2018 (7) TMI 2230 - HC - Indian Laws

Dishonor of Cheque - legally enforceable liability or not - rebuttal of presumption - cross-examination of witnesses - HELD THAT - It is now well settled that at the stage of issuance of process, the Magistrate cannot consider any probable defence in as much as the accused is not before the Court when the order of issuance of process is passed. Thus, an order issuing process cannot conceivably be challenged on the basis of any actual or probable defence, which, as the learned Sessions Judge has rightly found, can only be gone into at the trial. However, it is entirely a different matter, when on the basis of the allegations in the complaint, the notice and the documents produced by the complainant and even after taking them at the face value, prima facie, no offence is made out. The respondent presented the cheque bearing No. 079539 dated 2-4-2015 on 25-5-2015, which got dishonoured as the concerned account was closed sometime in the year 2010. In the notice, there was a specific averment made that the two undated cheques were issued by way of security. The respondent did not claim in the complaint that the cheques were issued by way of security. However, rest of the averments as made in the notice, find place as they are in the complaint. The question, in such circumstances, is whether the dishonour of the cheque can give rise to an offence under section 138 of the Act. Coming to the present case, on the respondent's own saying, the subject cheque (along with other cheque, in respect of which the respondent chose not to file any complaint) was undated and in all probability, was passed somewhere in the year 2006, at the inception of the contract and was agreed to be presented for encashment after 7 1/2 years, which the respondent resultantly did by putting the date 2-4-2015. The subject cheque is shown to be for an amount of ₹ 11,25,000/-. Thus, on the basis of the averments in the notice as well as the complaint itself, it cannot be accepted, prima facie, that there was a liability of ₹ 11,25,000/- against the petitioner towards the respondent at the time when the cheque was signed and passed on to the respondent. In fact the averments would show that there were two undated cheques passed by the respondent - Admittedly, there is not even an averment that any such amount was due and outstanding on or about the date, on which the two cheques were issued by the petitioner. There cannot be any manner of dispute with the proposition that once the presumption arising under section 118 read with section 139 of the Act is raised, it can be rebutted by the accused on preponderance of probability at the trial. This can be done on the basis of cross-examination of the complainant and his witnesses, if any, and/or by leading independent defence evidence - Here is a case, wherein on the say of the respondent himself and taking the contents of the notice and the complaint on their face value, it cannot be said that the cheque was issued for the discharge of any legally enforceable debt or liability, as on the date of issuance of the cheque. The learned Magistrate as well as the learned Sessions Judge has failed to consider the relevant aspects and the impugned order issuing process, thus, cannot be sustained - Petition allowed.

Summary

Issues Involved:
1. Legality of the issuance of process under Section 138 of the N.I. Act.
2. Existence of a legally enforceable debt or liability at the time of cheque issuance.
3. Validity of the oral agreement and the undated cheques.
4. Applicability of precedents from the Supreme Court and High Court.

Issue-wise Detailed Analysis:

1. Legality of the issuance of process under Section 138 of the N.I. Act:
The petitioner challenged the order dated 23-2-2016 by the Judicial Magistrate, First Class, Mapusa, which issued process against the petitioner for an offence under Section 138 of the N.I. Act. This order was confirmed by the Sessions Judge on 27-3-2018 in Criminal Revision Application No. 43/2016. The Magistrate's order stated, "Based on the material on record, I am prima facie satisfied that accused has committed an offence u/s. 138 NI Act. Issue s/s. to the accused."

2. Existence of a legally enforceable debt or liability at the time of cheque issuance:
The petitioner argued that the cheques were issued without any legally enforceable debt or liability at the time of issuance. According to the petitioner, the cheques were undated and issued in 2006, with an agreement that they would be presented after 7 1/2 years. The petitioner cited the Supreme Court's decision in Indus Airways Pvt. Ltd. vs. Magnum Aviation Pvt. Ltd., which held that for an offence under Section 138, there must be a legally enforceable debt or liability subsisting on the date of the cheque's drawal. The court noted, "the explanation leaves no manner of doubt that to attract an offence under section 138, there should be legally enforceable debt or other liability subsisting on the date of drawal of the cheque."

3. Validity of the oral agreement and the undated cheques:
The respondent's case was based on an oral agreement where the petitioner agreed to pay ?3 Lakhs per month for hiring trucks for 7 1/2 years. The petitioner issued two undated cheques as security, which were to be presented after the contract period. The cheque in question was presented on 25-5-2015 and dishonoured because the account was closed in 2010. The court observed that there was no legally enforceable debt or liability at the time the cheques were issued, as the cheques were undated and issued as security.

4. Applicability of precedents from the Supreme Court and High Court:
The respondent relied on Sampelly Satyanarayana Rao vs. Indian Renewable Energy Development Agency Limited, where the Supreme Court held that a post-dated cheque given as security could still give rise to an offence under Section 138 if dishonoured. However, the court distinguished this case from Indus Airways Pvt. Ltd., noting that in Indus Airways, the cheques were issued as advance payment for purchase orders that were later cancelled. The court concluded that the present case was governed by Indus Airways Pvt. Ltd. and Joseph Vilangadan vs. Phenomenal Health Care Services Ltd., where it was held that no offence under Section 138 could be made out if there was no existing debt or liability at the time of cheque issuance.

Conclusion:
The court concluded that the issuance of process against the petitioner could not be sustained as there was no legally enforceable debt or liability at the time the cheques were issued. The order issuing process was set aside, and the complaint was dismissed. The court stated, "In the given facts and circumstances, I do not find that the order of issuance of process can be sustained."

Order:
1. The petition is allowed.
2. The impugned order issuing process is set aside.
3. The complaint filed by the respondent is dismissed.
4. Rule is made absolute in the aforesaid terms.