Sharad Gupta vs M/S. Madhu Brother Through Madhukar ... on 27 June, 2017

[Cites 15, Cited by 0]

Madhya Pradesh High Court

Sharad Gupta vs M/S. Madhu Brother Through Madhukar ... on 27 June, 2017

2. Since a common question is involved in these petitions and, therefore, they are heard together and are being disposed of by a common order. For convenience, I narrate the facts from M.Cr.C. No.10979 of 2015.

3. This petition under Section 482 of the Code of Criminal Procedure Code, 1973 has been filed for quashment of order dated 11.9.2015 passed in Revision No.374 of 2014, by which the learned Revisional Court upheld the order dated 10.3.2014 passed by the Judicial Magistrate Ist Class, Indore in Criminal Case No.1312 of 2005, by which learned Judicial Magistrate Ist Class, Indore has rejected the application for quashment of proceedings under Section 138 of Negotiable Instruments Act, 1881 filed against the applicant and dismissed the revision application filed by the applicant.

4. The facts of the case are that the applicant--Sarad Gupta was the manager of the respondent M/s Madhu Brothers till 23.12.2004 at the Showroom No.2, GTB Complex, New Market, T.T. Nagar, Bhopal. The business of the non-applicant firm at this showroom was conducted by the applicant in the capacity of the manager of the firm. After 23.12.2004 the applicant was no longer the manager or employee of the firm. On 23.12.2004, the proprietor of the non-applicant firm, Mr. Madhukar Gupta decided to wind up and close the business at Bhopal, so the complete stock of 3 the showroom was also shifted by the non-applicant to some other place.

5. According to applicant, on 23.12.2004, a mutual agreement was executed between the non-applicant Madhukar Gupta and the applicant Sharad Gupta, that settlement of accounts and liabilities between both the parties would be done and then a Memorandum of Understanding (MOU) specifying the same would be executed within four days of the mutual agreement i.e. 23.12.2004. Therefore, it was decided in the agreement dated 23.12.2004 that it was only after the settlement of accounts and liabilities, the final MOU will be executed, and till that time for the purpose of security of the liabilities arising in such MOU, if any, 5 post- dated cheques No.864201, 864202, 864203, 864204 and 864205 of State Bank, branch T.T. Nagar, Bhopal each amounting Rs.4,80,000/- with total sum of Rs.24,00,000/- alongwith Rs.1,00,000/- cash were handed over to the non- applicant as a security purpose only and not for encashment.

6. The non-applicant--complainant Madhukar Gupta never cared to settle the accounts neither did he execute the MOU, thereby violating terms of the agreement dated 23.12.2004. The applicant upon realizing that the non- applicant is neither doing the settlement of account nor executing the MOU, gave directions to its banker to stop the payment of all the 5 cheques, which he issued for the purpose of security only and not for encashment. Applicant also communicated this fact to the non-applicant vide letter dated 27.1.2005 under postal certificate (UPC) where it is 4 stated that the subject cheques were issued as security, may not be presented for encashment.

7. The non-applicant Madhukar Gupta was to deposit the cheques if any liability would have arisen after settlement of accounts, only in accordance with conditions of the agreement dated 23.12.2004, but instead of that he presented those 5 cheques for enchasment, without settlement of accounts and performing his duties/obligation under the agreement dated 23.12.2004, with the malafide intention to illegally obtain money from the applicant as well as unnecessarily harass him.

8. The case of the applicant that the non-applicant had illegally presented 5 cheques which were dishonored due to stop payment instructions.

9. The non-applicant filed a criminal complaint under Section 138 of the Negotiable Instruments Act, 1881 against the applicant. An application was filed by the applicant on 8.8.2012 before the Judicial Magistrate Ist Class, Indore claiming that the Civil Court has decided that the complainant Madhukar Gupta did not have right to get the payment of the 5 cheques. The present criminal complaint arises out of one of those 5 cheques, so the issue has been finally decided by the Civil Court, hence the present criminal matter under Section 138 of Negotiable Instruments Act should be dismissed.

10. The learned Judicial Magistrate rejected the application vide order dated 10.3.2014. The said order has been upheld by the learned Revisional Court vide order dated 11.8.2015.

11. Learned Counsel for the applicant has submitted that after 23.12.2004 a Civil Suit for declaration was filed by the applicant that complainant--Madhukar Gupta proprietor of M/s. Madhu Brothers was not entitled to encash those 5 cheques without settling the accounts of execution of MOU within four days from the date of agreement. The said Civil Suit was finally decided vide judgment and decree dated 23.12.2011. The learned Civil Court while deciding the civil suit in favour of the applicant--Sharad Gupta passed the decree that:

(i) The non-applicant--Madhukar Gupta will not illegally interfere nor get interfered by anyone else, in the possession of the applicant--Sharad Gupta of the showroom No.2, GTB complex, New Market, T.T. Nagar, Bhopal, which belongs to the applicant.

(ii) The non-applicant--Madhukar Gupta will execute within 1 month of the judgment, the MOU in accordance with the mutual agreement dated 23.12.2004, and the applicant will support the non-

applicant in the execution of MOU.

(iii) Until the execution of MOU, the non-applicant does not have the right to get the payment of the 5 post-dated cheques specified in the mutual agreement of the Exhibit P-1.

12. He submitted that the said judgment and decree is binding upon the non-applicant, as it is not interfered with or amended by any superior Competent Court and in view of the judgment passed by the Civil Court, the criminal 6 complaint filed by the non-applicant under Section 138 of Negotiable Instruments Act, 1881 was not maintainable. The judgment and decree of Civil Court is binding on him. He also submitted that the complainant-non-applicant presented these five cheques for payment, which were supposed to be encashed only after the execution of M.O.U. upon the settlement of accounts and liabilities between the two parties, as has been agreed between them in the mutual agreement dated 23.12.2004. Till that time, the conditions of the mutual agreement dated 23.12.2004 were not fulfilled. Those five cheques including the present cheque were handed over only for the purpose of security and not for encashment. The ends of justice require that the proceedings ought to be quashed on the ground that a Court proceedings not to be permitted to degenerate into a weapon of harassment or persecution and prays for quashment of the order as well as criminal proceedings filed against him under Section 138 of N.I. Act.

13. Per contra, learned Counsel for the non-applicant has submitted that the cheques were not issued by way of security as the cheques were issued in order to discharge of debt or other liability. It was the contention of learned Counsel for the applicant that there was no debt or liability which can be legally held to be debt or any other liability in the eyes of law. He has drawn my attention to the decision of Principal Seat of this Court in the case of Jitendra Sing Flora vs. Ravikant Talwar reported in 2001 (1) M.P.L. J. 229, two decisions of the Apex Court in the case of Shanti Kumar Panda vs. Shakuntala Devi reported in (2004) 1 7 SCC 438 and M. S. Narayana Menon alias Mani vs. State of Kerala and another reported in 2006 (4) M.P. L.J. and prays for its quashment.

14. In the present case, a Civil Suit for declaration was decided on 23.12.2011, the criminal complaint under Section 138 of Negotiable Instruments Act, 1881 was filed on 28.5.2005 and those five cheques were dishonored on 22.2.2005. Thereafter, a Civil Suit was filed on 6.9.2005 i.e. after dishonored of cheques dated 22.2.2005.

15. To appreciate the submissions of the learned Counsel, it is necessary to consider the nature of agreement (Annexure P/1) entered into between the parties:-

"nksuksa ds e/; vkt Hkksiky esa e/kq cznlZ] 2 th-Vh-ch dkWEiysDl]Vh-Vh- uxj Hkksiky esa r; gqvk ftlds eqrkfcd vkt rkjh[k 23-12-04 rd ds O;kikj dh leLr ysunkjh&nsunkjh ds ,ot esa Jh 'kjn dqekj th xqIrk Qk;uy le>kSrk ds fy, mijksDr 24]00]000@& pkSchl yk[k ds pSd iksLV MsVsM dzekad 864201] 864202] 864203] 864204 ,oa 864205 dqy ikapksa pSdksa Hkkjrh; LVsV cSad Vh-Vh- uxj Hkksiky esa ns jgs gSaA mijksDr ,e-vks-;w- vkt rkjh[k ls pkj jkst ds vanj vafre rkSj ij fuLrkfjr djds ;g pSd ,oa okilh ekax ,e-vks-;w- eq>s funsZf'kr nsunkfj;kss ds ifjiszs{; esa izsf"kr fd, x, gSA ;g psd Jh 'kjn dqekj xqIrk] e/kqdj xqIrk dks ns nsaxsaA ftlls lacaf/kr nsunkfj;ksa dk Hkqxrku Jh e/kqdj xqIrk djsaxsaA vkt rkjh[k ds ckn ubZ [kjhnh&fcdzh e/kq cznlZ ds uke ls Jh 'kjn dqekj xqIrk ugh djsaxsaA ;g mYysf[kr lHkh ckrksa dk iw.kZ opu nksuksa i{kksa }kjk djds iw.kZ :i ls gks'k gokl esa fcuk fdlh ncko ds lksp le>dj gLrk{kj fd, gSA lkFk gh lkFk 1 yk[k :i, dk uxn Hkqxrku Hkh fd;k x;k gSaA tks 'kjn dqekj xqIrk us e/kqdj xqIrk dks fn, gSA "

16. It is well settled in law that if cheques were issued for security, then offence under Section 138 of N.I. Act is not made out.

17. It is also well settled in law that an accused can rebut the presumption of Section 139 of the Act simply by a preponderance of probability and it is not necessary for him to rebut the said presumption beyond reasonable doubt. He can rebut the presumption by referring the evidence the evidence coming out in the evidence adduced by the complainant and it is not necessary for him to adduce independent evidence with regard the stand taken by him vis- a-vis to the issuance of the cheque.

18. The Apex Court in the case of Syed Askari Hadi Ali Augustine Imam and another vs. State (Delhi Administration) and another reported in (2009) 5 SCC 528 has held the following in para 25 which reads as under:-

"25. It is, however, significant to notice that the decision of this Court in M/s Karam Chand Ganga Prasad & anr. etc. V/s. Union of India & ors., 1970 3 SCC 694, wherein it was categorically held that the decisions of the civil courts will be binding on the criminal courts but the converse is not true, was overruled, stating:

"33. Hence, the observation made by this Court in V.M. Shah case that the finding recorded by the criminal court stands superseded by the finding recorded by the civil court is not correct enunciation of law. Further, the general observations made in Karam Chand case are in context of the facts of the case stated above. The Court was not required to consider the earlier decision of the Constitution Bench in M.S. Sheriff case as well as Ss. 40 to 43 of the Evidence Act."

Axiomatically, if judgment of a civil court is not binding on a criminal court, a judgment of a criminal court will certainly not be binding on a civil court."

19. The Apex Court in the case of Don Ayengia Vs. State of Assam, (2016) SCC 3 page 1 has held that " Any debt or other liability" under Section 138 of N.I. Act need not be only of person who has directly/primarily enjoyed benefit 9 thereof like the principal debtor. Person who is secondarily liable, such as surety or guarantor may also be convicted under Section 138 of N.I. Act if the ingredients thereof are satisfied. Paras 11 and 12 are relevant which reads as under:-

"11. We have no hesitation in answering that question in the affirmative. The facts as narrated above and as held proved by the trial Court and the appellate court, leave no manner of doubt, that Nazimul Islam had received an amount of rupees ten lakhs from the complainant in connection with the agreement executed between the two. It is also not in dispute that upon termination of the agreement, the amount paid to Nazimul Islam was refundable to the complainant and that Nazimul Islam had agreed to refund the same within one month. The promissory note executed by Nazimul Islam contained an unequivocal acknowledgment of not only the debt/liability aforementioned but promised to liquidate the same within one month with interest at the bank rate. Five cheques handed over were to be returned but only upon payment of the amount in question. Such being the fact situation, it cannot be said that the cheques had nothing to do with any debt or other liability. As a matter of fact, the existence of the debt or liability was never in dispute. On the contrary, it was acknowledged by Nazimul Islam who simply sought one month's time to pay up the amount. The cheques were post dated, only to give to the drawer the specified one month's time to pay the amount. There is thus a direct relationship between the liability and the cheques issued in connection therewith. Thus far there is no difficulty. The difficulty arises only because the promissory note uses the words "security" qua the cheques. This would ordinarily and in the context in which the cheques were given imply that once the amount of rupees ten lakhs was paid, the cheques shall have to be returned. There would be no reason for their retention by the complainant or for their presentation. In case, however, the amount was not paid within the period stipulated, the cheques were liable to be presented for otherwise there was no logic or reason for their having been issued and handed over in the first instance. If non-payment of the agreed debt/liability within the time specified also did not entitle the holder to present the cheques for payment, the issue and delivery of any such cheques would be meaningless and futile if not absurd. It is important to note that it was not a case where no debt or liability was determined or acknowledged to be payable. If cheques were issued in relation to a continuing contract or business where no claim is made on the date of the issue nor 10 any determinate amount payable to the holder, one could perhaps argue that the cheques cannot be presented or prosecution launched on a unilateral claim of any debt or liability. The present is, however, a case where the existence of the debt/liability was never in dispute. It was on the contrary acknowledged and a promise was made to liquidate the same within one month. Failure on the part of the debtor to do so could lead to only one result, viz. presentation of the cheques for payment and in the event of dishonour, launch of prosecution as has indeed happened in the case at hand.

12. The argument that the respondent had no liability to liquidate the debt owed by Nazimul Islam, has not impressed us. What is important is whether the cheques were supported by consideration. Besides the fact that there is a presumption that a negotiable instrument is supported by consideration there was no dispute that such a consideration existed in as much as the cheques were issued in connection with the discharge of the outstanding liability against Nazimul Islam. At any rate the endorsement made by the respondent on the promissory note that the cheques can be presented for encashment after 25-09- 2007 clearly shows that the cheques issued by him were not ornamental but were meant to be presented if the amount in question was not paid within the extended period. The High Court in our view fell in error in upsetting the conviction recorded by the Courts below who had correctly analysed the factual situation and applied the law applicable to the same."

20. Recently the Apex Court in the case of Sampelly Satanarayana Rao vs. Indian Renewable Energy Development Agency Ltd., (2016) 10 SCC 458 has held that once loan amount was disbursed and as per agreement installments had fallen due on date of issuance of cheque, dishonour of such cheque would fall under Section 138. Such issuance of cheque undoubtedly represent outstanding liability. The Apex Court further held that Section 138 of N.I. Act is attracted, if on the date of issuance of cheque, there existed liability or debt or amount which had become legally recoverable. Issuance of cheque and admission of signature thereon would invoke presumption of legally enforceable debt in favour of holder. Accused needs to rebut such 11 presumption. Apex Court held:-

"13. Act Crucial question to determine applicability of Section 138 of the 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 Page 7principle as can be discerned from discussion of the said cases in the judgment of this Court.

14. 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.

15. 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 8 (2015) 11 SCC 776 Page 8stood 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 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.

***

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 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."

16. We are in respectful agreement with the above observations. In the present case, reference to the complaint (a copy of which is Annexures P-7) 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).

17. 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.

18. 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 10 .

19. Thus, the question has to be answered in favour of 13 the respondent and against the appellant. Dishonour of cheque in the present case being for discharge of existing liability is covered by Section 138 of the Act, as rightly held by the High Court.

21. In the present case five post-dated cheques were handed over to non-applicant not as a security but for said payment with a stipulation that when the amount of Rs.24 lakhs would be paid by applicant to the non-applicant then only the same were to be returned. As such the cheques issued were meant to discharge a debt or liability within the meaning of Section 138 of N.I. Act. The present petitions filed by the applicant are not maintainable. Learned Courts below have not committed any legal error in dismissing the application. No interference is required in these petitions under Section 482 of Code of Criminal Procedure, as prayed is made out.

22. Accordingly, M.Cr.C. Nos. 10979 of 2015, M.Cr.C. No.10981 of 2015, M.Cr.C. No.10990 of 2015, M.Cr.C. No.10994 of 2015 and M.Cr.C. No.10997 of 2015, are hereby dismissed.

(P. K. Jaiswal) Judge pp

Unlock Advanced Research with PRISMAI

Madhya Pradesh High Court