High Court Chhattisgarh (12.06.2023) In Smt. Sangeeta Agrawal Vs Chhattisgarh State Minor Forest Produce (T&D) Co-Operative Federation Limited [CRMP No. 590 of 2023] held that;
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.
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
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 installment maturing for repayment towards which such cheque is issued as security.
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.
The further defence as to whether the loan had been discharged as agreed by respondent No.2 and in that circumstance the cheque which had been issued as security had not remained live for payment subsequent thereto etc. at best can be a defence for the respondent No.2 to be put forth and to be established in the trial.
Excerpts of the order;
# 1. Petitioner has filed this criminal miscellaneous petition seeking following relief (s) :-
“a. Quash the entire proceedings initiated by the Respondent against the Petitioner under Section 138 of the Negotiable Instruments Act, 1881, as there is no legal debt as per the respondent’s own admission;
OR
a. Quash the impugned order dated 10.12.2022 & direct the Respondent to furnish/supply the documents & information sought by the Petitioner.
b. Pass any order (s) that this Hon’ble Court deems fit.”
# 2. Learned counsel for petitioner submits that respondent has filed a complaint/application under Section 138 of the Negotiable Instrument Act, 1881 (Hereinafter referred to as “the Act of 1881”). Petitioner submitted an application under Section 203 of the Code of Criminal Procedure, 1973 (Hereinafter referred to as “the Code of 1973”) for dismissal of complaint/application on the ground that the provision under Section 200 of Code of 1973 is not complied with and there is no legal enforceable debt or other liability against petitioner. He contended that the cheques were issued as security towards lot of Tendu leaves. Learned Magistrate dismissed the application on the ground that the complaint is already registered. He also submitted that during pendency of the said proceeding, petitioner has also moved an application for providing the documents of supply of Tendu leaves towards the liability of the cheque amount, which also came to be dismissed vide order dated 14.11.2019 and the same was put to challenge in a revision before the learned Sessions Court at Raipur and learned Sessions Court arbitrarily and illegally dismissed the revision without considering the fact that the documents, which were sought by petitioner is important for just decision of the case and non providing the documents as sought in the application would be against the interest of justice, fairness and ensuring fair trial. Because no Tendu leaves has been supplied/provided to petitioner, there is no legal debt. The complaint/application under Negotiable Instrument Act can only be filed if the said cheque is used by the complainant only for the purpose for which it was handed over whereas respondent had used the cheque given by petitioner, for another purpose. Learned counsel for petitioner relied upon the decision in case of Dashrathbhai Trikambhai Patel Vs. Hitesh Mahendra Bhai Patel, reported in (2023) 1 SCC 578.
# 3. Learned counsel for respondent opposing the submission of learned counsel for petitioner would submit that complaint under Section 138 of the Act of 1881 was filed mentioning the details of the amount to be paid with cheque number. Earlier the petitioner has challenged filing of complaint under Section 138 of the Act of 1881 in Cr.M.P. No. 653 of 2012, it was dismissed against which, petitioner approached before the Hon’ble Supreme Court in SLP (Cr.) No. 9846 of 2012, and it also came to be dismissed as withdrawn with liberty as prayed therein. It is submitted that petitioner asking for some documents from the respondent to be used in his defence on the ground that the cheque was not issued in discharge of the liability. The respondents in their reply to the application have pleaded that the documents which is sought is the matter of evidence and will be produced at appropriate stage of proceedings. Learned Magistrate in its order has recorded that, in the proceedings at the time of notice and appearance of non-applicant he is only entitled for copy of the complaint. Petitioner will be having full opportunity for her defence before the learned Magistrate. Learned Revisional Court based on the submission made by respective counsel has observed that petitioner has not deposited the sale amount pursuant to the terms of tender and therefore, the application seeking documents for supply of documents does not arise and had rightly dismissed the petition stating that the application is filed only with intent to protract the proceeding. In support of his contention, he placed reliance upon the judgment of Hon’ble Supreme Court in case of Ratish Babu Unnikrishnan Vs. State (Govt of NCT of Delhi) and Another, reported in 2022 SCC OnLine SC 513, in Sripati Singh (Since deceased) through His Son Gaurav Singh Vs. State of Jharkhand and Another, reported in 2021 SCC OnLine SC 1002, in HMT Watches Limited Vs. M.A. Abida and Another, reported in (2015) 11 SCC 776 and in case of Royden Harod Buthello and Another Vs. State of Chattisgarh and Others, reported in 2023 SCC OnLine SC 204.
# 4. I have heard learned counsel for both the parties and perused all the documents placed on record.
# 5. Perusal of copy of complaint (Annexure P-4) would show that application under Section 138 of the Act of 1881 is filed mentioning the details of the amount and the cheque numbers submitted against each lot. Petitioner has submitted 19 cheques against purchase of 19 lots of Tendu leaves and as per agreement, in the specified time entire amount of 19 lots was to be paid. Issuance of cheque under signature of respondent being proprietor is not denied. Under Section 139 of the Act of 1881 there is legal presumption that the cheque was issued in discharge of any whole or in part, of any debt or other liability and the presumption can be rebutted by accused by adducing evidence and therefore, the burden of prove is on the accused.
6. Hon’ble Supreme Court in case of Ratish Babu Unnikrishnan (supra) has observed thus
“10. It is also relevant to bear in mind that the burden of proving that there is no existing debt or liability, is to be discharged in the trial. For a two judges Bench in M.M.T.C. Ltd. & Anr. vs. Medchl Chemicals and Pharma (P) Ltd. & Anr. (2002) 1 SCC 234, Justice S.N. Variava made the following pertinent observation on this aspect: -
- “17. There is therefore no requirement that the complainant must specifically allege in the complaint that there was a subsisting liability. The burden of proving that there was no existing debt or liability was on the respondents. This they have to discharge in the trial. At this stage, merely on the basis of averments in the petitions filed by them the High Court could not have concluded that there was no existing debt or liability.”
11. The legal presumption of the cheque having been issued in the discharge of liability must also receive due weightage. In a situation where the accused moves Court for quashing even before trial has commenced, the Court’s approach should be careful enough to not to prematurely extinguish the case by disregarding the legal presumption which supports the complaint. The opinion of Justice K.G. Balakrishnan for a three judges 3 Bench in Rangappa vs. Sri Mohan (2010) 11 SCC 411 would at this stage, deserve our attention: - Page No.6
“26. ... we are in agreement with the respondent claimant that the presumption mandated by Section 139 of the Act does indeed include the existence of a legally enforceable debt or liability. As noted in the citations, this is of course in the nature of a rebuttable presumption and it is open to the accused to raise a defence wherein the existence of a legally enforceable debt or liability can be contested. However, there can be no doubt that there is an initial presumption which favours the complainant.”
12. At any rate, whenever facts are disputed the truth should be allowed to emerge by weighing the evidence. On this aspect, we may benefit by referring to the ratio in Rajeshbhai Muljibhai Patel vs. State of Gujarat (2020) 3 SCC 794 where the following pertinent opinion was given by Justice R. Banumathi:-
“22. ………….. 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 N.I. 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.”
7. Hon’ble Supreme Court in case of HMT Watches Limited (supra) has observed thus :-
“10. Having heard learned counsel for the parties, we are of the view that the accused (respondent no.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 N.I. Act stood uncomplied, even though the respondent no.1 (accused) had admitted that he replied the notice issued by the complainant. Also, the fact, as to whether the signatory of demand notice was authorized by the complainant company or not, could not have been examined by the High Court in its jurisdiction under Section 482 of the Code of Criminal Procedure when such plea was controverted by the complainant before it.
11. In Suryalakshmi Cotton Mills Limited v. Rajvir Industries Limited and others (2008) 13 SCC 678 this Court has made following observations explaining the parameters of jurisdiction of the High Court in exercising its jurisdiction under Section 482 of the Code of Criminal Procedure: -
"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.
xxx xxx xxx
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 [pic]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.'
12. In Rallis India Limited v. Poduru Vidya Bhushan Page No.9 and others (2011) 13 SCC 88, this Court expressed its views on this point as under:-
"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."
8. Hon’ble Supreme Court in case of Sripati Singh (supra) has observed in para 18 and 23 which reads as under :-
“18. 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 installment 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. Page No.10 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.
23. These aspects would prima facie indicate that there was a transaction between the parties towards which a legally recoverable debt was claimed by the appellant and the cheque issued by the respondent No.2 was presented. On such cheque being dishonoured, cause of action had arisen for issuing a notice and presenting the criminal complaint underSection 138 of N.I. Act on the payment not being made. The further defence as to whether the loan had been discharged as agreed by respondent No.2 and in that circumstance the cheque which had been issued as security had not remained live for payment subsequent thereto etc. at best can be a defence for the respondent No.2 to be put forth and to be established in the trial. In any event, it was not a case for the Court to either refuse to take cognizance or to discharge the respondent No.2 in the manner it has been done by the High Court. Therefore, though a criminal complaint under Section 420 IPC was not sustainable in the facts and circumstances of the instant case, the complaint under section 138 of the N.I Act was maintainable and all contentions and the defence were to be considered during the course of the trial.”
# 9. The decision relied upon by the learned counsel for petitioner in case of Dashrathbhai Trikambhai Patel (supra) is entirely on different facts of the case, hence, it is not applicable to the facts of the case at hand.
# 10. Reverting back to the facts of the case, petitioner has issued cheques in favour of respondents under terms and conditions of tender. Issuance of cheques are not in dispute. As many as 19 cheques have been issued on one date against purchase of 19 lots. Cheques were submitted in Bank upon which it got dishonoured. Respondent issued legal notice. There is presumption in favour of holder of a cheque. The petitioner will be having ample opportunity to rebut the presumption in trial.
# 11. In view of aforementioned facts of the case and the decision of Hon’ble Supreme Court, I do not find any merit in this petition to grant relief as sought in this petition and it is accordingly dismissed.
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