Gujarat High Court
M/S. Jalaram Jyot Sales Agency vs State Of Gujarat on 17 April, 2025
NEUTRAL CITATION
R/SCR.A/2125/2018 ORDER DATED: 17/04/2025
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CRIMINAL APPLICATION (QUASHING) NO. 2125 of 2018
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M/S. JALARAM JYOT SALES AGENCY & ANR.
Versus
STATE OF GUJARAT & ANR.
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Appearance:
MR RAVISH D BHATT(5867) for the Applicant(s) No. 1,2
ADITYA A GUPTA(7875) for the Respondent(s) No. 2
MOHIT A GUPTA(8967) for the Respondent(s) No. 2
MR AR GUPTA(1262) for the Respondent(s) No. 2
MR. MANAN MAHETA, APP for the Respondent(s) No. 1
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CORAM:HONOURABLE MR. JUSTICE J. C. DOSHI
Date : 17/04/2025
ORAL ORDER
1. This petition is filed under Article 14 and 226 of the Constitution of India read with Section 482 of the Code of Criminal Procedure, 1973 seeking following reliefs:-
"A. Allow this Special Criminal Application by quashing and setting aside the complaint lodged by the respondent no.2 (Annexure 'A') registered with the additional Chief Metropolitan Magistrate, NI. Court No.29, Ahmedabad being Criminal Case No. 5969/2016, in the ends of justice.
B. Pending admission, hearing and final disposal of the present petition, Yours Lordships may be pleased to stay further proceedings of the complaint lodged by the respondent no.2 (Annexure 'A') with the additional Chief Metropolitan Magistrate, NI. Court No.29, Ahmedabad being Criminal Case No. 5969/2016, in the ends of justice."Page 1 of 24 Uploaded by MANISH MISHRA(HC01776) on Wed Apr 30 2025 Downloaded on : Sat May 03 08:31:28 IST 2025
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2. Heard learned advocate Mr. Ravish Bhatt for the petitioners, learned advocate Mr. Aditya Gupta for the respondent No.2 and learned APP Mr. Manan Maheta for the respondent-State.
BRIEF FACTS OF THE CASE:-
3. The petitioner and respondent No.2 were business partners in a firm named Harikrishna Infrastructure, and they also had extensive inter se business dealings involving various individuals and entities, including M/s. Jalaram Jyot Sales Agency, Ghanshyambhai G. Thakkar (HUF), M/s. Universal Polymers, M/s.
Shreeji Polymers, M/s. Phoenix Plastotrade Pvt. Ltd., and others.
Respondent No.2, a chartered accountant by profession, was entrusted with various cheque books belonging to the petitioner and his associated firms, as he was handling bank liaisons, billing, and account entries. Around 2012, the parties initiated a housing project titled Rajipa Greenland, and the petitioner was authorized by the firm to execute sale deeds in favour of allottees. However, in December 2013, respondent No.2 secured a project loan for a separate scheme, Rajipa Utsav, using flats from Rajipa Greenland as collateral through a registered mortgage deed dated 07.12.2013.
Page 2 of 24 Uploaded by MANISH MISHRA(HC01776) on Wed Apr 30 2025 Downloaded on : Sat May 03 08:31:28 IST 2025NEUTRAL CITATION R/SCR.A/2125/2018 ORDER DATED: 17/04/2025 undefined 3.1. Subsequently, the petitioner instituted Special Civil Suit No. 593 of 2014 raising disputes pertaining to unauthorized mortgage of flats meant for allottees, misuse of signed blank cheques, and unresolved financial dealings among their respective firms and family members. The matter culminated in an MoU dated 17.03.2015, wherein both parties acknowledged that all mutual liabilities had been settled and entries reflecting inter se transactions were to be reversed. Based on this understanding, the civil suit was disposed of on 25.03.2015 through a consent decree.
3.2. Despite the binding terms of the MoU and decree, respondent No.2 initiated Criminal Case No. 5969 of 2016 by misusing the cheque(s) which were in his possession. The complaint alleged liability under the Negotiable Instruments Act. However, even from a plain reading of the complaint, it becomes apparent that the cheques were not issued in discharge of a legally enforceable debt, and any alleged debt was in fact time-barred. Moreover, the complaint lacked a valid board resolution and thus suffers from fundamental procedural infirmities, rendering it incompetent and liable to be quashed.
SUBMISSIONS OF THE PETITIONER:-
4. It is respectfully submitted that the petitioner is an innocent Page 3 of 24 Uploaded by MANISH MISHRA(HC01776) on Wed Apr 30 2025 Downloaded on : Sat May 03 08:31:28 IST 2025 NEUTRAL CITATION R/SCR.A/2125/2018 ORDER DATED: 17/04/2025 undefined person who has not committed any of the offences alleged in the impugned complaint. The complaint, being devoid of any prima facie material or credible basis, is liable to be quashed and set aside in the interest of justice.
4.1. The petitioner further submits that the contents of the complaint are wholly contrary to the decree passed in Special Civil Suit No. 593 of 2014 and the Memorandum of Understanding (MoU) dated 17.03.2015, both of which are unimpeachable in nature. In light of these binding civil proceedings, the allegations made in the complaint are rendered baseless, warranting its quashing in the ends of justice.
4.2. Without prejudice to the above, it is submitted that the complaint purportedly filed by Shri Ritesh Koak, Director of Phoenix Plastotrade Pvt. Ltd., is legally incompetent, as it is not supported by any board resolution authorizing initiation of criminal proceedings against the petitioner. In absence of such a resolution, the institution of the complaint is vitiated.
4.3. The petitioner respectfully submits that there exists no legally enforceable debt or liability. In view of the settlement arrived at between the parties--culminating in the consent decree dated Page 4 of 24 Uploaded by MANISH MISHRA(HC01776) on Wed Apr 30 2025 Downloaded on : Sat May 03 08:31:28 IST 2025 NEUTRAL CITATION R/SCR.A/2125/2018 ORDER DATED: 17/04/2025 undefined 25.03.2015 in RCS No. 593 of 2014--it stands conclusively recorded that the petitioner is not liable for any financial obligations of Harikrishna Infra Project Ltd. prior to 25.03.2015, which includes the financial year 2014-15.
4.4. It is further submitted that in light of the consent decree and the MoU dated 17.03.2015, it is not open to Respondent No. 2 to now allege that any cheque was issued for repayment of an advance allegedly extended in 2012-2013. Notably, the existence of a blank cheque book lying with Respondent No. 2 is itself acknowledged in the pleadings of Special Civil Suit No. 593 of 2014, thereby casting serious doubt on the bona fides of the complaint.
4.5. Lastly, learned advocate for the petitioners prayed to allow the present petition.
SUBMISSIONS OF THE RESPONDENTS:-
5. Per contra, learned advocate Mr. Aaditya Gupta for the respondent No.2 submitted that the present petition seeking quashing of Criminal Case No. 5969 of 2016 is wholly misconceived and an abuse of the process of law. The petition seeks to convert a disputed question of fact, involving liability under the Negotiable Instruments Act, 1881, into a matter for summary adjudication under Page 5 of 24 Uploaded by MANISH MISHRA(HC01776) on Wed Apr 30 2025 Downloaded on : Sat May 03 08:31:28 IST 2025 NEUTRAL CITATION R/SCR.A/2125/2018 ORDER DATED: 17/04/2025 undefined Section 482 of the CrPC, which is impermissible in law and prayed to dismiss the present petition.
5.1. The complaint in question clearly discloses the commission of an offence under Section 138 of the Negotiable Instruments Act. The issuance of cheque(s), subsequent dishonour, statutory notice, and failure to make payment within the prescribed time frame have all been clearly pleaded and substantiated. At this stage, only a prima facie case is required to be made out, and the allegations, taken at face value, attract the ingredients of the offence.
5.2. As per settled legal principles, once the issuance of cheque and signature are admitted or established, the presumption under Section 139 of the NI Act operates in favour of the complainant that the cheque was issued in discharge of a legally enforceable debt or liability. The burden to rebut such presumption lies upon the accused and cannot be adjudicated at the threshold stage of quashing proceedings.
5.3. In light of the above, it is respectfully prayed that this Hon'ble Court may be pleased to dismiss the petition, as it lacks merit and is filed solely with a view to stall the criminal prosecution initiated in accordance with law.
Page 6 of 24 Uploaded by MANISH MISHRA(HC01776) on Wed Apr 30 2025 Downloaded on : Sat May 03 08:31:28 IST 2025NEUTRAL CITATION R/SCR.A/2125/2018 ORDER DATED: 17/04/2025 undefined FINDINGS OF THE COURT:-
6. At the outset, it would be apposite to refer to paragraph 2 of the complaint, which pertains to the transaction between the parties and reads as under:--
"During the course of business relations complainant has given advance payment to accused firm for purchase of plastic granules and product between the time period of 27th January, 2012 and 16th April, 2013. That all the Accused have undertaken and assured complainant for re-payment of the due amount and all the Accused had also made some part payment to satisfy due of complainant, but amount worth Rs.6,39,01,600/-(Six Hundred Only) remained to be un-paid and which is due till this date."
6.1. The complainant has, in paragraph 2 of the complaint, alleged that an advance payment was made to the accused for the purchase of plastic granules during the period between 27.01.2012 and 16.04.2013. It is further alleged that a cheque for an amount of 6,39,01,600/- was handed over to the petitioner. It is not in dispute that the said cheque was deposited with the State Bank of India;
however, it was returned unpaid. A statutory notice, as contemplated under Section 138 (b) of the Negotiable Instruments Act, was issued and duly replied to. Nonetheless, as the amount under the cheque was not repaid, the complainant proceeded to file the present criminal complaint.
Page 7 of 24 Uploaded by MANISH MISHRA(HC01776) on Wed Apr 30 2025 Downloaded on : Sat May 03 08:31:28 IST 2025NEUTRAL CITATION R/SCR.A/2125/2018 ORDER DATED: 17/04/2025 undefined 6.2. It is an admitted position that the learned trial Court took cognizance and issued process against the partnership firm and Mr. Ghanshyambhai C. Thakkar, the signatory of the cheque. Notably, the learned trial Court declined to issue process against the other two partners of the firm on the ground that they are not involved in day to day affairs of partnership firm, which prima facie indicates proper application of judicial mind.
6.3. The first contention raised by learned advocate Mr. Ravish Bhatt for the petitioners is that the complainant has failed to produce any supporting evidence to establish that such a substantial amount was advanced to the accused. It is, however, pertinent to note that the present petition has been filed at the threshold, i.e., at the stage of issuance of process.
6.4. At this stage, it apt to refer Section 139 of the N.I. Act which is as under:-
"139. 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."Page 8 of 24 Uploaded by MANISH MISHRA(HC01776) on Wed Apr 30 2025 Downloaded on : Sat May 03 08:31:28 IST 2025
NEUTRAL CITATION R/SCR.A/2125/2018 ORDER DATED: 17/04/2025 undefined 6.5. A plain reading of Section 139 of the Negotiable Instruments Act, 1881 establishes a statutory presumption in favour of the holder of the cheque, to the effect that the cheque was received for the discharge, in whole or in part, of any debt or other legally enforceable liability, unless the contrary is proved. In other words, the burden of proof shifts upon accused to rebut the presumption and to demonstrate that the cheque was not issued in discharge of any debt or liability. Though the presumption under Section 139 is a rebuttable one, it continues to operate in favour of the holder of the cheque until it is successfully rebutted by the accused by leading cogent evidence.
6.6. At this juncture, it is apposite to refer to the judgment of the Hon'ble Supreme Court in Rohitbhai Jivanlal Patel v. State of Gujarat, AIR 2019 SC 1876, wherein the Hon'ble Court, in paragraph 7 and 7.1, extracted and examined the findings of the High Court as under:
"7. Against the aforementioned judgment and orders of acquittal, the complainant preferred appeals before the High Court of Gujarat, which have been considered and decided together by the impugned common judgment and order dated 08.01.2018. The High Court observed that the presumption under Sections 118 and 139 of the NI Act was required to be drawn that the cheques were issued for consideration and until contrary was proved, such presumption would hold good; that the complainant had proved legally enforceable Page 9 of 24 Uploaded by MANISH MISHRA(HC01776) on Wed Apr 30 2025 Downloaded on : Sat May 03 08:31:28 IST 2025 NEUTRAL CITATION R/SCR.A/2125/2018 ORDER DATED: 17/04/2025 undefined debt in the oral as also documentary evidence, including the written acknowledgment by the accused on stamp paper; and that except bare denial, nothing was brought on record by the accused to dislodge the proof adduced by the complainant.
7.1. The High Court observed that if the transaction in question was not reflected in the accounts and income-tax returns, that would at best hold the assesse or lender liable for action under the income-tax laws but, if the complainant succeeds in showing the lending of amount, the existence of legally enforceable debt cannot be denied. The High Court also observed that the issue regarding washing away of the cheques in rain water was of no significance when the accused had accepted his liability in clear terms. The High Court found that the defence plea of the accused that the money was given as hand loan by his friend Shri Jagdishbhai got falsified by the version of the said Shri Jagdishbhai, who was examined as a witness on behalf of the complainant. The High Court, therefore, set aside the impugned orders and, while convicting the accused-appellant for the offence under Section 138 of the NI Act, sentenced him in the manner noticed hereinbefore. The High Court, inter alia, observed and held as under:
"24. It is necessary at this stage also to refer to the emphasis laid by the learned counsel appearing for the respondent No.2 on the source of the fund which has been lent by the appellant. It has emerged from the detailed examination of the record, as also detailed examination-in-chief as well as cross-examination, that the complainant runs the business. He also maintains the books of account and he has his own factory in the name and style of 'Ashirwad Enterprise' and manufactures plastic. The said factory is situated at Jambusar. Ordinarily, any prudent business person would prefer to transact by cheque while lending money, but it is quite often noticed that the cash transactions in the business would allow huge sum of money as cash, which sometimes are shown in the books of account as cash on hands or otherwise as amount available on books. Assuming that cheque transaction of lending of amount is absent and income-tax returns also do not reflect such amount, that at the best would hold the assessee or lender liable for action under the Income-tax laws. However, otherwise, if he succeeds in showing lending of such amount, both by oral evidence of himself and his friend, on whom even respondent No.2 relies upon and from the Page 10 of 24 Uploaded by MANISH MISHRA(HC01776) on Wed Apr 30 2025 Downloaded on : Sat May 03 08:31:28 IST 2025 NEUTRAL CITATION R/SCR.A/2125/2018 ORDER DATED: 17/04/2025 undefined writing of the respondent No.2 given separately along with seven cheques signed by him, what possible reasons could weigh with the Court to deny the existence of legally enforceable debt in such glaring circumstances.
25. Considering the fact that the complainant maintains his books of account, coupled with the fact that the respondent No.2 had merely refuted on flimsy ground of his having transacted with witness Jagdishbhai and not with the complainant, has failed to discharge the burden which had shifted upon him. It is to be noted that the respondent No.2 has admitted his signature on the impugned cheque. At no point of time, the cheque has been disputed......Once this fact is acknowledged that the signature on the cheque is that of the respondent No. 2-accused, section 139 of the Negotiable Instruments Act would mandate the presumption that the cheque concerns a legally enforceable debt or liability. Of course, this presumption is in the nature of rebuttal and onus is on the accused thereafter to raise a probable defence. 25.1 As can be noted from the chronology of events and the material that has been placed before this Court that the defence raised by the accused is not at all probable. The respondent No.2-accused states that the money was given as a hand loan by his friend Jagdishbhai and not the appellant, also gets falsified completely by the version of Jagdishbhai. It appears that in case of all the seven cheques when notices were given prior to the filing of the complaint, he has chosen not to reply to four of the notices. Either on account of insufficiency of the funds or because he has closed account that the cheques could not be realized. All these circumstances cumulatively lead this Court to conclude that the appellant succeeded in proving the legally enforceable debt and no probable defence for rebutting the statutory presumption is raised by the respondent No.2. 25.2 Initial presumption as contemplated under section 139 of the Negotiable Instruments Act, when the proof of lending of the money and acceptance of the signatures on the cheques, shall need to be raised by the Court in favour of the appellant.
28. .......... Reasonably, when the appellant had proved the legally enforceable debt, not only through his own evidence, but also through the evidence of his friend Jagdishbhai and also other contemporaneous record, more particularly, the document at Exhibit 24, which is a writing by which the respondent No.2 clearly indicates and accepts his liability to Page 11 of 24 Uploaded by MANISH MISHRA(HC01776) on Wed Apr 30 2025 Downloaded on : Sat May 03 08:31:28 IST 2025 NEUTRAL CITATION R/SCR.A/2125/2018 ORDER DATED: 17/04/2025 undefined the tune of Rs. 22.50 lakh. Thus, the burden had shifted upon the respondent No. 2. The presumption which was needed to be drawn by the Court under section 118 of the Negotiable Instruments Act would oblige the Court to presume that the cheque had been issued for consideration and until contrary is proved, such presumption would hold the ground. Except the bare denial, nothing has been found to come on record to dislodge the positive proof that has been adduced by the appellant.
29. In the opinion of this Court, the entire argument that the rainy water could not have washed away the cheques, pales into insignificance and is not argument worth consideration, more particularly, when the respondent-accused in no unclear terms had accepted his liability of his having accepted the amount of Rs. 22.50 lakh from the complainant and it also declared the issuance of seven cheques of particular dates towards such legally enforceable debt. If it was an understanding between the parties qua issuance of fresh cheques, with an ostensible reason of old cheques having washed away, those are the non-issues. This Court cannot be oblivious of the fact that section 138 of the Negotiable Instruments Act has been made a penal provision not only for the cheques to give acceptability in the transaction, but it is the economic blood-line of the country and, therefore, the law makers have made the special rules of evidence by introducing sections 118 and 139 of the Negotiable Instruments Act.
30. The trial Court has committed a serious error by not discharging its obligation of recognizing the evidentiary value and not appreciating the positive evidence which led to the reasonable proof of legally enforceable debt existing on the side of the original complainant."
From the aforesaid judgment, para 13, 14, 15, and 16 are relevant which reads as under:-
13. We may usefully take note of the provisions contained in Sections 118 and 139, being the special rules of evidence applicable to the case as follows:
4 The principal and charging part of Section 138 NI Act may also be extracted for ready reference as follows:Page 12 of 24 Uploaded by MANISH MISHRA(HC01776) on Wed Apr 30 2025 Downloaded on : Sat May 03 08:31:28 IST 2025
NEUTRAL CITATION R/SCR.A/2125/2018 ORDER DATED: 17/04/2025 undefined "138 Dishonour of cheque for insufficiency, etc., of funds in the account.
---- Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other "118. Presumption 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;
(c) as to time of acceptance-----that every accepted bill of exchange was accepted within a reasonable time after its date and before its maturity;
(d) as to time of transfer----that every transfer of a negotiable instrument was made before its maturity;
(e) as to order of indorsements----that the indorsements appearing upon a negotiable instrument were made in the order in which they appear thereon;Page 13 of 24 Uploaded by MANISH MISHRA(HC01776) on Wed Apr 30 2025 Downloaded on : Sat May 03 08:31:28 IST 2025
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(f) as to stamps--- that a lost promissory note, bill of exchange or cheque was duly stamped;
(g) that holder is a holder in due course----that the holder of a negotiable instrument is a holder in due course;
Provided that, where the instrument has been obtained from its lawful owner, or from any person in lawful custody thereof, by means of an offence or fraud, or has been obtained from the maker or acceptor thereof by means of an offence of fraud, or for unlawful consideration, the burden of proving that the holder is a holder in due course lies upon him."
"139. Presumption in favour of holder ---- It shall be presumed, unless the contrary is proved, that the holder is a cheque received the cheque of the nature referred to in section 138 for the discharge, in whole or in part, if any debt or other liability."
14. So far the question of existence of basic ingredients for drawing of presumption under Sections 118 and 139 the NI Act is concerned, apparent it provisions of this Act ,be punished with imprisonment for [a term which may be extended to two years], or with fine which may extend to twice the amount of the cheque, or with both: is that the accused-appellant could not deny his signature on the cheques in question that had been drawn in favour of the complainant on a bank account maintained by the accused for a sum of Rs. 3 lakhs each. The said cheques were presented to the Bank concerned within the period of their validity and were returned unpaid for the reason of either the balance being insufficient or the account being closed. All the basic ingredients of Section 138 as also of Sections 118 and 139 are apparent on the face of the record. The Trial Court had also consciously taken note of these facts and had drawn the requisite presumption. Therefore, it is required to be presumed that the cheques in question were drawn for consideration and the holder of the cheques i.e., the complainant received the same in discharge of an existing debt. The onus, therefore, shifts on the accused-appellant to establish a probable defence so as to rebut such a presumption.
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15. In Rangappa v. Sri Mohan : (2010) 11 SCC 441, this Court has reiterated and summarised the principles relating to presumptions under Sections 118 and 139 of the NI Act and rebuttal thereof in the following:-
"26. In the light of these extracts, we are in agreement with the respondent claimant that the presumption mandated by Section 139 of the Act does indeed include the existence of a legally enforceable debt or liability. To that extent, the impugned observations in Krishna Janardhan Bhat may not be correct. However, this does not in any way cast doubt on the correctness of the decision in that case since it is based on the specific facts and circumstances therein. As noted in the citations, this is of course in the nature of a rebuttal presumption and it is open to the accused to raise a defence wherein the existence of a legally enforceable debt or liability can be contested. However, there can be no doubt that there is an initial presumption which favours the complainant.
27. Section 139 of the Act is an example of a reverse onus clause that has been included in furtherance of the legislative objective of improving the credibility of negotiable instruments. While Section 138 of the Act specifies a strong criminal remedy in relation to the dishonour of cheques, the rebuttable presumption under Section 139 is a device to prevent undue delay in the course of litigation. However, it must be remembered that the offence made punishable by Section 138 can be better described as a regulatory offence since the bouncing of a cheque is largely in the nature of a civil wrong whose impact is usually confined to the private parties involved in commercial transactions. In such a scenario, the test of proportionality should guide the construction and interpretation of reverse onus clauses and the defendant-accused cannot be expected to discharge an unduly high standard of proof.
28. In the absence of compelling justifications, reverse onus clauses usually impose an evidentiary burden and not a persuasive burden. Keeping this in view, it is a settled position that when an accused has to rebut the presumption under Section 139, the standard of proof for doing so is that of "preponderance of probabilities". Therefore, if the accused Page 15 of 24 Uploaded by MANISH MISHRA(HC01776) on Wed Apr 30 2025 Downloaded on : Sat May 03 08:31:28 IST 2025 NEUTRAL CITATION R/SCR.A/2125/2018 ORDER DATED: 17/04/2025 undefined is able to raise a probable defence which creates doubts about the existence of a legally enforceable debt or liability, the prosecution can fail. As clarified in the citations, the accused can rely on the materials submitted by the complainant in order to raise such a defence and it is conceivable that in some cases the accused may not need to adduce evidence of his/her own."
16. On the aspects relating to preponderance of probabilities, the accused has to bring on record such facts and such circumstances which may lead the Court to conclude either that the consideration did not exist or that its non- existence was so probable that a prudent man would, under the circumstances of the case, act upon the plea that the consideration did not exist. This Court has, time and again, emphasized that though there may not be sufficient negative evidence which could be brought on record by the accused to discharge his burden, yet mere denial would not fulfil the requirements of rebuttal as envisaged under Section 118 and 139 of the NI Act. This court stated the principles in the case of Kumar Exports (supra) as follows:
"20. The accused in a trial under Section 138 of the Act has two options. He can either show that consideration and debt did not exist or that under the particular circumstances of the case the non-existence of consideration and debt is so probable that a prudent man ought to suppose that no consideration and debt existed. To rebut the statutory presumptions an accused is not expected to prove his defence beyond reasonable doubt as is expected of the complainant in a criminal trial. 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 Page 16 of 24 Uploaded by MANISH MISHRA(HC01776) on Wed Apr 30 2025 Downloaded on : Sat May 03 08:31:28 IST 2025 NEUTRAL CITATION R/SCR.A/2125/2018 ORDER DATED: 17/04/2025 undefined consideration of which, the court may either believe 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. Apart from adducing direct evidence to prove that the note in question was not supported by consideration or that he had not incurred any debt or liability, the accused may also rely upon circumstantial evidence and if the circumstances so relied upon are compelling, the burden may likewise shift again on to the complainant. The accused may also rely upon presumptions of fact, for instance, those mentioned in Section 114 of the Evidence Act to rebut the presumptions arising under Sections 118 and 139.
21. The accused has also an option to prove the non- existence of consideration and debt or liability either by letting in evidence or in some clear and exceptional cases, from the case set out by the complainant, that is, the averments in the complaint, the case set out in the statutory notice and evidence adduced by the complainant during the trial. Once such rebuttal evidence is adduced and accepted by the court, having regard to all the circumstances of the case and the preponderance of probabilities, the evidential burden shifts back to the complainant and, therefore, the presumptions under Sections 118 and 139 of the Act will not again come to the complainant's rescue."
6.7. Therefore, applying the ratio laid down in the aforementioned judgment to the facts of the present case, the petitioner-accused cannot contend that merely because the complainant has not produced any supporting evidence at the stage of issuance of process, it should be presumed that the cheque in question was not issued towards discharge of any legally enforceable debt or liability. At the stage of issuance of process, the presumption under Section 139 of the Negotiable Instruments Act, 1881 operates in favour of the complainant.
Page 17 of 24 Uploaded by MANISH MISHRA(HC01776) on Wed Apr 30 2025 Downloaded on : Sat May 03 08:31:28 IST 2025NEUTRAL CITATION R/SCR.A/2125/2018 ORDER DATED: 17/04/2025 undefined 6.8. The second contention advanced is that, since the accounts between the parties were allegedly settled in civil litigation, criminal proceedings under Section 138 of the NI Act would not be maintainable. The gravamen of the argument is that the accused had instituted a civil suit against the complainant, wherein a settlement agreement was recorded, culminating in a compromise decree, thereby indicating that all disputes between the parties had been resolved in the year 2015 and that no amount remained outstanding thereafter. However, such contention are forming on disputed question of facts. At the stage of issuance of process, and where yet evidence is to be recorded, it cannot be decided that whether while drawing compromise decree, whole dispute was compromised or no amount remained outstanding. Whether transaction averred in complaint is also covered by said compromise or not. All this disputed questions cannot be adjudicated in exercise of inherent power also extraordinary jurisdiction.
6.9. In case of Sampelly Satyanarayana Rao v. Indian Renewable Energy Development Agency Ltd, (2016) 10 SCC 458, Paras 14, 13, and 16 reads as under:-
"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. versus M.A. Abida[8], relied upon on behalf of the respondent, this Court dealt with the Page 18 of 24 Uploaded by MANISH MISHRA(HC01776) on Wed Apr 30 2025 Downloaded on : Sat May 03 08:31:28 IST 2025 NEUTRAL CITATION R/SCR.A/2125/2018 ORDER DATED: 17/04/2025 undefined contention that the proceedings under Section 138 were liable to be quashed as the cheques were given as "security" as per defence of the accused. Negativing the contention, this Court held :-
"10. Having heard the learned counsel for the parties, we are of the view that the accused (Respondent 1) challenged the proceedings of criminal complaint cases before the High Court, taking factual defences. Whether the cheques were given as security or not, or whether there was outstanding liability or not is a question of fact which could have been determined only by the trial court after recording evidence of the parties. In our opinion, the High Court should not have expressed its view on the disputed questions of fact in a petition under Section 482 of the Code of Criminal Procedure, to come to a conclusion that the offence is not made out. The High Court has erred in law in going into the factual aspects of the matter which were not admitted between the parties. The High Court further erred in observing that Section 138(b) of the NI Act stood uncomplied with, even though Respondent 1 (accused) had admitted that he replied to the notice issued by the complainant. Also, the fact, as to whether the signatory of demand notice was authorised by the complainant company or not, could not have been examined by the High Court in its jurisdiction under Section 482 of the Code of Criminal Procedure when such plea was controverted by the complainant before it.
11. In Suryalakshmi Cotton Mills Ltd. v. Rajvir Industries Ltd. [(2008) 13 SCC 678], this Court has made the following observations explaining the parameters of jurisdiction of the High Court in exercising its jurisdiction under Section 482 of the Code of Criminal Procedure: (SCC pp. 685-87, paras 17 & 22) "17. The parameters of jurisdiction of the High Court in exercising its jurisdiction 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 Page 19 of 24 Uploaded by MANISH MISHRA(HC01776) on Wed Apr 30 2025 Downloaded on : Sat May 03 08:31:28 IST 2025 NEUTRAL CITATION R/SCR.A/2125/2018 ORDER DATED: 17/04/2025 undefined 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."
610. In the recent judgment rendered in the case of Rathish Babu Unnikrishnan v. State (Govt. of NCT of Delhi) and Another, 2022 Page 20 of 24 Uploaded by MANISH MISHRA(HC01776) on Wed Apr 30 2025 Downloaded on : Sat May 03 08:31:28 IST 2025 NEUTRAL CITATION R/SCR.A/2125/2018 ORDER DATED: 17/04/2025 undefined SCC OnLine SC 513, the Hon'ble Supreme Court, while referring to the ratio laid down in Rajeshbhai Muljibhai Patel v. State of Gujarat, (2020) 3 SCC 794, has categorically held that disputed questions of fact are not required to be adjudicated at the threshold stage.
Instead, such issues ought to be considered and decided only after the parties have had the opportunity to lead evidence. The relevant paragraphs of the judgment are reproduced hereinbelow:-
"12. At any rate, whenever facts are disputed the truth should be allowed to emerge by weighing the evidence. On this aspect, we may benefit by referring to the ratio in Rajeshbhai Muljibhai Patel vs. State of Gujarat5 where the following pertinent opinion was given by Justice R. Banumathi: -
"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 (2010) 11 SCC 441 5 (2020) 3 SCC 794 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."
13. Bearing in mind the principles for exercise of jurisdiction in a proceeding for quashing, let us now turn to the materials in this case. On careful reading of the complaint and the order passed by the Magistrate, what is discernible is that a possible view is taken that the cheques drawn were, in discharge of a debt for purchase of shares. In any case, when there is legal presumption, it would not be judicious for the quashing Court Page 21 of 24 Uploaded by MANISH MISHRA(HC01776) on Wed Apr 30 2025 Downloaded on : Sat May 03 08:31:28 IST 2025 NEUTRAL CITATION R/SCR.A/2125/2018 ORDER DATED: 17/04/2025 undefined to carry out a detailed enquiry on the facts alleged, without first permitting the trial Court to evaluate the evidence of the parties. The quashing Court should not take upon itself, the burden of separating the wheat from the chaff where facts are contested. To say it differently, the quashing proceedings must not become an expedition into the merits of factual dispute, so as to conclusively vindicate either the complainant or the defence.
14. The parameters for invoking the inherent jurisdiction of the Court to quash the criminal proceedings under S.482 CrPC, have been spelled out by Justice S. Ratnavel Pandian for the two judges' bench in State of Haryana v. Bhajan Lal6, and the suggested precautionary principles serve as good law even today, for invocation of power under Section 482 of the Cr.P.C.
"103. We also give a note of caution to the effect that the power of quashing a criminal proceeding should be exercised very sparingly and with circumspection and that too in the rarest of rare cases; that the court will not be justified in embarking upon an enquiry as to the reliability or genuineness or otherwise of the allegations made in the FIR or the complaint and that the extraordinary or inherent powers do not confer an arbitrary jurisdiction on the court to act according to its whim or caprice."
15. In the impugned judgment, the learned Judge had rightly relied upon the opinion of Justice J.S.Khehar for a Division Bench in Rajiv Thapar (supra), which succinctly express the following relevant parameters to be considered by the quashing Court, at the stage of issuing process, committal, or framing of charges, "28. The High Court, in exercise of its jurisdiction under Section 482 CrPC, must make a just and rightful choice. This is not a stage of evaluating the truthfulness or otherwise of the allegations levelled by the prosecution/ complainant against the accused. Likewise, it is not a stage for determining how weighty the defences raised on behalf of the accused are. Even if the accused is successful in showing some suspicion or doubt, in the allegations levelled by the prosecution/ complainant, it would be impermissible to discharge the accused before trial. This is so because it would Page 22 of 24 Uploaded by MANISH MISHRA(HC01776) on Wed Apr 30 2025 Downloaded on : Sat May 03 08:31:28 IST 2025 NEUTRAL CITATION R/SCR.A/2125/2018 ORDER DATED: 17/04/2025 undefined result in giving finality to the accusations levelled by the prosecution/complainant, without allowing the prosecution or the complainant to adduce evidence to substantiate the same."
16. The proposition of law as set out above makes it abundantly clear that the Court should be slow to grant the relief of quashing a complaint at a pre-trial stage, when the factual controversy is in the realm of possibility particularly because of the legal presumption, as in this matter. What is also of note is that the factual defence without having to adduce any evidence need to be of an unimpeachable quality, so as to altogether disprove the allegations made in the complaint.
17. The consequences of scuttling the criminal process at a pre-trial stage can be grave and irreparable. Quashing proceedings at preliminary stages will result in finality without the parties having had an opportunity to adduce evidence and the consequence then is that the proper forum i.e., the trial Court is ousted from weighing the material evidence. If this is allowed, the accused may be given an un- merited advantage in the criminal process. Also because of the legal presumption, when the cheque and the signature are not disputed by the appellant, the balance of convenience at this stage is in favour of the complainant/prosecution, as the accused will have due opportunity to adduce defence evidence during the trial, to rebut the presumption.
18. Situated thus, to non-suit the complainant, at the stage of the summoning order, when the factual controversy is yet to be canvassed and considered by the trial court will not in our opinion be judicious. Based upon a prima facie impression, an element of criminality cannot entirely be ruled out here subject to the determination by the trial Court. Therefore, when the proceedings are at a nascent stage, scuttling of the criminal process is not merited."
CONCLUSION AND ORDER:-
Page 23 of 24 Uploaded by MANISH MISHRA(HC01776) on Wed Apr 30 2025 Downloaded on : Sat May 03 08:31:28 IST 2025NEUTRAL CITATION R/SCR.A/2125/2018 ORDER DATED: 17/04/2025 undefined 6.11. In view of the foregoing, upon consideration of the submissions advanced by the learned advocate for the petitioner, this Court is of the opinion that the complaint cannot be non-suited at this preliminary stage, particularly at the juncture of issuance of the summoning order. The contentions raised by the learned advocate for the petitioners pertain to disputed questions of fact, which are required to be adjudicated during the course of trial.
Accordingly, since the proceedings are at a nascent stage, interference is not warranted. The petition is found to be devoid of merit and is, therefore, DISMISSED.
6.12. It is clarified that the observations made hereinabove are confined solely to the adjudication of the present petition and shall not prejudice the trial proceedings in any manner.
(J. C. DOSHI,J) MANISH MISHRA Page 24 of 24 Uploaded by MANISH MISHRA(HC01776) on Wed Apr 30 2025 Downloaded on : Sat May 03 08:31:28 IST 2025