2015 (6) TMI 149 - HC - Indian Laws

Dishonour of cheque - Nature of transaction - Discharge of debts or not - Held that - Court is not required to enter into the arena of disputed facts relating to the nature of transaction of being of assignment or of discharge of guarantee. Whether any specific permission is required from Reserve Bank of India under the FEMA is again a question of fact, which has to be considered in light of nature of transaction between the parties. In any case, this Court is of the considered opinion that no case for dropping of the proceedings against petitioners is made out as prima facie case is made out against petitioners to justify the continuance of proceedings, arising out of these two complaints in question. When the complaints in question are at advanced stage of recording of evidence, then meticulous examination of the averments in these complaints in the exercise of extra ordinary jurisdiction under Section 482 of Cr.P.C. is considered to be inappropriate as it cannot be said that the averments regarding the part played by petitioners in the transaction in question is lacking. - Since, prosecution of petitioners in these two complaints cannot be said to be vexatious or amounting to fishing inquiry against them, therefore, it cannot be said that continuance of instant proceedings against petitioners is an abuse of the process of the law. - Appeal disposed of.

Summary

Issues:
Quashing of criminal complaint under Section 138 of Negotiable Instruments Act, 1881; Vicarious liability of directors; Quashing of complaints under FEMA; Specific averments against petitioners; Nature of liability of the cheques; Requirement of Reserve Bank of India permission under FEMA.

Analysis:
The judgment involves six petitions seeking to quash criminal complaints under Section 138 of the Negotiable Instruments Act. The complaints revolve around a commercial transaction between two foreign companies, where post-dated cheques were dishonored, leading to legal action. The petitioners contested vicarious liability, arguing insufficient averments against them. The court considered precedents emphasizing the need for specific allegations against directors for vicarious liability. However, as the proceedings were in an advanced stage, the court refrained from determining vicarious liability at that point, leaving it for trial.

The petitioners also challenged the complaints under FEMA, claiming the cheques were issued as security and not towards an existing debt. They argued that no legally enforceable debt existed when the cheques were given. The court noted the need for a factual trial to ascertain the nature of the cheques and the existence of a debt. It declined to intervene at that stage, stating that the determination should occur during the final trial phase based on evidence presented.

Furthermore, the court addressed the requirement of Reserve Bank of India permission under FEMA. The respondent contended that no specific permission was needed as per relevant regulations. The court found that prima facie case existed against the petitioners, justifying the continuation of proceedings. It emphasized that the trial court should assess the allegations against the petitioners based on available evidence. As the complaints had been pending for five years, the trial court was instructed to expedite the proceedings and conclude them within the calendar year.

In conclusion, the court disposed of the petitions without commenting on the merits, granting the petitioners the liberty to raise their arguments during the trial. The judgment highlighted the need for a thorough trial to determine vicarious liability, the nature of the cheques, and compliance with FEMA regulations. It underscored the importance of evidence in resolving the complex legal issues involved in the case.