2024 (2) TMI 722 - HC - Indian Laws

Dishonour of Cheque - insufficient funds - existence of debt and liability or not - alleged authorization letter has not been issued by the applicant no.2, who being a Managing Director is solely authorized to issue any such letter on behalf of the Company - summons passed without considering the evidence produced by the applicants - violation of principles of natural justice - HELD THAT - After perusal of the materials available on record, prima facie it appears that the learned trial court has failed to appreciate the materials available on record and has committed manifest illegality while passing the impugned order while summoning the applicants as the same is passed without considering the evidence produced by the applicants, which is unsustainable in the eyes of law. On perusal of the authorization letter dated 14.08.2020, it would reveal that the alleged authorization letter as claimed by the opposite party No.2 has been issued for the specific time period of 15 working days i.e. from 16.08.2020 till 30.08.2020 and there is no averment in the complaint made by the opposite party No.2 that the said letter has been extended further - It is admitted case of the complainant that the alleged authorization letter has not been issued by the applicant no.2, who being a Managing Director is solely authorized to issue any such letter on behalf of the Company, thus, there exists no debt or liability upon the applicants. Section 138 is structured in two parts, the primary and the provisory. The contents of the proviso place conditions on the operation of the main provision, while it does not form a constituent of the crime itself, it modulates or regulates the crime in circumstances where,unless its provisions are complied with, the already committed crime remains impervious to prosecution - The cause of action for prosecution will arise only when the period stipulated in the proviso elapses without payment. Ingredients of the offence have got to be distinguished from the conditions precedent for valid initiation of prosecution. The stipulations in the proviso must also be proved certainly before the offender can be successfully prosecuted. But in the strict sense they are not ingredients of the deemed offence under the body of Section 138 of the N.I. Act, though the said stipulations must also be proved to ensure and claim conviction. It is in this sense that it is said that the proviso does not make or unmake the offence under Section 138 of the NI Act. That is already done by the body of the sections. Hon'ble the Supreme Court of India in the case of Lalankumar Singh and Others vs. State of Maharashtra 2022 (10) TMI 1135 - SUPREME COURT has specifically held in paragraph No.38 that the order of issuance of process is not an empty formality. The Magistrate is required to apply his mind as to whether sufficient ground for proceeding exists in the case or not. The impugned summoning order passed under Section 138 N.I. Act, Police Station P.G.I., District Lucknow and the entire proceeding are against the spirit and directions issued by the Hon'ble Apex Court and are liable to be set aside - the matter is remanded back to the trial court - the instant application under Section 482 Cr.P.C. is allowed in respect of the instant applicants.

Summary

Issues Involved:
1. Legality of the summoning order dated 22.07.2022.
2. Validity of the proceedings under Section 138 of the Negotiable Instruments Act.
3. Examination of the evidence and signatures involved.
4. Applicability of Section 68 of the N.I. Act.
5. Proper inquiry under Section 202 Cr.P.C.
6. Application of Section 482 Cr.P.C. for quashing proceedings.

Summary:

1. Legality of the Summoning Order:
The applicants sought to quash the summoning order dated 22.07.2022 in Complaint Case No.83520 of 2021 under Section 138 N.I. Act. The court observed that the trial court failed to appreciate the materials on record and committed manifest illegality while passing the impugned order without considering the evidence produced by the applicants.

2. Validity of Proceedings under Section 138 N.I. Act:
The applicants contended that the cheques were issued without any existing debt or liability, as the sale of the hotel took place after the cheques were issued. The court noted that Section 138 requires a legally enforceable debt or liability at the time of cheque issuance, which was not present in this case. The court referred to the Supreme Court's judgments in Indus Airways Private Limited and Others Vs. Magnum Aviation Private Limited and others and B. Krishna Reddy Vs. Syed Hafeez, emphasizing the necessity of an existing debt or liability for Section 138 to apply.

3. Examination of Evidence and Signatures:
The applicants argued that the cheques were stolen and presented with forged signatures. The court observed dissimilarities in the signatures on the cheques and the sale deed, supported by a forensic expert's report, indicating that the signatures were not made by the same person. The trial court did not consider this significant evidence while summoning the applicants.

4. Applicability of Section 68 N.I. Act:
The applicants contended that Section 68, which deals with instruments payable at a specified place, was not applicable as the cheques were not presented at the home branch. The court agreed that the cheques should have been returned by the bank with an appropriate endorsement, which was not done.

5. Proper Inquiry under Section 202 Cr.P.C.:
The court noted that the trial court did not conduct a proper inquiry under Section 202 Cr.P.C. to ascertain the truth and veracity of the allegations. The summoning order was passed mechanically without judicial application of mind.

6. Application of Section 482 Cr.P.C.:
The court emphasized the scope of Section 482 Cr.P.C. to prevent abuse of the process of the court and to secure the ends of justice. The court referred to several Supreme Court judgments, including State of Haryana Vs. Bhajan Lal and Inder Mohan Goswami v. State of Uttaranchal, outlining the circumstances under which proceedings can be quashed. The court concluded that the summoning order and the entire proceedings were against the spirit and directions of the Supreme Court and thus liable to be set aside.

Conclusion:
The court set aside the summoning order dated 22.07.2022 and the entire proceedings in Complaint Case No.83520 of 2021. The matter was remanded back to the trial court with directions to pass a fresh order within four months, considering the observations and judgments of the Supreme Court. The application under Section 482 Cr.P.C. was allowed.