2015 (5) TMI 280 - SC - Indian Laws

Criminal complaint pertaining to offence punishable under Section 138 of the Negotiable Instruments Act, 1881 - Dishonour of cheque due to stop payment instructions - Held that - 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 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. In the case of Pulsive Technologies P. Ltd. vs. State of Gujarat 2014 (9) TMI 21 - SUPREME COURT 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) TMI 632 - SUPREME COURT OF INDIA 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. - High Court has committed grave error of law in quashing the criminal complaints filed by the appellant in respect of offence punishable under Section 138 of the N.I. Act, in exercise of powers under Section 482 of the Code of Criminal Procedure by accepting factual defences of the accused which were disputed ones. Such defences, if taken before trial court, after recording of the evidence, can be better appreciated. - Decided in favour of appellant.

Summary

Issues:
Appeal against quashing of criminal complaint cases under Section 138 of the Negotiable Instruments Act, 1881 by the High Court of Kerala.

Analysis:
1. The appellant filed multiple criminal complaint cases under Section 138 of the Negotiable Instruments Act, 1881, against the respondent for dishonoring 57 cheques issued towards outstanding liability. The High Court quashed these cases based on the respondent's defense that the cheques were given as security, negating any liability to pay.

2. The respondent contended that the appellant company used to collect cheques post-2003 for securing payment, challenging the proceedings initiated by the appellant. The High Court accepted this defense and quashed the complaints, leading to the current appeals.

3. The appellant argued that the High Court erred in quashing the complaints solely based on factual defenses raised by the respondent. The High Court should not have delved into disputed factual aspects in a petition under Section 482 of the Code of Criminal Procedure, as these should be determined by the trial court after recording evidence.

4. The Supreme Court highlighted the legal provisions under Section 138, 139, and 140 of the N.I. Act, emphasizing the presumption in favor of the holder of a cheque regarding debt or liability. The Court cited precedents to establish liability even in cases of stop payment instructions, reinforcing the offense under Section 138.

5. Referring to legal precedents, the Court held that the High Court exceeded its jurisdiction by opining on disputed facts before the trial court. The High Court's decision to quash the complaints based on factual defenses was deemed a grave error, and the appeals were allowed to reinstate the trial court's jurisdiction for further proceedings.

6. The Supreme Court overturned the High Court's decision, quashing the criminal complaints and directed the trial court to proceed with the cases under Section 138 of the N.I. Act. The Court clarified that it did not express an opinion on the validity of the respondent's defenses, emphasizing that such matters should be addressed during trial proceedings.