2020 (1) TMI 383 - HC - Indian Laws

Dishonor of cheque - Section 138 of the Negotiable Instruments Act - the cheques, which were dishonoured, were given by way of security - suppression of fact by the complainant - HELD THAT - This Court finds that long standing business transaction and inability of refunding a loan has been given a color of criminal offence of cheating punishable under Section 420 of the Indian Penal Code. 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. It is the documents of the complainant, which show that the cheques were given by way of security. Even if I do not believe the statement of the accused, the documents of the complainant cannot be brushed aside - Since the cheques were given by way of security, which is evident from the complainant s documents (though this fact has also been suppressed in the complaint petition), I find that Section 138 of the Negotiable Instruments Act is also not attracted in this case. Application allowed.

Summary

Issues Involved:
1. Quashing of the order taking cognizance of offences under Section 420 of the Indian Penal Code (IPC) and Section 138 of the Negotiable Instruments Act.
2. Quashing of the order rejecting the discharge petition under Section 239 read with Section 245 of the Code of Criminal Procedure (CrPC).
3. Determination of whether the cheques were given as security or in discharge of a debt or liability.
4. Examination of suppression of material facts by the complainant.

Issue-wise Detailed Analysis:

1. Quashing of the Order Taking Cognizance:
The petitioner sought to quash the order dated 04.07.2016 by the Judicial Magistrate First Class, Palamau, which took cognizance of offences under Section 420 of the IPC and Section 138 of the Negotiable Instruments Act. The High Court noted that the complainant alleged the petitioner took a loan of ?2 crore and issued cheques that were dishonored. However, the Court found that the cheques were given as security, not in discharge of a debt, based on documents provided by the complainant. The Supreme Court in "Sudhir Kumar Bhalla versus Jagdish Chand" held that dishonor of cheques given as security does not attract Section 138 of the Negotiable Instruments Act. Therefore, the High Court quashed the cognizance order as no prima facie case was made out.

2. Quashing of the Order Rejecting the Discharge Petition:
The petitioner also challenged the order dated 13.06.2019, which dismissed the discharge petition. The High Court observed that the Judicial Magistrate failed to consider the evidence before charge and the materials on record. The Court emphasized that at the stage of framing charges, the Court must see if there are materials to frame charges based on the complaint and witness statements. The High Court found that the Judicial Magistrate misdirected himself by not considering relevant materials, leading to the quashing of the order rejecting the discharge petition.

3. Cheques Given as Security:
The High Court examined the agreements between the parties, which indicated that the cheques were given as security for the loan. The complainant's own documents and witness statements confirmed this fact. The Court differentiated this case from "Womb Laboratories Pvt Ltd. versus Vijay Ahuja & Anr.," where the nature of the cheques was a matter of trial. Here, the complainant's documents themselves indicated the cheques were security, making it clear that Section 138 of the Negotiable Instruments Act was not applicable.

4. Suppression of Material Facts by the Complainant:
The High Court found that the complainant suppressed material facts, including the long-standing monetary transactions between the parties from 2011 and the nature of the cheques as security. The complainant's daughter’s testimony confirmed these transactions. The Court emphasized that litigants must come with clean hands and not suppress material facts. The suppression of facts by the complainant led the Court to conclude that the criminal proceedings were an abuse of the process of law.

Conclusion:
The High Court allowed the criminal miscellaneous petitions (Cr. M.P. 2635 of 2017 and Cr. M.P. 2655 of 2017), setting aside the orders taking cognizance and rejecting the discharge petitions. Consequently, the entire criminal proceedings in Complaint Case Nos. 1839 of 2015 and 1833 of 2015 were quashed. The Court emphasized the importance of presenting complete and truthful facts in legal proceedings to prevent abuse of the judicial process.