2020 (2) TMI 961 - HC - Indian Laws

Dishonor of cheque - section 138 of NI Act - Breach of Section 269SS of the Act 1961 - respondent had send a notice which was presumed served upon the present applicant but payment was not made to the respondent - HELD THAT - Breach of Section 269SS of the Act 1961 provides that the penalty to which the person would be subjected to under Section 271D of the Act 1961 - Section 271D does not provide that such a transaction would be null and void. There is no provision under the Act 1881 which would vitiate the entire loan transaction for dealing with cash amount above Rs.20, 000/-. The culpability of offence under Section 138 of the Act 1881 will not freeze for the reason of violation of Section 269SS of the Act 1961 and nothing prevents the operation of the statutory presumption under Section 118 and Section 139 of the Act 1881. The applicant could not show any statutory provisions under the Act 1961 or any other law which stipulates that a loan transaction which is in violation of Section 269SS of the Act 1961 would be void. Violation of Section 269SS of the Act 1961 would not render the loan as not recoverable through a legal process. The payer of the money in cash in violation of Section 269SS of the Act 1961 would therefore be entitled to enforce an agreement of advancement of money in cash beyond Rs.20, 000/-. Under Section 139 of the Act 1881 there is a presumption in favour of the holder. Section 139 of the Act 1881 stipulates that it shall be presumed unless the contrary is proved that the holder of a cheque received the cheque of the nature referred to in Section 138 for the discharge in whole or in part of any debt or other liability. It is also well settled that at the time of the consideration of the case for summoning the merit of the case cannot be tested - In the case at hand the respondent-complainant has proved prima facie the basic ingredients of the offence under Section 138 of the Act 1881. It is wholly impermissible for this Court to enter into the factual arena to adjudge the correctness of the allegations in the complaint. The Court would not also examine the genuineness of the allegations made in the complaint since the Court does not function as a Court of Appeal or Revision while exercising its jurisdiction under Section 482 of the Code of Criminal Procedure 1973. The application has no force - The application filed under Section 482 of the Code of Criminal Procedure 1973 is dismissed.

Issues Involved:
1. Legality of the summoning order under Section 138 of the Negotiable Instruments Act, 1881.
2. Applicability of Section 269SS of the Income Tax Act, 1961 to the loan transaction.
3. Validity of the complaint process and the judicial mind applied by the Magistrate.
4. Examination of the factual correctness of the allegations in the complaint.

Detailed Analysis:

1. Legality of the Summoning Order under Section 138 of the Negotiable Instruments Act, 1881:
The applicant sought to quash the proceedings of Complaint Case No. 1008 of 2012 under Section 138 of the Negotiable Instruments Act, 1881. The complaint was filed because a cheque issued by the applicant for Rs. 8.75 Lakhs was dishonored. The applicant argued that the summoning order dated 16.01.2013 was issued without applying judicial mind and challenged the cognizance taken by the Magistrate. However, the court found that the respondent-complainant had prima facie proved the basic ingredients of the offence under Section 138, and the merit of the case could not be tested at the summoning stage.

2. Applicability of Section 269SS of the Income Tax Act, 1961 to the Loan Transaction:
The applicant contended that the loan transaction violated Section 269SS of the Income Tax Act, 1961, which mandates that any loan or deposit above Rs. 20,000 must be made through an account payee cheque or bank draft. The court noted that while Section 269SS provides for a penalty under Section 271D for violations, it does not render the transaction null and void. The court referred to precedents, including the Supreme Court's judgment in Nutan Kumar and others Vs. IInd Additional District Judge, which held that a contract contrary to statutory provisions remains binding unless the statute explicitly voids it.

3. Validity of the Complaint Process and Judicial Mind Applied by the Magistrate:
The applicant argued that the Magistrate did not consider whether there was a legally enforceable debt and claimed that the cheque was given as a blank cheque when he joined a committee. The court found that the applicant had not raised the plea regarding Section 269SS in earlier proceedings, and there was no explanation for this omission. The court emphasized that the violation of Section 269SS does not affect the culpability under Section 138 of the Negotiable Instruments Act, 1881, and does not prevent the statutory presumption under Sections 118 and 139 of the Act.

4. Examination of the Factual Correctness of the Allegations in the Complaint:
The applicant claimed that the allegations in the complaint were false. The court held that it is impermissible to adjudge the correctness of the allegations at this stage, as the court does not function as a Court of Appeal or Revision while exercising jurisdiction under Section 482 of the Code of Criminal Procedure, 1973. The court cited the Supreme Court's observations in Pepsi Food Limited Vs. Special Judicial Magistrate, which emphasized the cautious exercise of inherent powers.

Conclusion:
The court dismissed the application under Section 482 of the Code of Criminal Procedure, 1973, stating that the applicant could raise disputed questions of fact before the trial court. The dismissal of the application would not prejudice the applicant's case on merits. The judgment reinforced that the breach of Section 269SS does not invalidate the loan transaction or affect the proceedings under Section 138 of the Negotiable Instruments Act, 1881.

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