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2014 (9) TMI 21 - SC - Companies LawOffences punishable under Section 138 and 142 of the Negotiable Instruments Act - cheque bounced - Payment stopped by drawer - failure to fulfill the obligation by the drawee - The High Court observed that stop payment instructions were given because the complainant had failed to discharge its obligations as per agreement by not repairing/replacing the damaged UPS system. - Held that - The High Court fell into a grave error when it proceeded to quash the complaint. Even stop payment instructions issued to the bank are held to make a person liable for offence punishable under Section 138 of the NI Act in case cheque is dishonoured on that count. In Modi Cements v. Kuchil Kumar Nandi 1998 (3) TMI 632 - SUPREME COURT OF INDIA this Court made it clear that even if a cheque is dishonoured because of stop payment instructions given to the bank, Section 138 of the NI Act would get attracted. Whether complainant had failed to discharge its obligations or not could not have been decided by the High Court conclusively at this stage. The High Court was dealing with a petition filed under Section 482 of the Code for quashing the complaint. On factual issue, as to whether the complainant had discharged its obligations or not, the High Court could not have given its final verdict at this stage. - Decided in favor of appellant.
Issues involved:
Quashing of criminal complaint under Section 138 of the Negotiable Instruments Act by the High Court based on "stop payment" instructions given by the accused, failure to disclose complete facts in the complaint, and the High Court's interpretation of Section 138. Analysis: The case involved appeals against the High Court's judgment quashing a criminal complaint under Section 138 of the Negotiable Instruments Act. The appellant, a private limited company, had filed a complaint against the accused company and its directors for dishonoring a cheque due to "stop payment" instructions. The High Court quashed the complaint, stating it did not disclose an offense under Section 138. The appellant argued that the High Court erred in its interpretation, as "stop payment" instructions do constitute an offense under Section 138. The Supreme Court agreed, citing previous judgments that affirmed liability even in the case of dishonor due to such instructions. The Supreme Court emphasized that "stop payment" instructions can make a person liable under Section 138, as established in previous cases like Modi Cements v. Kuchil Kumar Nandi and M.M.T.C. Ltd. v. Medchl Chemicals and Pharma. The Court reiterated that once a cheque is issued, a presumption under Section 139 follows, and the burden of proof lies with the accused to show valid reasons for such instructions. The High Court's error was highlighted for quashing the complaint based on the accused's claim of the appellant's failure to meet obligations, as this required factual evidence and could not be conclusively decided at that stage. Furthermore, the High Court's decision to quash the complaint due to the accused's reply contents not being disclosed was deemed erroneous. The Court emphasized that the accused had the opportunity to present their defense during the proceedings, and the complaint should not have been quashed on that ground. Ultimately, the Supreme Court set aside the High Court's order and directed the Chief Judicial Metropolitan Magistrate to expedite the disposal of the criminal complaint within a year from the date of the Supreme Court's order. In conclusion, the Supreme Court's judgment clarified the applicability of Section 138 in cases of dishonor due to "stop payment" instructions, emphasized the burden of proof on the accused, and criticized the High Court's premature conclusions on factual matters. The decision ensured the continuation of the criminal complaint process and highlighted the importance of evidence in determining liability under the Negotiable Instruments Act.
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