Gujarat High Court
Triton Ratial Private Limited & 2 vs State Of Gujarat & on 4 April, 2017
Author: J.B.Pardiwala
Bench: J.B.Pardiwala
R/CR.MA/24863/2016 JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
CRIMINAL MISC.APPLICATION (FOR QUASHING & SET ASIDE
FIR/ORDER) NO. 24863 of 2016
With
CRIMINAL MISC.APPLICATION NO. 24868 of 2016
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR.JUSTICE J.B.PARDIWALA
==========================================================
1 Whether Reporters of Local Papers may be allowed to see the judgment ? YES 2 To be referred to the Reporter or not ?
YES
3 Whether their Lordships wish to see the fair copy of the
judgment ? NO
4 Whether this case involves a substantial question of law
as to the interpretation of the Constitution of India or NO any order made thereunder ?
========================================================== TRITON RATIAL PRIVATE LIMITED & 2....Applicant(s) Versus STATE OF GUJARAT & 1....Respondent(s) ========================================================== Appearance:
MR RS SANJANWALA, SENIOR ADVOCATE ASSISTED BY MR. SAHIL M SHAH, ADVOCATE for the Applicant(s) No. 1 - 3 MR AMIT M NAIR, ADVOCATE for the Respondent(s) No. 2 MS NISHA THAKORE, APP for the Respondent(s) No. 1 ========================================================== CORAM: HONOURABLE MR.JUSTICE J.B.PARDIWALA Page 1 of 30 HC-NIC Page 1 of 30 Created On Tue Aug 15 17:10:14 IST 2017 R/CR.MA/24863/2016 JUDGMENT Date : 04/04/2017 ORAL COMMON JUDGMENT 1 Since the issues raised in both the captioned applications are the same, the parties are same and the questions of law raised also being the same, those were heard analogously and are being disposed of by this common judgment and order.
2 By these two applications under Section 482 of the Code of Criminal Procedure, 1973, the applicants - original accused Nos.1, 4 and 5 seek to invoke the inherent powers of this Court, praying for quashing of the proceedings of the Criminal Cases Nos.1213 of 2016 and 341 of 2016 respectively filed in the Court of the learned Additional Chief Metropolitan Magistrate (N.I. Act) at Ahmedabad arising from the two complaints filed under Section 138 of the Negotiable Instruments Act for the dishonour of the cheques.
3 The Criminal Miscellaneous Application No.24863 of 2016 is treated as the lead matter.
4 The respondent No.2 herein - original complainant lodged a complaint in the Court of the Additional Chief Metropolitan Magistrate (N.I. Act) at Ahmedabad culminating in the Criminal Case No.1213 of 2016 for the offence punishable under Section 138 of the Negotiable Instruments Act. The complaint reads as under:
"2 That accused No.1 is a Company Registered under the Company's Act, 1956, under Registration No.U52100TN2010PTC074515, having Registered Office at 2/1, Subrayyan Street, Nungambakkam, Chennai. Accused No.2 to 6 are directors of No.1 company who are looking after the day to day routine and financial business activity of the company. Accused Page 2 of 30 HC-NIC Page 2 of 30 Created On Tue Aug 15 17:10:14 IST 2017 R/CR.MA/24863/2016 JUDGMENT No.7 is also company incorporated under Company Act having its Registered office address mention hereinabove. Accused No.8 to 10 are directors of No.7 company who are looking after the day to day routine and financial business activity looking after the day to day routine and financial business activity of the company, all accused are jointly and severally responsible and liable for the Act of the company. That both the companies are related with each other, as such both companies are responsible and liable for the transactions entered with complainant, therefore their directors are also equally responsible as such they are arraigned as accused in this complaint.
3 That accused No.7, Pavers England wanted to open its exclusive show room in Ahmedabad, as such inquired and approached complainant for leasing his property, CEO and Managing Director Mr. Utsav Seth accused No.9, of Pavers England has negotiated and finalized the terms and conditions of the lease agreement with complainant, after finalization of the terms and conditions and lease amount accused No.1 entered to execute the agreement being franchise of pavers England accordingly lease agreement dated 09/08/2012 was executed, which is registered with the SubRegistrar of Ahmedabad - 3(Memnagar) under Serial Number : 4603 dated 09/08/2012, with consent and permissible of Pavers England Ltd who is also jointly and severely responsible and liable. As such agreement executed is also binding on accused No.7 i.e. Pavers England Ltd.
4 It is the say of complainant that as per the lease agreement executed between accused and complainant initial period of 9 (Nine) Years starting from 15/08/2012 was fixed with lock in period of Five (5) years at the monthly licence fee of Rs.3,00,000/ (Rupees Three Lacs Only) excluding all taxes, maintenance charges and all other levies and electricity charges. That complainant has handed over the possession of the above office to Pavers England Ltd for commercial purpose only.
5 That for the purpose of licence fee months starts from 1st date of each English Calendar month and ends on the last day of the same month.
6 That as per the clause 5 of the agreement lock in period is five years, during this period neither party has right to terminate the agreement and in any case same is determined for any reason or terminated by any party then also accused are liable and responsible to pay the licence fee for the full lock in period.
7 That accused have informed complainant vide their email dated 20/07/2015, that showroom will be under renovation as the showroom has completed 3 years time, as such its need to be renovated. Accused have made the payment of the licence fee up to August 2015. Thereafter for the month of September, October and November cheques issued by accused towards licence fee have been dishonoured, complainant has filed criminal Page 3 of 30 HC-NIC Page 3 of 30 Created On Tue Aug 15 17:10:14 IST 2017 R/CR.MA/24863/2016 JUDGMENT complaint u/s 138 of Negotiable Instruments Act. Accused are in arrears of licence fee and the said amount is due and payable since September 2015 till March 2016 for period of 7 months. For the present complaint cheques are presented for December 2015 and January and February 2016 for 3 months that works out to Rs.9,00,000 @ 3,00,000 p.m. + 18% interest P.A. on delay payment as per agreed terms and conditions. Accused have not paid the Licence fee from September 2015. Complainant submits that accused are in terms of Licence free for continuously for Seven months.
8 That as per the agreed terms and condition accused have issued post dated cheques towards the monthly licence fee, which is legal dues and complainant, in part of the following description, the cheques were issued along with service tax amount.
CHEQUES DATE AMOUNT BANK
998041 '10/12/2015 3,07,080/ HDFC BANK
998042 '10/01/2015 3,07,080/ HDFC BANK
998043 '10/02/2015 3,07,080/ HDFC BANK
TOTAL AMOUNT 9,21,240/
That complainant have to recover from accused a total amount of Rs.9,21,240/ (Rupees Nine Lacs Twenty One Thousand Two Hundred forty Only) against the licence fee due and payable by accused. Complainant has several time demanded the above said amount from accused but they have avoided to pay the amount on the one or other pretext, at the time of issuing the cheques accused have assured complainant that the cheques will be honour as and when will be presented for encashment on its due date.
9 That on the due dates of cheques complainant has deposited 2 cheques with his banker but same were returned unpaid, complainant immediately contacted accused and informed them about the dishonoured of cheques. Accused are avoiding legal dues of complainant, accused are bound by the agreed terms and condition of agreement executed between them as such complainant is legally entitle to recover its dues.
10 That on 10/02/106 complainant has sent the above said 3 cheques for clearing i.e. cheque No.998041 dated 10/12/2015 for Rs.3,07/080/, cheque No.998042 dated 10/01/2016 for Rs.3,07,080/ and cheque No.998043 dated 10/02/2016 for Rs.3,07,080/ aggregating an amount of Rs.9,21,240/ (Rupees Nine Lacs Twenty One Thousand Two Hundred Forty Only) all cheques drawn on HDFC Bank Ltd., Mylapore Branch, Chennai, through his banker Indusind Bank, C.G. Road Branch, Ahmedabad. But complainant was surprised and shocked to see the bank Page 4 of 30 HC-NIC Page 4 of 30 Created On Tue Aug 15 17:10:14 IST 2017 R/CR.MA/24863/2016 JUDGMENT advice dated 11/02/2016 that the cheques have been return uncashed and it has been dishonoured by accused banker with remarks on it "ACCOUNT BLOCKED" which means there has been no sufficient amount in accused account to honoured the cheques.
11 That after the return of the said uncashed and dishonoured cheques complainant has made several telephone calls for pay of the amount and complainant requested accused also to make the arrangement of the amount to be paid by them, that accused have avoided and failed to pay amount under the returned cheque. The facts and circumstances thus show that accused induce complainant with dishonest and deceitful representation to part with a sum of Rs.9,21,240/ (Rupees Nine Lacs Twenty One Thousand Two Hundred Forty Only) and accused have no intention to repaying the cheques amount and it is also clear the cheques are dishonourned because of insufficiency of funds in accused account with the said Bank i.e. HDFC Bank. Accused have thus rendered themselves liable to prosecution for the offences under Section 138 of Negotiable Instruments Act, in addition to prosecution for other offences under the Indian Penal Code and other Laws.
12 That as per the agreed terms and conditions accused have no legal rights to stop the payment of cheques or block the account as matter of facts and terms and conditions of agreement fix lock in period was agreed for 5 years and if any issues arises and matter is referred to the arbitrator in that case also accused required to make the payment of licence free as such accused action of blocking the account if illegal cannot be sustained as such both companies and all the directors are jointly and severely responsible for the dishonoured of the cheques which attract the Penal provisions of Negotiable Instruments Act.
13 It is humbly further submitted that, as accused have issued cheques towards the licence fee, which are legal dues as such complainant will deposit the remaining cheques at the end of the month on its due date, and if the said cheques are also dishonour in the event complainant reserves his right to initiate appropriate legal action available to him.
14 Complainant thereafter address notice dated 20/02/2016 to accused as required u/s. 138 of Negotiable Instrument Act proviso B calling upon accused to pay the amount of the dishonoured cheque i.e. Rs.9,21,240/ (Rupees Nine Lacs Twenty One Thousand Two Hundred Forty Only).
15 Complainant further humbly submits before the Hon'ble Court that the notice was posted to the accused by the advocate of complainant by Speed Post at accused registered office address and to each individual directors at their respective addresses, as such notice is duly served upon the accused.
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16 Thus, after receiving the notice, the accused have neither replied the
said notice or acted as per the notice issued by the complainant in his notice, even accused has neither complied with a notice provision nor paid the amount till todate.
17 The accused the drawer of the cheque has failed to make the payment of their dishonoured cheques within 15 days from the date of receipt of the said notice as required by the provision of clause (C) of the proviso to section 138 of N.I. Act.
18 That the accused have not complied as per the notice of the complainant nor made the payment of the amount of Rs.9,21,240/ (Rupees Nine Lacs Twenty One Thousand Two Hundred Forty only) to the complainant, within a period of 15 days from the date of receipt of the notice by them or till today. The accused have committed the offence punishable under Section 138 of Negotiable Instruments Act.
19 The above offence under Section 138 of N.I. Act has been committed within the jurisdiction of this Hon'ble Court and at the office of the complainant and other places. It is therefore prayed that this complaint be registered and process be issued against the accused for the offence under Section 138 of Negotiable Instruments Act."
5 Thus, it appears on plain reading of the averments made in the complaint that the accused persons herein entered into a lease agreement with the complainant with respect to the premises in question. At this stage, let me look into the terms of the agreement. The lease agreement is dated 9th August 2012 duly signed by the parties. The Clause 4 of the lease deed is with respect to the 'tenure'. It reads as under:
"Tenure: a) The duration of this Deed shall be initially for a term of 9(Nine) years starting from 15th AUG 2012 subject to earlier termination and/or determination as mentioned herein (herein referred to as "The Period").
b) The Lessee will be permitted to carry out fit outs and furniture after the Lessee have paid to the Lessor, deposits and all other monies under the terms hereof as stated in Clause 8 of this Deed.
c) The payment of Lease rent and other payments will start from 15 th AUG 2012 (hereinafter referred to as "THE EFFECTIVE DATE").Page 6 of 30
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d) The tenure of the lease shall end on close of business hours on completion of 9 (Nine) years from the effective date and/or earlier termination thereof."
6 The Clause 5 provides with the minimum lockinperiod. It reads as under;
"MINIMUM LOCK IN PERIOD: The initial period of 5 (five) years (from the date of commencement of Lease rent) of the tenure of lease shall be minimum lock in period. During such period the Lessee is not entitled to terminate this Deed for any reason/s whatsoever. During such period the Lessor ceases his rights to terminate/determinate this Deed for any reason whatsoever. During such period if this Deed is terminated and or determined for any reason whatsoever, whether by the Lessee, the Lessee shall pay to the Lessor compensation and all other monies payable under the terms and conditions hereof, for the unpaid tenure of the minimum lock in period. In such event the Lessor shall be entitled to forfeit deposits and credits (limited to the extent of monies payable) lying with it. If the value of such deposits/credits is less than the monies payable, then the Lessor shall have lien on the equipment and stocks, inventories etc, lying in the said premises. The extent of this lien will be limited in the amount recoverable. For this purpose, the value of such equipment and stocks, inventories etc. lying in the said counter will be the actual price realized by the Lessor of the same."
7 The Clause 17 is with regard to the jurisdiction. It reads as under:
"JURISDICTION: All matters requiring any reference in the Court pursuant to the provisions of the Arbitration any Conciliation Act, 1996 whether prior to the commencement of arbitration, during the arbitration proceedings or thereafter, shall be subject to the exclusive jurisdiction of the High Court of Gujarat Ahmedabad."
8 The Clause 20 is for termination of the Lease Agreement. It reads as under:
"TERMINATION : a) If any of the P.D.C. Dishonour, within the lockin period, then, the Lessee shall pay to the Lessor compensation and all other monies payable under the terms and conditions hereof, for the unexpired tenure of the minimum lockinperiod. If such type of event occurs after lockinperiod, in such case, the Lessor may at its sole option terminate the arrangement herein contained by giving 15 days notice. In such event the Page 7 of 30 HC-NIC Page 7 of 30 Created On Tue Aug 15 17:10:14 IST 2017 R/CR.MA/24863/2016 JUDGMENT Lessor shall be entitled to forfeit deposits and credits (limited to the extent of monies payable) lying with it. If the value of such deposits / credits is less than the monies payable then the Lessor shall have lien on the equipment, stocks, inventories, furnitures etc. lying in the said leased premises. The extent of this lien will be limited to the amount recoverable. For this purpose, the value of such equipment, stocks, inventions, furniture, fixtures, etc lying in the said leased premises will be as per the fair market value of the same.
b) In case of breach of any of the term and/or condition by either party, the other party shall give written notice of not less than one month requiring the defaulting party to cure the same. In case the defaulting party fails to remedy the breach, the nondefaulting party may at its sole discretion be entitled to terminate this Deed by giving two months notice in writing. It is clarified that no specific notice and or intimating is requiring to be given by the Lessor in respect of all kinds of payments to be made by the Lessee.
c) In case the services being provided by the association are not satisfactory and no attempt is made by the association to rectify the services after receiving such intimating from the Lessee for such deficiency, the Lessee may withhold/deduct the common maintenance charges till such defects are rectified.
d) Upon the termination of this Deed, the Lessee shall have the lensed premises in as good condition as it was at the beginning of this arrangement, except for reasonable wear and tear. The Lessee hereby undertakes to the Lessor that on termination of this Deed it shall remove their employees, agents belonging and its articles from the leased premises and vacates and give charge of the leased premises together with the fixtures and fittings (loft, shutters and glass doors) belonging to Lessor, if any, in the same status and condition in which it was at the beginning of this Deed.
e) In the event of the Lessee failing to leave the leased premises on the date as may be mentioned in this deed upon termination of this Deed or earlier determination thereof, the Lessor shall be entitled to remove the Lessee from the leased premises and prevent them and/or their employees, agents and suppliers from entering in the building and/or the leased premises. The Lessor shall be at liberty to remove the goods, articles, and other things belonging to the Lessee and lying in the leased premises and to store the same at any other place or dispose off the same at the risk and cost of the Lessee.
f) Neither the termination nor the premature determination of this Deed shall release either party from its obligations to pay any sums then owning to the other party or from the obligation to perform or discharge Page 8 of 30 HC-NIC Page 8 of 30 Created On Tue Aug 15 17:10:14 IST 2017 R/CR.MA/24863/2016 JUDGMENT any liability that had been incurred on or prior to the date of such termination and/or determination.
g) After completion of the lock in period the Lessee is entitled to terminate this Deed by giving 6 months notice thereof.
h) Upon the Deed determined by lapse of time, and/or termination of this Deed, out of total deposit amount of Rs.30,00,000/ (Rupees Thirty Lacs only), a sum of Rs.18,00,000/ (Rupees Eighteen Lacs Only) will be adjusted for 6 months notice period and remaining balance will be return back to the Lessee after deducting any arrears in property tax, electricity bill, telephone bill and maintenance charges, immediately. However, in any event, the refund of deposit will be simultaneous against the Lessee removing itself and its belongings from the leased premises. For any reason, if the Lessor commit defaults to return back the balance amount of security deposit, in such case, the Lessee can continue its business from the leased premises rent free until the balance amount of security deposit, in such case, the Lessee can continue its business from the leased premises rent free until the balance amount of security deposit return back by the Lessor to the Lessee."
9 The Clause 22 provides for resolution of disputes. It reads as under:
"RESOLUTION OF DISPUTES: a) Indian laws shall govern the construction, validity and performance of this Deed and the High Court at Ahmedabad shall have an exclusive jurisdiction. If any dispute or difference of any kind whatsoever, shall arise between the parties in connection with the interpretation of any of the provisions hereof and/or performance of this Deed (and whether before or after the termination or breach of this Deed) the Lessor and the Lessee shall promptly and in good faith negotiate with a view to reach its amicable resolution and settlement. In case no amicable resolution or settlement will reach withing a period of 30 days from the date of which the dispute or difference was referred for such settlement then such dispute and difference shall be referred to the two arbitrators appointed by the Lessor and Lessee separately. All the charges of the Arbitrators shall be paid by the Lessor and Lessee separately. All such proceeding shall be conducted at Ahmedabad in accordance with and subject to the provisions of the Arbitration and Conciliation Act, 1996 or any other statutory modification thereof or any other reenactment for the time being in force.
b) the parties have mutually agreed that in case of anydispute, not settle mutually by the parties hereto, then and in such an event before referring such dispute to the arbitration, the Lessee shall have the option Page 9 of 30 HC-NIC Page 9 of 30 Created On Tue Aug 15 17:10:14 IST 2017 R/CR.MA/24863/2016 JUDGMENT either to hand over the leased premises to the Lessor after bringing the leased premises in the same State and condition (except normal wear and tear) in which it was at the beginning of this Deed or to continue conducting the said Business from the leased premises against the prompt and regular payments of amounts due to the Lessors as provided herein.
c) It is specifically agreed by the Lessee that in such case before referring such dispute to the Arbitrator, the Lessee shall pay to the Lessor in respect of the leased premises as per the terms and conditions hereof for the balance of the lock in period and can't stop business of the Lessee.
d) And in case if such dispute is referred to the Arbitration after the completion of the lock in period, such references of dispute to the Arbitration shall be subject to the condition that the Lessee shall continue to pay all payments to the Lessor as provided herein, regularly and punctually, till final award is given the Arbitrator, in case if, the Lessee decides to continue with the lease hereby granted pending such arbitration. If the Lessee stop its business from the leased premises, in such case, it will not be liable to pay lease rent to the Lessor."
10 The Clause 23 is general. It reads as under:
"GENERAL: a) The parties hereto agree that if any condition/s hereof is/are found to be invalid or unlawful under any enactment or rule of law pertaining thereto the same shall be to such an extent stand over ridden, whether it be an entire condition or conditions or some part or parts thereof. And all other terms and conditions hereof shall remain enforceable as if the invalid or unlawful part or parts had not been included.
b) The parties hereto acknowledge, declare and confirm that this Deed represents the entire Deed and finally agreed terms and conditions between them regarding the subject matter hereof and no alternation, addition or modification hereto shall be valid and binding unless the same are reduced in writing and signed by the authorized representatives of both parties and for which Pavers England Limited has given its consent and confined the same.
c) The parties to this Deed also admit, acknowledge, confirm, declare and say that there are no assurances or representations made by the parties to one another, either oral or in writing, other than what is recorded in this Deed.
d) the parties shall be responsible and liable to pay and discharge their respective income tax and all other tax liability on the incomes Page 10 of 30 HC-NIC Page 10 of 30 Created On Tue Aug 15 17:10:14 IST 2017 R/CR.MA/24863/2016 JUDGMENT and/or operative from the leased premises arising out of or accruing from this Deed.
e) Neither party shall disclose to any third party any information as to the business plan/secret/methods relating to conduct or financial affairs, present or past or future plans or the policy of the other which information is not in public domain and is not compulsorily disclose able under any statute.
f) The parties further record and confirm that this Deed is their final Deed and this overrides all other writings and other representations made prior hereto.
g) Access to the leased premises shall be on all days of the week subject to relevant prevailing rules of the Government and the Association rules."
11 Mr. R.S. Sanjanwala, the learned senior counsel assisted by Mr. Sahil M. Shah, the learned counsel appearing for the applicants submitted that the lease agreement dated 9th August 2012 was terminated by mutual consent in a meeting convened between the parties on 5th September 2015 in Ahmedabad. It was agreed by the applicants that they would pay the lease rental for a period of three months from July 2015 by way of compensation for the early termination of the lease agreement. Mr. Sanjanwala submits that the complainant had unconditionally agreed to the same, and thereafter, the applicants vacated the premises in question and handed over the peaceful and vacant possession of the same to the complainant. According to the learned counsel, the understanding was arrived at in good faith, and therefore, at the relevant point of time, it was not found necessary to reduce the same in writing. Mr. Sanjanwala submits that vide letter dated 17th April 2015, the complainant was informed that in view of the understanding arrived at, the complainant now be estopped from enforcing his alleged right under the lease agreement and would not deposit the postdated cheques, which were issued at the time when the lease agreement was executed.
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12 According to Mr. Sanjanwala, the cheques, which were issued by
his clients at the time of the execution of the lease deed dated 9th August 2012 towards rent, could not have been deposited by the complainant for encashment in view of the subsequent developments. The complainant could not have used those cheques, as it cannot be said that he was trying to enforce a legally enforceable debt. According to the learned counsel, at best, the complainant can file a suit for damages and to recover an appropriate compensation in terms of the lease deed. No liability can be fastened under Section 138 of the Negotiable Instrument Act because the debt or the liability cannot be said to be legally enforceable once the lease deed is terminated and the possession of the premises is handed over to the complainant.
13 Mr. Sanjanwala submitted that even otherwise, the complaints are not maintainable because in the lease agreement, there is a clause which provides that in the event of any dispute between the parties, the same shall be referred for settlement to the two Arbitrators that may be appointed by the lessor and lessee separately. As there is an arbitration clause in the lease agreement and what is sought to be enforced are the terms of the lease agreement, then in such circumstances, the complainant under Section 138 of the Negotiable Instruments Act is not maintainable.
14 Mr. Sanjanwala further submitted that the company had sufficient balance for the period between 10th September 2015 and 11th May 2016 in their current account maintained with the H.D.F.C. Bank, when the stop payment instructions were issued by the accused persons. In such circumstances, no offence under Section 138 of the Negotiable Instruments Act could be said to have been made out.
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15 The learned counsel, thereafter, submitted that the applicants
Nos.2 and 3 were not Directors of the company at the time when the lease agreement dated 9th August 2012 was executed. The applicants Nos.2 and 3 had already resigned on 24th December 2011. The learned counsel tried to substantiate his submission by placing reliance on the Form No.32 submitted before the Registrar of the Companies in that regard.
16 On the other hand, both the applications have been vehemently opposed by Mr. Nair, the learned counsel appearing for the complainant. According to Mr. Nair, none of the contentions canvassed merit any consideration. Mr. Nair submitted that the understanding was distinct and the same was reduced into writing in the form of a lease agreement. What is sought to be enforced by the complainant are the terms of the lease agreement. While entering into the lease agreement, the postdated cheques were issued by the accused persons towards rent, and thereby, they created a debt, which could be termed as legally enforceable. Merely because they were unable to continue with the business and handed over the possession of the premises, will not absolve them from their liability created under the lease agreement.
17 Mr. Nair submitted that merely because there is an arbitration clause in the lease agreement, the same will not make the complaints under Section 138 of the Negotiable Instruments Act not tenable in law. The complainant is not precluded from prosecuting the accused under Section 138 of the N.I. Act for the dishonour of the cheques. It is for the Trial Court to consider whether the accused has a legally enforceable liability or not.
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18 Mr. Nair submitted that so far as the contention that the
applicants Nos.2 and 3 had ceased to be the Directors of the company at the time when the lease agreement was executed is a highly disputed question of fact because the name of the applicant No.2 i.e. Mr. Vivek Mehrotra figures in the lease agreement at page: 54 of the paper book. The signature of Vivek Mehrotra is very much there for and on behalf of the company.
19 Mr. Nair submits that there being no merit in both the applications, they be rejected.
20 Having heard the learned counsel appearing for the parties and having considered the materials on record, the only question that falls for my consideration is whether the complaints should be quashed.
21 Let me first deal with the contention raised by the learned senior counsel appearing for the applicants as regards the arbitration clause in the lease agreement. The question as to whether merely because there is an arbitration clause will take away the right of the complainant to move for criminal prosecution has been dealt with by the Supreme Court in the case of S. W. Palanitkar vs. State of Bihar [(2002) 1 SCC 241]. The Supreme Court held that merely because there is an arbitration clause in a commercial transaction agreement, the same would not operate as a bar for instituting criminal prosecution, if such breach even prima facie constituted a criminal offence.
22 An arbitration clause in a agreement in respect of business transaction is not a bar for filing a criminal complaint under Section 138 of the Negotiable Instruments Act for dishonour of the cheque. It is also settled law that merely because there is a civil remedy available, the Page 14 of 30 HC-NIC Page 14 of 30 Created On Tue Aug 15 17:10:14 IST 2017 R/CR.MA/24863/2016 JUDGMENT same is not a ground to quash the criminal proceedings, if the allegations, prima facie, made out a criminal offence as well. In a case under Section 138 of the Negotiable Instruments Act, the ingredients to be proved are that a cheque was issued in discharge of any partial or whole liability which when presented was dishonoured and in spite of notice issued if the amount is not paid, then, it will attract the penal provisions under Section 138 of the Negotiable Instrument Act. The ultimate liability as to how much amount is payable, is a matter to be considered in the arbitration proceedings and that will not debar the complainant from filing a complaint for prosecution under Section 138 of the Negotiable Instruments Act, if the complainant comes forward with a case that the cheque was issued in discharge of an admitted liability by the accused. The question as to whether it is an admitted liability and whether there is any legally enforceable debt for which the cheque was issued, etc, are matters to be considered by the Trial Court on appreciation of evidence adduced on both the sides.
23 In view of the above discussion, the contention as regards the arbitration clause should fail and is hereby rejected.
24 Let me now deal with the contention that at the time of issuing the stop payment instructions to the Bank, there was sufficient balance in the current account of the accused company maintained with the H.D.F.C. Bank. For the purpose of answering this contention, I can do no better than refer to and rely upon a decision of the Supreme Court in the case of M.M.T.C. Limited vs. Medchl Chemicals and Pharma Private Limited [(2002) 1 SCC 234]. I may quote the relevant observations as under:
"13. The learned Judge has next gone into facts and arrived at a Page 15 of 30 HC-NIC Page 15 of 30 Created On Tue Aug 15 17:10:14 IST 2017 R/CR.MA/24863/2016 JUDGMENT conclusion that the cheques were issued as security and not for any debt or liability existing on the date they were issued. In so doing the learned Judge has ignored well settled law that the power of quashing criminal proceedings should be exercised very stringently and with circumspection. It is settled law that at this stage the Court is not justified in embarking upon an enquiry as to the reliability or genuineness or otherwise of the allegations made in the complaint. The inherent powers do not confer an arbitrary jurisdiction on the Court to act according to its whim or caprice. At this stage the Court could not have gone into merits and / or come to a conclusion that there was no existing debt or liability.
It is next held as follows : "This is a special provision incorporated in the Negotiable Instruments Act. It is necessary to allege specifically in the complaint that there was a subsisting liability and an enforceable debt and to discharge the same, the cheques were issued. But, we do not find any such allegation at all. The absence of such vital allegation, considerably impairs the maintainability."
14. In the case of Maruti Udyog Ltd. v. Narender reported in (1999) 1 SCC 113, this Court has held that by virtue of Section 139 of the Negotiable Instruments Act, the Court has to draw a presumption that the holder of the cheque received the cheque for discharge of a debt or liability until the contrary is proved. This Court has held that at the initial stage of the proceedings the High Court was not justified in entertaining and accepting a plea that there was no debt or liability and thereby quashing the complaint.
15. A similar view has been taken by this Court in the case of K.N.Beena v. Muniyappan reported in 2001 (7) Scale 331, wherein again it has been held that under Section 139 of the Negotiable Instruments Act the Court has to presume, in a complaint under Section 138, that the cheque had been issued for a debt or liability.
16. There is therefore no requirement that the Complainant must specifically allege in the complaint that there was a subsisting liability. The burden of proving that there was no existing debt or liability was on the respondents. This they have to discharge in the trial. At this stage, merely on basis of averments in the Petitions filed by them the High Court could not have concluded that there was no existing debt or liability.
17. Lastly it was submitted that complaint under Section 138 could only be maintained if the cheque was dishonoured for reason of funds being insufficient to honour the cheque or if the amount of the cheque exceeds the amount in the account. It is submitted that as payment of the cheques had been stopped by the drawer one of the ingredient of Section 138 was not fulfilled and thus the complaints were not maintainable.
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18. Such a just contention has been negatived by this Court has, in the case of Modi Cements Ltd. v. Kuchil Kumar Nandi reported in (1998) 3 SCC 249. It has been held that even though the cheque is dishonoured by reason of 'stop payment' instruction an offence under Section 138 could still be made out. It is held that presumption under Section 139 is attracted in such a case also. The authority shows that even when the cheque is dishonoured by reason of stop payment instructions by virtue of Section 139 the Court has to presume that the cheque was received by the holder for the discharge, in whole or in part, of any debt or liability. Of course this is a rebuttable presumption. The accused can thus show that the "stop payment" instructions were not issued because of insufficiency or paucity of funds. If the accused shown that in his account there was sufficient funds to clear the amount of the cheque at the time of presentation of the cheque for encashment at the drawer bank and that the stop payment notice had been issued because of other valid causes including that there was no existing debt or liability at the time of presentation of cheque for encashment, then offence under Section 138 would not be made out. The important thing is that the burden of so proving would be on the accused. Thus a Court cannot quash a complaint on this ground."
25 Let me now deal with the principal argument canvassed on behalf of the applicants as regards the liability.
26 The issue of cheque is not in dispute. The lease agreement is also not in dispute. There is no dispute as regards the terms and conditions of the lease agreement. The applicants are trying to wriggle out of their liability under Section 138 of the Negotiable Instruments Act on the ground that as they did not do well in the business, the company decided to terminate the agreement and vacated the premises. The vacant and peaceful possession was handed over to the complainant, being the owner of the premises. Once the premises is vacated and the possession is handed over, thereafter, the complainant being the lessor could not have deposited the cheques.
27 In order to attract the penal provisions for the bouncing of a
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cheque, it is essential that the dishonoured cheque should have been issued in discharge, wholly or in part of any debt or other liability of the drawer to the payee. The explanation to Section 138 defines the expression "debt or other liability" as a legally enforceable debt or other liability. A cheque given not for the satisfaction of any debt or other liability, partly or wholly, even if it is returned unpaid due to insufficiency of funds or the stop payment instructions, it would not attract the consequences provided in Section 138 of the Negotiable Instruments Act. This means that only those payments are covered which are in discharge of any debt or other liability. Unless the two conditions set out in section 138 are satisfied, no criminal liability can be fastened. This is also in accordance with the general scheme, as laid down in Section 118(a) of the Negotiable Instruments Act. It also enforces the doctrine of consideration, as laid down in Section 2(d) of the Indian Contract Act, 1872. Too many definitions of the word debt have been given though the word debt is not defined in the Act. 'Debt' is defined in the Stroud's Judicial Dictionary, (4th edition, volume 2) as a sum payable in respect of a liquidated money demand recoverable by action (Rawley vs. Rawley 1 QBD 460].
28 In Dictionary of Banking by F.E. Perry (1979 edition, page 64), debt is mentioned as something owed to another, a liability, an obligation, a chose in action which is capable of being assigned by the creditor to some other person.
Shri K.J. Aiyar's Judicial Dictionary (page 314) mentions debt as under:
"Debt is a pecuniary liability. A sum payable or recoverable by action in respect of money demand. It refers to the definition given by Lindey Page 18 of 30 HC-NIC Page 18 of 30 Created On Tue Aug 15 17:10:14 IST 2017 R/CR.MA/24863/2016 JUDGMENT L.J. In Webb v. Stention (1888 QBD 518)... a debt is a sum of money which is now payable or will become payable in future by reason of a present obligation".
In Union of India v. Raman Iron Foundry [AIR 1974 SC 1265], it is decided as a existing obligation to pay a sum of money now or in future. Thus, there must be debitum in praesenti solvendum may or may not be praesenti. The following passage adopted from the judgment of Supreme Court of California was approved by Supreme Court of India in Keshoram Industries v. CWT [AIR 1966 SC 1370].
"Standing alone, the word 'debt' is as applicable to a sum of money which has been promised at a future day as to a sum not due and payable. If we to distinguish between the two, we say of the former that it is a debt owing and of the latter, it is a debt due".
"The above passage indicates that there is an obligation to pay a sum of money at a future date. It is debt owing, but when the obligation is to pay a sum of money in praesenti it is a debt due. A sum due would, therefore, mean a sum for which there is an existing obligation to pay in praesenti or in other words, it is presently payable."
29 Let me now look into the Law Laxicon by P. Ramanathan for meaning of word "liability":
"Liability: a broad term, it may be employed as meaning the state of being liable: that for which one is responsible or liable; obligation in general; that condition of affairs which gives rise to an obligation to do a particular thing to be enforced by action, responsibility, legal responsibility. In other words, the condition of one who is subject to charge or duty which may be judicially enforced."Page 19 of 30
HC-NIC Page 19 of 30 Created On Tue Aug 15 17:10:14 IST 2017 R/CR.MA/24863/2016 JUDGMENT 30 At this stage, it would be appropriate for me to look into the decision of the Supreme Court in the case of Sampelly Satyanarayana Rao vs. Indian Renewable Energy Development Agency Limited [AIR 2016 SC 4363]. The question for consideration before the Supreme Court in the facts of the case was whether the dishonour of a postdated cheque given for repayment of loan installment, which is also described as "security" in the loan agreement, is covered by Section 138 of the Negotiable Instruments Act. The Supreme Court proceeded to explain the law as under:
"7. It will be appropriate to reproduce the statutory provision in question which 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 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 Page 20 of 30 HC-NIC Page 20 of 30 Created On Tue Aug 15 17:10:14 IST 2017 R/CR.MA/24863/2016 JUDGMENT 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. Clause 3.1(iii) of the agreement may also be noted : " 3.1 SECURITY FOR THE LOAN The loan together with the interest, interest tax, liquidated damages, commitment fee, up front fee prima on repayment or on redemption, costs, expenses and other monies shall be secured by ;
(I) xxxxx
(ii) xxxxx
(iii) Deposit of Post dated cheques towards repayment of installments of principal of loan amount in accordance with agreed repayment schedule and installments of interest payable thereon."
9. Reference may now be made to the decision of this Court in Indus Airways Private Limited versus Magnum Aviation Private Limited [(2014) 12 SCC 539], on which strong reliance has been placed by learned counsel for the appellant. The question therein was whether post dated cheque issued by way of advance payment for a purchase order could be considered for discharge of legally enforceable debt. The cheque was issued by way of advance payment for the purchase order but the purchase order was cancelled and payment of the cheque was stopped. This Court held that while the purchaser may be liable for breach of the contract, when a contract provides that the purchaser has to pay in advance and cheque towards advance payment is dishonoured, it will not give rise to criminal liability under Section 138 of the Act. Issuance of cheque towards advance payment could not be considered as discharge of any subsisting liability. View to this effect of the Andhra Pradesh High Court in Swastik Coaters (P) Ltd. Versus Deepak Bros.[1997 Cr.L.J. 1942], Madras High Court in Balaji Seafoods Exports (India) Ltd. Versus Mac Industries Ltd. [(1999) 1 CTC 6], Gujarat High Court in Shanku Concretes (P) Ltd. Versus State of Gujarat [2000 Cri.L.J. 1988] and Kerala High Court in Supply House versus Ullas [2006 Cri.L.J. 4330] was held to be correct view as against the view of Delhi High Court in Magnum Aviation (P) Ltd. Versus State [(2010) 172 DLT 91] and Mojj Engg. Systems Ltd. Versus A.B. Sugars Ltd. [(2008) 154 DLT 579] which was disapproved.
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10. We have given due consideration to the submission advanced on behalf of the appellant as well as the observations of this Court in Indus Airways (supra) with reference to the explanation to Section 138 of the Act and the expression "for discharge of any debt or other liability"
occurring in Section 138 of the Act. We are of the view that the question whether a postdated cheque is for "discharge of debt or liability" depends on the nature of the transaction. If on the date of the cheque liability or debt exists or the amount has become legally recoverable, the Section is attracted and not otherwise.
11. Reference to the facts of the present case clearly shows that though the word "security" is used in clause 3.1(iii) of the agreement, the said expression refers to the cheques being towards repayment of installments. The repayment becomes due under the agreement, the moment the loan is advanced and the installment falls due. It is undisputed that the loan was duly disbursed on 28th February, 2002 which was prior to the date of the cheques. Once the loan was disbursed and installments have fallen due on the date of the cheque as per the agreement, dishonour of such cheques would fall under Section 138 of the Act. The cheques undoubtedly represent the outstanding liability.
12. Judgment in Indus Airways (supra) is clearly distinguishable. As already noted, it was held therein that liability arising out of claim for breach of contract under Section 138, which arises on account of dishonour of cheque issued was not by itself at par with criminal liability towards discharge of acknowledged and admitted debt under a loan transaction. Dishonour of cheque issued for discharge of later liability is clearly covered by the statute in question. Admittedly, on the date of the cheque there was a debt/liability in presenti in terms of the loan agreement, as against the case of Indus Airways (supra) where the purchase order had been cancelled and cheque issued towards advance payment for the purchase order was dishonoured. In that case, it was found that the cheque had not been issued for discharge of liability but as advance for the purchase order which was cancelled. Keeping in mind this fine but real distinction, the said judgment cannot be applied to a case of present nature where the cheque was for repayment of loan installment which had fallen due though such deposit of cheques towards repayment of installments was also described as "security" in the loan agreement. In applying the judgment in Indus Airways (supra), one cannot lose sight of the difference between a transaction of purchase order which is cancelled and that of a loan transaction where loan has actually been advanced and its repayment is due on the date of the cheque. .
13. Crucial question to determine applicability of Section 138 of the Act is whether the cheque represents discharge of existing enforceable debt or Page 22 of 30 HC-NIC Page 22 of 30 Created On Tue Aug 15 17:10:14 IST 2017 R/CR.MA/24863/2016 JUDGMENT liability or whether it represents advance payment without there being subsisting debt or liability. While approving the views of different High Courts noted earlier, this is the underlying principle as can be discerned from discussion of the said cases in the judgment of this Court.
14.In Balaji Seafoods (supra), the High Court noted that the cheque was not handed over with the intention of discharging the subsisting liability or debt. There is, thus, no similarity in the facts of that case simply because in that case also loan was advanced. It was noticed specifically therein - as was the admitted case of the parties - that the cheque was issued as "security" for the advance and was not intended to be in discharge of the liability, as in the present case.
15. In HMT Watches Ltd. Versus M.A. Abida [(2015) 11 SCC 776], 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, 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. 68587, paras 17 & 22) Page 23 of 30 HC-NIC Page 23 of 30 Created On Tue Aug 15 17:10:14 IST 2017 R/CR.MA/24863/2016 JUDGMENT "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 wellknown legal principles involved in the matter.
***
22. Ordinarily, a defence of an accused although appears to be plausible should not be taken into consideration for exercise of the said jurisdiction. Yet again, the High Court at that stage would not ordinarily enter into a disputed question of fact. It, however, does not mean that documents of unimpeachable character should not be taken into consideration at any cost for the purpose of finding out as to whether continuance of the criminal proceedings would amount to an abuse of process of court or that the complaint petition is filed for causing mere harassment to the accused. While we are not oblivious of the fact that although a large number of disputes should ordinarily be determined only by the civil courts, but criminal cases are filed only for achieving the ultimate goal, namely, to force the accused to pay the amount due to the complainant immediately. The courts on the one hand should not encourage such a practice; but, on the other, cannot also travel beyond its jurisdiction to interfere with the proceeding which is otherwise genuine. The courts cannot also lose sight of the fact that in certain matters, both civil proceedings and criminal proceedings would be maintainable."
12. In Rallis India Ltd. v. Poduru Vidya Bhushan [(2011) 13 SCC 88], this Court expressed its views on this point as under: (SCC p. 93, para 12) "12. At the threshold, the High Court should not have interfered with the cognizance of the complaints having been taken by the trial court. The High Court could not have discharged the respondents of the said liability at the threshold. Unless the parties are given opportunity to lead evidence, it is not possible to come to a definite conclusion as to what was the date when the earlier partnership was dissolved and since what date the respondents ceased to be the partners of the firm."
16. We are in respectful agreement with the above observations. In the present case, reference to the complaint (a copy of which is Annexures P7) 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 Page 24 of 30 HC-NIC Page 24 of 30 Created On Tue Aug 15 17:10:14 IST 2017 R/CR.MA/24863/2016 JUDGMENT the dues under the loan agreement (para 5 of the complaint).
17. As is clear from the above observations of this Court, it is well settled that while dealing with a quashing petition, the Court has ordinarily to proceed on the basis of averments in the complaint. The defence of the accused cannot be considered at this stage. The court considering the prayer for quashing does not adjudicate upon a disputed question of fact.
18. In Rangappa v. Sri Mohan [(2010) 11 SCC 441], 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 [Goaplast (P) Ltd v. Chico Ursula D'Souza (2003) 3 SCC 232].
19. 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."
31 Incorporating a rebuttable presumption, Section 139 lays down that unless the contrary is proved, it shall be presumed by the court 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". The term "presumption" in its largest and most comprehensive signification, according to Gajendragadkar, J., (as he then was) who spoke for the majority in Izhar Ahmad v. Union of India, AIR 1962 SC 1052 at 1060, may be defined to be an inference, affirmative or disaffirmative of the truth or falsehood of a doubtful fact or proposition drawn by a process of probable reasoning from something proved or taken for granted. The contention advanced is that the presumption is violative of the fundamental right guaranteed under clause (3) of Article 20 of the Constitution of India. The expression "holder of a cheque"
Page 25 of 30HC-NIC Page 25 of 30 Created On Tue Aug 15 17:10:14 IST 2017 R/CR.MA/24863/2016 JUDGMENT occurring in Section 139 cannot be understood as defined in Section 8 of the Act which covers any person entitled in his own name to the possession thereof and to receive or recover the amount due on cheque from the parties thereto. The definition as contained in Section 8 comprehends even an endorsee for collection though he may not have property in the instrument. The presumption incorporated in Section 139 is not intended to cover all kinds of holders; it covers only the holder of a cheque "of the nature referred to in Section 138". Only in respect of a cheque which was issued in discharge, in whole or in part, of a debt or other liability, the presumption operates in favour of the payee as well as in favour of a holder in due course as defined in Section 9. This construction receives support from the language employed in clause
(a) of Section 142, which speaks of cognizance of offences, and provisions (b) and (c) of Section 138. Section 4 of the evidence Act defines the expression "shall presume" as, "Whenever it is provided by this Act, that the court shall presume a fact, it shall regard such fact as proved, unless and until it is disproved". It is, therefore, incumbent on the court, in a prosecution under Section 138, unless the contrary is proved to draw the inference that the cheque received by its holder was a cheque of the nature referred to under Section 139 for the discharge, in whole or in part, of any debt or other liability. The presumption is displaced only when the truth of the inference is disproved on other evidence. However, as pointed out above, the rebuttable presumption under Section 139 operates only in favour of the payee or a holder in due course but not in favour of a person, who, without consideration became the holder of the cheque.
32 I am of the view that only because the possession of the premises came to be handed over to the complainant by terminating the lease agreement at an early stage, will not absolve the accused from their Page 26 of 30 HC-NIC Page 26 of 30 Created On Tue Aug 15 17:10:14 IST 2017 R/CR.MA/24863/2016 JUDGMENT liability incurred under the agreement. The cheques, at the relevant point of time, could be said to have been issued in favour of the complainant in discharge of a legally enforceable debt. Indisputably, on the date when the cheques were issued, there was a debt / liability in presenti in terms of the lease agreement. However, I leave it upon the Trial Court to look into this issue after appreciating the evidence that the parties may lead in the course of the trial. Ordinarily, a defence of an accused, although appears to be plausible, should not be taken into consideration for exercise of jurisdiction under Section 482 of the Cr.P.C. Section 142(c) invests certain Magistrates with the power of trying offences punishable under Section 138. When power is given to try an offence, it includes the power to convict or acquit and, in case of conviction, to exercise the sentencing discretion also to award an appropriate sentence, allowed by law. In order to convict an accused, the court must find him guilty. For the purpose of entering conviction or acquittal, the Magistrate must get himself satisfied of the ingredients of the offence. Power to try and convict includes the power to decide existence of the ingredients necessary to constitute the offence. One of the ingredients to be found is as to whether the cheque was drawn in discharge, in whole or in part of any legally enforceable debt or other liability. If that question arises in a civil suit, it could be said that it could be decided only by that civil court. In a criminal prosecution, that question will arise only collaterally for the purpose of deciding criminal liability. The Magistrate himself can decide it for the purpose of the criminal trial and conviction. The Magistrate is not deciding that matter to decree a suit for money due under the cheque. His finding may not be binding on a civil court. Still, for the purpose of conviction, the Magistrate himself can decide that matter. Without deciding that matter, the Magistrate cannot enter conviction. After taking cognizance, the Magistrate need not refer the question of drawing of the cheque in Page 27 of 30 HC-NIC Page 27 of 30 Created On Tue Aug 15 17:10:14 IST 2017 R/CR.MA/24863/2016 JUDGMENT discharge of a legally enforceable debt or other liability to a competent civil court and await its decision to proceed with the trial.
33 In the aforesaid context, I may quote the observations of the Supreme Court in the case of S. Krishnamoorthy vs. Chellammal [AIR 2015 SC 3182] as under:
"4. The respondent (accused) challenged the proceedings of criminal complaint case by moving a Criminal Original Petition under Section 482 of the Code before the High Court. In said petition the accused pleaded that her soninlaw A. Raj and Ayyavu (father of A. Raj) had actually borrowed a sum of Rs.2,00,000/ on 19.4.2005. The cheques in question were only taken as security. Actually, loan was taken by A. Raj and Ayyavu by mortgaging their house in favour of one Balakrishnan, brother of the present appellant. It is alleged by the present respondent (accused) in the petition that Balakrishnan, instead of getting the mortgage deed executed, obtained an agreement of sale from aforesaid two persons with false and incorrect recitals, that a sum of Rs.2,00,000/ was paid as advance and part of consideration, and balance of Rs.25,000/ shall be paid within 35 months. Cheques bearing Nos. 857491, 857492 and 857493 of Canara Bank, Dharapuram Branch, were got filled up in the name of the complainant (appellant), which were misused by him.
5. The above defence of the respondent (accused) before the High Court, in the petition filed under Section 482 of the Code, is nothing but absolutely factual in nature, which is neither admitted by the complainant, nor apparent on the face of the record. Such type of disputed factual defences could have been appreciated only by the trial court, after the parties led their evidence. In our opinion, the High Court committed grave error of law in examining the allegations and counter allegations which are disputed and factual in nature in a proceeding under Section 482 of the Code.
6. In Padal Venkata Rama Reddy alias Ramu v. Kovvuri Satyanarayana Reddy and others (2011) 12 SCC 437, this Court, explaining the law on the scope of Section 482 of the Code, has observed, in paragraph 32, as under:
"32. It would not be proper for the High Court to analyse the case of the complainant in the light of all the probabilities in order to determine whether conviction would be sustainable and on such premise arriving at a conclusion that the proceedings are to be quashed. In a proceeding instituted on a complaint, exercise of Page 28 of 30 HC-NIC Page 28 of 30 Created On Tue Aug 15 17:10:14 IST 2017 R/CR.MA/24863/2016 JUDGMENT inherent powers to quash the proceedings is called for only in a case in which the complaint does not disclose any offence or is frivolous, vexatious or oppressive. There is no need to analyse each and every aspect meticulously before the trial to find out whether the case would end in conviction or acquittal.""
34 So far as the vicarious liability of the Directors under Section 141 of the Negotiable Instruments Act is concerned, I may quote the observations of the Supreme Court as contained in para 31 in the case of Gunmala Sales Private Ltd. vs. Navkar Infra Projects Pvt Ltd [AIR 2015 SC 1072] as under:
"30. When in view of the basic averment process is issued the complaint must proceed against the Directors. But, if any Director wants the process to be quashed by filing a petition under Section 482 of the Code on the ground that only a bald averment is made in the complaint and that he is really not concerned with the issuance of the cheque, he must in order to persuade the High Court to quash the process either furnish some sterling uncontrovertible material or acceptable circumstances to substantiate his contention. He must make out a case that making him stand the trial would be abuse of the process of court. He cannot get the complaint quashed merely on the ground that apart from the basic averment no particulars are given in the complaint about his role, because ordinarily the basic averment would be sufficient to send him to trial and it could be argued that his further role could be brought out in the trial. Quashing of a complaint is a serious matter. Complaint cannot be quashed for the asking. For quashing of a complaint it must be shown that no offence is made out at all against the Director."
35 I shall conclude my judgment quoting the observations of the Supreme Court, as contained in paras 10 and 13, in the case of HMT Watches Ltd vs. M.A. Abida [2015 (3) Scale 832] as under:
"10. Having heard learned counsel for the parties, we are of the view that the accused (respondent No.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 Page 29 of 30 HC-NIC Page 29 of 30 Created On Tue Aug 15 17:10:14 IST 2017 R/CR.MA/24863/2016 JUDGMENT 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 N.I. Act stood uncomplied, even though the respondent No.1 (accused) had admitted that he replied the notice issued by the complainant. Also, the fact, as to whether the signatory of demand notice was authorized 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."
"13. Lastly, it is contended on behalf of the respondent No.1 that it was not a case of insufficiency of fund, as such, ingredients of offence punishable under Section 138 of the N.I.Act are not made out. We are not inclined to accept the contention of learned counsel for respondent No.1. In this connection, it is sufficient to mention that in the case of Pulsive Technologies P. Ltd. v. State of Gujarat [(2014) 9 SCALE 437 : (AIR 2015 SC 910)], this Court has already held that instruction of "stop payment" issued to the banker could be sufficient to make the accused liable for an offence punishable under Section 138 of the N.I. Act. Earlier also in Modi Cements Ltd. v. Kuchil Kumar Nandi (1998) 3 SCC 249 : (AIR 1998 SC 1057)], this Court has clarified that if a cheque is dishonoured because of stop payment instruction even then offence punishable under Section 138 of N.I. Act gets attracted."
36 In the overall view of the matter, I have reached to the conclusion that no case is made out for the quashing of the two complaints under Section 138 of the Negotiable Instruments Act.
37 Both the applications fail and are hereby rejected. Rule in both the applications stands discharged. The adinterim order earlier granted stands vacated.
(J.B.PARDIWALA, J.) chandresh Page 30 of 30 HC-NIC Page 30 of 30 Created On Tue Aug 15 17:10:14 IST 2017