2025 (6) TMI 527 - HC - Indian Laws

Dishonour of Cheque - legally enforceable debt or not - Section 482 of the Criminal Procedure Code (Cr.P.C.) - HELD THAT - On perusal of the pleadings of the parties as well as the annexures filed along with the petition it is evident that there is no dispute regarding the issuance of post-dated security cheques by the petitioner No. 2. Further it is also not disputed that there was a lease deed agreement between the parties and pursuant to said lease deed agreement the petitioner No. 2 was paying monthly rental amount to the respondent. The dispute arose when the petitioners allegedly failed to pay the monthly rental amount for which the respondent had to deposit the post-dated security cheques issued by the petitioner No. 2. However it is seen that those post-dated security cheques were issued by the petitioner No. 2 in the name of M/s OM Constructions and not in the name of the petitioner No. 1 i.e. M/s Maa Bagala Amusement Hub. But at the same time it cannot be denied that M/s OM Construction is a proprietorship firm owned by the petitioner No. 2. In case of Rajeshbhai Muljibhai Patel vs. State of Gujarat and Anr. 2020 (2) TMI 412 - SUPREME COURT as relied by the respondent the Hon ble Apex Court has expressed the view that the issue of non-existence of enforceable debt etc. lies on the accused to rebut the presumption by adducing evidence and the disputed question of facts involved in the case needs to be adjudicated after the parties adduced evidence. In the present case also the petitioner claim that no legally enforceable debt lies on the OM Constructions which is not a party to the lease agreement. That apart it is also seen that the cause of action for all the criminal complaint cases are different and the cases were instituted after dishonour of post-dated security cheques by the petitioner No. 2. Hence it also cannot be denied that under single petition there cannot be prayer for quashing of all 5(five) criminal complaint cases given that the cause of action for all 5(five) complaint cases are admittedly different. The learned Court below had taken cognizance finding a prima facie case against the petitioners. As discussed above the petitioners will get ample opportunity to rebut the presumption under Section 139 of N.I. Act at the time of trial. However this Court is of the opinion that there cannot be any reason to quash or set aside all the criminal complaint cases by invoking the power under Section 482 of Cr.P.C. The present criminal petition stands dismissed and disposed of.

Summary

1. ISSUES PRESENTED and CONSIDERED

- Whether the five criminal complaint cases filed under Section 138 of the Negotiable Instruments Act (N.I. Act) against the petitioners are liable to be quashed under Section 482 of the Criminal Procedure Code (Cr.P.C.) on the ground that no legally enforceable debt or liability exists against the petitioners.

- Whether the post-dated cheques alleged to have been dishonoured were issued by the petitioners in relation to the lease deed executed between the parties or by a different entity, thereby affecting the maintainability of the complaint cases.

- Whether the criminal complaints amount to an abuse of the process of law, especially given the pendency of a civil suit between the parties on the same subject matter.

- Whether the petitioners can seek quashing of all five complaint cases by a single petition, considering that the causes of action for the complaints are different.

- The scope and applicability of the presumption under Section 139 of the N.I. Act at the stage of taking cognizance and the extent to which this presumption can be rebutted prior to trial.

- The legal effect of issuance and dishonour of post-dated security cheques in the context of Section 138 of the N.I. Act.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Legally Enforceable Debt and Liability under Section 138 N.I. Act

The legal framework under Section 138 of the N.I. Act mandates that a cheque issued for discharge of a legally enforceable debt or liability, if dishonoured, attracts penal consequences. The presumption under Section 139 of the N.I. Act favors the complainant, presuming the existence of such debt or liability unless rebutted by the accused.

The petitioners contended that no legally enforceable debt exists against them in relation to the post-dated cheques alleged to have been dishonoured, as all payments under the lease deed were made by account payee cheques issued in the name of M/s Maa Bagala Amusement Hub (petitioner No. 1). The post-dated cheques in question were allegedly issued by petitioner No. 2 in the name of M/s OM Constructions, a separate proprietorship firm, which was not a party to the lease deed.

The Court noted that the issuance of post-dated cheques by petitioner No. 2 in the name of M/s OM Constructions was not disputed. The question of whether the debt was enforceable against M/s OM Constructions or the petitioners could only be adjudicated after evidence is led at trial. The Court relied on precedents which establish that the presumption under Section 139 is rebuttable but such rebuttal is to be done at trial and not at the stage of taking cognizance.

The Court referred to the decision emphasizing that the High Court cannot quash a complaint under Section 138 merely on the ground of inter se disputes or absence of enforceable debt without trial, as the presumption stands unless rebutted by evidence.

Issue 2: Relationship Between Post-Dated Cheques and Lease Deed

The petitioners argued that the post-dated cheques were issued as security for a proposed lease deed in the name of M/s OM Constructions, which was never executed, and that all lease payments were made by the petitioner No. 1's firm. The respondent, however, claimed that the cheques were accepted in good faith as security for rent payments and that the cheques were dishonoured due to insufficient funds.

The Court observed that while the Lease Deed was executed with M/s Maa Bagala Amusement Hub, the post-dated cheques were issued by the proprietor of M/s OM Constructions, which is a proprietorship firm owned by petitioner No. 2. This factual matrix raised disputed questions of fact, which are not appropriate for determination at the quashing stage.

Therefore, the Court held that these issues require trial for proper adjudication and cannot be resolved on a petition under Section 482 Cr.P.C.

Issue 3: Abuse of Process of Court and Pendency of Civil Suit

The petitioners contended that the criminal complaints were an abuse of process since a civil suit on the same subject matter was already pending, seeking eviction and recovery of arrear rent. They relied on judicial principles that criminal proceedings should not be allowed to proceed when the dispute is essentially civil in nature and a civil remedy is available and pursued.

The Court examined the principle that the High Court's power under Section 482 Cr.P.C. to quash criminal proceedings is to be exercised sparingly and primarily to prevent abuse of process or miscarriage of justice. The Court referred to authoritative judgments which stipulate that if the complaint discloses a criminal offence and there is prima facie material, the criminal proceedings should not be quashed merely because a civil remedy exists.

The Court held that the pendency of a civil suit does not automatically warrant quashing of criminal complaints under Section 138 of the N.I. Act, especially when the criminal liability is distinct and the courts below have taken cognizance upon prima facie satisfaction.

Issue 4: Maintainability of Single Petition for Quashing Multiple Complaints

The respondent argued that since the causes of action for the five complaint cases are different, the petitioners cannot seek quashing of all five cases in a single petition, rendering the petition not maintainable.

The Court agreed that the causes of action for the complaints were admittedly different, and the complaints were filed after dishonour of different post-dated cheques. Therefore, the Court found that a single petition for quashing all five complaints is not maintainable.

Issue 5: Scope of Presumption under Section 139 of N.I. Act at Cognizance Stage

The respondent relied on authoritative Supreme Court decisions holding that the presumption under Section 139 of the N.I. Act operates at the stage of trial and that the court taking cognizance cannot delve into the rebuttal of such presumption. The presumption is rebuttable but requires evidence to be led by the accused.

The Court concurred with this position, noting that the learned Magistrate had rightly taken cognizance upon prima facie satisfaction of the complaint's ingredients. The petitioners' contentions regarding absence of enforceable debt and issuance of cheques by a different entity are matters for trial and cannot be grounds for quashing at this stage.

Issue 6: Legal Effect of Post-Dated Security Cheques

The respondent also submitted that even if the cheques were issued as security, the dishonour thereof would attract Section 138 of the N.I. Act if the loan or liability was not discharged before the due date, relying on recent Supreme Court precedents.

The Court noted the legal principle that a cheque issued for security matures for presentation if the underlying liability is not discharged within the stipulated time. The petitioners' claim that the cheques were not intended to be encashed and were security cheques is a factual issue to be examined at trial.

3. SIGNIFICANT HOLDINGS

"While exercising its jurisdiction under Section 482 of Cr. P.C., the High Court has to be conscious that this power is to be exercised sparingly and only for the purpose of prevention of abuse of the process of the court or otherwise to secure ends of justice. Whether a complaint discloses a criminal offence or not, depends upon the nature of the act alleged thereunder. Whether the essential ingredients of a criminal offence are present or not, has to be judged by High Court. A complaint disclosing civil transaction may also have a criminal texture. But the High Court must see whether the dispute which is in substance of a civil nature is given a cloak of a criminal offence. In such a situation, if civil remedy is available and is in fact adopted, as has happened in case on hand, the High Court should have quashed the criminal proceeding to prevent abuse of process of Court."

"(i) Step one, whether the material relied upon by the accused is sound, reasonable, and indubitable, i.e., the material is of sterling and impeccable qualityRs.

(ii) Step two, whether the material relied upon by the accused, would rule out the assertions contained in the charges levelled against the accused, i.e., the material is sufficient to reject and overrule the factual assertions contained in the complaint, i.e., the material is such, as would persuade a reasonable person to dismiss and condemn the factual basis of the accusations as false.

(iii) Step three, whether the material relied upon by the accused, has not been refuted by the prosecution/complainant; and/or the material is such, that it cannot be justifiably refuted by the prosecution/complainantRs.

(iv) Step four, whether proceeding with the trial would result in an abuse of process of the court, and would not serve the ends of justiceRs."

"The presumption available under Section 139 of NI Act has to be rebutted and that rebuttal can only be done after adducing evidence. This, by itself clearly reflects that the rebuttal presumption cannot be looked into at the stage of the Court taking cognizance of the offence and registering the case: all that Court would have to see is whether there is a prima facie case made out meeting the conditions precedent as envisaged under Section 138 of NI Act."

"When once the issuance of cheque is admitted/established, the presumption would arise under Section 139 of the N.I. Act in favour of the holder of cheque that is the complainant. The nature of presumptions under Section139 of the N.I. Act and Section 118 (a) of the Indian Evidence Act are rebuttable. The burden lies upon the accused to rebut the presumption by adducing evidence."

"Where the borrower agrees to repay the loan within a specified timeline and issues a cheque for security but defaults in repaying the loan within the timeline, the cheque matures for presentation. When the cheque is sought to be encashed by the debtor and is dishonoured, Section 138 of the Act will be attracted."

Final determinations:

- The petitioners' contention that no legally enforceable debt exists and that the post-dated cheques were not issued in relation to the lease deed but by a different proprietorship firm raises disputed questions of fact which require trial.

- The presumption under Section 139 of the N.I. Act operates at the trial stage and cannot be rebutted at the cognizance stage; therefore, the complaint cases are maintainable.

- The pendency of a civil suit on the same subject matter does not warrant quashing of criminal complaints under Section 138 of the N.I. Act.

- The petitioners cannot seek quashing of all five complaint cases by a single petition as the causes of action are different.

- The Court found no ground to quash the complaints under Section 482 Cr.P.C. and dismissed the petition accordingly.