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Friday, September 5, 2014

Sec.138 of N.I. Act - Stop Payment - Non-discloser of reply notice in the complaint - High court quashed the complaint on the above said two grounds - Apex court held that it is a settled law already decided in M.M.T.C. Ltd. and Modi Cements - stop payment also attracts as offence - non-discloser of reply notice in complaint is immaterial whether amount paid or not is to be proved by way of defence but not way of reply notice - High court erred totally and hence set aside the order of the High court =CRIMINAL APPEAL NO. 1808 OF 2014 [Arising out of Special Leave Petition (Crl.) No.9901 of 2011] Pulsive Technologies P. Ltd. … Appellant Vs. State of Gujarat & Ors. … Respondents = 2014 - Aug. Part - http://judis.nic.in/supremecourt/filename=41838

 Sec.138 of N.I. Act - Stop Payment - Non-discloser of reply notice in the complaint - High court quashed the complaint on the above said two grounds - Apex court held that it is a settled law already decided in M.M.T.C.  Ltd.  and  Modi Cements  - stop payment also attracts as offence - non-discloser of reply notice in complaint is immaterial whether amount paid or not is to be proved by way of defence but not way of reply notice - High court erred totally and hence set aside the order of the High court =

The High Court further held that the cheque  in  question  was  returned  on
account of “stop payment” instructions given  by  the  accused  vide  letter
dated 13/07/2006 in view of the fact that  the  complainant  had  failed  to
discharge its obligations as per the agreement  by  not  repairing/replacing
the  damaged  UPS  system.   The  High  Court  further  observed  that   the
complainant had not disclosed complete facts as required under provisos  (b)
and (c) of Section 138 of the NI Act.  The High  Court  concluded  that  the
complaint did not disclose offence contemplated under Section 138 of the  NI
Act.  The High Court, in the circumstances, quashed the complaint.

10.   The High Court, in our opinion,  fell  into  a  grave  error  when  it
proceeded to quash the complaint. Even “stop  payment”  instructions  issued
to the bank are held to make a person liable for  offence  punishable  under
Section 138 of the NI Act in case  cheque is dishonoured on that count.   In
Modi Cements  v.   Kuchil Kumar Nandi[1] this Court made it clear that  even
if a cheque is dishonoured because of “stop payment” instructions  given  to
the bank, Section 138 of  the  NI  Act  would  get  attracted.   This  Court
further observed that once the cheque is issued by the drawer a  presumption
under Section 139 must follow and merely because the drawer issues a  notice
to the drawee or to the bank  for  stoppage  of  the  payment  it  will  not
preclude an action under Section 138 of the NI Act  by  the  drawee  or  the
holder of the cheques in due course.

We find that the High Court has  relied  on  M.M.T.C.  Ltd.  and  Modi
Cements  and yet drawn a  wrong  conclusion  that  inasmuch  as  cheque  was
dishonoured because  of  “stop  payment”  instructions,  offence  punishable
under Section 138 of the NI Act is not made out.
The  High  Court  observed
that “stop payment” instructions were  given  because  the  complainant  had
failed  to   discharge   its   obligations   as   per   agreement   by   not
repairing/replacing the damaged UPS system.  
Whether complainant had  failed
to discharge its obligations or not could not have been decided by the  High
Court conclusively at this  stage.  
The  High  Court  was  dealing  with  a
petition filed under Section 482 of the Code  for  quashing  the  complaint.
On  factual  issue,  as  to  whether  the  complainant  had  discharged  its
obligations or not, the High Court could not have given  its  final  verdict
at this stage.  It is matter of evidence.
This is exactly what  this  Court said in M.M.T.C. Ltd.  
Though the High Court referred to M.M.T.C. Ltd.,  it failed to note the most vital caution sounded therein.

14.   The High Court also erred in quashing  the  complaint  on  the  ground
that the contents of the reply sent by the accused  were  not  disclosed  in
the complaint.  Whether any money is paid by the accused to the  complainant
is a matter of evidence. The accused has  ample  opportunity  to  probabilis
his defence.  On that count, in the facts of this case, complaint cannot  be
quashed.

15.   In  view  of  the  above,  we  set  aside  the  impugned  order  dated
08/09/2011 passed by the Gujarat High Court in  Criminal  Misc.  Application
No. 1757 of 2007 with Criminal Misc.  Application  No.  9158  of  2007.
2014 - Aug. Part - http://judis.nic.in/supremecourt/filename=41838

                                                       NON-REPORTABLE


                        IN THE SUPREME COURT OF INDIA

                       CRIMINAL APPELLATE JURISDICTION

                    CRIMINAL APPEAL NO. 1808     OF 2014
       [Arising out of Special Leave Petition (Crl.) No.9901 of 2011]


Pulsive Technologies P. Ltd.      …          Appellant

Vs.

State of Gujarat & Ors.                 …          Respondents

                                    WITH

                       CRIMINAL APPEAL NO.1807 OF 2014
[Arising out of Special Leave Petition (Crl.) No.9915 of 2011]


                               J U D G M E N T


(SMT.) RANJANA PRAKASH DESAI, J.


1.    Leave granted.


2.    These appeals are  directed  against  the  judgment  and  order  dated
08/09/2011  passed  by  the  High  Court  of  Gujarat  in   Criminal   Misc.
Application No.1757 of 2007 and Criminal Misc. Application No.9158  of  2007
whereby the High Court of Gujarat quashed the criminal  complaint  filed  by
the appellant being Criminal Case No.6076 of 2006 pending  on  the  file  of
the Chief Judicial Magistrate of  Vadodara  for  offences  punishable  under
Section 138 and 142 of the Negotiable Instruments Act (‘the NI Act’).

Brief facts of the appellant-Company’s case.
3.    The appellant in both the appeals is the original complainant.  It  is
a private limited company.   Contesting respondent no. 2 in  appeal  arising
out of  SLP  No.  9915  of  2011  is  the  accused  company  and  contesting
respondent nos. 2 to 4 in appeal arising out of SLP No.  9901  of  2011  are
its directors.

4.    In the course of its business, the accused received bulk  orders  from
Gujarat Informatics Limited (“GIL”), a Government  of  Gujarat  Company  for
supply of  desktop  computers,  printers,  UPS  and  other  products.    The
complainant being one of the approved vendors on the list of  the  GIL,  the
accused, placed  various  purchase  orders  with  the  complainant  and  the
complainant  sold  and  supplied  the   same   as   per   the   demand   and
specifications.        During the course of business, the accused made  part
payments regularly.  For the remaining outstanding legitimate  dues  of  the
complainant, the accused handed over a post-dated cheque  bearing  No.387176
dated 15/07/2006 for  Rs.11,80,670/-  drawn  on  HSBC  Bank,  Bangalore   in
favour of the complainant.

5.     The complainant presented the cheque  twice  for  collection  through
its bankers viz.  Bank of Baroda, Jetalpur Branch.  It was  returned  unpaid
on 3/10/2006 for the reason “Payment stopped by drawer”. The complainant  on
13/10/2006 sent a demand notice to the  accused asking   them  to  pay   the
cheque amount within a period of 15 days from the date  of  the  receipt  of
the notice.  The accused failed to pay the amount to the complainant.

6.    On 15/11/2006  the  complainant  filed  a  complaint   being  Criminal
Complaint No.6076/06  in the Court of Chief Judicial  Magistrate,  Vadodara,
Gujarat against the accused under Sections  138/142  of  the  NI  Act.   The
Chief Judicial  Magistrate,  Vadodara,  by  order  dated  15/11/2006  issued
summons to all the accused.

7.     The accused filed applications before the High  Court  under  Section
482 of the Code Criminal Procedure for quashing of the said complaint  case.
 The High Court by the impugned order dated 8/9/2011  allowed  the  petition
and quashed the said complaint.  Being  aggrieved  by  the  said  order  the
complainant has approached this Court.

8.     We have heard Mr. D.N. Ray, learned counsel for the  complainant  and
Mr. Giriraj Subramanium, learned counsel for the accused.  Counsel  for  the
complainant submitted that the High Court erred in coming to the  conclusion
that the complaint does not disclose offence punishable  under  Section  138
of the NI Act.  Counsel submitted that the High Court was wrong  in  holding
that “stop payment” instructions are not covered by Section 138  of  the  NI
Act. The High Court failed to notice authoritative  pronouncements  of  this
Court which state that  if  a  cheque  bounces  because  of  “stop  payment”
instructions it would constitute an offence under  Section  138  of  the  NI
Act.  Counsel urged that impugned  order  must,  therefore,  be  set  aside.
Counsel for the accused, on the other hand, supported the impugned order.

9.    The High Court held that provisions of Section 138 of the NI  Act  are
attracted where a cheque is returned by the bank on the  ground  that  there
is insufficient amount or that the  amount  of  cheque  exceeds  the  amount
arranged to be paid from that account by an agreement made  with  the  bank.
The High Court further held that the cheque  in  question  was  returned  on
account of “stop payment” instructions given  by  the  accused  vide  letter
dated 13/07/2006 in view of the fact that  the  complainant  had  failed  to
discharge its obligations as per the agreement  by  not  repairing/replacing
the  damaged  UPS  system.   The  High  Court  further  observed  that   the
complainant had not disclosed complete facts as required under provisos  (b)
and (c) of Section 138 of the NI Act.  The High  Court  concluded  that  the
complaint did not disclose offence contemplated under Section 138 of the  NI
Act.  The High Court, in the circumstances, quashed the complaint.

10.   The High Court, in our opinion,  fell  into  a  grave  error  when  it
proceeded to quash the complaint. Even “stop  payment”  instructions  issued
to the bank are held to make a person liable for  offence  punishable  under
Section 138 of the NI Act in case  cheque is dishonoured on that count.   In
Modi Cements  v.   Kuchil Kumar Nandi[1] this Court made it clear that  even
if a cheque is dishonoured because of “stop payment” instructions  given  to
the bank, Section 138 of  the  NI  Act  would  get  attracted.   This  Court
further observed that once the cheque is issued by the drawer a  presumption
under Section 139 must follow and merely because the drawer issues a  notice
to the drawee or to the bank  for  stoppage  of  the  payment  it  will  not
preclude an action under Section 138 of the NI Act  by  the  drawee  or  the
holder of the cheques in due course.

11.   Again in M.M.T.C. Ltd. and anr.   v.    Medchl  Chemicals  and  Pharma
(P) Ltd. and anr.[2] this Court reiterated the  same  view.   What  is  more
important is the fact that this Court declared that the complaint cannot  be
quashed on this ground.  Relevant observations of this Court read as under:

“… … …Even  when  the  cheque  is  dishonoured  by  reason  of  stop-payment
instructions by virtue of Section 139 the court  has  to  presume  that  the
cheque was received by the holder for the discharge, in whole  or  in  part,
of any debt or liability. Of course this is a  rebuttable  presumption.  The
accused can thus show that the “stop-payment” instructions were  not  issued
because of insufficiency or paucity of funds. If the accused shows  that  in
his account there were sufficient funds to clear the amount  of  the  cheque
at the time of presentation of the cheque for encashment at the drawer  bank
and that the stop-payment notice had been  issued  because  of  other  valid
causes including that there was no existing debt or liability  at  the  time
of presentation of cheque for encashment, then  offence  under  Section  138
would not be made out. The important thing is that the burden of so  proving
would be on the accused. Thus a court  cannot  quash  a  complaint  on  this
ground.”


12.   In Laxmi Dyechem    v.    State  of  Gujarat  and  ors[3]  this  Court
reiterated the above view.

13.   We find that the High Court has  relied  on  M.M.T.C.  Ltd.  and  Modi
Cements  and yet drawn a  wrong  conclusion  that  inasmuch  as  cheque  was
dishonoured because  of  “stop  payment”  instructions,  offence  punishable
under Section 138 of the NI Act is not made out.  The  High  Court  observed
that “stop payment” instructions were  given  because  the  complainant  had
failed  to   discharge   its   obligations   as   per   agreement   by   not
repairing/replacing the damaged UPS system.  Whether complainant had  failed
to discharge its obligations or not could not have been decided by the  High
Court conclusively at this  stage.   The  High  Court  was  dealing  with  a
petition filed under Section 482 of the Code  for  quashing  the  complaint.
On  factual  issue,  as  to  whether  the  complainant  had  discharged  its
obligations or not, the High Court could not have given  its  final  verdict
at this stage.  It is matter of evidence.  This is exactly what  this  Court
said in M.M.T.C. Ltd.   Though the High Court referred to M.M.T.C. Ltd.,  it
failed to note the most vital caution sounded therein.

14.   The High Court also erred in quashing  the  complaint  on  the  ground
that the contents of the reply sent by the accused  were  not  disclosed  in
the complaint.  Whether any money is paid by the accused to the  complainant
is a matter of evidence. The accused has  ample  opportunity  to  probabilis
his defence.  On that count, in the facts of this case, complaint cannot  be
quashed.

15.   In  view  of  the  above,  we  set  aside  the  impugned  order  dated
08/09/2011 passed by the Gujarat High Court in  Criminal  Misc.  Application
No. 1757 of 2007 with Criminal Misc.  Application  No.  9158  of  2007.   We
direct the Chief Judicial Metropolitan Magistrate, Vadodara  to  dispose  of
the Criminal Complaint No.6076 of 2006 as expeditiously as possible and,  in
any event, within a period of one year from the  date  of  receipt  of  this
order.

16.   The appeals are disposed of in the afore-stated terms.



                                                       ……………………………………………..J.
                                                     (RANJANA PRAKASH DESAI)



                                                       ……………………………………………..J.
                                (N.V. RAMANA)
NEW DELHI,
August 22, 2014.


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[1]    (1998) 3 SCC 249
[2]    (2002)1 SCC 234
[3]    (2012) 13 SCC 375

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