Case BriefsHigh Courts

Allahabad High Court: Dr Kaushal Jayendra Thaker, J., refused to exercise and inherent powers under Section 482 CrPC to quash a complaint filed under Section 138 of the Negotiable Instruments Act for dishonour of cheque.

Instant application was filed to quash the proceeding of a criminal complaint under Section 138 of the Negotiable Instruments Act, 1881.

In the present matter, a proposal for OTS was submitted by Chairperson with an application to the Chief Manager, Bank of India. The said proposal was accepted by the applicants.

Further, it was stated that a resolution was passed giving 4 Cheques. Letter for renewal of OTS by giving 4 new Cheques were submitted before Zonal Manager for Rs 100 lacs was allegedly given.

Union Bank of India issued a return memo with the remark ‘Funds Insufficient’. Legal notice due to dishonor of cheque was issued.

A complaint under Section 138 NI At was also filed by the Bank of India and Chief Manager’s statement was recorded under Section 200 CrPC.

Court opined that it is not justified in embarking upon an enquiry as to the probability, reliability or genuineness of the allegations made therein.

In, State of Haryana v. Bhajan Lal, 1992 Supp (1) SCC 335, it was held that an F.I.R. or a complaint may be quashed if the allegations made therein are so absurd and inherently improbable that no prudent person can ever reach a just conclusion that there is sufficient ground for proceeding against the accused, but the High Court has not recorded such a finding, obviously because on the allegation in the F.I.R. it was not possible to do so. Therefore, it must be held that the High Court has committed a gross error of law in quashing the F.I.R. and the complaint.

Bench stated that it is only an afterthought that non-bailable warrants were issued that the applicants approached this Court, they did not appear before the lower court nor challenge the summoning order.

High Court held that prima facie ingredients of the offence were made out.

High Court should be loath in exercise of jurisdiction under Section 482 of Code to enter into the process of determining the veracity of complaint.

Powers vested in High Court under Section 482 CrPC have far-reaching consequences, most important being the consequence that it would negate the prosecution’s/complainant’s case without allowing the prosecution/complainant to lead evidence and therefore, the exercise of the said powers should be with the utmost caution, care and circumspection.

In Court’s view, the present matter is one which cannot be said to be one where extraordinary power is required to be exercised.

“…application is devoid of merits and is dismissed with exemplary costs of Rs. 50,000/- to be deposited with the Legal Service Authority which can be utilized for the patients of Covid-19 as officers of such institutions after falling to appear before the Court below have come up with this challenge which is a belated challenge.”

Bench added that two proceedings cannot simultaneously be proceeded. Further, the Court stated that the liabilities were prima facie there and hence cannot be said that the issuance of summons was bad.

Hence, the amount of cheque and contours of Section 138 of N.I. Act, cannot be said to have been prima facie not made out.

Accused may appear before the lower court and the Court may consider the applications for cancellation of non-bailable warrants.

In view of the above discussion, application was dismissed with exemplary costs of Rs 50,000.[Shiksha Educational Trust v. State of U.P., 2021 SCC OnLine All 450, decided on 2-07-2021] 

Case BriefsHigh Courts

Allahabad High Court: Vivek Varma, J., held that factum of disputed service of notice requires adjudication on the basis of evidence and the same can only be done by the trial court.

In the instant matter, OP had filed a complaint under Section 138 of the Negotiable Instruments Act against the applicant as the cheques issued by the applicant was returned by the bank with the remark “fund insufficient”.

A legal notice in view of the above-stated circumstances was sent. There is a presumption of service of the said notice and despite service of notice, the applicant did not make any payment nor sent any reply.

Analysis, Law and Decision

Bench stated that Section 138 NI Act was considered by the Supreme Court in C.C. Alavi Haji v. Palapetty Muhammed, (2007) 6 SCC 555, wherein the presumption under Section 114 of the Evidence Act and Section 27 of the General Clauses Act was enunciated.

The above-stated case was followed by the Supreme Court in Ajeet Seeds Limited v. K. Gopala Krishnaiah, (2014) 12 SCC 685 and held that absence of averments in the complaint about service of notice upon the accused’s is the matter of evidence.

Noting the settled legal position in the above cases, Bench expressed that the complaint cannot be thrown at the threshold even if it does not make a specific averment with regard to service of notice on the drawer on a given date. Complaint, however, must contain basic facts regarding the mode and manner of issuance of notice to the drawer of the cheque.

Supreme Court’s decision in Subodh S. Salaskar v. Jayprakash M. Shah, (2008) 13 SCC 689, was relevant to the present matter.

High Court elaborated that, notice being sent on 19-09-2012, if the presumption of service of notice within a reasonable time is raised, shall be deemed to have been served, at the best within a period of 30 days from the date of issuance. Applicant was required to make payment in terms of the said notice within 15 days thereafter.

The factum of disputed service of notice requires adjudication on the basis of evidence and the same can only be done and appreciated by the trial court and not by this Court under the jurisdiction conferred by Section 482 CrPC.

However, since the complaint case was pending since the year 2014, as per the mandate of the Act the proceedings under Section 138 NI Act ought to be concluded within 6 months.

Hence, the Court below was directed to expedite the hearing of the complaint case. [Anil Kumar Goel v. State of U.P., 2021 SCC OnLine All 410, decided on 7-06-2021]


Advocates before the Court:

Counsel for Applicant:- Anand Prakash Dubey, Pradeep Kumar Rai, Saurabh Trivedi

Counsel for Opposite Party:- Govt. Advocate Vikrant Rana

Case BriefsHigh Courts

Delhi High Court: Manoj Kumar Ohri, J., while allowed the present petition and quashed the impugned order summoning the petitioners under Section 138 Negotiable Instruments Act, 1881.

Petitioners in the present case were summoned for the offence punishable under Section 138 NI Act.

Respondent filed a complaint stating that the accused were regular purchasers of goods from the complainant on a credit basis and made regular payment towards sale consideration from time to time in the past. There was an outstanding balance payable by the accused against which 4 account payee cheques were issued. However, the same were returned unpaid to the complainant vide bank’s return with remarks “Funds Insufficient”.

Complainant issued a legal notice of demand calling upon the accused to make payment within 15 days from the date of receipt. Since no payment was made within the statutory period of 15 days, a complaint under Section 138 read with Sections 141/142 of NI Act was filed.

Counsel for the petitioner contended that, petitioners were the independent non-executive Additional Directors and were never involved in the day to day affairs of the company at any point of time. Further, he referred to the complaint where the present petitioners were wrongly described as Directors.

It is an admitted case of the respondent that the petitioners were neither the Managing Directors nor the signatories to the cheques in question.

Further, the Counsel for the respondent submitted that the petitioners were named as Directors in the complaint on the basis of the information which was downloaded from the official website of ROC.

Decision

While concluding its decision, Court stated that, Vicarious liability of a person arises in terms of Section 141 of NI Act, and referred to S.M.S Pharmaceuticals Ltd. v. Neeta Bhalla, (2005) 8 SCC 89.

Another Supreme Court’s decision that the bench referred was a recent one,

Chintalapati Srinivasa Raju v. Securities and Exchange Board of India, (2018) 7 SCC 443, wherein it was held that

Non-Executive Directors are, therefore, persons who are not involved in the day-to-day affairs of the running of the company and are not in charge of and not responsible for the conduct of the business of the company.

Thus, in view of the above, Court stated that the petitioners were neither the Managing Directors nor the authorized signatories of the accused company.

Further, the Court noted that, a perusal of the complaint filed by the respondent shows that except for general allegation stating that petitioners were responsible for control and management and day to day affairs of the accused company, no specific role had been attributed to petitioners.

To fasten the criminal liability under The Negotiable Instruments Act, 1881, the above generalised averment without any specific details as to how and in what manner, the petitioners were responsible for the control and management of affairs of the company, is not enough.

Hence the impugned order summoning the petitioners under Section 138 NI Act is quashed. [Sunita Palta v. Kit Marketing (P) Ltd., Crl. MC No. 1410 of 2018, decided on 03-03-2020]

Case BriefsHigh Courts

Delhi High Court: A Single Judge Bench comprising of Valmiki Mehta, J. dismissed a regular first appeal filed under Section 96 CPC against the judgment of the trial court whereby the appellant’s application for leave to defend was dismissed.

Brief facts of the case are that the appellant-defendant took a loan of Rs 20 lakhs from the plaintiff and issued two cheques for the part-payment thereof. However, on presentation, the said cheques were dishonoured with remarks funds insufficient. After serving the legal notice, the petitioner filed a suit. The defendant filed an application for leave to defend. His basic defence was that the cheques in question were stolen from his car while he was driving from Rohtak to Delhi. However, the trial court dismissed the defendant’s application for leave to defend. Aggrieved thus, the defendant filed the instant appeal.

The High Court was of the view that judgment of the trial court did not warrant any interference. It was noted that indeed an FIR was filed by the defendant in regard to the said robbery. However, there was no mention of the said cheques being stolen. The defendant was using such fact to create a completely false defence to the suit. Referring to the Supreme Court decision in IDBI Trusteeship Services Ltd. v. Hubtown Ltd., (2017) 1 SCC 568, the High Court observed that once the defence is clearly frivolous and vexatious and there is no triable issue, leave to defend should not be granted. In the present case too, the Court completely disbelieved the story put forth by the defendant, and concluded that the defence was frivolous and vexatious. Thus, the trial court was right in dismissing the defendant’s application for leave to defend. The appeal was dismissed sans merit. [Mange Ram v. Raj Kumar Yadav,2018 SCC OnLine Del 10316, dated 03-08-2018]

Case BriefsHigh Courts

Himachal Pradesh High Court: A Single Judge Bench comprising of Chander Bhushan Barowalia, J. allowed a criminal appeal filed under Section 378 CrPC against the order of the trial court whereby complaint filed by the appellant was dismissed for non-appearance of the complainant-appellant.

The appellant filed a complaint under Section 138 of Negotiable Instruments Act 1881, alleging that the respondent had to pay a legally liable debt to the appellant. The respondent issued a cheque in favour of the appellant for the same. The appellant presented the said cheque before the respondent’s bank for payment. However, the cheque was returned with the endorsement ‘Funds Insufficient’. The appellant issued a demand notice to the respondent in compliance with the provisions of NI Act, but even then the respondent did not discharge his debt. Consequently, the appellant filed a complaint under Section 138 of the Act. The trial court issued notice for the service on the accused-respondent on 23-12-2015. On that date, the appellant did not appear before the court as he was under the impression that it was a formal hearing and it would be attended to by his counsel. However, appellant’s counsel was busy in conducting a criminal trial before the first Appellate Court and even he could not appear before the trial court on the given date. Resultantly, the trial court, under Section 256 CrPC, dismissed the complaint and acquitted the respondent. Aggrieved by the same, the appellant was in appeal before the High Court.

The High Court perused the record and was of the view that the trial court was not right in dismissing appellant’s complaint. The Court noted that non-appearance of the appellant, as well as his counsel, was not due to inadvertence. The appellant was relying on his counsel to appear before the trial court as it was a formal hearing, and the counsel was busy in conducting the criminal trial as stated hereinabove. The Court was of the opinion that such non-appearance was due to unavoidable circumstances. The Court concluded that the non-appearance of the appellant as well his counsel was neither intentional nor willful, but was beyond their control. Therefore, the High Court allowed the appeal and set aside the impugned judgment of the trial court dismissing the complaint of the appellant herein. [Padam Singh Saini v. Megh Singh,2018 SCC OnLine HP 784, dated 18-6-2018]