Gujarat High Court
Ramesh Ishwarlal Bhatt vs State Of Gujarat & on 26 April, 2017
Author: J.B.Pardiwala
Bench: J.B.Pardiwala
R/SCR.A/642/2016 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
SPECIAL CRIMINAL APPLICATION (QUASHING) NO. 642 of 2016
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RAMESH ISHWARLAL BHATT....Applicant(s)
Versus
STATE OF GUJARAT & 1....Respondent(s)
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Appearance:
MR HRIDAY BUCH, ADVOCATE for the Applicant(s) No. 1
MR DILIP B RANA, ADVOCATE for the Respondent(s) No. 2
MS SHRUTI PATHAK, APP for the Respondent(s) No. 1
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CORAM: HONOURABLE MR.JUSTICE J.B.PARDIWALA
Date : 26/04/2017
ORAL ORDER
1. Rule returnable forthwith. Ms. Pathak, the learned APP waives service of notice of rule for and on behalf of the respondent No.1 State of Gujarat. Mr. Dilip Rana, the learned advocate waives service of notice of rule for and on behalf of the respondent No.2 original first informant.
2. By this writapplication under Article 226 of the Constitution of India, the writapplicant has prayed for the following reliefs: 8(A) to admit and allow the present petition;
(B) to quash and set aside the complaint being Criminal Case No.667 of 2006 pending before the learned Additional Chief Judicial Magistrate, Dhangadhra and all other proceedings initiated pursuant thereto;
(C) pending admission, hearing and final disposal of this petition, to stay further proceedings of the complaint being Criminal Case No.667 of 2006 pending before the learned Additional Chief Judicial Magistrate, Dhangandhra and all other proceedings initiated pursuant thereto;
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R/SCR.A/642/2016 ORDER
(D) Such other and further relief or relieves as may be deem fit, just and proper, in the facts and circumstances of the case.
3. It appears from the materials on record that the writapplicant herein had shares of the Company by name Reliance Energy Limited. The writapplicant and the complainant entered into an agreement, by which, the writapplicant herein agreed to sell the shares in favour of the complainant. According to the complainant, he paid an amount of Rs.5,25,000/ in cash towards the purchase of the shares to the writ applicant. At that point of time, as a part of the outstanding, a cheque an amount of Rs.5,25,000/ was drawn by the writapplicant in favour of the complainant by way of security. This fact is not in dispute. The complainant own showing in the form of the averments in the complaint, the cheque in question was towards the security. The security in the sense that if something would go wrong with the procedure of the transfer, then the cheque can be presented by the complainant for an encashment.
4. Thus, on the date when the cheque was drawn in favour of the complainant, there was no existing debt or any liability. The law in this regard has been well explained by the Supreme Court in the case of Samplelly Satyanarayana Rao Vs. Indian Renewable Energy Development Agency Limited reported in (2016) 10 SCC 458. I may quote the relevant observations:
10. Reference to the facts of the present case clearly shows that though the word "security" is used in clause 3.1(iii) of the agreement, the said expression refers to the cheques being towards repayment of installments. The repayment becomes due under the agreement, the moment the loan is advanced and the installment 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 installments 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 Page 2 of 8 HC-NIC Page 2 of 8 Created On Wed Aug 16 06:55:18 IST 2017 R/SCR.A/642/2016 ORDER 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 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 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.
14 In HMT Watches Ltd. v. M.A. Abida, (2015) 11 SCC 776 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 : Page 3 of 8 HC-NIC Page 3 of 8 Created On Wed Aug 16 06:55:18 IST 2017 R/SCR.A/642/2016 ORDER "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. 68587, paras 17 & 22) "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 wellknown 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 Page 4 of 8 HC-NIC Page 4 of 8 Created On Wed Aug 16 06:55:18 IST 2017 R/SCR.A/642/2016 ORDER 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 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."
15 We are in respectful agreement with the above observations. In the present case, reference to the complaint (a copy of which is Annexures P7) shows that as per the case of the complainant, the cheques which were subject matter of the said complaint were towards the partial repayment of the dues under the loan agreement (para 5 of the complaint).
16 As is clear from the above observations of this Court, it is well settled that while dealing with a quashing petition, the Court has ordinarily to proceed on the basis of averments in the complaint. The defence of the accused cannot be considered at this stage. The court considering the prayer for quashing does not adjudicate upon a disputed question of fact.
17 In Rangappa v. Sri Mohan, (2010) 11 SCC 441 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.[Goaplast (P) Ltd. v. Chico Ursula D' Souza (2003) 3 SCC 232].
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R/SCR.A/642/2016 ORDER
5. On 02/02/2016, the following order was passed by this Court:
1. The facts of this case are quite disturbing. The complaint under section 138 of the Negotiable Instruments Act appears to have been filed on 9th June, 2006. The verification of the complainant on oath was recorded on 30th June, 2006. It appears that on 11th October, 2013, an order came to be passed for an inquiry under section 202 of the Code of Criminal Procedure, 1973, and ultimately, process was issued vide order dated 17th July, 2014. I fail to understand why it took so long for the court concerned to issue process. The court concerned owes some explanation in this regard. The Registry is directed to call for the explanation of the concerned court. Now coming to the merits of the case, it appears that the cheque was issued by way of a security. This is apparent from the averments made in the complaint itself, more particularly, in para2. If that be so, a prima facie case is made out for issue of notice.
2. Let notice be issued to the respondents, returnable on 18.3.2016. Mr. Shah, the learned APP, waives service of notice for and behalf of the respondent No.1.
3. Let there be an adinterim order in terms of para8(C).
Direct service is permitted qua the respondent No.2.
6. Pursuant to the order passed by this Court referred to above, the Additional Senior Civil Judge and Additional Chief Judicial Magistrate, Dhangandhra, has addressed a letter dated 18/03/2016 to the Registrar General stating as under: To, The Hon'ble Registrar General Saheb, High Court of Guajrat AHMEDABAD.
Through : The Principal District Judge Saheb, Surendranagar.
Subject : Explanation about delay of process in Criminal Case No.667/2006 & Special Criminal Application (Quashing) No.642/2016.
Respected Sir, With respect to above subject I have the honour to submit my Page 6 of 8 HC-NIC Page 6 of 8 Created On Wed Aug 16 06:55:18 IST 2017 R/SCR.A/642/2016 ORDER explanation for delay of the proceeding as under:
1) I have taken over charge on 14/05/2015 as a Addl. Senior Civil Judge and Addil. Chief Judicial Magistrate, Dhrangadhra before the so many time process was issued to the accused from 17/07/2014.
2) Case filed on 30/06/2006 and kept for Inquiry under section 202 of Cr.P.C. Complainant's verification was recorded on 17/06/2014.
3) Case registered under Negotiable Instrument Act Section138 as on 17/07/2014.
4) On dated 19/08/2014, 25/09/2014, 15/12/2014, 10/09/2015, for service of summons application given by the complainant, First time summons was served to accuse on 10122015 then he remained present before this court with his Ld. Advocate.
5) Plea was recorded on 08012016 and then after this matter is kept for Evidence.
Kindly accept the same and oblige me.
Thanking Your Honour.
Yours faithfully, Addl. Senior Civil Judge & Addl. Chief Judi. Magi.
Dhrangadhra.
7. There is no explanation worth the name in the entire letter. In substance the order passed by this Court dated 02/02/2016 remains notcomplied. Be that as it may, the prosecution of the writapplicant herein for the offence under Section138 of the N.I. Act should fail on the ground that on the date of the drawing of the cheque, there was no existing debt or liability. This fact not being in dispute, the proceedings of the Criminal Case No.667 of 2006 pending before the learned Additional Chief Judicial Magistrate, Dhangadhra, are hereby quashed.
This order shall have no bearing on any other matter pending between the parties including the Civil Suit, which is pending in the Page 7 of 8 HC-NIC Page 7 of 8 Created On Wed Aug 16 06:55:18 IST 2017 R/SCR.A/642/2016 ORDER Court of the Civil Judge, Rajkot.
Rule is made absolute to the aforesaid extent. Direct service is permitted.
(J.B.PARDIWALA, J.) aruna Page 8 of 8 HC-NIC Page 8 of 8 Created On Wed Aug 16 06:55:18 IST 2017