Gujarat High Court
Dhirubhai Rananbhai Bhanderi vs State Of Gujarat on 3 July, 2018
Author: Sonia Gokani
Bench: Sonia Gokani
R/CR.A/832/2018 CAV JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/CRIMINAL APPEAL NO. 832 of 2018
FOR APPROVAL AND SIGNATURE:
HONOURABLE MS JUSTICE SONIA GOKANI
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1 Whether Reporters of Local Papers may be allowed to
see the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy of the
judgment ?
4 Whether this case involves a substantial question of law
as to the interpretation of the Constitution of India or any
order made thereunder ?
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DHIRUBHAI RANANBHAI BHANDERI
Versus
STATE OF GUJARAT
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Appearance:
MR VISHAL B MEHTA(5319) for the PETITIONER(s) No. 1
for the RESPONDENT(s) No. 2
MR CHINTAN DAVE, PUBLIC PROSECUTOR(2) for the RESPONDENT(s)
No. 1
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CORAM: HONOURABLE MS JUSTICE SONIA GOKANI
Date : 03/07/2018
CAV JUDGMENT
1. This is an appeal under Section 378 of the Code of Criminal Procedure, 1973, where, the original complainant has approached this Court being aggrieved and dissatisfied with the judgment and order passed by the learned Judicial Magistrate, First Class, Visavadar, Junagadh (for short, 'trial Court'), rendered in Criminal Case No. 34 of 2017, Dated: 21.12.2017, whereby, Page 1 of 35 R/CR.A/832/2018 CAV JUDGMENT opponent No.2 is ordered to be acquitted from the offence punishable under Section 138 of the Negotiable Instruments Act, 1881 ('NI Act', hereinafter).
2. The case of the appellant-original complainant is that he is possessions two vehicles, i.e. one is a mounting vehicle bearing registration No. GJ-3-EA-9785 and another is compressor vehicle bearing registration No. GJ-3- EA-9784, which he sold to the original accused- opponent No. 2, herein, by executing an agreement on 28.12.2015, whereby, the total value of both the vehicles was fixed at Rs.60.51/- lakh. Opponent No.2 paid a sum of Rs.10.51/- lakh in cash and had given five post dated cheques of Rs.10/- lakh each towards the remaining amount of consideration to the appellant.
2.1 The appellant filed Inquiry Case No. 9 of 2016, as the remaining amount of consideration was not paid, before the Court of the competent Court at Visavadar. The court ordered to conduct an inquiry into the matter and the aforesaid dispute came to be resolved by the parties amicably, where, the settlement agreement came to be executed between the parties on 28.09.2016. A copy of the said agreement is produced on record.
Page 2 of 35 R/CR.A/832/2018 CAV JUDGMENTPursuant to such settlement, opponent No.2 issued two cheques to the appellant for an amount of Rs.21.51/- lakh and Rs.20/- lakh. When those cheques were deposited by the appellant in his account with Central Bank of India on 27.12.2016, they were dishonoured on 28.12.2016. The appellant was given the intimation about return of those cheques by a memorandum dated 29.12.2016.
2.2 A demand notice, therefore, came to be issued by the appellant through his advocate on 06.01.2017 and the same was served on opponent No.2 on 09.01.2017. However, neither any reply was given to the same nor the outstanding amount was paid by opponent No.2. Therefore, a criminal case being Criminal Case No. 34 of 2017 came to be lodged by the appellant with the trial Court on 01.03.2017 under the provisions of Section 138 of the NI Act against opponent No.2.
2.3 Upon the summons issued by the trial Court, opponent No.2 appeared through his learned Advocate. After hearing both the sides, the trial Court vide judgment and order dated 21.12.2017 acquitted opponent No.2, and therefore, the present appeal.
3. This Court has heard the learned Page 3 of 35 R/CR.A/832/2018 CAV JUDGMENT Advocate, Mr. Mehta, for the appellant, who has urged that when the cheques have been dishonoured, the presumptions available under Sections 118 and 139 of the NI Act ought to have been drawn in favour of the appellant by the trial Court. Unless rebutted, legal presumptions ought to have been drawn in favour of the appellant. The Court, unfortunately, had not taken into account the settled legal position and instead appreciated the evidence erroneously and illegally. He, further, has urged that it is not in dispute that both the cheques had been dishonoured and the memorandum to that effect had been received from the bank concerned.
4. Per contra, learned Advocate, Ms. Shukla, appearing for and on behalf of opponent No.2 urged that unregistered agreement with respect to the sell of the vehicles in question was for the consideration of Rs.60.51/- lakh. On 28.12.2015, opponent No.2 had already paid the earnest money of Rs.10.50/- lakh. It is not in dispute that when five different cheuqes were issued by opponent No.2 and it was agreed that on the due date the appellant would be at liberty either to encash those cheques or to return the same to opponent No.2 and opponent No. 2 would pay the concerned installment in cash. He paid the first installment on 01.02.2016 and the appellant had Page 4 of 35 R/CR.A/832/2018 CAV JUDGMENT returned the first cheque to opponent No.2. Similarly, opponent No.2 also paid the second installment on 01.03.2016 and the second cheque was also returned by the appellant to him. Thus, out of the total sale consideration of Rs.60.51/- lakh, an amount of Rs.30.51/- lakh had already been paid. However, opponent No. 2 and three of his associates decided not to purchase the vehicles in question, and therefore, according to him, the sale agreement dated 28.12.2015 could not be completed. Further, for use of the vehicles in question for a period of three months, he had given an offer to the appellant to deduct a sum of Rs.10/- lakh from the amount paid towards the consideration and return the remaining amount. It is, therefore, her say that with a view to avoid this repayment, appellant has filed a vexatious private complaint after about four months, i.e. on 18.07.2016 being Criminal Complaint No. 9 of 2016 with Visavadar Court under Sections 420, 406, 465, 467, 469 and 471 of the Indian Penal Code, 1860. It is filed only against opponent No.2, though, it meant that it was against his associates also. She has specifically alleged that on 20.09.2016, opponent No.2 was called by the IO under the pretext of recording his statement and in connivance with the appellant, opponent No.2 was administered threat and by way of such coercion, he was made Page 5 of 35 R/CR.A/832/2018 CAV JUDGMENT to enter into a settlement and to give two cheques. This aspect also is revealed in the cross-examination of the appellant in Criminal Case No. 34 of 2017.
4.1 It was agreed, as per the said settlement, according to him, to pay the outstanding amount of Rs.41.51/- lakh, after selling the vehicles in question within a period of three months. These vehicles, however, could not be sold, as they continue to be in the ownership of the appellant. It is only with a view to harass opponent No.2 that the applicant deposited the cheques, knowing fully well that he himself is the owner of the vehicles. The appellant had intentionally suppressed the factum of original agreement dated 28.12.2015. She, further, urged that there is a gross suppression in the legal notice as well as in the criminal case, where, there is no reference of other persons and the respondent is the victim of appellant having forcefully obtained these cheques with the help of police.
4.2 In the legal contentions, she urged that the cheques were not issued towards the discharge of any existing debt or liability, but, were issued for due performance of the agreement, and therefore, such transaction is exclusively and Page 6 of 35 R/CR.A/832/2018 CAV JUDGMENT essentially a civil transaction, which would not attract criminal liability under Section 138 of the NI Act for which she has placed reliance on the decision in 'HARISHKUMAR HIRALAL TAPIYAWALA VS. STATE OF GUJARAT', 2010 GLH_EL 227642. She, further, urged that the payment of balance consideration in pursuance to agreement to sell cannot be said to be a legally enforceable debt. If, there is violation of any term of the agreement and if, the cheque is issued under any agreement between the parties, he is to take appropriate steps before the Civil Court and not before the Criminal Court. She, further, has urged that the cheques, since, were obtained due to intervention of the police, it should be construed that the opponent No.2-accused rebutted the presumption under Section 139 of the NI Act. In this regard, she placed reliance on the decision rendered in case of 'RAJENDRAN VS. N. RADHAKRISHNAN', 2012 SCC Mad 2639. She further urged that, if, there are two views possible in acquittal appeal from the very set of evidence, the appellate Court has to adopt the view which is favourable to the accused. She sought to rely on the decision in 'GAJANAN LOBAJI KITTURKAR VS. SUMATI S. BHANDARI AND ANOTHER', 2014 SCC Online Bom 1712.
4.3 Since, learned Advocate on both the sides Page 7 of 35 R/CR.A/832/2018 CAV JUDGMENT have fervently argued on the custody of the vehicles, this Court deemed it appropriate to refer to them to the High Court Mediation Centre. Even otherwise, in wake of the decision in 'DAMODAR S. PRABHU VS. SAYED BABALAL H.', (2010) 5 SCC 663, this Court deemed it appropriate to avail an opportunity to the parties to settle their disputes amicably. However, the report of the learned Mediator received by this Court indicates that the same is not successful.
4.4 With this background, at this stage, it would be profitable to take note of the law laid down by the Apex Court in various decisions that when there are two views possible, appellate Court is not to interfere, even if, there is a possibility of arriving at a different conclusion with the very set of evidence adduced before the Court. The trial Court after extensive recordance and appreciation of the evidence, chose to acquit opponent No.2 by holding that the appellant did not succeed in proving his guilt beyond reasonable doubt.
4.5 Therefore, what is required to be considered is as to whether, there is an apparent illegality in arriving at such a conclusion by the trial Court. It is a matter of record that the two cheques, which have been dishonoured, had Page 8 of 35 R/CR.A/832/2018 CAV JUDGMENT not been issued by opponent No.2 in connection with the two vehicles in regard to which an unregistered agreement to sale was executed. Opponent No.2 and three of his associates were said to be interested in purchasing the vehicles in question, jointly. As stated above, an unregistered agreement to sale with respect to those vehicles was executed on 28.12.2015 for the total sell consideration of Rs.60.51/- lakh. It is not in dispute that at the time of execution of the agreement to sale, the amount of Rs.10.51/- lakh was paid towards earnest money and five different cheques were issued by opponent No.2 of Rs.10/- lakh each towards the remaining amount of sale consideration.
4.5.1 In the cross-examination, the appellant had agreed that this transaction had been entered into with opponent No.2 and three of his associates, namely Mansukh Bhagwanbhia Gajera and his brother of village Bhader and one Gordhanbhai of village Juna Janjaliz. However, the registered agreement dated 28.12.2015 is only with opponent No.2. It is also not disputed by the appellant that he had made a private complaint being Inquiry Case No. 9 of 2016 in the Court of the learned Judicial Magistrate, First Class, Visavadar, for the offence punishable under Sections 420, 406 etc. of the IPC against Page 9 of 35 R/CR.A/832/2018 CAV JUDGMENT opponent No.2 only. This was because payment had been made in cash by opponent No.2 and that the payment of two initial installments was also made in cash by him and after making such payments, opponent No.2 and his associates decided to return the vehicles in question after using the same for about three months. This had aggrieved the appellant obviously and he lodged the complaint against opponent No.2 by way of a private complaint, which was sent for investigation to Visavadar Police Station. It is the specific case of opponent No.2 that he was compelled to enter into a settlement at the police station and he had issued two cheques of Rs. 21.51/- lakh, bearing No. 000041, drawn on ICICI Bank, Bagasar, and of Rs.20/- lakh, bearing No. 0000042, drawn on ICICI Bank, Bagasar. This was when presented in Central Bank of India on 28.12.2016 by the appellant, they were returned with the endorsement 'Insufficient Funds'. Thus, those cheques were given pursuant to the agreement of settlement executed between the appellant and opponent No.2 on 28.09.2016. This settlement was produced before the trial Court vide Exhibit-19. It has been the consistent stand of opponent No.2 and he also had stepped into the witness box and stated that he has a shop in market yard area at village Bagasar. He with three of his associates had decided to Page 10 of 35 R/CR.A/832/2018 CAV JUDGMENT purchase the vehicles in question from the appellant. He had executed a writing with the appellant and the cash of Rs.20.50/- lakh had been given to the appellant. Mansukhbhai had confided in him that both the vehicles were in bad condition and they needed to incur huge expenditure for even starting the vehicles, and therefore, they had made a request, after three months, to the appellant to take the vehicles back and out of the total cash amount of Rs.20.51/- lakh paid to him and they had made a request to the appellant to return Rs.10/- lakh, but, it is not agreeable to the appellant for the reason that once there is a contract to purchase the vehicles, they could not have utilized it for three months and return the same without even making full payment. He had ensured on the payment of the entire amount, the transfer of the vehicles. However, when the same was not made, he lodged the private complaint being Inquiry Case No. 9 of 2016 before the Court at Visavadar.
4.6 It was alleged in the examination-in- chief by opponent No.2 that the police took him at Visavadar Police Station, as if he was a terrorist and by coercion and also threatening him, made him enter into settlement with the appellant, which according to him is perverse. As per the said settlement, the appellant needed to Page 11 of 35 R/CR.A/832/2018 CAV JUDGMENT withdraw Inquiry Case No. 9 of 2016, whereas, opponent No.2 had to pay the remaining amount of consideration by selling the vehicles in question to the appellant. Both the cheques were given by way of security, which have been misused by the appellant. Nobody was ready to purchase those vehicles considering its condition and both the vehicles were also taken away by the complainant.
4.6.1 In the cross-examination, this witness had agreed that the settlement had been arrived at Visavadar Police Station and it is pursuant to such agreement that those two cheques were given. It was also a part of the settlement agreement that after three months, the remaining amount of consideration of Rs.41.50/- had to be made to the appellant by opponent No.2 by selling both the vehicles. Both the cheques were given towards the security. The question, therefore, would arise as to whether, at the time, when the cheques were given there existed a legally enforceable debt. It is not in dispute between the parties as to who possessed the vehicles at the time of such settlement agreement. Undoubtedly, the ownership continued to be that of the appellant an there is a serious dispute with regard to the possession of the vehicles in question. According to the appellant, the very condition of the sale of the vehicle is clearly Page 12 of 35 R/CR.A/832/2018 CAV JUDGMENT revealing that vehicles were handed over to opponent No.2 and the unregistered agreement of 28.12.2015 speaks of the said transaction and handing over of the vehicles to opponent No.2 and others, whereas, according to opponent No.2, since, the complainant has the ownership of those vehicles, he had not parted with their possession and only the onus of selling the vehicle and giving the remaining amount of consideration was of opponent No.2.
4.7 The law on the point is quite clear, as can be noticed from the decision of the Apex Court in 'INDUS AIRWAYS PRIVATE LIMITED VS. MAGNUM AVIATION PRIVATE LIMITED', (2014) 12 SCC 539, it was a case of dishonour of cheque issued towards advance payment. The appellant purchaser placed two purchase orders with the respondent supplier by issuing two separate cheques towards advance payment. After some time, deal between parties got cancelled as goods were not supplied. The respondent supplier tried to supply goods, but it was refused by the appellant purchaser. Therefore, a complaint under Section 138 of the NI Act was made by the respondent supplier. The trial Court issued summons and it was challenged by the appellant purchaser before the Sessions Court. Issuance of process was quashed by the Sessions Court. However, when the challenge was Page 13 of 35 R/CR.A/832/2018 CAV JUDGMENT taken to the High Court, it set aside the order passed by the Sessions Court and thereby, the matter came-up for consideration before the Apex Court. The Apex Court observed and held that the explanation appended to Section 138 of the NI Act explains the meaning of the expression 'debt or other liability' for the purpose of Section 138 of the NI Act. This expression means a legally enforceable debt or other liability. Section 138 of the NI Act treats dishonoured cheque as an offence, if the cheque has been issued in discharge of any debt or other liability subsisting on the date of drawl of the cheuqe. The relevant observations read thus:
"7.. Section 138 of the N.I. Act is as follows:
"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 Page 14 of 35 R/CR.A/832/2018 CAV JUDGMENT 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:
Provided that nothing contained in this section shall apply unless -
(a) the cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier;
(b) the payee or the holder in due course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving a notice in writing, to the drawer of the cheque, within thirty days of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and
(c) the drawer of such cheque fails to make the payment of the said amount of money to the payee or, as the case may be, to the holder in due course of the cheque, within fifteen days of the receipt of the said notice.
Explanation. - For the purposes of this section, "debt or other liability" means a legally enforceable debt or other liability."
8. The interpretation of the expression 'for discharge of any debt or other liability' occurring in Page 15 of 35 R/CR.A/832/2018 CAV JUDGMENT Section 138 of the N.I. Act is significant and decisive of the matter.
9. The explanation appended to Section 138 explains the meaning of the expression 'debt or other liability' for the purpose of Section
138. This expression means a legally enforceable debt or other liability. Section 138 treats dishonoured cheque as an offence, if the cheque has been issued in discharge of any debt or other liability. The explanation leaves no manner of doubt that to attract an offence under Section 138, there should be legally enforceable debt or other liability subsisting on the date of drawal of the cheque. In other words, drawal of the cheque in discharge of existing or past adjudicated liability is sine qua non for bringing an offence under Section
138. If a cheque is issued as an advance payment for purchase of the goods and for any reason purchase order is not carried to its logical conclusion either because of its cancellation or otherwise, and material or goods for which purchase order was placed is not supplied, in our considered view, the cheque cannot be held to have been drawn for an exiting debt or liability. The payment by cheque in the nature of advance payment indicates that at the time of drawal of cheque, there was no existing liability.
10. In Swastik Coaters[2] , the single Judge of the Andhra Pradesh High Court while considering the Page 16 of 35 R/CR.A/832/2018 CAV JUDGMENT explanation to Section 138 held:
"........Explanation to Section 138 of the Negotiable Instruments Act clearly makes it clear that the cheque shall be relateable to an enforceable liability or debt and as on the date of the issuing of the cheque there was no existing liability in the sense that the title in the property had not passed on to the accused since the goods were not delivered. ........"
11. The Gujarat High Court in Shanku Concretes[3] dealing with Section 138 of the N.I. Act held that to attract Section 138 of the N.I. Act, there must be subsisting liability or debt on the date when the cheque was delivered. The very fact that the payment was agreed to some future date and there was no debt or liability on the date of delivery of the cheques would take the case out of the purview of Section 138 of the N.I. Act. While holding so, Gujarat High Court followed a decision of the Madras High Court in Balaji Seafoods[4].
12 In Balaji Seafoods, the Madras High Court held:
"7. Section 138 of the Negotiable Instruments Act makes it clear that where the 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 Page 17 of 35 R/CR.A/832/2018 CAV JUDGMENT 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 under Section 138 of the Act. The explanation reads that for the purposes of this section, 'debt or other liability' means a legally enforceable debt or liability."
13. The Kerala High Court in Ullas[5] had an occasion to consider Section 138 of the N.I. Act. In that case, the post-dated cheque was issued by the accused along with the order for supply of goods. The supply of goods was not made by the complainant. The accused first instructed the bank to stop payment against the cheque and then requested the complainant not to present the cheque as he had not supplied the goods. The cheque was dishonoured. The single Judge of the Kerala High Court held, ".........Ext.P1 cheque cannot be stated to be one issued in discharge of the liability to the tune of the amount covered by it, which was really issued, as is revealed by Ext. D1, as the price amount for 28 numbers of mixies, which the complainant had not supplied. ....."
14. The reasoning of the Delhi High Court in the impugned order is as follows:
Page 18 of 35 R/CR.A/832/2018 CAV JUDGMENT"8. If at the time of entering into a contract it is one of the conditions of the contract that the purchaser has to pay the amount in advance then advance payment is a liability of the purchaser. The seller of the items would not have entered into contract unless the advance payment was made to him. A condition of advance payment is normally put by the seller for the reason that the purchaser may not later on retract and refuse to take the goods either manufactured for him or procured for him. Payment of cost of the goods in advance being one of the conditions of the contract becomes liability of the purchaser. The purchaser who had issued the cheque could have been asked to make payment either by draft or in cash. Since giving cheque is a mode of payment like any other mode of payment, it is normally accepted as a payment. The issuance of a cheque at the time of signing such contract has to be considered against a liability as the amount written in the cheque is payable by the person on the date mentioned in the cheque. Where the seller or manufacturer, on the basis of cheques issued, manufactures the goods or procures the goods from outside, and has acted upon the contract, the liability of the purchaser gets fastened, the moment the seller or manufacturer acts upon the contract and procures the goods. If for any reason, the seller fails to manufacture the goods or procure the goods it is only under those circumstances that no liability is created. However, where the goods or raw material has been procured for the purchaser by seller or goods have Page 19 of 35 R/CR.A/832/2018 CAV JUDGMENT been manufactured by the seller, it cannot be said that the cheques were not issued against the liability. I consider that if the liability is not construed in this manner, the sole purpose of making dishonour of the cheque as an offence stands defeated. The purpose of making or enacting Section 138 of the N.I. Act was to enhance the acceptability of cheque in settlement of commercial transactions, to infuse trust into commercial transactions and to make a cheque as a reliable negotiable instrument and to see that the cheques of business transactions are not dishonoured. The purpose of Negotiable Instrument Act is to make an orderly statement of rules of law relating to negotiable instruments and to ensure that mercantile instruments should be equated with goods passing from one hand to other. The sole purpose of the Act would stand defeated if after placing orders and giving advance payments, the stop payments are issued and orders are cancelled on the ground of pricing of the goods as was done in this case."
15. The above reasoning of the Delhi High Court is clearly flawed inasmuch as it failed to keep in mind the fine distinction between civil liability and criminal liability under Section 138 of the N.I. Act. If at the time of entering into a contract, it is one of the conditions of the contract that the purchaser has to pay the amount in advance and there is breach of such condition then purchaser may have to make good the loss that might have occasioned to the seller but Page 20 of 35 R/CR.A/832/2018 CAV JUDGMENT that does not create a criminal liability under Section 138. For a criminal liability to be made out under Section 138, there should be legally enforceable debt or other liability subsisting on the date of drawal of the cheque. We are unable to accept the view of the Delhi High Court that the issuance of cheque towards advance payment at the time of signing such contract has to be considered as subsisting liability and dishonour of such cheque amounts to an offence under Section 138 of the N.I. Act. The Delhi High Court has traveled beyond the scope of Section 138 of the N.I. Act by holding that the purpose of enacting Section 138 of the N.I. Act would stand defeated if after placing orders and giving advance payments, the instructions for stop payments are issued and orders are cancelled. In what we have discussed above, if a cheque is issued as an advance payment for purchase of the goods and for any reason purchase order is not carried to its logical conclusion either because of its cancellation or otherwise and material or goods for which purchase order was placed is not supplied by the supplier, in our considered view, the cheque cannot be said to have been drawn for an existing debt or liability.
16. In our opinion, the view taken by Andhra Pradesh High Court in Swastik Coaters2, Madras High Court in Balaji Seafoods4, Gujarat High Court in Shanku Concretes3 and Kerala High Court in Ullas5 is the correct view and accords with the scheme of Section 138 of the N.I. Page 21 of 35 R/CR.A/832/2018 CAV JUDGMENT Act. The view taken by Delhi High Court is plainly wrong and does not deserve acceptance."
It is, thus, clear that to make out criminal liability under Section 138 of the NI Act, there should be a legally enforceable debt or liability in existence on the date of the drawl of the cheque.
4.8 The above decision was again considered by the Apex Court in 'SAMPELLY SATYANARAYANA RAO VS. INDIAN RENEWABLE ENERGY DEVELOPMENT AGENCY LIMITED', (2016) 10 SCC 458, where, the appellant had given certain post-dated cheques towards payment of installment of loan. When such cheques were presented, they were dishonoured and the proceedings under Section 138 of the NI Act came to be initiated. The appellant, therefore, approached the High Court for quashing of the proceedings. However, the High Court declined to interfere. When the appellant approached the Apex Court, it considered the legality of such proceedings to hold that whether cheque was given as security or there existed outstanding liability or not is a question of fact. Under such conditions, High Courts cannot entertain disputed question of fact under Section 482 of the Code. It, further, held that High Courts need to exercise powers under Section 482 of the Code Page 22 of 35 R/CR.A/832/2018 CAV JUDGMENT with great deal of care and caution. Even though, defence of the accused appears to be plausible but is should be not be considered while exercising powers under Section 482 of the Code. The Apex Court, further, held that post dated cheque is a well-recognized mode of payment and presumption of legally enforceable debt or liability in favour of holder of cheque. While so holding, it further held that Section 138 of the NI 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 and the accused concerned needs to rebut such a presumption. Profitable it would be to reproduce relevant observations:
"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.Page 23 of 35 R/CR.A/832/2018 CAV JUDGMENT
14. In HMT Watches Ltd. versus M.A. Abida, 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 stood uncomplied with, Page 24 of 35 R/CR.A/832/2018 CAV JUDGMENT 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 Page 25 of 35 R/CR.A/832/2018 CAV JUDGMENT 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 Page 26 of 35 R/CR.A/832/2018 CAV JUDGMENT 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, 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 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 Page 27 of 35 R/CR.A/832/2018 CAV JUDGMENT 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 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].
18. Thus, the question has to be answered in favour of 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."
Page 28 of 35 R/CR.A/832/2018 CAV JUDGMENT4.9 Whether, the cheque was for discharge of any existing debt or liability would depend on the nature of the transaction. Section 138 of the NI Act would attracted only if, on the date on which the cheque was issued, the liability or debt existed or the amount had become legally recoverable. Interpreting the words 'Security', as given in the agreement between the parties, the Apex Court held that the cheque issued to repay the installment of loan, once the loan was disbursed and the installment was due, the dishonour of cheque would give rise to criminal liability under Section 138 of the NI Act.
4.10 The vital question, therefore, would arise is as to whether, on the date on which the cheque was issued in the instant case, the liability or the debt existed or the amount had become legally recoverable. Since, admittedly, both the cheques given were post dated cheques, given towards the security, as otherwise, as per the settlement agreement on sale of both the vehicles, respondent No.2 shall be remitted the amount of remaining sale consideration to the appellant.
4.11 If, one goes by the first agreement of Page 29 of 35 R/CR.A/832/2018 CAV JUDGMENT 28.12.2015, entered into between the appellant and opponent No.2, the same speaks of sale of both the vehicles for the sale consideration of Rs.60.51/- lakh. It is to be noted that the cheques, which have been referred to in the first agreement are not the cheques, which are impugned in the instant case. Pursuant to the dispute that arose on account of return of both the vehicles after three months by opponent No.2 and his three associates. When a complaint was made before the Visavadar Police Station, which resulted into investigation by the police and the allegations on the part of opponent No.2, whereby, he rebutted the presumption legally, which, otherwise, arise in favour of the appellant. Opponent No.2 has made serious allegations of dubious nature about the role of the police, culminating written settlement at the police station. Even assuming that opponent No.2 had volunteered to bring an end to the criminal complaint then also, the cheques issued by opponent No.2 subsequently were not towards the sale consideration of the vehicles, which had been sold by the appellant to opponent No.2 and others. But, the same were towards the security of the selling the vehicles and to give the remaining amount of consideration to the appellant.
Page 30 of 35 R/CR.A/832/2018 CAV JUDGMENT4.12 In the chronology of the events, the circumstances which have emerged on record, it would be difficult, to hold that the post dated cheques, which were said to have been given on the date on which, they were issued, the liability or the debts existed or the amount had become legally recoverable. Since, while deciding, whether the dishonored cheques issued were for discharging the existing liability would fall under Section 138 of the NI Act or not, the nature of transaction becomes quite relevant. Opponent No.2 when returned the vehicles with a request that they were not in working condition and it was too heavy a burden for them to incur for starting the vehicles and made a request to the appellant to deduct a sum of Rs.10/- lakh and return the balance. It is understandable that as an owner it cannot be an agreeable proposal for the appellant. However, the best course would be available to the appellant would have been to get the same adjudicated by a competent Court of law or by another mode or method. Even the lodging of the private complaint before Visavadar Court was a step towards a legal recourse, however, the subsequent developments of executing the settlement agreement on 28.09.2016 at Visavadar Police Station, places this entire transaction into a questionable act. It is also not out of place to make a specific mention that two Page 31 of 35 R/CR.A/832/2018 CAV JUDGMENT cheques, which were issued subsequently cannot be said for discharge of the debt or liability, which existed on the date on which they were issued. Even if, one does not consider the consistent stand of threat and coercion, as taken by opponent No.2, when one of the parties had chosen to rescind from a contract, which was not reduced into writing by way of any registered agreement, the same had given rise to various disputed questions of law and facts, both. Therefore, in such circumstances, it is not possible to hold that dishonored cheques were issued to discharge any existing liability or debt to attract the provisions of Section 138 of the NI Act.
4.13 The trial Court also, it can be noticed that, noted the fact that in the notice of demand issued by the appellant and also in the complaint made before the Court, there is no detail given of the total number of persons, who had contracted with him. He, further, had agreed, in his cross-examination, that this was a contract agreement with four persons and the unregistered agreement of 2015 was with only opponent No.2. For some strange reasons, Exhibit-17 produced before the trial Court does not have reference of other three persons nor in his demand notice or Page 32 of 35 R/CR.A/832/2018 CAV JUDGMENT the complaint there is any mention of other three persons. The complaint also has been filed only against opponent No.2. In the settlement agreement, which was executed on 28.09.2016 also none of the three associates of opponent No.2 has been referred to. The trial Court, therefore, hold that this lapse on the part of the appellant is delirious and it also proves the version of opponent No.2, who succeeded in rebutting all the positive evidence so also the presumption of legally enforceable debt in favour of the holder of the cheque. Both the cheques, which are impugned in this matter are established to have been issued, without existence of any debt. The post dated cheques would be considered as a bill of exchange, as per the settled position of law and not a cheque before the date mentioned on the said instrument of demand. It would become payable only from the date mentioned on the face of the document. By bill of exchange, it would mean that the document would be stated to be unquestionable and would turn into cheque on the date, it would be payable on demand. Thus, the post dated cheques become cheque only on the date mentioned on the document and prior to the said date, it would be only a bill of exchange. Therefore, the trial Court has rightly held that at the time of issuance of those cheques by opponent No.2, they were bill of exchange only Page 33 of 35 R/CR.A/832/2018 CAV JUDGMENT and had not become the cheques, since, there was no reference of any particular date. The trial Court also held that in his examination-in-chief, opponent No.2 had clearly stated that both the vehicles were taken away by the appellant and there is no dispute with regard to the same in the cross-examination. It also has not been disputed that both the vehicles till the date are in the ownership of the appellant-original complainant, therefore also, with this disputed fact that no change is made in the name of the ownership, no fault can be found with the findings recored and the conclusions arrived at by the trial Court that the sale, itself, of the vehicles has not been established. Therefore, there was no question of paying the remaining amount of consideration. Either the ownership ought to have been changed or the vehicles' possession ought to have been given to opponent No.2 and towards the remaining part of consideration, there ought to have been issuance of those two cheques. With none of these vital aspects having come on record, the trial Court has committed no error, much less any illegality, warranting interference at the hands of this Court.
5. Resultantly, this appeal fails and is Page 34 of 35 R/CR.A/832/2018 CAV JUDGMENT dismissed. The judgment and order of acquittal passed by the learned Judicial Magistrate, First Class, Visavadar, Junagadh, in Criminal Case No. 34 of 2017, Dated: 21.12.2017, stands CONFIRMED.
5.1 While parting, it is clarified that the appellant shall be at LIBERTY to take recourse to any other remedy available to him under the law and if such a remedy is taken resort to, this order shall not come in his way.
Office to send back R&P, if any called, to the trial Court concerned, FORTHWITH.
(SONIA GOKANI, J) UMESH/-
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