2021 (7) TMI 1041 - HC - Indian Laws

Dishonor of Cheque - non-CTS-2010 cheque - valid cheque or not - scope of four corners of Section 138 of the Negotiable Instruments Act - Scope of circular issued by Reserve Bank of India dated 18.3.13 - time limitation - HELD THAT - The circular issued by Reserve Bank of India dated 18.3.13, which has been pressed into service to put forth the contention that the non-CTS-2010 cheque is an invalid cheque, however, clause (c) of the circular issued by Reserve Bank of India provides that all residual non-CTS-2010 cheques with customers will continue to be valid and accepted in clearing houses (including the Cheque Truncation System (CTS) Centres) for another four months up to July 31, 2013, subject to a review in June, 2013. From the said clause it is evident that validity is given till 31.7.2013, which is subject to review. However, no material is placed on record to show the actual decision taken by the Reserve Bank of India as to the validity of the cheques, which are non-CTS-2010 complaint. The petitioners are bound to establish the validity or otherwise of the cheque by adducing oral and documentary evidence during trial and at this point of time, it would not be prudent for this Court to render one finding or the other as to the validity of the cheque, in the absence of any substantial material voicing any particular view with regard to the same - the circular of the Reserve Bank of India shows that the banking channels, based on the digital signature in the form of Magnetic Ink Character Recognition (MICR), would be in a position to distinguish a non-CTS-2010 cheque from a CTS-2010 cheque. The Court, appreciating an issue u/s. 482 of the Code of Criminal Procedure, would not be justified in giving a decision one way or the other as to the nature of the cheque, which is put in issue by the parties as the same has to be established only at the time of trial by adducing oral and documentary evidence. In the present petition u/s. 482 Cr.P.C., no material with regard to the cheque being given as security or the business arrangement between the petitioners and the respondent is placed - deciding on the nature of the cheque, being a non-CTS-2010 cheque, according to the petitioners, would not be justified. This Court is of the considered view that the petition at the behest of the petitioners 1 and 2 for quashing the charge sheet cannot be permitted and, accordingly, it deserves to be rejected - the criminal original petition is allowed in part.

Summary

Issues Involved:
1. Validity of non-CTS-2010 cheques under Section 138 of the Negotiable Instruments Act.
2. Limitation period for presenting a cheque.
3. Liability of non-executive directors for cheque dishonour.

Issue-wise Detailed Analysis:

1. Validity of Non-CTS-2010 Cheques under Section 138 of the Negotiable Instruments Act:
The petitioners argued that the cheques in question were non-CTS-2010 compliant and thus invalid after 31.07.2013, as per the Reserve Bank of India's circular dated 18.03.2013. They contended that the cheques were issued in 2010 for security purposes and were misused by the respondent in 2015. The respondent countered that the validity of the cheque should be determined during the trial and not at the quashing stage. The court noted that the RBI circular allowed non-CTS-2010 cheques to be valid until 31.07.2013, subject to review, and no material was presented to show the actual decision by the RBI post-review. The court concluded that the validity of the cheque must be established through trial with oral and documentary evidence, and thus, quashing the proceedings at this stage was premature.

2. Limitation Period for Presenting a Cheque:
The petitioners claimed that the cheque was issued in 2010 and presented in 2015, making it barred by limitation. The court observed that the respondent alleged the cheque was issued on 20.07.2015 and subsequently deposited. The court emphasized that the limitation issue was a factual matter requiring evidence and could not be resolved in a petition under Section 482 Cr.P.C. Therefore, the court did not accept the petitioners' limitation argument at this stage.

3. Liability of Non-Executive Directors for Cheque Dishonour:
The petitioners argued that A-3 and A-4, being non-executive directors, were not involved in the day-to-day affairs of the company and should not be held liable. The respondent failed to provide tangible evidence showing that A-3 and A-4 were actively involved in the company's operations. The court noted that mere designation as directors without evidence of active involvement in daily affairs did not justify implicating them. Consequently, the court quashed the proceedings against A-3 and A-4.

Conclusion:
The court allowed the criminal original petition in part, quashing the case against petitioners 3 and 4 (non-executive directors). However, the petition was dismissed concerning petitioners 1 and 2 (the company and its managing director), directing them to cooperate with the trial court for an early completion of the trial. The appearance of the 2nd petitioner before the trial court was dispensed with, except for specific proceedings as outlined.