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TMI Blog2024 (9) TMI 1404X X X X Extracts X X X X X X X X Extracts X X X X ..... , at the stage of the summoning order, when the factual controversy is yet to be canvassed and considered by the trial court will not in our opinion be judicious. Based upon a prima facie impression, an element of criminality cannot entirely be ruled out here subject to the determination by the trial Court. Therefore, when the proceedings are at a nascent stage, scuttling of the criminal process is not merited.' In the case of Sunil Todi and Others v. State of Gujarat and Another [ 2021 (12) TMI 175 - SUPREME COURT] , the cheques were issued by the accused as a security deposit under a power supply agreement, and on non-payment of the amount, the cheques were dishonoured on its presentation. It was contended on behalf of the accused that the cheques were intended at all material times to be security towards debt and were not intended to be deposited and would not attract the provisions of Section 138 of the NI Act on its dishonour. Section 138 of the NI Act specifically mentions that the cheque must have been issued for discharge of not only any debt but can also be for other liability . It is, therefore, not necessary that when the cheques are issued, the drawer had any debt t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y to fill in the date in the said cheques, in case of any violation of terms of the service manual. 4. The accused failed to report with effect from October, 2022, absented himself from duty, and abandoned the job. The accused thus caused breach of terms and conditions and became liable to pay pre-estimated and pre-determined damages in terms and conditions governing him. 5. The complainant, thereafter, served the accused with a letter dated 07.01.2023 asking him to keep his account funded to honour the cheques in question. 6. According to the complainant, the aforesaid cheques when presented for realisation, were received back dishonoured vide bank return memo dated 17.01.2023 with the remarks Payment Stopper by the Drawer . Consequentially, a legal notice dated 13.02.2023 was served by the complainant upon the accused calling upon the accused to make the payment towards the cheque amount in question within 15 days of receipt of the notice. According to the complainant, the said notice was duly served upon the accused but no payment against the above dishonoured cheques was made by the accused within the statutory period. Hence the present complaint. 7. The cognizance of offence u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erefore, hit by Section 23 of the Contract Act, 1872 (hereafter the Contract Act ). 11. She submitted that the summoning order is erroneous, perverse, bereft of reasons, and has been passed in a mechanical manner, and there is no legally enforceable debt or liability for which the respondent can demand any amount. She further submitted that the same is an abuse of the process of law, the prime argument being that the cheque in question did not represent an amount that could be termed as legally enforceable debt or other liability . She placed reliance on Indus Airways Private Limited and Others vs. Magnum Aviation Private Limited and Another: (2014) 12 SCC 539. 12. It was submitted that the offence under Section 138 of the NI Act is not made out since the amount mentioned on the cheques was not in lieu of any debt owed to the respondent-institute. On the date of issuing the cheques, no liability existed against the petitioner. In the absence of any legally enforceable debt or liability against the drawer of the cheque, the offence under Section 138 of the NI Act will not be attracted. 13. Aggrieved by the aforesaid order, the petitioner has preferred the present petition seeking th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e scope of interference by the High Court against the issuance of process under the NI Act as under: 8. The issue to be answered here is whether summons and trial notice should have been quashed on the basis of factual defences. The corollary therefrom is what should be the responsibility of the quashing Court and whether it must weigh the evidence presented by the parties, at a pre-trial stage. xxxx xxxx xxxx 16. The proposition of law as set out above makes it abundantly clear that the Court should be slow to grant the relief of quashing a complaint at a pre-trial stage, when the factual controversy is in the realm of possibility particularly because of the legal presumption, as in this matter. What is also of note is that the factual defence without having to adduce any evidence need to be of an unimpeachable quality, so as to altogether disprove the allegations made in the complaint. 17. The consequences of scuttling the criminal process at a pre-trial stage can be grave and irreparable. Quashing proceedings at preliminary stages will result in finality without the parties having had an opportunity to adduce evidence and the consequence then is that the proper forum i.e., the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade out. The High Court has erred in law in going into the factual aspects of the matter which were not admitted between the parties. xxxx xxxx xxxx 33. At this stage, it would be instructive to note the order of a two judge Bench of this Court in Womb Laboratories Pvt. Ltd. v. Vijay Ahuja. In that case, the High Court had quashed proceedings initiated against the first respondent for offences punishable under Section 138 of the NI Act merely on the basis of the assertion in the complaint that security cheques were demanded in response to which the accused had issued three signed blank cheques with the assurance that if the amount was not returned, the cheques could be encashed. The High Court held that the cheques were given only by way of security and therefore not towards the discharge of a debt or liability on the basis of which the complaint was quashed. Allowing the appeal by the drawee, this Court observed: 5. In our opinion, the High Court has muddled the entire issue. The averment in the complaint does indicate that the signed cheques were handed over by the accused to the complainant. The cheques were given by way of security, is a matter of defence. Further, it was not f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of defence at the trial. The Magistrate having exercised his discretion, it was not open to the High Court to substitute its discretion. The High Court has in a carefully considered judgment, analysed the submissions of the appellants and for justifiable reasons has come to the conclusion that they are lacking in substance. 20. This Court, in the case Suresh Chandra Goyal v. Amit Singhal : 2015 SCC OnLine Del 9459 had an occasion to deal in detail with the circumstances where the debt in question can be interpreted to be owed by the accused to the complainant for the purpose of Section 138 of the NI Act. The Court interpreted the term legally enforceable debt when the cheques are issued as a security. It was held that the expression security cheque is not a statutorily defined expression in the Act. There can be a situation where the cheques are given to provide an assurance or comfort to the drawee that in case of failure to pay the primary consideration on the due date, the security may be enforced. It was held as under : 50. In Indus Airways Pvt. Ltd. v. Magnum Aviation Pvt. Ltd., IV (2014) SLT 321, the question that arose for consideration before the Supreme Court was, whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... impliedly states that the security cheques are not to be used to recover the installments, even in case of failure to pay the same by the respondent/debtor. 62. Section 138 of NI Act does not distinguish between a cheque issued by the debtor in discharge of an existing debt or other liability, or a cheque issued as a security cheque on the premise that on the due future date the debt which shall have crystallized by then, shall be paid. So long as there is a debt existing, in respect whereof the cheque in question is issued, in my view, the same would attract Section 138 of NI Act in case of its dishonour. 21. Section 138 of the NI Act specifically mentions that the cheque must have been issued for discharge of not only any debt but can also be for other liability . It is, therefore, not necessary that when the cheques are issued, the drawer had any debt to discharge on the date of issuance. 22. As discussed above, the allegations made in the complaint, at the stage when the complaint is sought to be quashed at the initial stage, are to be taken as correct unless evidence of unimpeachable character has been produced. 23. The legal presumption of the cheques having been issued in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under Section 482 of the CrPC should be exercised sparingly and with circumspection. 26. The learned counsel for the petitioner relied on the judgment passed by a coordinate bench of this Court in Vivek Rai v. Aakash Institute (supra), to contend that clauses contained in a similar Service Rule Manual pertaining to security cheques were deemed unconscionable and contrary to public policy under Section 23 of the Indian Contract Act. 27. At this stage, however, it is important to note that the petitioner had entered into a contract with the respondent regarding his employment, which was governed by certain terms and conditions. In accordance with the contract, the petitioner provided undated cheques as security, which were duly signed. When the petitioner allegedly breached the terms of the contract, the respondent presented the cheques, and upon their dishonour, initiated proceedings under Section 138 of the NI Act. 28. Whether the judgment relied upon by the petitioner in Vivek Rai v. Aakash Institute (supra) is applicable to the facts of the present case or whether the Service Manual signed by the petitioner was executed under coercion or deception thereby vitiating the consent a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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