TMI Blog2023 (7) TMI 294X X X X Extracts X X X X X X X X Extracts X X X X ..... al in detail with the circumstances where the debt in question can be interpreted to be owed by the accused to the complainant for the purpose of Section 138 of the Negotiable Instruments Act. The Court interpreted the term legally enforceable debt when the cheques are issued as a security. It was held that the expression security cheque is not a statutorily defined expression in the Act. There can be a situation where the cheques are given to provide an assurance or comfort to the drawee that in case of failure to pay the primary consideration on the due date, the security may be enforced. Section 138 specifically mentions that the cheque must have been issued for discharge of not only any debt but can also be for other liability . It is therefore, not necessary that when the cheques are issued, the drawer had any debt to discharge on the date of issuance. The debt or any liability is to exist when the cheque in question is presented for encashment - the allegations made in the complaint, at the stage when the complaint is sought to be quashed at the initial stage, are to be taken as correct unless evidence of unimpeachable character has been produced. The defence taken by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 - - - Dated:- 3-7-2023 - HON BLE MR. JUSTICE AMIT MAHAJAN Advocates who appeared in this case: For the Petitioners : Mr. Anuj Jain, Advocate For the Respondents :Ms Priyanka Dalal, APP for the State JUDGMENT 1. The present petition has been filed under Section 482 of the Code of Criminal Procedure, 1973( CrPC ), interalia, praying for quashing of impugned notice framed under Section 251 of the CrPC vide order dated 03.03.2022 and for setting aside of summoning order dated 26.08.2021 passed by Ld. Metropolitan Magistrate (NI Act), Digital Court-02, South East District, Saket Courts, New Delhi (hereafter the learned MM )in a complaint filed by Respondent No. 2 being CC NI Act 1768/2021, titled Vivek Sapra vs. Vihan Exims Company Pvt. Ltd. Ors. , taking cognizance for the offence under Section 138 of the Negotiable Instruments Act, 1881 ( NI Act ). 2. The brief facts of the case as alleged in the complaint are that the petitioners herein are engaged in the business of manufacturing ornaments out of gold and diamonds. They specialise in manufacturing customised jewellery based upon orders from the customers. Respondent No. 2 is engaged in the bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnment of India to contain the spread of COVID 19 pandemic, claiming that the consignment had to come from Bombay. 8. It is alleged that Respondent No. 2 approached the petitioners for the finished goods several times till 15.12.2020, but they failed to deliver the same. Hence, as per the agreed terms of the MOU, on 16.12.2020, Respondent No. 2 presented the cheque bearing no. 857711 for a sum of ₹50,00,000/-for encashment, but the same was returned unpaid vide return memo dated 16.12.2020 with remarks Funds Insufficient on 17.12.2020. 9. It is further claimed that after repeated reminders and requests with respect to the dishonour of the aforementioned cheque, Respondent No. 2 sent a legal notice dated 28.12.2020 to the petitioners on 29.12.2020, and the same was also served through WhatsApp and email on 31.12.2020. 10. It is also alleged that on 30.12.2020, Respondent No. 2 presented the other two cheques bearing no. 857712 and 857719 for a sum of ₹50,00,000/- and ₹20,00,000/- respectively hoping that the petitioners must have maintained the requisite funds, but the same were also returned unpaid vide separate return memos dated 31.12.2020 with remark ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... que in question did not represent an amount that could be termed as legally enforceable debt or other liability . He places reliance on Indus Airways Private Limited and Others vs. Magnum Aviation Private Limited and Another: (2014) 12 SCC 539 and Pine Product Industries and Anr. v. R.P. Gupta Sons Anr.:2006 SCC OnLine Del 1514. 19. Learned counsel submitted that on a bare perusal of the order dated 03.03.2022, it can be seen that none of the aforesaid contentions of defence of the petitioner were considered and/or adjudicated by the learned MM. He claimed that the said order lacks reasons and is a non-speaking order. 20. Learned counsel submitted that admittedly, all three cheques were security cheques without any dates and dates i.e., 16.12.2020 and 30.12.2020 were filled up later by Respondent No. 2. He further averred that the cheques were not issued for the payment of any amount in discharge, in whole or in part of any debt or other liability. 21. He submitted that MOU dated 16.02.2020 did not authorise Respondent No. 2 to present the cheques for encashment. 22. He claimed that the present case is a business transaction for the return of bullion/jewellery ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fect that the disputed facts are matter of trial and cannot be adjudicated in a petition invoking the jurisdiction of High Court under Section 482 of the CrPC. 29. He further submitted that the High Court while exercising power under Section 482 of the CrPC, ought not to examine the truthfulness of the averments in a complaint under Section 138, NI Act as the same would amount to usurping the power of the learned Trial Court. 30. Learned counsel further submitted that the dishonour of cheques issued as a security attracts offences under Section 138, NI Act, and the said issue is no more res integra. The Hon'ble Supreme Court in the case of Sripati Singh (Since Deceased) Through His Son Gaurav Singh v. State of Jharkhand and Another(supra), held that a cheque issued as security cheque could not be considered as a worthless piece of paper and can attract an offence under Section 138 of the NI Act. 31. The Hon'ble Supreme Court further in the case of Sunil Todi and Others v. State of Gujarat and Another: 2021 SCC OnLine SC 1174, held that once the time for which the security cheques are issued is over, the security cheques become mature for presentation and wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as security for the alleged gold handed over by the complainant for making the jewellery. The petitioners at no stage were required to make any payment that could be construed as a legally enforceable debt enabling the complainant to present the cheques in question. 39. The maintainability of a complaint on dishonour of a post-dated cheque or an unfilled cheque has come up for consideration before this Court as well as the Hon ble Apex Court in several cases. 40. In the case of Indus Airways Private Limited and Others v. Magnum Aviation Private Limited and Another (supra), the Hon ble Apex Court, in the facts of that case, held that a post-dated cheque issued by way of advance payment against a purchase order cannot be considered as a cheque issued towards the discharge of legally enforceable debt. In the said case, it was admitted between the parties that the purchase order was cancelled. The Hon ble Apex Court held that in such circumstances, the cheque could not be held to have been presented for encashment for discharge of legally enforceable debt or liability. 41. In the case of Sripati Singh (Since Deceased) Through His Son Gaurav Singh v. State of Jharkhand and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inability of refunding a loan has been given a colour of criminal offence of cheating punishable under Section 420 of the Penal Code, 1860. A breach of trust with mens rea gives rise to a criminal prosecution. In this case when I go through the evidence before charge of the complainant and the documents of the complainant, I find that there were long standing business transactions between the parties. Since 2011 money was advanced by the complainant and his family members to the accused and the complainant witness admits that money was also transferred from the account of the accused to the account of daughter of the complainant. From the evidence, I find that there is no material to suggest existence of any mens rea. Thus, this case becomes a case of simplicitor case of non-refunding of loan, which cannot be a basis for initiating criminal proceeding. The Hon'ble Supreme Court in the case of Samir Sahay alias Sameer Sahay v. State of UP reported in (2018) 14 SCC 233 held that when the dispute between the parties was ordinarily a civil dispute resulting from a breach of contract on the part of the appellant by non-refunding of amount advanced, the same would not constit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d above, it is noted that the High Court has itself arrived at the conclusion that the instant case becomes a simpliciter case of non-refunding of loan which cannot be a basis for initiating criminal proceedings. The conclusion to the extent of holding that it would not constitute an offence of cheating, as already indicated above would be justified. However, when the High Court itself has accepted the fact that it is a case of non-refunding of the loan amount, the first aspect that there is a legally recoverable debt from the respondent No. 2 to the appellant is prima-facie established. The only question that therefore needs consideration at our hands is as to whether the contention put-forth on behalf of respondent No. 2 that an offence under Section 138 of the N.I. Act is not made out as the dishonourment alleged is of the cheques which were issued by way of security and not towards discharge of any debt. 13. In order to consider this aspect of the matter we have at the outset taken note of the four loan agreements dated 13.08.2014 which is the subject matter herein. Under each of the agreements, the promise made by respondent No. 2 is to pay the appellant a sum of Rs. 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refers to the cheques being towards repayment of instalments. The repayment becomes due under the agreement, the moment the loan is advanced and the instalment 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 instalments 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le issue. We say so because, handing over of the cheques by way of security per se would not extricate the accused from the discharge of liability arising from such cheques. 6. Suffice it to observe, the impugned judgment of the High Court cannot stand the test of judicial scrutiny. The same is, therefore, set aside. 17. A cheque issued as security pursuant to a financial transaction cannot be considered as a worthless piece of paper under every circumstance. Security in its true sense is the state of being safe and the security given for a loan is something given as a pledge of payment. It is given, deposited or pledged to make certain the fulfilment of an obligation to which the parties to the transaction are bound. If in a transaction, a loan is advanced and the borrower agrees to repay the amount in a specified timeframe and issues a cheque as security to secure such repayment; if the loan amount is not repaid in any other form before the due date or if there is no other understanding or agreement between the parties to defer the payment of amount, the cheque which is issued as security would mature for presentation and the drawee of the cheque would be entitled ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vanced had already fallen due for payment. Therefore, prima facie the cheque which was taken as security had matured for payment and the appellant was entitled to present the same. On dishonour of such cheque the consequences contemplated under the Negotiable Instruments Act had befallen on respondent No. 2. As indicated above, the respondent No. 2 may have the defence in the proceedings which will be a matter for trial. In any event, the respondent No. 2 in the fact situation cannot make a grievance with regard to the cognizance being taken by the learned Magistrate or the rejection of the petition seeking discharge at this stage. 20. In the background of the factual and legal position taken note supra, in the instant facts, the appellant cannot be non-suited for proceeding with the complaint filed under Section 138 of N.I. Act merely due to the fact that the cheques presented and dishonoured are shown to have been issued as security, as indicated in the loan agreement. In our opinion, such contention would arise only in a circumstance where the debt has not become recoverable and the cheque issued as security has not matured to be presented for recovery of the amount, if th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 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. xxxx xxxx xxxx 33. At this stage, it would be instructive to note the order of a two judge Bench of this Court in Womb Laboratories Pvt. Ltd. v. Vijay Ahuja . In that case, the High Court had quashed proceedings initiated against the first respondent for offences punishable under Section 138 of the NI Act merely on the basis of the assertion in the complaint that security cheques were demanded in response to which the accused had issued three signed blank cheques with the assurance that if the amount was not returned, the cheques could be encashed. The High Court held that the cheques were given only by w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch would be within the contemplation of the drawer. The cheque, in other words, would in such an instance mature for presentation and, in substance and in effect, is towards a legally enforceable debt or liability. This precisely is the situation in the present case which would negate the submissions of the appellants. xxxx xxxx xxxx 54. In the present case, it is evident that the principal grounds of challenge which have been set up on behalf of the appellants are all matters of defence at the trial. The Magistrate having exercised his discretion, it was not open to the High Court to substitute its discretion. The High Court has in a carefully considered judgment, analysed the submissions of the appellants and for justifiable reasons has come to the conclusion that they are lacking in substance. 43. This Court, in the case Suresh Chandra Goyal v. Amit Singhal :2015 SCC OnLine Del 9459 had an occasion to deal in detail with the circumstances where the debt in question can be interpreted to be owed by the accused to the complainant for the purpose of Section 138 of the Negotiable Instruments Act. The Court interpreted the term legally enforceable debt when the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ischarged on a future date itself, is sufficient to read into the arrangement, an agreement that in case of failure of the debtor to make payment on the due date, the security cheque may be presented for payment, i.e. for recovery of the due debt. If that were not so, there would be no purpose of obtaining a security cheque from the debtor. A security cheque is issued by the debtor so that the same may be presented for payment. Otherwise, it would not be a security cheque. As observed above, the MOU (Ex.CW-1/4) does not expressly, or even impliedly states that the security cheques are not to be used to recover the installments, even in case of failure to pay the same by the respondent/debtor. 62. Section 138 of NI Act does not distinguish between a cheque issued by the debtor in discharge of an existing debt or other liability, or a cheque issued as a security cheque on the premise that on the due future date the debt which shall have crystallized by then, shall be paid. So long as there is a debt existing, in respect whereof the cheque in question is issued, in my view, the same would attract Section 138 of NI Act in case of its dishonour. 44. Section 138 specifically ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for encashment on 16.12.2020 and 30.12.2020 respectively. It is also specifically averred that further, another security cheque of ₹20 lakhs was given by the accused since the value of the gold had increased which was also presented to the bank for the encashment on 30.12.2020. The cheques together represented the value of the gold. The complainant has further alleged in the complaint that when the accused failed to return the gold on demand, it was constrained to present the cheques in question. 48. The legal presumption of the cheques having been issued in the discharge of liability must also receive due weightage. In a situation where the accused moves Court for quashing even before the trial has commenced, the Court's approach should be careful not to prematurely extinguish the case by disregarding the legal presumption supporting the complaint. The Supreme Court, in the case of Bir Singh v. Mukesh Kumar :(2019) 4 SCC 197 , held as under: 32. The proposition of law which emerges from the judgments referred to above is that the onus to rebut the presumption under Section 139 that the cheque has been issued in discharge of a debt or liability is on the accuse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should be exercised sparingly and with circumspection. The Court, at this stage is not to embark upon an inquiry as to the reliability or genuineness of the allegations made in the complaint. The Court, at the same time, is also not to go into the merits of the complaint to reach a conclusion that there was any existing debt or liability. Furthermore, the burden of proving that there was no existing debt or liability is on the accused which is required to be discharged at the time of trial unless some evidence of unimpeachable and uncontroverted in nature is produced before the Court to take a different view. The presumption envisaged under Section 139 of the Negotiable Instruments Act is a rebuttal presumption at the time of trial. The Court can exercise power under Section 482 of the Cr.P.C, if the complaint on the face of it does not make out any case against the accused or if any evidence of an unimpeachable nature is produced. 52. In similar circumstances, in the case of HMT Watches Limited v. M.A. Abida and Another : (2015) 11 SCC 776 , the Hon ble Apex Court held as under : 10. Having heard the learned counsel for the parties, we are of the view that the accused ..... X X X X Extracts X X X X X X X X Extracts X X X X
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