2025 (1) TMI 334 - HC - Indian Laws

Dishonour of Cheque - legally enforceable debt or other liability - Nature of Advance Payment - whether the cheque as given by the applicant was in discharge of a legally enforceable debt/liability or not? - Complainant i.e. opposite party no.2 has not disclosed the lawyer and client relationship between him and the applicant - HELD THAT - It is clear that for commission of an offence under Section 138 N.I. Act, the cheque that is dishonoured must represent a legally enforceable debt not only on the day when it was drawn but also on the date of its maturity/presentation. If the cheque presented for collection of total value of the cheque without endorsing the part payment made by the drawer is dishonoured no offence under Section 138 N.I. Act would be attracted, as being held in the case of DASHRATHBHAI TRIKAMBHAI PATEL VERSUS HITESH MAHENDRABHAI PATEL ANR. 2022 (10) TMI 424 - SUPREME COURT . In the present case, the opposite party no.2 has mentioned that he had given Rs.12,25,000/- in cash to the applicant for purposes of purchasing property. Although, in the complaint as well as notice, the complainant has spoken about returning of Rs.11,00,000/- by giving a cheque in this regard but there is no whisper about Rs.1,25,000/-. In case it is taken that Rs.1,25,000/- has already been paid, therefore, as part payment was already made, the complaint under Section 138 N.I. Act could not have been entertained - Be that as it may, once the complainant i.e. opposite party no.2 has not disclosed the lawyer and client relationship between him and the applicant and as for the first time admitted the aforesaid fact in his counter affidavit, the story in the complaint of giving advance in cash without disclosing as to how and from where such an arrangement was made also gives benefit to the applicant who under such relationship as admitted by the opposite party no.2 in his counter affidavit has mentioned about an agreement which cannot be disbelieved by this Court. As per the provision of Section 202 Cr.P.C. as amended with effect from 23.6.2006, the requirement is that in those cases where the accused is residing at a place beyond the area in which the concerned Magistrate exercises his jurisdiction, it is mandatory on the part of Magistrate to conduct an enquiry or investigation before issuing the process. That means, in case, if such an enquiry is not conducted in cases where the accused resides at a place beyond the area in which the Magistrate exercises his jurisdiction, the purpose of amendment in Section 202 Cr.P.C. would frustrate. Further the Apex Court in BHARAT BARREL DRUM MANUFACTURING COMPANY VERSUS AMIN CHAND PAYRELAL 1999 (2) TMI 627 - SUPREME COURT , had considered Section 118(a) of the Act and held that once execution of the promissory note is admitted, the presumption under Section 118(a) would arise that it is supported by a consideration. Such a presumption is rebuttable and defendant can prove the non-existence of a consideration by raising a probable defence. The present case appears to be a case of malicious prosecution wherein the opposite party no.2 has concealed the real fact of lawyer-client relationship and has wrongly disclosed about Dilip Kumar Singh who is related to the applicant being Manager of the Institution where opposite party no.2 was working at the relevant point of time to which the Court cannot close its eyes as at the instance of relative of the applicant, the present complaint has been filed concealing the real relationship of lawyer client. It is also relevant to point out the fact that scope and ambit of Section 482 Cr.P.C. is a very agitated and debatable issue. Nevertheless, there are some cases which have got wide acceptance in the legal fraternity and hence, are used as the minor guidelines/principles governing the cases of quashing criminal proceedings. Conclusion - In the facts of the present case, where it has been established that opposite party no.2 has not approached the Court with clean hand, noticing his conduct as is clear from the records, this Court finds it to be a fit case for exercising powers under Section 482 Cr.P.C. Keeping in mind that criminal prosecution is a serious matter, it effects the liberty of a person, no greater damage can be done to the reputation of a person than dragging him in a criminal case, continuance of prosecution would be nothing but an abuse of the process of law and will be a mental trauma to the applicants, it becomes necessary for this Court to invoke inherent powers under Section 482 Cr.P.C. in present facts and circumstances of his case. This Court finds a good ground for quashing the impugned summoning order as well as entire proceedings - The present application under Section 482 Cr.P.C. is, accordingly, allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment include:

• Whether the complaint under Section 138 of the Negotiable Instruments Act, 1881, was filed with a malicious intent, given the non-disclosure of the lawyer-client relationship between the parties.
• Whether the cheque issued by the applicant constituted a legally enforceable debt or liability.
• Whether the procedural requirements under Section 202 of the Criminal Procedure Code (Cr.P.C.) were followed, given that the accused resided outside the jurisdiction of the Magistrate.
• Whether the proceedings constituted an abuse of the process of the court, warranting quashing under Section 482 Cr.P.C.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Malicious Intent and Non-disclosure of Lawyer-Client Relationship

• Relevant Legal Framework and Precedents: The court examined the principles of malicious prosecution and the requirement for complainants to approach the court with clean hands.
• Court's Interpretation and Reasoning: The court found that the non-disclosure of the lawyer-client relationship by the complainant indicated a lack of clean hands and suggested malicious intent.
• Key Evidence and Findings: The complainant failed to disclose the relationship, which was only admitted in a counter affidavit.
• Application of Law to Facts: The court applied the principles of malicious prosecution, concluding that the complaint was filed with an ulterior motive.
• Treatment of Competing Arguments: The complainant's arguments about the relationship were dismissed due to lack of initial disclosure.
• Conclusions: The court concluded that the complaint was filed with malicious intent.

Issue 2: Legally Enforceable Debt or Liability

• Relevant Legal Framework and Precedents: The court referenced Section 138 of the Negotiable Instruments Act and relevant case law, including the Indus Airways Pvt. Ltd. case.
• Court's Interpretation and Reasoning: The court determined that the cheque was issued as an advance payment, not for a legally enforceable debt.
• Key Evidence and Findings: The cheque was issued in the context of a contingent contract for purchasing a car, which was not fulfilled.
• Application of Law to Facts: The court found that the cheque did not represent an existing debt at the time of issuance.
• Treatment of Competing Arguments: The complainant's assertion of debt was undermined by the lack of evidence of a legally enforceable obligation.
• Conclusions: The court concluded that no legally enforceable debt existed.

Issue 3: Compliance with Section 202 Cr.P.C.

• Relevant Legal Framework and Precedents: The court examined the mandatory requirement for inquiry under Section 202 Cr.P.C. when the accused resides outside the jurisdiction.
• Court's Interpretation and Reasoning: The court found that the Magistrate failed to conduct the necessary inquiry.
• Key Evidence and Findings: The lack of inquiry was evident from the procedural history.
• Application of Law to Facts: The court applied the procedural requirement and found a violation.
• Treatment of Competing Arguments: The complainant's arguments regarding procedural compliance were rejected.
• Conclusions: The court concluded that the procedural requirements were not met.

Issue 4: Abuse of Process and Quashing under Section 482 Cr.P.C.

• Relevant Legal Framework and Precedents: The court considered the principles governing the exercise of inherent powers under Section 482 Cr.P.C.
• Court's Interpretation and Reasoning: The court determined that the proceedings were an abuse of process due to the malicious intent and procedural violations.
• Key Evidence and Findings: The malicious intent and lack of procedural compliance were key factors.
• Application of Law to Facts: The court found that the proceedings should be quashed to prevent abuse of process.
• Treatment of Competing Arguments: The complainant's arguments for continuing the proceedings were found unpersuasive.
• Conclusions: The court quashed the proceedings under Section 482 Cr.P.C.

3. SIGNIFICANT HOLDINGS

• Preserve verbatim quotes of crucial legal reasoning: "The cheque which was issued by the applicant as an advance payment for the purchase of the vehicle, cannot be said to be issued in discharge of an existing liability and therefore the same creates no legally enforceable debt as against the applicant."
• Core principles established: The court reinforced the requirement for a legally enforceable debt under Section 138 of the Negotiable Instruments Act and the necessity of procedural compliance under Section 202 Cr.P.C.
• Final determinations on each issue: The court quashed the proceedings, finding them to be an abuse of process, filed with malicious intent, and procedurally flawed.