Damayanti Mohapatra vs Pitambar Acharya
2023 Latest Caselaw 3755 Ori

        IN THE HIGH COURT OF ORISSA AT CUTTACK

                     CRLMC No.4651 of 2015

  Damayanti Mohapatra, Proprietor   ....             Petitioner
  M/s Damayanti Rice Mill
                               Mr. Devashis Panda, Advocate


                              -Versus-


  Pitambar Acharya, CSO-cum-                ....     Opposite Party
  District Manager, OSCS
  Corporation Limited, Koraput
                                         Mr. A.K. Mishra, Advocate

            CORAM:
            JUSTICE R.K. PATTANAIK

              DATE OF JUDGMENT:19.04.2023

1.

Invoking the inherent jurisdiction under Section 482 Cr.P.C, the petitioner has approached this Court for quashing of the impugned order of cognizance dated 15th April, 2015 and the criminal proceeding in 1.C.C. Case No. 72 of 2015 pending in the Court of learned S.D.J.M., Jeypore on the grounds inter alia that the criminal prosecution which has been initiated at the behest of the opposite party is not tenable in law.

2. The opposite party filed the complaint before the learned Court below with the allegation that the petitioner, who is the proprietor of a rice mill M/s. Damayanti Rice Mill entered into an agreement with them on 21st February, 2014 to act as custom miller for the Corporation during the KMS (Rabi Season), 2013-14 and in that connection, paddy was delivered to him with an amount of Rs.9,00,000/- pledged as security. It is stated therein that the Sub-Collector-cum-S.D.M., Jeypore raided the petitioner's rice mill and detected shortage of paddy on 26th September, 2014

Damayanti Mohapatra, Proprietor M/s Damayanti Rice Mill Vrs. Pitambar Acharya, CSO-cum-DM

and it was alleged that the stocks were removed by the petitioner and in course of Special Audit, an amount of Rs.1,43,37,854/- was due for payment and for that, a notice was issued and when such request was not honoured and obliged, the security cheques dated 13th February, 2015 submitted by the petitioner were presented for collection and encashment, however, all of them stood dishonoured with an endorsement 'Account closed', the fact which was duly informed to the petitioner with a notice dated 3rd March, 2015 but the payment was not made within the stipulated time, consequent upon which, the complaint in 1.C.C. Case No. 72 of 2015 was filed.

3. Head Mr. Panda, learned counsel for the petitioner and Mr. Mishra, learned counsel for the opposite party.

4. Mr. Panda, learned counsel for the petitioner submits that the complainant did not have any locus standi to represent the Odisha State Civil Supply Corporation Limited having not been duly authorized by the Board of Directors under Section 291 of the Company's Act, 1956 and therefore, it cannot be entertained. Furthermore, according to Mr. Panda, no offence under Section 138 of N.I. Act is made out for the reason that the cheques had been issued as security to the Corporation. Referring to a decision of M.S. Narayana Menon @ Mani Vrs. State of Kerala reported in AIR 2006 SC 3366, Mr. Panda submits that in view of the ratio laid down therein, the cheques issued by way of security, as in the present case, in the event of its dishonour cannot fall within the mischief of Section 138 of N.I. Act and hence, the complaint against the petitioner cannot lie and therefore, inherent jurisdiction under Section 482 Cr.P.C. is required to be exercised to quash it. Some other grounds have been raised and pleaded for by the petitioner, however, Mr. Panda, learned counsel for the petitioner confined his argument principally on the ground that

Damayanti Mohapatra, Proprietor M/s Damayanti Rice Mill Vrs. Pitambar Acharya, CSO-cum-DM

no offence under Section 138 of the N.I. Act is made out since the cheques were in the hands of the opposite party as security.

5. Mr. Mishra, learned counsel for the opposite party, on the other hand, challenged the contention of the petitioner and would submit that the cheques were presented before the Bank for encashment since the petitioner failed to honour the obligation and thereafter, when it stood bounced back and demand was made for payment, notwithstanding the fact that the alleged cheques had been issued and lying with the Corporation as security, an offence under Section 138 of the N.I. Act is clearly made out as it was issued in relation to discharge of a liability.

6. A counter affidavit is filed by the opposite party and therein it is stated that the opposite party has the right to register the complaint against the petitioner who entered into an agreement with him and therefore the contention is that he had not been authorized is outrightly misconceived. It is further stated that the agreement was with the opposite party as the District Manager- cum-C.S.O., OSCSC Limited, Koraput at Jeypore and therefore, the complaint is properly constituted and duly filed and hence, it was rightly entertained by the learned Court below. It is also stated therein that as per clause 36 (III) and (IV), the District Manager, OSCSC limited is empowered to initiate the civil and criminal action against the defaulting miller for any shortage, diversion, misappropriation and in the present case, since the petitioner defaulted and there was shortage of stock detected, the complaint was filed when the alleged cheques could not be honoured to realize the outstanding due even though it had been issued as security to the alleged transaction. A copy of the agreement dated 21st February, 2014 between the petitioner and opposite party is annexed to the counter affidavit for the Court's perusal. In course of hearing, Mr. Mishra produced a copy of the

Damayanti Mohapatra, Proprietor M/s Damayanti Rice Mill Vrs. Pitambar Acharya, CSO-cum-DM

Operational Guidelines for KMS 2013-14 issued by the Odisha State Civil Supplies Corporation Limited. According to the opposite party, since the Corporation as per the guidelines received the cheques as security and it was against a legal liability or debt arising therefrom and as the petitioner being the custom miller defaulted and could not honour the obligation and when default was in respect of the differential amount, the opposite party had every right to realize the same and accordingly, presented the cheques for encashment and when outstanding due failed to be realized, the complaint was registered and hence, the offence under Section 138 of the N.I. Act was committed.

7. Mr. Mishra, learned counsel for the opposite party while responding to the submission of Mr. Panda and that a criminal prosecution under Section 138 of the N.I. Act cannot be initiated and lie as the cheques were received as security, referred to a decision of the Apex Court in Sampelly Satyanarayana Rao Vrs. Indian Renewable Energy Development Agency Limited reported in (2016) 10 SCC 458 and contended that even in respect of post- dated cheques described as security towards payment of the differential amount when stood dishonoured, an offence under Section 138 of the N.I. Act can be said to have been committed. Two more decisions, such as, Sripati Singh Vrs. State of Jharkhand and Another 2021 SCC Online SC 1002 and Sunil Todi and Others Vrs. State of Gujarat and Another 2021 SCC OnLine SC 1174 have been placed reliance on by Mr. Mishra, learned counsel for the opposite party contending that even in respect of security cheques, a criminal proceeding under Section 138 of the N.I.Act would lie.

8. As per the contract, the petitioner was to supply paddy being the custom miller and the said transaction is covered by the Operational Guidelines for KMS 2013-14 issued by the Odisha

Damayanti Mohapatra, Proprietor M/s Damayanti Rice Mill Vrs. Pitambar Acharya, CSO-cum-DM

State Civil Supply Corporation Limited. As per the clause 23 under the heading 'Security Deposit By the Custom Millers' of the KMS Guidelines, the purpose of the security deposit is to protect the Corporation from loss which may arise in the event of non- delivery of required quantity of custom milled rice by the custom miller in respect of paddy delivered to him. Considering the agreement between the parties for KMS (Rabi Season) 2013-14 and the fact that the cheques had been issued as security, according to Mr. Mishra, learned counsel for the opposite party, the same having been dishonored, an offence under Section 138 of the N.I.Act is committed by the petitioner. It is contended that since the liability was not discharged and debt to be in existence and in that regard, the cheques were issued nevertheless as security and on being represented and dishonored, the petitioner is prima facie guilty of an offence under Section 138 of the N.I. Act which is what has been held by the Apex Court in Sampelly Satyanarayana Rao (Supra) and in also the other two decisions.

9. As to Section 138 of the N.I. Act, if a cheque is drawn on an account and issued by the accused for payment of any amount from out of that account for the discharge in whole or any part of any debt or other liabilities (emphasis is supplied by the Court) is returned by the Bank unpaid either because of an amount of money standing in credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid by an agreement made with that Bank, such person shall be deemed to have committed the offence. In such view of the matter, if the conditions are satisfied and to the effect that the cheque in question issued to discharge any debt or liability stands dishonored for the stated reasons, then by a deeming fiction, an offence under Section 138 N.I. Act is alleged to be committed. The drawer of the cheque, thereafter, would be required to

Damayanti Mohapatra, Proprietor M/s Damayanti Rice Mill Vrs. Pitambar Acharya, CSO-cum-DM

submit rebuttal evidence and discharge the burden and presumption against it.

10. In so far as the complaint is concerned, the opposite party filed it before the learned Court below which is as per the agreement in existence between them. Whether the opposite party was duly authorized by the Board of Directors to file the complaint and in terms of Section 291 of the Company's Act 1956 may be a matter to be debated on and deliberated during trial. However, considering the contract between the parties, it can be said that the opposite party being empowered to initiate action and the signatory to the contract as well filed complaint which was entertained by the learned Court below.

11. As regards the maintainability of the criminal action for the offence under Section 138 of the N.I. Act based on the arguments that the cheques were issued as security, the Court is of the humble view that such a prosecution can lie if there is any debt or liability in existence which is primarily its essential ingredient. In other words, while discharging any debt or liability in whole or in a part even when a cheque is issued as security and the obligation is not discharged and on being presented to realize the outstanding due and in case such realization is not successful on account of insufficiency of funds in the account or for such other reason as specified in Section 138 of the N.I. Act, an offence is said to have been committed by the accused being its drawer. In this regard, the decision in Sampelly Satyanarayana Rao (Supra) may be referred to. The other two decisions in Sripati Singh and Sunil Todi (supra) are also in support of the contention of opposite party. In fact, the decision in Sampelly Satyanarayana Rao (Supra) has been quoted with approval in Sunil Todi (Supra).

12. Considering the above decisions, the conclusion is that in case of a post-dated cheque issued as security and the same is for and

Damayanti Mohapatra, Proprietor M/s Damayanti Rice Mill Vrs. Pitambar Acharya, CSO-cum-DM

towards discharge of debt or liability which has become legally recoverable, the offence under Section 138 of the N.I. Act is deemed to have been committed. In Sunil Todi (supra), one of the issues for consideration before the Apex Court was, whether, the dishonour of cheques furnished as security is covered under Section 138 of the N.I. Act and it was held therein that the explanation to Section 138 of the N.I. Act provides that the debt or any other liability means a legally enforceable debt or other liability and as per Aiyar's Judicial Dictionary, debt is defined as a pecuniary liability and a sum payable or recoverable by action in respect of money demand. Referring to a decision in Webb Vrs. Strention 1888 QBD 518, it has been held that a sum of money which is payable or will become payable in future by reason of a present obligation debitum in praesenti, solvendum in futuro falls within the definition of 'debt'. A judgment of Kolkata High Court in Keshoram Industries Vrs. CWT AIR 1966 SC 1370 has also been placed reliance on in Sunil Todi (supra) to hold that a debt includes a sum of money promised to be paid on a future date and hence, a post-dated cheque issued in respect thereof would be covered by the definition 'debt'. So, therefore, the Court is of the view that even where a post-dated cheque was issued as security, it can still invite criminal liability, in the event, the same is dishonoured and by a legal fiction, an offence under Section 138 of the N.I. Act is said to have been committed. In so far as the decision in M.S. Narayana Menon @ Mani (supra) which is relied upon by Mr. Panda, learned counsel for the petitioner is concerned, on a reading of the said judgment, the Court finds that in that case, the defence was accepted and held to be probable and hence, it was held therein that the cheque therefore could not be said to have been issued in the discharge of debt. In absence of any proof of debt or liability in existence and the defence that it was issued as security since found to be acceptable, the Apex

Damayanti Mohapatra, Proprietor M/s Damayanti Rice Mill Vrs. Pitambar Acharya, CSO-cum-DM

Court in M.S. Narayana Menon @ Mani (Supra) concluded that no offence under Section 138 of the N.I. Act is made out.

13. As to the present dispute between the parties, the Court is of the conclusion that there is an agreement between the petitioner and opposite party and the former was to supply the custom rice and when such obligation failed to be discharged, the opposite party Corporation in order to realize the due presented the security cheques for encashment and the same having been dishonoured, an offence under Section 138 of the N.I. Act is prima facie deemed to have been committed. So said ground challenging the criminal action by the Corporation does not find favour with the Court.

14. Hence, it is ordered.

15. In the result, the CRLMC stands dismissed.

(R.K. Pattanaik) Judge

Balaram