Gujarat High Court
Jitendra Jetha Patel vs State Of Gujarat & on 29 March, 2017
Author: J.B.Pardiwala
Bench: J.B.Pardiwala
R/CR.MA/14352/2015 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
CRIMINAL MISC.APPLICATION (FOR QUASHING & SET ASIDE
FIR/ORDER) NO. 14352 of 2015
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JITENDRA JETHA PATEL....Applicant(s)
Versus
STATE OF GUJARAT & 1....Respondent(s)
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Appearance:
MR ASIM J PANDYA, ADVOCATE for the Applicant(s) No. 1
MR LIYAKAT I MEHTA, ADVOCATE for the Respondent(s) No. 2
MS NISHA THAKORE, APP for the Respondent(s) No. 1
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CORAM: HONOURABLE MR.JUSTICE J.B.PARDIWALA
Date : 29/03/2017
ORAL ORDER
RULE returnable forthwith. Ms.Nisha Thakore, the learned APP, waives service of notice of rule for and on behalf of the respondent no.1 - State of Gujarat. Mr.Liyakat Mehta, the learned counsel waives service of notice of rule for and on behalf of the respondent no.2 - original complainant.
By this application under Section 482 of the Code of Criminal Procedure, 1973, the applicant - original accused seeks to invoke the inherent powers of this Court, praying for quashing of the proceedings of the Criminal Case No.920 of 2015 pending before the court of the learned Metropolitan Magistrate, Surat, for the offence under Section 138 of the Negotiable Instruments Act.
The respondent no.2 is a limited company. The company is engaged in the business of manufacturing and supply of Page 1 of 13 HC-NIC Page 1 of 13 Created On Tue Aug 15 13:35:16 IST 2017 R/CR.MA/14352/2015 ORDER mattresses and furniture. According to the complainant, the applicant herein was one of its customers. Being one of the customers, he had purchased the mattresses and other products on credit. The complainant, thereafter, raised invoices and informed the accused that as on 27th March 2013, an amount of Rs.76,26,766=00 was due and payable.
According to the complainant, after repeated requests and demands, the accused issued a cheque bearing no.029781 dated 30th March 2013 for the amount of Rs.76,26,776=00 drawn on the ICICI Bank, Surat city Light Party Plot Branch, Surat. The cheque in question was presented by the complainant with its banker SBI, IFB Branch, Bangalore. The cheque came to be dishonoured as the funds in the account maintained by the accused were insufficient. On receipt of the intimation of the dishonour of the cheque, the complainant issued a notice dated 10th April 2013 under Section 138 of the Negotiable Instruments Act. The notice is said to have been received by the accused on 15th April 2013. However, despite the expiry of the statutory time period, the accused failed to make the payment and, therefore, the complaint under Section 138 of the Negotiable Instruments Act had to be lodged.
Mr.Asim Pandya, the learned counsel appearing for the applicant-accused, vehemently submitted that his client was not one of the customers of the complainant but is one of the dealers. According to Mr.Pandya, the company offered dealership to his client subject to certain terms and conditions. Way back in the year 2011, the dealership was accepted by the accused, and at that point of time, one blank cheque duly signed by the accused was handed over to the company by way of security. The said cheque was filled up by the Page 2 of 13 HC-NIC Page 2 of 13 Created On Tue Aug 15 13:35:16 IST 2017 R/CR.MA/14352/2015 ORDER complainant in his own handwritings and was presented in the bank, which came to be dishonoured.
According to Mr.Pandya, the date on which the blank cheque duly signed by his client was handed over to the complainant, there was no existing debt. Mr.Pandya invited my attention to the letter received by his client dated 31st March 2013 from the complainant and the reply given by the applicant-accused to the company. According to Mr.Pandya, no liability under Section 138 of the Negotiable Instruments Act can be fastened upon his client for the dishonour of the cheque which was issued way back in the year 2011 towards the security as one of the terms and conditions of the dealership.
On the other hand, this application has been vehemently opposed by Ms.F.I.Mansuri, the learned counsel appearing for the complainant. According to Ms.Mansuri, more than a prima facie case could be said to have been made out and, therefore, the application deserves to be rejected.
Ms.Mansuri submitted that as the accused failed to give any reply to the statutory notice issued by her client, the accused should not be heard now at this stage in the present proceedings.
Having heard the learned counsel appearing for the parties and having considered the materials on record, the only question that falls for my consideration is, whether the complaint deserves to be quashed.
The company, i.e. the complainant, addressed a letter dated 31st March 2013 to the accused, which reads as under :
Page 3 of 13HC-NIC Page 3 of 13 Created On Tue Aug 15 13:35:16 IST 2017 R/CR.MA/14352/2015 ORDER "To, 31st March 2013 M/s.Bajrang Sales Surat SUB : CONFIRMATION OF BALANCE AS ON 31st MARCH 2013 Dear Sir, In connection to the audit of our accounts, we request you to confirm your balance of Rs.76,26,766/- due to us as on 31st March 2013.
If the amount shown above is in agreement with your books, please sign the original and duplicate copy of this letter and return the same to us.
If the amount shown above is not in agreement with your books, please indicate the amount as per your records, enclosing the statement of our account in your books, for immediate reconciliation.
Please confirm the above balance latest by 15th April 2013.
In the event of non-receipt of any reply from your end within the date specified, the above stated balance will be treated by us as correct.
Thanking you, Your faithfully, For KURLON LIMITED"
The accused replied to the said notice vide letter dated 2nd April 2013 in the following terms :
"To, T.Sudhakar Pai (CMD) The M/s.Kurlon Limited Bangalore.
We inform you that, Bajarang Sales Proprietor Firm At 79, Page 4 of 13 HC-NIC Page 4 of 13 Created On Tue Aug 15 13:35:16 IST 2017 R/CR.MA/14352/2015 ORDER New Bhatar, Udhna Magdalla Road, Surat, Gujarat, the Distributors of The M/s.Kurlon Limited, Dealing Business with the Tha M/s.Kurlon Limited, As per Bajarang Sales Account's all dues is cleared since last 9 months, As per Our Account Statement, nothing dues from us against the purchase from your company.... this is accepted & Authorize stamping with signed by the authorized persons of M/s.Kurlon Limited Company (ASO SURAT) named Himanshu Bhalala (ABM), Krunal Dankar (BO) at (ASO SURAT) on dated 12/07/2012.
As per Statement, authorized persons of company (ASO SURAT) who accepted all Credit Notes which are promised by your company against the purchase turnover & time to time payment. All Account cleared & Deposit Rs.13,54,500/- also counting in this particular account. This all matter is settled and both parties we & authorized persons of company (ASO SURAT) are agree to Bajarang Sales Account is cleared & nil balance on 12/07/2012.
After long time February 2013. Mr.Guruji (banglore) who called for due payment of Rs.76,26,766/- By telephone, then we provide them account statement then nothing any reply from him. In this regarding we also informed to you by e-mail dated 18/02/2013.
Important matter is that three Blank cheques give by us in the beginning of the business the company who misused them by deposit in the bank with amount 76,26,766=00 Cheque No.029781 ICICI BANK on 01/04/2013.
Please reply us in regarding of the deposited cheque amount 76,26,766=00 on 01/04/2013 within 7 days."
The following is not in dispute :
(1) The company offered dealership to the accused and the same was accepted by the accused subject to certain terms and conditions;
(2) In the year 2011, a blank cheque duly signed by the
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accused was handed over to the complainant by way of security;
(3) The materials on record, prima facie, indicates that the cheque was from a cheque-book of the year 2011. I need not go into this issue as this fact has not been disputed.
The moot question is, whether on the date the blank cheque was handed over to the complainant, there was any existing debt or liability so as to bring the case within the ambit of Section 138 of the Negotiable Instruments Act ?
The learned counsel appearing for the complainant has placed reliance on a recent pronouncement of the Supreme Court in the case of Sampelly Satyanarayana Rao v. Indian Renewable Energy Development Agency Limited, (2016)10 SCC 458, wherein the Supreme Court observed as under :
"6. It will be appropriate to reproduce the statutory provision in question which is as follows :
"138. Dishonour of cheque for insufficiency, etc., of funds in the account. - 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 provisions of this Act, be punished with imprisonment for a term which may Page 6 of 13 HC-NIC Page 6 of 13 Created On Tue Aug 15 13:35:16 IST 2017 R/CR.MA/14352/2015 ORDER be extended to two years, 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 thirty 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.
Explanation. - For the purposes of this section, "debt or other liability" means a legally enforceable debt or other liability."
7. Clause 3.1(iii) of the agreement may also be noted :-
" 3.1 SECURITY FOR THE LOAN The loan together with the interest, interest tax, liquidated damages, commitment fee, up front fee prima on repayment or on redemption, costs, expenses and other monies shall be secured by:
(i) - (ii) xxxxx
(iii) Deposit of Post dated cheques towards repayment of installments of principal of loan amount in accordance with agreed repayment schedule and installments of interest payable thereon."
8. Reference may now be made to the decision of this Page 7 of 13 HC-NIC Page 7 of 13 Created On Tue Aug 15 13:35:16 IST 2017 R/CR.MA/14352/2015 ORDER Court in Indus Airways Private Limited versus Magnum Aviation Private Limited, (2014)12 SCC 539, on which strong reliance has been placed by learned counsel for the appellant. The question therein was whether post- dated cheque issued by way of advance payment for a purchase order could be considered for discharge of legally enforceable debt. The cheque was issued by way of advance payment for the purchase order but the purchase order was cancelled and payment of the cheque was stopped. This Court held that while the purchaser may be liable for breach of the contract, when a contract provides that the purchaser has to pay in advance and cheque towards advance payment is dishonoured, it will not give rise to criminal liability under Section 138 of the Act. Issuance of cheque towards advance payment could not be considered as discharge of any subsisting liability. View to this effect of the Andhra Pradesh High Court in Swastik Coaters (P) Ltd. versus Deepak Bros., 1997 CriLJ 1942, Madras High Court in Balaji Seafoods Exports (India) Ltd. versus Mac Industries Ltd., (1999)1 CTC 6, Gujarat High Court in Shanku Concretes (P) Ltd. versus State of Gujarat, 2000 CriLJ 1988 and Kerala High Court in Supply House versus Ullas, 2006 CriLJ 4330 was held to be correct view as against the view of Delhi High Court in Magnum Aviation (P) Ltd. versus State, (2010)172 DLT 91 and Mojj Engg. Systems Ltd. versus A.B. Sugars Ltd., (2008)154 DLT 579 which was disapproved.
9. We have given due consideration to the submission advanced on behalf of the appellant as well as the observations of this Court in Indus Airways (supra) with reference to the explanation to Section 138 of the Act and the expression "for discharge of any debt or other liability" occurring in Section 138 of the Act. We are of the view that the question whether a post-dated cheque is for "discharge of debt or liability" depends on the nature of the transaction. If on the date of the cheque liability or debt exists or the amount has become legally recoverable, the Section is attracted and not otherwise.
11. The 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 Page 8 of 13 HC-NIC Page 8 of 13 Created On Tue Aug 15 13:35:16 IST 2017 R/CR.MA/14352/2015 ORDER 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.
12. The crucial question to determine applicability of Section 138 of the Act is whether the cheque represents discharge of existing enforceable debt or liability or whether it represents advance payment without there being subsisting debt or liability. While approving the views of different High Courts noted earlier, this is the underlying principle as can be discerned from discussion of the said cases in the judgment of this Court.
13. In Balaji Seafoods (supra), the High Court noted that the cheque was not handed over with the intention of discharging the subsisting liability or debt. There is, thus, no similarity in the facts of that case simply because in that case also loan was advanced. It was noticed specifically therein - as was the admitted case of the parties - that the cheque was issued as "security" for the advance and was not intended to be in discharge of the liability, as in the present case.
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14. In HMT Watches Ltd. versus M.A. Abida[8], relied upon on behalf of the respondent, this Court dealt with the contention that the proceedings under Section 138 were liable to be quashed as the cheques were given as "security" as per defence of the accused. Negativing the contention, this Court held :-
"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 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 Page 10 of 13 HC-NIC Page 10 of 13 Created On Tue Aug 15 13:35:16 IST 2017 R/CR.MA/14352/2015 ORDER 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."
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 Page 11 of 13 HC-NIC Page 11 of 13 Created On Tue Aug 15 13:35:16 IST 2017 R/CR.MA/14352/2015 ORDER 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."
17. In Rangappa versus Sri Mohan[9], this Court held that once issuance of a cheque and signature thereon are admitted, presumption of a legally enforceable debt in favour of the holder of the cheque arises. It is for the accused to rebut the said presumption, though accused need not adduce his own evidence and can rely upon the material submitted by the complainant. However, mere statement of the accused may not be sufficient to rebut the said presumption. A post dated cheque is a well recognized mode of payment."
The dictum laid down by the Supreme Court in Sampelly Satyanarayana Rao (supra) makes the position of law abundantly clear that the crucial question to determine the applicability of Section 138 of the Negotiable Instruments Act is, whether the cheque represents discharge of existing enforceable debt or liability or whether it represents advance payment without there being any subsisting debt or liability. In the year 2011, when the blank signed cheque was handed over by the accused to the company, indisputably, there was no liability existing on that date. If such is the position, then I have no other option but to hold that the cheque in question was nothing but a security without any subsisting debt or liability as on the date of handing over of the cheque. The liability to pay an amount of Rs.76 lac and odd could be said to have been incurred by the accused over a period of time in the course of the business transactions.
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In such circumstances referred to above, the proceedings of the Criminal Case No.920 of 2015 pending before the court of the learned Metropolitan Magistrate, Surat, are hereby ordered to be quashed. Rule made absolute. Direct service is permitted.
It is very surprising that till this date the company, i.e. the complainant, has not filed any civil suit for recovery of such a huge amount.
(J.B.PARDIWALA, J.) MOIN Page 13 of 13 HC-NIC Page 13 of 13 Created On Tue Aug 15 13:35:16 IST 2017