2024 (8) TMI 389 - HC - Indian Laws

Dishonour of cheque - existence of legally and enforceable debt or liability - dispute of Civil nature for which the institution of criminal proceedings warranted or not - HELD THAT - It is admitted that the entire deal was for purchase of 5 Acres of land for a total sale consideration of Rs. 7.75 Crores from the petitioner, which initially was agreed to be purchased by one Ms. Sindhu, who subsequently, introduced the petitioner and buyer No. 1, Mr. Ramalingu, who agreed to substitute Ms Sindhu and instead purchased the entire piece of land. The perusal of these documents would show that while an Agreement to Sell was admittedly executed on 12.05.2022, there are inherent contradictions in the assertions made by the petitioner about the Sale Deed having been already executed; if the Sale Deed was already executed, there was no question of there being an Agreement to Sell. Rather from the perusal of these documents, aside from there being inherent contradictions in the various clauses, it is the defence of the petitioner that he has paid the entire sale consideration that these cheques were issued as the security cheques and that a Sale Deed had been duly executed in his favour on payment of the sale consideration. The respondent has denied the execution of Sale Deed and has claimed it to be a fabricated document produced by the Petitioner in his defence, which needs to be proved by him by way of evidence. In fact, the cross examination of the respondent got deferred for production of the Original sale Deed. It cannot be said that a complaint under Section 138 of the N.I. Act, filed by the respondent No. 2, does not prima facie disclose the commission of an offence or that it is liable to be quashed - Pertinently, the Apex Court in the case of M.M.T.C Ltd. vs. Medchl Chemicals Pharma (P) Ltd. 2001 (11) TMI 837 - SUPREME COURT has held that the burden of proving that there is no existing debt or liability on the respondents and merely on the basis of averments in the petition, the Court cannot conclude that there was no existing debt or liability in that regard. The petitioner has admitted the issue of cheques by him and date of 22.05.2023 has also been put by him giving rise to the presumption in favour of the respondent. Secondly, the petitioner had neither challenged the Order of summoning or framing of Notice. Thirdly, it is at the stage of cross-examination of the complainant when the petitioner intends to confront with the alleged Sale Deed which is denied by the respondent, which is being produced by him and he needs to prove his defence. There is absolutely no merit in the present Petition claiming that no prima facie case is disclosed by the petitioner in his complaint under S.138 N.I. Act, which is hereby dismissed.

Issues Involved:
1. Quashing of Criminal Complaint under Section 138 of the Negotiable Instruments Act.
2. Validity and enforceability of the Agreement to Sell and Sale Deed.
3. Nature of cheques issued - whether they were security cheques or for discharge of liability.
4. Prima facie case for the offence under Section 138 of the N.I. Act.
5. Whether the dispute is of a civil nature or warrants criminal proceedings.

Detailed Analysis:

1. Quashing of Criminal Complaint under Section 138 of the Negotiable Instruments Act:
The petitioner sought to quash the Criminal Complaint No. CC 6905/2023 under Section 138 of the Negotiable Instruments Act, which was pending before the Metropolitan Magistrate-01 (South), NI Act, Saket, New Delhi. The petitioner argued that the complaint did not disclose any prima facie case for the offence under Section 138 of the N.I. Act. The court, however, found that the complaint did prima facie disclose the commission of an offence and thus, dismissed the petition.

2. Validity and Enforceability of the Agreement to Sell and Sale Deed:
The petitioner contended that there were ambiguities in the Agreement to Sell and the Registered Sale Deed dated 12.05.2022. The complainant had initially entered into an Agreement to Sell with Ms. Sindhu, who later introduced the petitioner and another buyer. The petitioner claimed that a Sale Deed was executed on 12.05.2022 for Rs. 3.60 Crores, which discharged him from any further liability. The court noted inherent contradictions in the petitioner's assertions and found that the Sale Deed appeared to be a fabricated document, which needed to be proved by the petitioner through evidence.

3. Nature of Cheques Issued - Security Cheques or for Discharge of Liability:
The petitioner argued that the cheques were issued as security for the agreed amount and were not meant for discharge of any liability. The complainant alleged that the cheques were given to fulfill the balance sale consideration of Rs. 1.75 Crores. The court found it difficult to comprehend why a security cheque would be given for the balance sale consideration and noted that the petitioner did not serve any notice or stop the payment of these cheques, indicating that the cheques were indeed meant for discharge of liability.

4. Prima Facie Case for the Offence under Section 138 of the N.I. Act:
The court examined whether the complaint under Section 138 of the N.I. Act disclosed a prima facie case. The court referred to several precedents, including M.M.T.C Ltd. vs. Medchl Chemicals & Pharma (P) Ltd. and Rangappa vs. Sri Mohan, which established that the presumption under Section 139 of the N.I. Act includes the existence of a legally enforceable debt or liability. The court concluded that the complaint did disclose a prima facie case and the burden was on the petitioner to rebut the presumption during the trial.

5. Whether the Dispute is of a Civil Nature or Warrants Criminal Proceedings:
The petitioner argued that the dispute was essentially of a civil nature and did not warrant criminal proceedings. The court referred to the case of Paramjeet Batra vs. State of Uttaranchal, which emphasized that the High Court should quash criminal proceedings if the dispute is civil in nature. However, the court found that the present case involved a prima facie criminal offence under Section 138 of the N.I. Act and thus, did not quash the proceedings.

Conclusion:
The High Court dismissed the petition for quashing the criminal complaint under Section 138 of the N.I. Act. The court found that the complaint disclosed a prima facie case, the cheques were issued for discharge of liability, and the dispute warranted criminal proceedings. The petitioner's contentions regarding the Agreement to Sell and the Sale Deed were found to be contradictory and required evidence to be proved. The application was disposed of accordingly.

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