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2025 (4) TMI 1107 - HC - Indian LawsDishonour of Cheque - existence of legally enforceable debt or liability at the time of issuance and presentation of the cheques - multiplicity of proceedings - vicarous liability of petitioners - HELD THAT - There is absolutely no disclosure on behalf of the respondent in the complaint filed subsequently with respect to the cheques issued by petitioner no. 1 on behalf of the petitioner firm i.e. in Complaint Case no. 3298/2019 (subject- matter of CRL. M.C. 8002/2023) with regard to the cheques already issued by petitioner no. 1 from his personal bank account. In view of the averments made in the complaints there cannot be in any manner doubt left that the respondent exercised his option to present the cheques issued from the personal bank account of the petitioner towards the personal guarantee for discharge of the liability. In these circumstances the respondent cannot be permitted to present the other set of cheques issued from the bank account of the petitioner firm again for the same transaction. In these circumstances in the considered opinion of this Court continuance of proceedings in Criminal Complaint no. 3298/2019 (subject matter of CRL.M.C. 8002/2023) would be an abuse of process of law and therefore in the interest of justice exercise of powers under Section 482 of the Cr.P.C. by this Court is warranted in the present case. It is pertinent to note that petitioner no. 2 was neither a part of the proprietorship firm which entered into the agreement to sell nor a party to any of the proceedings; and was also not a signatory on the document of guarantee executed by petitioner no. 1. In these circumstances petitioner no. 2 cannot be prosecuted for the offence punishable under Section 138 of the Act. She cannot be held liable for dishonour of the cheques as the same were not issued by her in discharge of any legal liability or debt. Similarly she cannot be held vicariously liable on the ground of being a joint holder of the account with petitioner no. 1 from which the subject cheques towards personal guarantee were issued. Conclusion - i) The complaint shall continue against petitioner no. 1 but is quashed against petitioner no. 2 for lack of liability and absence of signature. ii) The complaint is quashed as an abuse of process due to multiplicity and non-disclosure. iii) Existence of legally enforceable debt or liability is a disputed question of fact to be decided at trial. iv) Pendency of arbitration proceedings does not bar criminal complaints under Section 138. v) The Court exercised inherent powers under Section 482 Cr.P.C. judiciously to prevent abuse of process and secure ends of justice. Petition allowed in part.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Court in these petitions under Section 482 of the Code of Criminal Procedure, 1973, challenging complaints under Sections 138, 141, and 142 of the Negotiable Instruments Act, 1881, are as follows:
2. ISSUE-WISE DETAILED ANALYSIS Existence of Legally Enforceable Debt or Liability at the Time of Cheque Issuance The legal framework governing this issue is Section 138 of the Negotiable Instruments Act, which criminalizes dishonour of cheques issued for discharge of any debt or other liability. The Explanation to Section 138 clarifies that the cheque must be drawn for a legally enforceable debt or liability subsisting at the time of issuance. The petitioners relied heavily on the Supreme Court's ruling in Indus Airways Private Limited v. Magnum Aviation Private Limited, which held that if a cheque is issued as an advance payment and the transaction does not culminate in a legally enforceable liability, offence under Section 138 is not made out. The petitioners argued that the agreement to sell was for two years, and the cheques were issued without any subsisting liability, thus misused by the complainant. The Court noted that the respondent had issued receipts acknowledging the entire amount of Rs. 1,72,21,200/-, and the petitioners had not disputed the execution of the agreement to sell or the personal guarantee. The respondent's claim of payment through banking channels was supported by documentary evidence, whereas the petitioners' claim of partial repayment was unsubstantiated. The Court referred to the presumption under Section 139 of the Act, which favors the holder of the cheque, and emphasized that the burden to prove absence of liability lies on the accused. Citing the Supreme Court's decision in Rathish Babu Unnikrishnan v. State, the Court held that disputed questions of fact regarding liability should be adjudicated at trial, and the quashing petition is not the forum for detailed fact-finding. Multiplicity of Proceedings and Abuse of Process The petitioners contended that multiple complaints had been filed for the same transaction, amounting to multiplicity of proceedings and abuse of process, violating Article 20 of the Constitution. Reliance was placed on the Bhajan Lal case, which enumerates categories where quashing is appropriate, including mala fide prosecution and multiplicity of proceedings. The respondent countered that the complaints related to different cheques issued at different times, including personal guarantee cheques and cheques issued on behalf of the proprietorship firm, and hence were distinct. The Court observed that the respondent initially presented the personal guarantee cheques issued from petitioner no. 1's personal joint account with petitioner no. 2, which were dishonoured. Subsequently, the respondent also presented the cheques issued by the petitioner firm, without disclosing the prior dishonour of the personal guarantee cheques in the latter complaint. The Court found that the respondent exercised the option to present the personal guarantee cheques first, which were to be used if the respondent wished to withdraw money before 15.12.2018. The respondent's failure to disclose the dishonour of these cheques in the complaint filed later for the firm's cheques amounted to an abuse of process. The Court held that continuance of the complaint based on the firm's cheques, after the personal guarantee cheques had been dishonoured and presented, would be an abuse of process and quashed the complaint in CRL.M.C. 8002/2023 accordingly. Liability of Petitioner no. 2 and Vicarious Liability under Section 141 Petitioner no. 2, wife of petitioner no. 1, was arrayed as accused in the complaint based on the joint bank account from which the personal guarantee cheques were issued. The petitioners argued that petitioner no. 2 was neither a party to the agreement nor a signatory to the cheques, and hence cannot be held liable under Section 138 or vicariously liable under Section 141. The Court examined the statutory provisions of Section 141, which creates vicarious liability for offences committed by companies or firms, but requires specific averments showing how the accused was responsible for the conduct of business. The Court relied on the Supreme Court's ruling in Ashok Mal Bafna v. Upper India Steel Manufacturing, which mandates strict construction of Section 141 and requires clear allegations against the accused. The Court further referred to the Supreme Court's decision in Aparna A. Shah v. Sheth Developers, which held that in case of joint accounts, a joint account-holder who has not signed the cheque cannot be prosecuted under Section 138. The Court found that petitioner no. 2 had not signed the cheques and was not a party to the guarantee or agreement. Accordingly, the Court quashed the complaint against petitioner no. 2 in CRL.M.C. 7912/2023, holding that she cannot be held liable for dishonour of the cheques. Pendency of Arbitration Proceedings The petitioners submitted that the subject matter of the agreement was sub judice in arbitration proceedings and that criminal complaints should be quashed to avoid multiplicity and conflicting adjudications. The respondent contended that the arbitration petition does not bar criminal proceedings under Section 138 of the Act. The Court noted that the arbitration petition had been allowed by a Coordinate Bench and that an SLP against that order was dismissed by the Supreme Court. The Court held that pendency of arbitration does not constitute a bar to criminal proceedings under the Negotiable Instruments Act. Non-Disclosure of Other Complaints The petitioners argued that the respondent concealed the filing of other complaints arising from the same transaction, violating the principle laid down in Damodar S. Prabhu v. Sayed Babalal H., which mandates disclosure of all complaints in respect of the same transaction. The Court observed that the respondent had filed multiple complaints but did not disclose the earlier dishonour of personal guarantee cheques in the complaint based on firm's cheques. This non-disclosure was a factor in the Court's finding of abuse of process in CRL.M.C. 8002/2023. Application of Section 482 Cr.P.C. to Quash Complaints The Court examined the scope of inherent powers under Section 482 Cr.P.C. to prevent abuse of process and to secure ends of justice, referring to the Bhajan Lal guidelines. It noted that the power to quash is to be exercised sparingly and only where allegations do not prima facie constitute an offence, or where proceedings are malicious or an abuse of process. Applying these principles, the Court found that the complaint in CRL.M.C. 8002/2023 was an abuse of process due to multiplicity and non-disclosure, warranting quashing. However, the complaint in CRL.M.C. 7912/2023 against petitioner no. 1 was maintainable, as disputed questions of fact regarding liability and payment require trial. The complaint against petitioner no. 2 was quashed for lack of specific allegations and absence of signature on the cheques. 3. SIGNIFICANT HOLDINGS The Court's crucial legal reasoning and core principles established include:
Final determinations on each issue are:
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