Karnataka High Court
Anchor Agritech vs Arsh Group on 20 November, 2024
Author: M.Nagaprasanna
Bench: M.Nagaprasanna
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NC: 2024:KHC:46994
CRL.P No. 34 of 2023
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 20TH DAY OF NOVEMBER, 2024
BEFORE
THE HON'BLE MR JUSTICE M.NAGAPRASANNA
CRIMINAL PETITION NO. 34 OF 2023
BETWEEN:
1. ANCHOR AGRITECH
NO.201, "HARI DHARSHAN"
A, CIVIL ROAD
NANAKWADA
VALSAD
GIRJATH - 396 001.
2. JAYESH DESAI
S/O RAMANLAL DESAI
AGED ABOUT 63 YEARS
PARTNER, ANCHOR AGRITECH
NO.201, "HARI DHARSHAN"
A, CIVIL ROAD
Digitally signed
by NAGAVENI NANAKWADA
Location: HIGH VALSAD
COURT OF
KARNATAKA GIJRATH - 396 001.
...PETITIONERS
(BY SRI JAYANTHA POOJARY, ADVOCATE)
AND:
1. ARSH GROUP
REPRESENTED BY
SRI MOHAMMED SHAFI
S/O K.HUSSAIN
AGED ABOUT 42 YEARS
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NC: 2024:KHC:46994
CRL.P No. 34 of 2023
"NOOR MAHAL"
N.S.ROAD
HEJAMADI
KAUP TALUK AND DISTRICT.
...RESPONDENT
(BY SRI NISHIT KUMAR SHETTY, ADVOCATE)
THIS CRIMINAL PETITION IS FILED UNDER SECTION 482
OF CR.P.C.,(528 OF BNSS) PRAYING TO QUASH THE ENTIRE
PROCEEDING IN C.C.NO.2597/2022 PENDING ON THE FILE OF
III ADDITIONAL CIVIL JUDGE AND JMFC UDUPI AGAINST THE
PETITIONER FOR THE OFFENCE P/U/S.138 OF NI ACT.
THIS PETITION, COMING ON FOR ADMISSION, THIS DAY,
ORDER WAS MADE THEREIN AS UNDER:
CORAM: HON'BLE MR JUSTICE M.NAGAPRASANNA
ORAL ORDER
The petitioners are before this Court calling in question proceedings in C.C.No.2597/2022, pending before the III Additional Civil Judge and JMFC, Udupi, for the offence under Section 138 of the Negotiable Instruments Act, 1881 (for short 'the Act').
2. Heard Sri Jayantha Poojary, learned counsel for petitioners and Sri Nishit Kumar Shetty, learned counsel for respondent.
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3. Facts in brief, germane, are as follows:
The petitioners are accused Nos.1 and 3, the respondent, the complainant. On an alleged transaction between the petitioners and the complainant, it transpires that the petitioners have issued a cheque and the cheque so issued is also appended to the petition. The cheque is dishonoured with an endorsement 'payment stopped by the drawer'. Based upon this, legal proceedings are instituted against the accused and the matter leads to the Court of learned Magistrate after a complaint having been filed under Section 200 of the Cr.P.C.
The learned Magistrate takes cognizance of the matter and issues summons to the petitioners. The petitioners calling in question the entire proceedings before the concerned Court in C.C.No.2597/2022, are before this Court in the subject petition.
4. A solitary submission of the learned counsel for petitioners is that the cheque is issued as a security. There is no contract or transaction of any kind between the complainant and the petitioners. The alleged contract that is projected by the complainant as having between the petitioners and the -4- NC: 2024:KHC:46994 CRL.P No. 34 of 2023 complainant is false and the transaction is with other company.
Therefore, he would submit that the cheuqe that is issued as a security is misused by the complainant and instituted proceedings invoking Section 200 of the Cr.P.C, for the offence under Section 138 of the Act.
5. Per contra, learned counsel for the respondent would refute the submissions contending that the transaction or otherwise between the petitioner and the respondent is a matter of evidence or trial as the cheque is issued in favour of the complainant. In that light, he would seek dismissal of the petition.
6. I have given my anxious consideration to the submissions made by the learned counsel for respective parties and have perused the material on record.
7. The afore-narrated facts are not in dispute. The transaction between the two, at this juncture is a maze of facts.
Therefore, it is necessary that the same has to be thrashed out in a full blown trial before the concerned Court. The issuance -5- NC: 2024:KHC:46994 CRL.P No. 34 of 2023 of the cheque by the petitioners in favour of the respondent -
complainant for an amount of Rs.1,42,48,500/- is a matter of record. Therefore, once having issued a cheque, presumption under the Act is, the cheque issued as security or otherwise is a matter of evidence to be lead and proved before the concerned Court. Interdicting or quashment of the proceedings against the petitioners would run foul of the judgment of the Apex Court in the case of SRIPATI SINGH VS. STATE OF JHARKHAND reported in (2022) 18 SCC 614. The Apex Court has held as follows:
"17. In order to consider this aspect of the matter we have at the outset taken note of the four loan agreements dated 13-8-2014 which is the subject-matter herein. Under each of the agreements, the promise made by Respondent 2 is to pay the appellant a sum of Rs 50 lakhs. Thus, the total of which would amount to Rs 2 crores as contended by the appellant. Towards the promise to pay, the repayment agreed by Respondent 2 is to clear the total amount within June/July 2015. Para 5 of the loan agreement indicates that six cheques have been issued as security. The claim of the appellant has been negated by the High Court only due to the fact that the agreement indicates that the cheques have been given by way of security and the complainant has also stated this fact in the complaint. Though the High Court has taken note of the decision in Sudhir Kumar Bhalla [Sudhir Kumar Bhalla v. Jagdish Chand, (2008) 7 SCC 137 : (2008) 3 SCC (Cri) 11] to hold that the cheque issued as security cannot constitute -6- NC: 2024:KHC:46994 CRL.P No. 34 of 2023 an offence, the same in our opinion does not come to the aid of Respondent 2. There is no categorical declaration by this Court in the said case that the cheque issued as security cannot be presented for realisation under all circumstances. The facts in the said case relate to the cheques being issued and there being alterations made in the cheques towards which there was also a counter complaint filed by the drawer of the cheque. Hence, the said decision cannot be a precedent to answer the position in this case and the High Court was not justified in placing reliance on the same.
18. In fact, it would be apposite to take note of the decision of this Court in Sampelly Satyanarayana Rao [Sampelly Satyanarayana Rao v. Indian Renewable Energy Development Agency Ltd., (2016) 10 SCC 458 :
(2017) 1 SCC (Civ) 126 : (2017) 1 SCC (Cri) 149] wherein this Court while answering the issue as to what constitutes a legally enforceable debt or other liability as contained in Explanation 2 to Section 138 of the NI Act has held as hereunder : (SCC p. 463, paras 9 to 12) "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 [Indus Airways (P) Ltd. v. Magnum Aviation (P) Ltd., (2014) 12 SCC 539 : (2014) 5 SCC (Civ) 138 : (2014) 6 SCC (Cri) 845] 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 -7- NC: 2024:KHC:46994 CRL.P No. 34 of 2023 recoverable, the Section is attracted and not otherwise.
10. Reference to the facts of the present case clearly shows that 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 28-2-2002 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 [Indus Airways (P) Ltd. v. Magnum Aviation (P) Ltd., (2014) 12 SCC 539 :
(2014) 5 SCC (Civ) 138 : (2014) 6 SCC (Cri) 845] 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 on a 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 praesenti in terms of the loan agreement, as against the case of Indus Airways [Indus Airways (P) Ltd. v. Magnum Aviation (P) Ltd., (2014) 12 SCC 539 : (2014) 5 SCC (Civ) 138 : (2014) 6 SCC (Cri) 845], where the purchase order had been cancelled and cheque issued towards advance payment for the purchase order was -8- NC: 2024:KHC:46994 CRL.P No. 34 of 2023 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 inIndus Airways [Indus Airways (P) Ltd. v. Magnum Aviation (P) Ltd., (2014) 12 SCC 539 : (2014) 5 SCC (Civ) 138 :
(2014) 6 SCC (Cri) 845] , 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."
(emphasis supplied)
20. Further, this Court in Womb Laboratories (P) Ltd. [Womb Laboratories (P) Ltd. v. Vijay Ahuja, (2022) 18 SCC 631] has held as follows : (SCC p. 632, paras 4 & 5) -9- NC: 2024:KHC:46994 CRL.P No. 34 of 2023 "4. 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.
5. Suffice it to observe, the impugned judgment [Vijay Ahuja v. State (NCT of Delhi), 2018 SCC OnLine Del 10028] of the High Court cannot stand the test of judicial scrutiny. The same is, therefore, set aside."
24. In the background of the factual and legal position taken note supra, in the instant facts, the appellant cannot be non-suited for proceeding with the complaint filed under Section 138 of the NI Act merely due to the fact that the cheques presented and dishonoured are shown to have been issued as security, as indicated in the loan agreement.
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 Respondent 2 was presented. On such cheque being dishonoured, cause
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NC: 2024:KHC:46994 CRL.P No. 34 of 2023 of action had arisen for issuing a notice and presenting the criminal complaint under Section 138 of the NI Act on the payment not being made. The further defence as to whether the loan had been discharged as agreed by Respondent 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 Respondent 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 Respondent 2 in the manner it has been done by the High Court. Therefore, though a criminal complaint under Section 420IPC was not sustainable in the facts and circumstances of the instant case, the complaint under Section 138 of the NI Act was maintainable and all contentions and the defence were to be considered during the course of the trial.
(Emphasis supplied) The Apex Court was considering the very issue as to whether the cheque issued as a security would entail invocation of Section 138 of the Act. The Apex Court holds as it does and all other issues whether the cheque issued as a security or otherwise, is a matter of evidence.
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8. In that light, I decline to entertain the petition and the petition lacking in merit, stands dismissed.
Since the issue is of the year 2021, the concerned Court shall conclude the matter within an outer limit of 6 months from the date of receipt of a copy of the order, if not earlier.
The observations made in the course of the order, shall not influence or bind the proceedings before the concerned Court.
I.A.No.1/2022 stands disposed, as a consequence.
Sd/-
(M.NAGAPRASANNA) JUDGE NVJ List No.: 1 Sl No.: 7