Madhya Pradesh High Court
M/S Chinar Shipping And Infrastructure ... vs M/S Laxyoenergy Ltd. on 20 May, 2025
Author: Sanjeev S Kalgaonkar
Bench: Sanjeev S Kalgaonkar
1
NEUTRAL CITATION NO. 2025:MPHC-IND:13550
IN THE HIGH COURT OF MADHYA PRADESH
AT I n d o re
BEFORE
HON'BLE SHRI JUSTICE SANJEEV S KALGAONKAR
ON THE 20th OF MAY, 2025
MISC. CRIMINAL CASE No. 54607 of 2021
M/S CHINAR SHIPPING AND INFRASTRUCTURE (INDIA) PVT.
LTD. AND OTHERS
Versus
M/S LAXYO ENERGY LTD.
Appearance:
Shri Vivek Singh Senior Advocate with Shri Neeraj Jain - Advocate
and Shri Ravindra Pal Singh Nayyar -Advocate for the petitioners.
Shri Rishi Tiwari, learned counsel for the respondent [R-1].
ORDER
This petition under section 482 of Code of Criminal Procedure, 1973 (hereinafter referred to as "Cr.P.C") is filed by the petitioners for quashing of Criminal Complaint registered as SC NIA no. 503 of 2019 for the offence punishable under section 138 of the Negotiable Instruments Act (hereinafter 2 NEUTRAL CITATION NO. 2025:MPHC-IND:13550 referred to as " N.I. Act") and consequential proceedings, before learned Judicial Magistrate First Class, Ratlam.
2. The exposition of facts, giving rise to present petition, in brief, is as under :
A. M/s Laxyo Energy Ltd filed a complaint for the offence punishable under section 138 of N.I. Act through its Director Jaiprakash Sharma against accused no. 1 / M/s Chinar Shipping and Infrastructure (India) Pvt. Ltd and accused no. 2 Avnindra Kumar Tripathi, Director of M/s Chinar Shipping and Infrastructure (India) Pvt. Ltd stating that the accused Company is a legally constituted and registered company. The commercial agreements were executed on 11/11/2011 and 14/11/2011 between the complainant and the accused with regard to dredging work in the river. In furtherance of the agreement, the complainant had purchased 45% of the share of accused no. 2 in the Company and paid Rs. 87,12,000/-. Jaiprakash Sharma and Yogesh Sharma were appointed as Directors in the Company. Accused no. 2 Avnindra Kumar Tripathi issued a cheque no. 102099 dated 18/12/2018 of Federal Bank Ltd, Mumbai for an amount of Rs. 5,00,00,000/- in favour of the complainant towards the payment of profit share in the Company. After execution of the agreement between the parties, the Company Law Board, Mumbai, vide order dated 13/04/2015, appointed Ms. Manjiri Kakkar as Chairperson authorizing her to issue cheques on behalf of the Company (Accused no. 1). The complainant, vide letter dated 13/12/2018, requested accused no. 2 for issuance of a new cheque duly signed by Competent 3 NEUTRAL CITATION NO. 2025:MPHC-IND:13550 Authority, otherwise, the impugned cheque dated 18/12/2018 shall be presented for payment at the Bank. Accused no. 2 did not respond to the communication, therefore, the complainant presented the cheque at HDFC Bank, Branch Ratlam. The Bank dishonored the cheque with the intimation that the accused has closed the account. The accused did not respond to the statutory notice for payment of the amount of cheque, therefore, the complaint for the offence punishable under section 138 of N.I. Act was filed.
B. Learned Judicial Magistrate First Class, Raltam, vide order dated 15/07/2019, took cognizance for the offence punishable under section 138 of N.I. Act against both the accused and directed issuance of process to secure their presence.
3. The present petition is filed for quashing the complaint and the impugned summoning order dated 15.07.2019 on following grounds :
A. The registration of impugned complaint against the petitioner is illegal and without application of mind on the facts and circumstances of the case.
B. The impugned cheque was invalid. The petitioner / accused no. 2 was not authorized signatory for the Company at the relevant time.
C. The Company Law Board, vide order dated 13/04/2015 has appointed another person as Authorized Signatory for the purpose of issuing cheques on behalf of the Company. There was no possibility 4 NEUTRAL CITATION NO. 2025:MPHC-IND:13550 of issuing the cheque by petitioner no. 2 on 18/12/2018 in view of the order of Company Law Board.
D. Learned Judicial Magistrate ignored the fact that name of account holder Company is different from the name of accused / Company as stated in impugned complaint. The name of the accused / Company was changed on 12/07/2012. The impugned cheque was presented after seven years of the agreement dated 11/11/2011. The impugned cheque was issued on the bank account, which was already closed in the year 2015 i.e. four years prior to presentation of impugned cheque in the bank for payment. The closure of the account was within the knowledge of respondent and its Director Jaiprakash Sharma.
On these grounds, it is requested that the Criminal Complaint registered as SC NIANo. 503 of 2019 and its consequential proceedings pending before the Court of Judicial Magistrate First Class, Ratlam be quashed.
4. Learned counsel for the petitioners, in addition to the grounds mentioned in the petition, contended that the Company Law Board had appointed Ms. Manjiri Kakkar as independent Chairperson of the petitioner and the respondent group i.e. M/s Chinar Shipping and Infrastructure (India) Pvt. Ltd and it was directed that all the cheques in respect of respondent no. 1 Company (petitioner no. 1 herein) shall be signed by independent Chairperson only after due verification and information to both the groups. The accused no. 2 was not authorized signatory on behalf of accused no. 1 Company as independent Chairperson was already appointed. The accused 5 NEUTRAL CITATION NO. 2025:MPHC-IND:13550 were not holding the bank account in the name of M/s Chinar Shipping and Infrastructure (India) Pvt. Ltd on the date of impugned cheque. The impugned cheque was allegedly issued on the Account No. 15380200001161, which was closed on 17/04/2015, almost three years prior to the date of issuance of the cheque. Learned counsel further contended that name of accused / Company, which appears on the impugned cheque has already been changed in the year 2012. The complainant himself averred that the impugned cheque is no more valid in view of the order of the Company Law Board, therefore, the offence punishable under section 138 of N.I. Act is not made out.
5. Per contra, learned counsel for the respondent admitting that the Company Law Board had appointed independent Chairperson, vide order dated 13/04/2015 authorizing her to issue cheques on behalf of the accused Company, contended that despite this order, accused no. 2 continued to be Director of the accused no. 1 Company. The impugned cheque was issued against pre-existing liability of profit share. The cheque was postdated in view of the agreement between the parties, therefore, closure of the account by accused-Company constitutes the offence punishable under section 138 of N.I. Act. Learned counsel further submitted that accused no. 2 has not denied or raised objection regarding signature on the impugned cheque, therefore, in view of the presumption under section 139 of N.I. Act, the accused is liable for dishonor of cheque issued against pre-existing liability. Learned counsel further referring to section 141 of N.I. Act, contended that the Company and its Director, who has signed the cheque, are liable for the alleged offence. Learned counsel further referring to the letter dated 6 NEUTRAL CITATION NO. 2025:MPHC-IND:13550 25/11/2011 by the Managing Director of M/s Chinar Shipping and Trading Co. Pvt. Ltd (Annexure-R/4), contends that the letter states submission of two cheques to Mr. D.N. Upadhayay of Laxyo Energy Ltd showing number of impugned cheque also. It is also contended that sufficient averments have been made in the complaint with regard to liability of accused no. 2 as Director of the Company, therefore, no case for quashing of the complaint is made out.
6. Heard both the parties and perused the record.
7. The Supreme Court in case of State of Haryana Vs. Ch. Bhajan Lal, reported in AIR 1992 SC 604 after an elaborate consideration of the matter and after referring to its various earlier decisions, has observed in para 108 as under:-
''108. In the backdrop of the interpretation of the various relevant provisions of the Code under Chapter XIV and of the principles of law enunciated by this Court in a series of decisions relating to the exercise of the extraordinary power under Article 226 or the inherent powers under Section 482 of the Code which we have extracted and reproduced above, we give the following categories of cases by way of illustration wherein such power could be exercised either to prevent abuse of the process of any Court or otherwise to secure the ends of justice, though it may not be possible to lay down any precise, clearly defined and sufficiently channelized and inflexible guidelines or rigid formulae and to give an exhaustive list of myriad kinds of cases wherein such power should be exercised.
(1) Where the allegations made in the First Information Report or the complaint, even if they are taken at their face value and accepted in their entirety do not prima facie constitute any offence or make out a case against the accused.
(2) Where the allegations in the First Information Report and other materials, if any, accompanying the F.I.R. do not disclose a cognizable offence, justifying an investigation by police officers under Section 156(1)of the Code except under an order of a Magistrate within the purview of Section 155(2)of the Code.
(3) Where the uncontroverted allegations made in the FIR or complaint and the evidence collected in support of the same do not disclose the commission of any offence and make out a case against the accused.7
NEUTRAL CITATION NO. 2025:MPHC-IND:13550 (4) Where, the allegations in the F.I.R. do not constitute a cognizable offence but constitute only a noncognizable offence, no investigation is permitted by a police officer without an order of a Magistrate as contemplated under Section 155(2) of the Code.
(5) Where the allegations made in the FIR or complaint are so absurd and inherently improbable on the basis of which no prudent person can ever reach a just conclusion that there is sufficient ground for proceeding against the accused.
(6)Where there is an express legal bar engrafted in any of the provisions of the Code or the concerned Act (under which a criminal proceeding is instituted) to the institution and continuance of the proceedings and/or where there is a specific provision in the Code or the concerned Act, providing efficacious redress for the grievance of the aggrieved party. (7) Where a criminal proceeding is manifestly attended with malafide and/or where the proceeding is maliciously Instituted with an ulterior motive for wreaking vengeance on the accused and with a view to spite him due to private and personal grudge.'' (emphasis added)
8. The Apex Court in the case of Indian Oil Corpn. v. NEPC India Ltd., reported in (2006) 6 SCC 736 has held as under:
"12. The principles relating to exercise of jurisdiction under Section 482 of the Code of Criminal Procedure to quash complaints and criminal proceedings have been stated and reiterated by this Court in several decisions. To mention a few-- Madhavrao Jiwajirao Scindia v. Sambhajirao Chandrojirao Angre [(1988) 1 SCC 692 : 1988 SCC (Cri) 234], State of Haryana v. Bhajan Lal [1992 Supp (1) SCC 335 : 1992 SCC (Cri) 426], Rupan Deol Bajaj v. Kanwar Pal Singh Gill [(1995) 6 SCC 194 : 1995 SCC (Cri) 1059], Central Bureau of Investigation v. Duncans Agro Industries Ltd. [(1996) 5 SCC 591 : 1996 SCC (Cri) 1045], State of Bihar v. Rajendra Agrawalla [(1996) 8 SCC 164 : 1996 SCC (Cri) 628], Rajesh Bajaj v. State NCT of Delhi [(1999) 3 SCC 259 : 1999 SCC (Cri) 401], Medchl Chemicals & Pharma (P) Ltd. v. Biological E. Ltd. [(2000) 3 SCC 269 : 2000 SCC (Cri) 615], Hridaya Ranjan Prasad Verma v. State of Bihar [(2000) 4 SCC 168 : 2000 SCC (Cri) 786], M. Krishnan v. Vijay Singh [(2001) 8 SCC 645 : 2002 SCC (Cri) 19] and Zandu Pharmaceutical Works Ltd. v. Mohd. Sharaful Haque [(2005) 1 SCC 122 : 2005 SCC (Cri) 283].
The principles, relevant to our purpose are:
(i) A complaint can be quashed where the allegations made in the complaint, even if they are taken at their face value and accepted in their entirety, do not prima facie constitute any offence or make out the case alleged against the accused. For this purpose, the complaint has to be examined as a whole, but without examining the merits of the allegations.
Neither a detailed inquiry nor a meticulous analysis of the material nor an assessment of the reliability or genuineness of the allegations in the 8 NEUTRAL CITATION NO. 2025:MPHC-IND:13550 complaint, is warranted while examining prayer for quashing of a complaint.
(ii) A complaint may also be quashed where it is a clear abuse of the process of the court, as when the criminal proceeding is found to have been initiated with mala fides/malice for wreaking vengeance or to cause harm, or where the allegations are absurd and inherently improbable.
(iii) The power to quash shall not, however, be used to stifle or scuttle a legitimate prosecution. The power should be used sparingly and with abundant caution.
(iv) The complaint is not required to verbatim reproduce the legal ingredients of the offence alleged. If the necessary factual foundation is laid in the complaint, merely on the ground that a few ingredients have not been stated in detail, the proceedings should not be quashed. Quashing of the complaint is warranted only where the complaint is so bereft of even the basic facts which are absolutely necessary for making out the offence.
(v) A given set of facts may make out: (a) purely a civil wrong; or
(b)purely a criminal offence; or (c) a civil wrong as also a criminal offence. A commercial transaction or a contractual dispute, apart from furnishing a cause of action for seeking remedy in civil law, may also involve a criminal offence. As the nature and scope of a civil proceeding are different from a criminal proceeding, the mere fact that the complaint relates to a commercial transaction or breach of contract, for which a civil remedy is available or has been availed, is not by itself a ground to quash the criminal proceedings. The test is whether the allegations in the complaint disclose a criminal offence or not. (emphasis added)
9. Chapter XIII of the Negotiable Instruments Act, 1881 provides for "Special Rules of Evidence". Section 118 provides for presumptions as to negotiable instruments as follows:
Presumptions as to negotiable instruments.-- Until the contrary is proved, the following presumptions shall be made:
(a) of consideration: that every negotiable instrument was made or drawn for consideration, and that every such instrument when it has been accepted, indorsed, negotiated or transferred, was accepted, indorsed, negotiated or transferred for consideration;
(b) as to date : that every negotiable instrument bearing a date was made or drawn on such date;"9
NEUTRAL CITATION NO. 2025:MPHC-IND:13550
10. Section 139 of the Act, 1881 provides for presumption in favour of holder as under-
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 nature referred to in Section 138 for the discharge, in whole or in part, of any debt or other liability."
11. The Supreme Court Bharat Barrel & Drum Mfg. Co. Vs. Amin Chand Payrelal reported in (1999) 3 SCC 35, held that once execution of the promissory note is admitted, the presumption under Section 118(a) would arise that it is supported by consideration. It was observed that-
"12. Upon consideration of various judgments as noted hereinabove, the position of law which emerges is that once execution of the promissory note is admitted, the presumption under Section 118(a) would arise that it is supported by a consideration. Such a presumption is rebuttable. The defendant can prove the non-existence of a consideration by raising a probable defence. If the defendant is proved to have discharged the initial onus of proof showing that the existence of consideration was improbable or doubtful or the same was illegal, the onus would shift to the plaintiff who will be obliged to prove it as a matter of fact and upon his failure to prove would disentitle him to the grant of relief on the basis of the negotiable instrument. The burden upon the defendant of proving the non-existence of the consideration can be either direct or by bringing on record the preponderance of probabilities by reference to the circumstances upon which he relies. In such an event, the plaintiff is entitled under law to rely upon all the evidence led in the case including that of the plaintiff as well. In case, where the defendant fails to discharge the initial onus of proof by showing the non-existence of the consideration, the plaintiff would invariably be held entitled to the benefit of presumption arising under Section 118(a) in his favour. The court may not insist upon the defendant to disprove the existence of consideration by leading direct evidence as the existence of negative evidence is neither possible norcontemplated and even if led, is to be seen with a doubt. The bare denial of the passing of the consideration apparently does not appear to be any defence. Something which is probable has to be brought on record for getting the benefit of shifting the onus of proving to the plaintiff. To disprove the presumption, the defendant has to bring on record such facts and circumstances upon consideration of which the court may either believe that the consideration did not exist or its 10 NEUTRAL CITATION NO. 2025:MPHC-IND:13550 nonexistence was so probable that a prudent man would, under the circumstances of the case, shall act upon the plea that it did not exist." ( emphasis added)
12. In case of Kumar Exports v. Sharma Carpets reported in (2009) 2 SCC 513, the Supreme Court examined the application of above mentioned statutory presumptions and laid down as under:
"18. Applying the definition of the word "proved" in Section 3 of the Evidence Act to the provisions of Sections 118 and 139 of the Act, it becomes evident that in a trial under Section 138 of the Act a presumption will have to be made that every negotiable instrument was made or drawn for consideration and that it was executed for discharge of debt or liability once the execution of negotiable instrument is either proved or admitted. As soon as the complainant discharges the burden to prove that the instrument, say a note, was executed by the accused, the rules of presumptions under Sections 118 and 139 of the Act help him shift the burden on the accused. The presumptions will live, exist and survive and shall end only when the contrary is proved by the accused, that is, the cheque was not issued for consideration and in discharge of any debt or liability. A presumption is not in itself evidence, but only makes a prima facie case for a party for whose benefit it exists.
19. The use of the phrase "until the contrary is proved" in Section 118 of the Act and use of the words "unless the contrary is proved" in Section 139 of the Act read with definitions of "may presume" and "shall presume" as given in Section 4 of the Evidence Act, makes it at once clear that presumptions to be raised under both the provisions are rebuttable. When a presumption is rebuttable, it only points out that the party on whom lies the duty of going forward with evidence, on the fact presumed and when that party has produced evidence fairly and reasonably tending to show that the real fact is not as presumed, the purpose of the presumption is over.
20. ... The accused may adduce direct evidence to prove that the note in question was not supported by consideration and that there was no debt or liability to be discharged by him.However, the court need not insist in every case that the accused should disprove the non-existence of consideration and debt by leading direct evidence because the existence of negative evidence is neither possible nor contemplated. At the same time, it is clear that bare denial of the passing of the consideration and existence of debt, apparently would not serve the purpose of the accused. Something which is probable has to be brought on record for getting the burden of proof shifted to the complainant. To disprove the presumptions, the accused should bring on record such facts and circumstances, upon consideration of which, the court may either believe 11 NEUTRAL CITATION NO. 2025:MPHC-IND:13550 that the consideration and debt did not exist or their non-existence was so probable that a prudent man would under the circumstances of the case, act upon the plea that they did not exist." ( emphasis added)
13. The Supreme Court in case of Rangappa Vs. Sri Mohan reported in (2010)11 SCC 441 held that Section 139 of the Act is an example of reverse onus and imposes an evidentiary burden on the accused which can be discharged by establishing preponderance of probabilities of the defence. After referring to catena of judgments, the Supreme Court held that the presumption mandated by Section 139 of the Act includes the existence of a legally enforceable debt or liability.
14. The Supreme Court in case of Basalingappa Vs. Mudibasappa reported in AIR 2019 SC 1983, considered the presumption under Sections 118(a) and 139 of the Act, as under-
25.1. Once the execution of cheque is admitted Section 139 of the Act mandates a presumption that the cheque was for the discharge of any debt or other liability.
25.2. The presumption under Section 139 is a rebuttable presumption and the onus is on the accused to raise the probable defence. The standard of proof for rebutting the presumption is that of preponderance of probabilities.
25.3. To rebut the presumption, it is open for the accused to rely on evidence led by him or the accused can also rely on the materials submitted by the complainant in order to raise a probable defence. Inference of preponderance of probabilities can be drawn not only from the materials brought on record by the parties but also by reference to the circumstances upon which they rely.
25.4. That it is not necessary for the accused to come in the witness box in support of his defence, Section 139 imposed an evidentiary burden and not a persuasive burden.
25.5. It is not necessary for the accused to come in the witness box to support his defence.
15. In case of Rajeshbhai Muljibhai Patel v. State of Gujarat reported in AIR 2020 SC 818, it was held that-
12NEUTRAL CITATION NO. 2025:MPHC-IND:13550 "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 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."
16. In the light of the aforesaid propositions of law, the factual scenario of the matter in hand is considered.
17. Learned counsel for petitioner referring to the judgment of Supreme court in the case of Jugesh Sehgal Vs. Shamsher Singh Gogi [Order dated 10.07.2009 passed in Cr.A. No. 1180/2009] contends that where the cheque was issued from an account which was non-existent on the day it was issued, the requisite ingredient of the offence punishable u/S 138 of the N.I. Act is not made out.
18. The Supreme Court in the case of NEPC MICON Ltd. & Ors. Vs. Magma Leasing Ltd. reported in 1999(4) SCC 253 held as under:
7. Further, the offence will be complete only when the conditions in the proviso (a), (b) and (c) are complied with. Hence, the question is, in a case where cheque is returned by the bank unpaid on the ground that the account is closed, would it mean that cheque is returned as unpaid on the ground that the amount of money standing to the credit of that account is insufficient to honour the cheque. In our view, the answer would obviously be in the affirmative because cheque is dishonoured as the amount of money standing to the credit of that account was nil at the relevant time apart from it being closed. Closure of the account would be an eventuality after the entire amount in the account is withdrawn. It means that there was no amount in the credit of that account on the relevant date when the cheque was presented for honouring the same. The expression the amount of money standing to the credit of that account is 13 NEUTRAL CITATION NO. 2025:MPHC-IND:13550 insufficient to honour the cheque is a genus of which the expression that account being closed is specie. After issuing the cheque drawn on an account maintained, a person, if he closes that account apart from the fact that it may amount to another offence, it would certainly be an offence under Section 138 as there was insufficient or no fund to honour the cheque in that account; Further, cheque is to be drawn by a person for payment of any amount of money due to him on an account maintained by him with a banker and only on that account cheque should be drawn. This would be clear by reading the Section along with provisos (a), (b) & (c ).
15. In view of the aforesaid discussion we are of the opinion that even though Section 138 is a penal statute, it is the duty of the Court to interpret it consistent with the legislative intent and purpose so as to suppress the mischief and advance the remedy. As stated above, Section 138 of the Act has created a contractual breach as an offence and the legislative purpose is to promote efficacy of banking and of ensuring that in commercial or contractual transactions cheques are not dishonoured and credibility in transacting business through cheques is maintained. The above interpretation would be in accordance with the principle of interpretation quoted above brush away the cobweb varnish, and show the transactions in their true light (Wilmot C. J.) or (by Maxwell) to carry out effectively the breach of the statute, it must be so construed as to defeat all attempts to do, or avoid doing, to an indirect or circuitous manner that it has prohibited. Hence, when the cheque is returned by a bank with an endorsement account closed, it would amount to returning the cheque unpaid because the amount of money standing to the credit of that account is insufficient to honour the cheque as envisaged in Section 138 of the Act.
19. Learned counsel for the petitioner relying on the judgment in S.P.Mani and Mohan Dairy Vs. Dr Snehalatha Elangovan reported in (2023) 10 SCC 685 and SMS Pharmaceutical Vs. Neeta Bhalla reported in AIR 2005 SC 3512 and referring to Para-5 of the complaint and the order dated 13/04/2015 passed in C.P. no. 27/2015 by the Company Law Board, Mumbai (Annexure-P/3), contended that the Company Law Board had appointed Ms. Manjiri Kakkar as independent Chairperson of the petitioner and the respondent group i.e. M/s Chinar Shipping and Infrastructure (India) Pvt. Ltd and it was directed that all the cheques in respect of respondent no. 1 Company (petitioner no. 1 herein) shall be signed by independent Chairperson only after due verification and information to both the groups.
14NEUTRAL CITATION NO. 2025:MPHC-IND:13550 The accused no.2 was not incharge of or responsible for the conduct of the business of the company on the date of cheque in question i.e.18.12.2018. The cheque in question was issued for an amount which was non-existent on the date of cheque. Learned counsel further referring to certificate of incorporation consequent upon change of name of petitioner no. 1 dated 12/07/2012, contended that name of accused / Company, which appears on the impugned cheque has already been changed in the year 2012. Learned counsel further referring to the information given by Federal Bank Ltd dated 25/10/2021 (Annexure-P/6), contends that Account No. 15380200001161 appearing on the impugned cheque was closed on 17/04/2015. Therefore, the offence punishable u/S 138 of the N.I. Act is not made out. The accused no.2 cannot be prosecuted for the offence punishable u/S 138 of the N.I. Act.
20. It is specifically pleaded in para 2, 3, 4 and 5 of complaint that the accused no.2 on behalf of accused no.1 company had promised 45% of the share profit, calculated the share profit on the date of agreement dated 11.11.2011 and 14.11.2011 and to discharge the said liability, issued a post dated cheque No. 102099 dated 18.12.2018 of the Federal Bank Ltd. Mumbai. As per the averments in the complaint, the cheque in question was issued in year 2011 towards share profit in furtherance of agreement between the parties to be paid in year 2018 and accordingly, the post dated cheque was issued. The accused no.2 has not denied his signature on the cheque in question. Therefore, the presumption u/S 118 and 138 of the N.I. Act would apply. The veracity of the averments in the complaint can be determined after evidence at trial. No inference, as to defence of the accused, can be drawn at the preliminary stage of cognisance. Whether, 15 NEUTRAL CITATION NO. 2025:MPHC-IND:13550 there was an agreement between the parties, or whether the cheque in question was issued for discharge of calculated future share profit is a disputed question of fact, which cannot be determined at the preliminary stage of issuance of process. Therefore, in view of above discussion and the specific averments made in the complaint, the benefit of law laid down in case of S.P. Mani and SMS Pharmaceuticals(supra) is not available to the petitioners.
21. The subsequent appointment of Authorized Officer by the Company Law Board or closure of the account in year 2015 by the accused company or subsequent change in name of the company does not absolve the accused from the liability of the cheque issued for discharge of the liability existing on the date of its issuance. Merely, post dating the cheque cannot be inferred to nullify the averments of pre-existing debt or liability.
22. The Supreme Court in the case of Sripati Singh(since Deceased)through sons Vs. State of Jharkhand & Another reported in (2022) 18 SCC 614 observed as under:
18. In fact, it would be apposite to take note of the decision of this Court in the case of Sampelly Satyanarayana Rao (supra) wherein this Court while answering the issue as to what constitutes a legally enforceable debt or other liability as contained in the Explanation 2 to Section 138 of N.I. Act has held as hereunder:
"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 postdated 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.
10. Reference to the facts of the present case clearly shows that 16 NEUTRAL CITATION NO. 2025:MPHC-IND:13550 though the word "security" is used in Clause 3.l (iii) of the agreement, the said expression refers to the cheques being towards repayment of instalments. The repayment becomes due under the agreement, the moment the loan is advanced and the instalment falls due. It is undisputed that the loan was duly disbursed on 28th February, 2002 which was prior to the date of the cheques. Once the loan was disbursed and instalments have fallen due on the date of the cheque as per the agreement, dishonour of such cheques would fall under Section 138 of the Act. The cheques undoubtedly represent the outstanding liability.
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 present 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 instalment which had fallen due though such deposit of cheques towards repayment' of instalments 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."
19. The said conclusion was reached by this Court while distinguishing the decision of this Court in the case of Indus Airways Pvt. Ltd. Vs. Magnum Aviation Pvt. Ltd. (2014) 12 SCC 539 which was a case wherein the issue was of dishonour of postdated cheque issued by way of advance payment against a purchase order that had arisen for consideration. In that circumstance, it was held 17 NEUTRAL CITATION NO. 2025:MPHC-IND:13550 that the same cannot be considered as a cheque issued towards discharge of legally enforceable debt.
20. Further, this Court in the case of M/s Womb Laboratories Pvt. Ltd. (supra) has held as follows:
"5. In our opinion, the High Court has muddled the entire issue. The averment in the complaint does indicate that the signed cheques were handed over by the accused to the complainant. The cheques were given by way of security, is a matter of defence. Further, it was not for the discharge of any debt or any liability is also a matter of defence. The relevant facts to countenance the defence will have to be proved that such security could not be treated as debt or other liability of the accused. That would be a triable issue. We say so because, handing over of the cheques by way of security per se would not extricate the accused from the discharge of liability arising from such cheques.
6. Suffice it to observe, the impugned judgment of the High Court cannot stand the test of judicial scrutiny. The same is, therefore, set aside."
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.
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 18 NEUTRAL CITATION NO. 2025:MPHC-IND:13550 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.
29. 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 under Section 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.
23. In view of the above discussion, this Court is of the considered opinion that the ingredients for the offence punishable u/S 138 of the N.I. Act by accused no. 1 and 2 were prima-facie made out. There are sufficient averments in the complaint with regard to existence of liability in respect of which, the cheque in question, post dated to 18.12.2018 was issued by the accused no.2 on behalf of accused no.1 in favour of complainant (respondent). The allegations made in complaint prima facie constitute the offence punishable under Section 138 of the N.I. Act against the petitioner/accused. Consequently, the quashing of complaint is unwarranted at present stage. The learned trial Court had committed no error in issuing the process against the petitioners. No case is made out to invoke inherent jurisdiction u/S 482 of Cr.P.C. for quashing of criminal complaint and the 19 NEUTRAL CITATION NO. 2025:MPHC-IND:13550 subsequent proceedings pending before the learned Judicial Magistrate First Class, Ratlam. [Krishnamoorthy Vs. Chellammal reported in (2015) 14 SCC 559 relied].
24. The petition, being meritless, is dismissed.
(SANJEEV S KALGAONKAR) JUDGE sh/-
SEHAR HASEEN Digitally signed by SEHAR HASEEN DN: c=IN, o=HIGH COURT OF MADHYA PRADESH BENCH INDORE, ou=BENCH AT INDORE, 2.5.4.20=900ec6fc757798eaeb3df7a32860bd32984 15a4d1c2d91436213f2568c8f27da, postalCode=452001, st=Madhya Pradesh, serialNumber=E7DBBA955B262C04B8413251CE7FB 6F0B7DBA610C57F1559C08BF6C6F5DD40D4, cn=SEHAR HASEEN Date: 2025.05.22 17:24:42 +05'30'