2022 (4) TMI 1028 - HC - Indian Laws

Dishonor of Cheque - insufficiency of funds - cause of action for instituting the case, against the petitioners or not - Section 138 r/w Section 141 of Negotiable Instruments Act 1881 - HELD THAT - A perusal of the documents filed by the petitioners in support of their case shows that the amounts as stated had been paid by the petitioners and they are reflected in the accounts statement of the respondent. The purchase order dated 13.11.2014 shows that the post dated cheques were issued by the petitioners to the respondent, obviously as a security for the supply of the goods. The e-mail correspondence from the petitioners to the respondent dated 12.02.2015 shows that the respondent undertook to return the cheques for which payment had been already made through RTGS. With regard to the impugned four cheques, it was mentioned in the e-mail that the cheque nos. 798097, 804836, 804584 and 804657 would be returned once RTGS transfer is made. This E-mail was sent on 12.02.2015, even before the statutory notice was sent on 24.03.2015. It reinforces the claim of the petitioners that the cheques concerned in this cases had been given as a security for ensuring the payments due in the business transaction from the petitioners. In the case before hand, it is not the case of the petitioners that the cheque were issued as an advance payment. It is claimed that the cheques were issued as a security. Of course, there are materials to suggest that the cheques were issued as security. However, the petitioners did not deny their liability to pay the money to the respondent. Though it is claimed that a sum of ₹ 5,91,000/- ₹ 70,164/- and 21,52,662/- were paid on 08.04.2015, 07.05.2015 and 08.07.2015 respectively, all these payments have been made after the receipt of the statutory notice - The reasons for the issuance of the cheques, alleged discharge of the liability are disputed facts are required to be decided only after recording the evidence. This Court cannot decide the disputed facts in this petition. Petition allowed.

Summary

Issues:
1. Quashing of Criminal Complaint No. 6543 of 2015.
2. Quashing of Criminal Complaint No. 6544 of 2015.

Analysis:

Issue 1: Quashing of Criminal Complaint No. 6543 of 2015
The respondent/complainant filed complaints under Section 138 r/w Section 141 of the Negotiable Instruments Act against the petitioners for dishonoring cheques issued as payment for cotton fabric supply. The petitioners argued that they paid the amount within the notice period, as evidenced by an accounts statement. The court accepted this evidence and quashed the case, finding no cause of action due to the payment made within the stipulated time frame.

Issue 2: Quashing of Criminal Complaint No. 6544 of 2015
In this case, the petitioners claimed the cheques were issued as security and not as advance payment. They contended that the amounts covered by the cheques were paid subsequently. However, the court noted that the payments were made after the statutory notice and did not conclusively represent the cheque amounts. The court emphasized that the reasons for issuing the cheques and the alleged discharge of liability were disputed facts requiring trial evidence. As a result, the court dismissed the petition to quash this complaint, stating that the facts need to be decided through trial proceedings.

The judgment also referenced a legal precedent (2014) 12 SCC 539, emphasizing the distinction between civil and criminal liability under Section 138 of the Negotiable Instruments Act. It highlighted that for criminal liability, there must be a legally enforceable debt or liability at the time of cheque issuance. The court disagreed with the view that issuing cheques as advance payment automatically creates criminal liability, stressing the need for an existing debt or liability for such offenses.

In conclusion, the court allowed the quashing of Criminal Complaint No. 6543 of 2015 while dismissing the petition to quash Criminal Complaint No. 6544 of 2015, directing the petitioners to participate in the trial to establish their claims effectively.