to prevent harassment of honest drawers.
Sec. 138 of the Act reads as under :
["Where any cheque drawn by a person on an
account maintained by him with a banker for
payment of any amount of money to another
person from out of that account for the
discharge, in whole or in part, of any debt or
other liability, is returned by the bank unpaid,
either because of the amount of money standing
to the credit of that account is insufficient to
honour the cheque or that it exceeds the amount
arranged to be paid from that account by an
agreement made with that bank, such person
shall be deemed to have committed an offence
and shall, without prejudice to any other
provision of this Act, be punished with
imprisonment for a term which may extend to
one year, or with fine which may extend to twice
the amount of the cheque, or with both :
[Provided that nothing contained in this Section
shall apply unless -
[(a) the cheque has been presented to the bank
within a period of ,six months from the date on
which it is drawn or within the period of its
validity, whichever is earlier; ]
[(b) the payee or the holder in due course of the
cheque, as the case may be, makes a demand
for the payment of the said amount of money by
giving a notice in writing, to the drawer of the
cheque, within fifteen days of the receipt of
information by him from the bank regarding the
return of the cheque as unpaid; and ]
[(c) the drawer of such cheque fails to make the
payment of the said amount of money to the
payee or as the case may be, to the holder in
due course of the cheque within fifteen days of
the receipt of the said notice." ]
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On a careful analysis of the above Section it is seen
that its main part creates an offence when a cheque
is returned by the bank unpaid for any of the reasons
mentioned therein. The significant fact, however, is
that the proviso lays down three conditions precedent
to the applicability of the above Section and, for that
matter, creation of such offence and the conditions
are: (i) the cheque should have been presented to the
bank within six months of its issue or within the
period of its validity whichever is earlier; (ii) payee
should have made a demand for payment by
registered notice after the cheque is returned unpaid:
and (iii) that the drawer should have failed to pay the
amount within 15 days of the receipt of notice. It is
only when all the above three conditions are satisfied
that a prosecution can be launched for the offence
under Section ! 38. So far as the first condition is
concerned clause (a) of -the proviso to Sec. 138 does
not put any embargo upon the payee to successively
present a dishonoured cheque during the period of its
validity. This apart, in course of business transactions
it is not uncommon for a cheque being returned due
to insufficient funds or similar such reasons and
being presented again by the payee after sometime,
on his own volition or at the request of the drawer, in
expectation that it would be encashed. Needless to
say, the primary interest of the payee is to get his
money and not prosecution of the drawer, recourse to
which, normally, is taken out of compulsion and not
choice. For the above reasons it must be held that a
cheque can be presented any number of times during
the period of its validity. Indeed that is also the
consistent view of all the High Courts except that of
the Division Bench of the Kerala High Court in
Kumaresan (supra) which struck a discordant note
with the observation that for the first dishonour of the
cheque only a prosecution can be launched for there
cannot be more than one cause of action for
prosecution.
5. The next question that fails for our determination is
whether dishonour of the cheque on each occasion of
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its presentation gives rise to a fresh cause of action
within the meaning of Sec. 142(b) of the Act. Sec. 142
reads as under :
["Notwithstanding anything contained in the
Code of Criminal Procedure, 1973 -
[(a) no court shall take cognizance of any offence
punishable under Sec. 138 except upon a
complaint, in writing, made by the payee or, as
the case may be, the holder in due course of the
cheque; ]
[(b) such complaint is made within one month of
the date on which the cause of action arises
under clause of the proviso to Sec. 138; ]
[(c) no court inferior to that of a Metropolitan
Magistrate or a Judicial Magistrate of the first
class shall try any offence punishable under
Section 138." ]
] From a plain reading of the above Sec-lion it is
manifest that a competent Court can take cognizance
of a written complaint of an offence under Sec. 138 if
it is made within one month of the date on which the
cause of action arises under clause (C) of the proviso
to Sec. 138. (Emphasis supplied.)
6. In a generic and wide sense (as in Sec. 20 of the
Civil Procedure Code, 1908) 'cause of action' means
every fact which it is necessary to establish to support
a right or obtain a judgment. Viewed in that context,
the following facts are required to be proved to
successfully prosecute the drawer for an offence
under Sec. 138 of the Act : -
[(a) that the cheque was drawn for payment of
an amount of money for discharge of a
debt/liability and the cheque was dishonoured; ]
[(b) that the cheque was presented within the
prescribed period; ]
[(c) that the payee made a demand for payment
of the money by giving a notice in writing to the
drawer within the stipulated period; and ]
[(d) that the drawer failed to make the payment
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within 15 days of the receipt of the notice. ]
If we were to proceed on the basis of the generic
meaning of the term 'cause of action' certainly each of
the above facts would constitute a part of the cause of
action but then it is significant to note that clause (b)
Sec. 142 gives it a restrictive meaning, in that, it
refers to only one fact which will give rise to the
cause of action and that is the failure to make the
payment within 15 days from the date of the receipt of
the notice. The reason behind giving such a restrictive
meaning is not far to seek Consequent upon the
failure of the drawer to pay the money within the
period of 15 days as envisaged under clause (C) of the
proviso to Sec. 138, the liability of the drawer for
being prosecuted for the offence he has committed
arises, and the period of one month for filing the
complaint under Sec. 142 is to be reckoned
accordingly. The combined reading of the above two
Sections of the Act leaves no room for doubt that
cause of Action within the meaning of Sec. 142 (C)
arises - and can arise - only once."
11. Thus, in view of aforesaid proposition of the law laid down
by the Hon'ble Apex Court, in order to successfully prosecute the
offender for the offence under section 138 of the NI Act the
insignia are that cheque was drawn for payment of an amount of
money for discharge of a debt/liability and the cheque was
dishonoured; that the cheque was presented within the
prescribed period; that the payee made a demand for payment
of the money by giving a notice in writing to the drawer within
the stipulated period; and that the drawer failed to make the
payment within statutory period after receiving notice. If all
above insignia exists, the complainant can successfully
prosecute drawer of the cheque. Cause of action for filing the
complaint u/s 138 of the NI Act would start as soon as the
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aforesaid insignia are completed.
12. In the present case, it is undoubted that all four insignia
exist and the prosecution under the NI Act has been launched.
It is now case of the petitioners - accused that since they have
paid the amount of cheques dishonoured during pendency of
the trial towards settlement, further proceedings of trial u/s
138 of the NI Act would be abuse of process of law.
13. In Rajneesh Aggarwal Versus Amit J.Bhalla, 2001 (1)
SCC 631, before the Hon'ble Apex Court, two questions arose
for consideration, out of them, question No.2 posed by the
Hon'ble Apex Court is relevant to decide the dispute raised in the
petition, which reads as under:-
"(1) Was the High Court justified in coming to the
conclusion that the drawer has not been duly served
with notice for payment -
(2) Whether deposit of the entire amount covered by
three cheques, while the matter is pending in this
Court, would make any difference?
13.1 The Hon'ble Apex Court discussed and answered
aforesaid question in para 7 as under:-
"7. So far as the question of deposit of the money
during the pendency of these appeals is concerned,
we may state that in course of hearing the parties
wanted to settle the matter in Court and it is in that
connection, to prove the bona fide, the respondent
deposited the amount covered under all the three
cheques in the Court, but the complainant's counsel
insisted that if there is going to be a settlement, then
all the pending cases between the parties should be
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settled, which was, however not agreed to by the
respondent and, therefore, the matter could not be
settled. So far as the criminal complaint is concerned,
once the offence is committed, any payment made
subsequent thereto will not absolve the accused of the
liability of criminal offence, though in the matter of
awarding of sentence, it may have some effect on the
Court trying the offence. But by no stretch of imagination,
a criminal proceeding could be quashed on account of
deposit of money in the Court or that an order of quashing
of criminal proceeding, which is otherwise unsustainable
in law, could be sustained because of the deposit of money
in this Court. In this view of the matter, the so-called
deposit of money by the respondent in this Court is of no
consequence."
12. The findings recorded by the Hon'ble Apex Court is
clearly providing answer to the argument of learned advocate
Mr. DK Puj. Therefore, merely depositing money during the
trial, criminal proceedings initiated under the provisions of
the NI Act cannot be quashed.
13. The word "compounding" means to compromise to effect
the composition with creditor. The compromise as such is a
bilateral act and one of the parties cannot compromise lis
unilaterally. Even admission of the claim lodged by the
adversary does not amount to compromising the lis. True,
offence u/s 138 of the NI Act has been made compoundable by
section 147 of the NI Act, but unless, both the parties seek for
compounding the offence, the Court cannot in its discretion
order for compounding the offence and acquit the accused u/s
320(8) of the Code notwithstanding the fact that the accused
has, by this time, either repaid the entire cheque amount or is
willing to pay the same.
14. Thus, it is true that section 147 of the NI Act provides
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that offence under the NI Act is compounding offence. However,
compounding of the offence u/s 138 of the NI Act cannot be held
effective in absence of consent of the person i.e. the complainant
compounding it. In Jik Industries Limited Versus Amarlal V.Jumani,
AIR 2012 SC 1079, the Hon'ble Apex Court held that consent of the
complainant is necessary for compounding the offence u/s 147 of
the NI Act.
15. Noticeably, the direction given by the Coordinate Bench of
this Court in its order dated 11.12.2025 to place on record the
letter of authorization in favour of original accused Nos.9 and 10 on
the strength of which they issued the cheques in favour of the
complainant, is not complied with.
16. As far as judgment cited by learned advocate for the
petitioners, it is on the different footings and rendered no help to
the case of the petitioners.
17. In view of above and for the foregoing reasons, since the
petitions being bereft of merit, accordingly, they stand dismissed.
Notice discharged. Interim relief granted earlier stands vacated.
(J. C. DOSHI,J)
SHEKHAR P. BARVE
FURTHER ORDER
After pronouncement of the judgment, learned advocates for
the respective petitioners request the Court to stay operation and
execution of this judgment for a further period of four weeks so as
to enable the petitioners to approach the higher forum.
Considering the facts and circumstances of the case and further
considering the fact that trial under the provisions of the
Negotiable Instrument Act is going on, the request is declined.
(J. C. DOSHI,J)
SHEKHAR P. BARVE
