Delhi High Court
Sh. Daljeet Singh Chandok vs State And Anr. on 9 January, 2006
Author: J.P. Singh
Bench: J.P. Singh
ORDER J.P. Singh, J.
1. This petition under Section 482 of the Code of Criminal Procedure has been filed for quashing summoning order-dated 4.3.1996 passed by learned Metropolitan Magistrate in a complaint case under Section 138 of the Negotiable Instruments Act. There is also prayer for quashing the complaint and the proceedings emanating there from.
2. I have heard Mr. Vijay Aggarwal learned counsel for the petitioner and Mr. Sanjeev Anand learned counsel for respondent No. 2 (complainant) on the point of admission and have gone through the impugned order as also copies of the documents placed on the file.
3. Briefly the facts are that petitioner and others approached the complainant company for availing inter-corporate deposit of Rs. 50 lacs for a period of 82 days for commercial purposes. The said request was considered and the deposit of Rs. 50 lacs was given on 13.9.1995 against promissory note and receipt executed by the accused company. The company also handed over two post dated cheques on the said date with a clear stipulation that the said cheques would be honoured positively on presentation. Cheque No. 016303 dated 4.12.1995 was for Rs. 50 lacs while cheque No. 016304 dated 4.12.1995 was for Rs. 2.07584/- as interest amount on maturity.
4. On maturity of the aforesaid cheque the accused company called upon the complainant and requested not to present the cheque for Rs. 50 lacs as the accused company had changed its bank and in lieu thereof another cheque No. 990951 dated 6.12.1995 was given. The earlier cheques was of Bank of Baroda and the second cheque was of Bank of Madura, both having branches in New Delhi. Accordingly the complainant company presented the said cheques but both the cheques were dishonoured, on the ground effects not yet cleared, please present again this was for the cheque of Rs. 50 lacs on bank of Madura and regarding the other cheque on interest the remark of the bank was insufficient funds.
5. It is alleged in the complaint that the accused persons had deliberately and fraudulently caused wrongful loss to the complainant by issuing the cheques on false promises knowing that they had no arrangements for honouring the said cheques.
6. It is averred in para-6 of the complaint that all the accused -accused No. 1 as company, accused No. 2-7 are directors of the company and accused No. 8 as Manager/principal officer of the company managing the day to day conduct of the business and affairs of the accused No. 1 company have played a fraud on the complainant company upon which the complainant reserves its right to take appropriate legal action. The learned MM passed the following summoning order on 4.3.1996 :
Present : Complainant with counsel.
Two CWs present recorded CE closed. Arguments heard. It is argued that complainant filed this complaint on the ground that complainant issued intercorporate loan to respondent No. 1 through its Director and Principal Officer respondent No. 2 to 8.
sd/- M.M./4.3.96
7. This petition has been filed on 2.7.1996 i.e., after about 8.1/2 years which shows that the legislatures despite having made the dishonour of cheques a criminal offence and despite intentions for quick disposal practically it had no effect on the ground situation and the loan dodgers continue to delay the refund of the loans. In such state of affairs the NI Act was again amended in the year 2002.
8. Learned counsel for the petitioner has submitted that there were no averments in the complaint against the petitioner. No evidence has been lead to show petitioners involvement; therefore the petitioner cannot be prosecuted.
9. Learned counsel for the respondent has vehemently argued that the impugned order was passed on 4.3.1996 and the same is being challenged after about 8.1/2 years and that the petition should be dismissed on this ground alone. Further the learned counsel for the respondent has submitted that even the requirement of averment has been substantially complied with in this old petition.
10. It is further alleged that towards the payment of this amount respondent No. 1 through respondent No. 2 to 8 issued the cheques in dispute which were deposited in the bank for encashment on 4.12.95, 6.12.95 which were returned unpaid with the remarks In sufficient Fundsand effects not clear. Legal notice was issued on 20.12.95 which was served on respondent on 21.12.95 as per AD card. Inspite of that notice respondent have not paid any amount hence on 17.1.96 this complaint is instituted.
11. In support of its complainant examined its officer and one officer from Bank. Beside this a number of document including photostat copies of the bank memos, legal notice etc. proved in the file. After considering the allegations made in the complaint statement of the witnesses and the documents at this stage I consider it proper that there are sufficient grounds to proceed against all the respondents under Section 138 NI Act. Issue process against them on filing of PF, copy etc. summon be also taken dusty if so desired for 11.4.96.
12. Perusal of the petition shows that even in the memorandum of parties of the petition the petitioner has not disclosed as to whether he is only a Director or a Managing director or a Joint Director nor has he disclosed in the accompanying affidavit his position and duties in the company, rather over writings with correcting fluid have been used in the memorandum of parties as also in the affidavit and no where it has been disclosed as to what is his rank, position and duties in the company. It shows that the petitioner has not come to the court with clean hands and his only intention is to delay the disposal of the case, which should have been decided as expeditiously as possible by the learned MM.
13. Learned counsel for the respondent has further submitted that it was a loan for a small period though the amount was large i.e., Rs. 50 lacs and for any such loan or facility and giving of post dates cheques on the same day cannot be done without passing of resolution by the Board of Directors and approval thereof by all concerned in the company, therefore, every Director in this case acted as in charge and was responsible for the conduct of the business of the company.
14. The present case appears to be a classic example of the delay in disposal of the complaint cases under the Negotiable Instruments Act. In this connection I may reproduce hereunder some portions of the preamble in the amended Negotiable Instruments Act:
Amendment Act 55 of 2002 Statement of Objects and Reasons The Negotiable Instruments Act, 1881 was amended by the Banking, Public Financial Institutions and Negotiable Instruments Laws (Amendment) Act, 1988 wherein a new Chapter XVII was incorporated for penalties in case of dishonour of cheques due to insufficiency of funds in the account of the drawer of the cheque. These provisions were incorporated with a view to encourage the culture of use of cheques and enhancing the credibility of the instrument. The existing provisions in the Negotiable Instruments Act, 1981, namely Sections 138 to 142 in Chapter XVII have been found deficient in dealing with dishonour of cheques. Not only the punishment provided in the Act has proved to be inadequate, the procedure prescribed for the Courts to deal with such matters has been found to be cumbersome. The Courts are unable to dispose of such cases expeditiously in a time bound manner in view of the procedure contained in the Act.
5. The proposed amendments in the Act are aimed at early disposal of cases relating to dishonour of cheques, enhancing punishment for offenders, introducing electronic image of a truncated cheque and a cheque in the electronic form as well as exempting an official nominee director from prosecution under the Negotiable Instruments Act, 1881.
15. Under Section 138 of the Negotiable Instruments Act, the period of imprisonment has been enhanced from 1 year to 2 years. Already there is provision for fine which may extend to twice the amount of the cheque as additional punishment for the offence. Under Section 143(3) of the Act, the trial court has to make efforts to conclude the trial within 6 months. These amendments have been incorporated to curb the delays and to highlight the gravity of the offences in which cheques are being readily given seemingly to discharge a liability or to enter into a contract, but the real intention of the drawer is either not to pay or to delay the payment or to cheat the other party. There can be fabrication on the part of the complainants as well. All these are matters of evidence in the trial court.
16. In the judgment titled B. Mohan Krishana v. Union of India reported in 1996 Cr.L.J. 638 (Andh. Pra.) (D.B.), para-29, the Andhra Pradesh High Court referred to the scope and objectives of earlier amendments, thoroughly discussed the law and held as under :-
The impugned legislation was enacted in public interest, its objective is to:- enhance the acceptability of cheques in settlement of liabilities by making the drawer liable for penalties in certain cases while at the same time providing adequate safeguards to prevent harassment of honest drawers. As the evil practice of issuing cheques in settlement of liabilities without there being adequate amount in the accounts became rampant, the Union Parliament thought it fit to curb the same effectively by enacting a stringent law while at the same time taking care to safeguard the interests of honest drawers. An honest drawer can always avert the threat of prosecution by paying the amount due within 15 days from the date of receipt of notice from the payee on holder in due course in case the cheque issued by him was dishonoured on either of the grounds specified in Section 138.
17. In the judgment titled Joseph Jose v. J. Baby Puthuval Puravidom Poothappu reported in 2002 Cr.L.J. 4392 (Ker.), para-8, the trial court had acquitted the accused for offence under Section 138 of Negotiable Instruments Act. The High Court set aside the acquittal, remanded the matter and held as under :-
The purpose behind the incorporation of Section 138 of the Negotiable Instruments Act is to lend credibility for cheque transactions. For establishing the requirements in Section 138, there is no burden on the part of the complainant to prove before Court the entire details of the transaction resulting in issuance of cheque.
The object of bringing Section 138 on statue is to inculcate faith in the efficacy of banking operations and credibility in transacting business on negotiable instruments :
In the judgment titled Shri Ishar Alloy Steels Ltd. v. Jayaswals Neco Ltd. reported in AIR 2001 SC 1161 (para-5), the Supreme Court of India discussed several judgments inter alia on the point of date of presentation of cheque and the concerned bank and held as under :-
It now stands established as to when, how and who can be imp leaded in matters regarding dis-honour of cheques (SMS Pharmaceuticals Ltd. v. Neeta Bhalla and Anr. reported in 2005 (7) SCALE).
18. In the judgment titled Kusum Ingots and Alloy Ltd. v. Pennar Peterson Securities Ltd. , , the Supreme Court of India discussed several judgments including the application of Section 138 of Negotiable Instruments Act qua sick industrial companies and opined that criminal proceedings should not be foreclosed at the threshold (para-16) and held as under :
The main object of the Negotiable Instruments Act is to legalize the system of which instruments contemplated by it could pass from hand to hand by negotiation like any other goods. The purpose of the Act was to present an orderly and authoritative statement of the leading rules of law relating to the negotiable instruments. To achieve the objective of the Act, the Legislature thought it proper to make provisions in the Act for conferring certain privileges to the mercantile instruments contemplated under it and provide special procedure in case the obligation under the instrument was not discharged.
19. Once the guidelines have been laid by the Supreme Court of India and the High Courts, the trial courts are bound to follow those guidelines and in the facts and circumstances of a given case, the complainant on its own or even the trial court can give opportunity to the complainant to voluntarily drop any or all of the accused persons. In my view, there is no legal bar in allowing any such prayer of the complaint. But if the complainant insists to continue with the proceedings against all or any of the accused persons then while finally deciding the matter the Magistrate may pass observations or strictures for wrong implication of all the accused persons or a particular accused and may also initiate proceedings under Section 211 Indian Penal Code or 340 Code of Criminal Procedure as deemed fit by the trial court.
20. As regards the exercise of powers under 482 Code of Criminal Procedure I am reproducing the said section hereunder :
482. Saving of inherent power of High Court Nothing in this Code shall be deemed to limit or effect the inherent powers of the High Court to make such orders as may be necessary to give effect to any order under this Code, or to prevent abuse of the process of any Court of otherwise to secure the ends of justice.
21. Recently, the Supreme Court of India after examining the entire case law under Section 482 Code of Criminal Procedure in the judgment titled Zandu Pharmaceutical Works Ltd. v. Mohd. Sharaful Haque has inter alia opined as under:
The inherent power should not be exercised to stifle a legitimate prosecution. The High Court being the highest court of a State should normally refrain from giving a prima facie decision in a case where the entire facts are incomplete and hazy, more so when the evidence has not been collected and produced before the court and the issues involved, whether factual or legal, are of magnitude and cannot be seen in their true perspective without sufficient material.
22. After examining the amendments in the Negotiable Instruments Act, according to which summary trial procedure is to be followed (Section 138, 143, Negotiable Instruments Act and Section 254, 260 to 264 Indian Penal Code); relying upon the established law regarding the dis-honour of cheques (supra) and powers of the High Court under 482 Code of Criminal Procedure (supra), I am of the view that it will be better for the petitioners to defend themselves in the trial court and if they are so sure of their defense, then they should get themselves discharged or acquitted at the earliest, rather than rushing to the High Court against every order and praying for examining the entire evidence without it being on record of the trial court, without it having been tested by cross-examination.
23. Any such attempts will be a negation of the amendments and will defeat the very purpose of the repeated amendments.
24. Considering all the facts and circumstances, specially the delay of about 8.1/2 years in challenging the order, I do not find it a fit case for interference under Section 482 of the Code of Criminal Procedure, the petition being vexatious is, therefore, dismissed with Rs. 5,000/- (Rupees Five Thousand) as costs, which be deposited in Delhi High Court Legal Services Committee.
25. The trial court is directed to dispose of this matter preferably within 3 months.
26. Nothing said herein will tantamount to expression of opinion on the merits of the case.
27. A copy of this order be sent to Secretary, Delhi High Court Legal Services Committee.