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Sunday, January 16, 2022

Cheque issued as security is enforceable the cheque though issued as security at the point when the loan was advanced, it was issued as an assurance to repay the amount after the debt becomes due for repayment. The loan was in subsistence when the cheque was issued and had become repayable during June/July 2015 and the cheque issued towards repayment was agreed to be presented thereafter. If the amount was not paid in any other mode before June/July 2015, it was incumbent on the respondent No.2 to arrange sufficient balance in the account to honour the cheque which was to be presented subsequent to June/July 2015. These aspects would primafacie indicate that there was a transaction between the parties towards which a legally recoverable debt was claimed by the appellant and the cheque issued by the respondent No.2 was presented. On such cheque being dishonoured, cause of action had arisen for issuing a notice and presenting the criminal complaint under Section 138 of N.I. Act on the payment not being made

Cheque issued as security is enforceable

the cheque though issued as security at the point when the loan was advanced, it was issued as an assurance to repay the amount after the debt becomes due for repayment. The loan was in subsistence when the cheque was issued and had become repayable during June/July 2015 and the cheque issued towards repayment was agreed to be presented thereafter. If the amount was not paid in any other mode before June/July 2015, it was incumbent on the respondent No.2 to arrange sufficient balance in the account to honour the cheque which was to be presented subsequent to June/July 2015. These aspects would primafacie indicate that there was a transaction between the parties towards which a legally recoverable debt was claimed by the appellant and the cheque issued by the respondent No.2 was presented. On such cheque being dishonoured, cause of action had arisen for issuing a notice and presenting the criminal complaint under Section 138 of N.I. Act on the payment not being made

REPORTABLE

IN THE SUPREME COURT OF INDIA

CRIMINAL APPELLATE JURISDICTION

CRIMINAL APPEAL NOS. 12691270 OF 2021

(Arising out of SLP(Criminal) No.252253/2020)

Sripati Singh (since deceased) Through ….Appellant(s)

His Son Gaurav Singh

Versus

The State of Jharkhand & Anr. …. Respondent(s)

J U D G M E N T

A.S. Bopanna,J.

1. The appellant is before this Court assailing the order

dated 17.12.2019 passed by the High Court of Jharkhand

at Ranchi in Criminal M.P. No.2635 of 2017 and Criminal

M.P. No.2655 of 2017. Through the said order, the High

Court has allowed the said Crl.Miscellaneous Petitions and

has set aside the orders dated 04.07.2016 and 13.06.2019

passed by the Judicial Magistrate First Class, Palamau in

Complaint Case No.1833 of 2015. The learned Judicial

Magistrate by the order dated 04.07.2016 had taken

cognizance of the offence alleged against the respondent

No.2 herein. By the order dated 13.06.2019 the learned

Judicial Magistrate had rejected the petition filed by the

respondent No.2 seeking discharge in the said criminal

complaint.

2. The brief facts leading to the present case as pleaded

is that the appellant and the respondent No.2 are known to

each other inasmuch as the respondent No.2 and the

daughter of the appellant were pursuing their education

together in London. On their return to India, the

respondent No.2 had settled in Bangalore and due to the

earlier acquaintance, the cordial relationship amongst the

families had continued. The respondent No.2 on learning

that the appellant was involved in business, had

approached him at Daltonganj and sought financial

assistance to the tune of Rs.1 crore so as to enable the

respondent No.2 to invest the same in his business. Since

the respondent No.2 had assured that the same would be

returned, the appellant placed trust in him and the

appellant claims to have advanced further sum and in all a

total sum of Rs.2 crores during the periods between

January 2014 to July 2014. The said amount was paid to

respondent No.2 by transferring from the account of

appellant’s daughter and also from the account of the

appellant. Towards the said transaction, four agreements

are stated to have been entered acknowledging the receipt

of the loan. The said agreements were reduced into writing

on nonjudicial stamp papers bearing No. B489155,

B489156, B489157 and B489159.

3. The respondent No.2 assured that the amount would

be returned during June/July 2015. Towards the same,

three cheques amounting to Rs.1 crore was handed over to

the appellant. Thereafter, three more cheques for Rs.1

crore was also given. The appellant is stated to have met

respondent No.2 during July 2015 when the respondent

No.2 assured that the amount will be repaid during October

2015. Based on such assurance, the appellant presented

the cheques for realisation on 20.10.2015. On

presentation, the said cheques were returned due to

‘insufficient funds’ in the bank account of respondent No.2.

The appellant therefore got issued a legal notice as

contemplated under Section 138 of the Negotiable

Instruments Act (“N.I. Act” for short). Since the respondent

No.2 had taken the money on the assurance that the same

would be returned but had deceived the appellant, the

appellant contended that the respondent No.2 had cheated

him and accordingly the complaint was filed both under

Section 420 of IPC as also Section 138 of N.I. Act. The

appellant had submitted the sworn statement of himself

and witnesses. The learned Judicial Magistrate through the

order dated 04.07.2016 took cognizance and issued

summons to the respondent No.2.

4. The respondent No.2 on appearance filed a

miscellaneous petition seeking discharge from the criminal

proceeding, which was rejected by the order dated

13.06.2019. It is in that background, the respondent No.2

claiming to be aggrieved by the order dated 04.07.2016 and

13.06.2019 approached the High Court in the said criminal

miscellaneous petitions. The High Court, through the

impugned order has allowed the petitions filed by the

respondent No.2. The appellant therefore claiming to be

aggrieved is before this Court in these appeals.

5. We have heard Mr. M.C. Dhingra, learned counsel for

the appellant, Mr. Raj Kishor Choudhary, learned counsel

for the respondent No.1, Mr. Keshav Murthy, learned

counsel for respondent No.2 and perused the appeal

papers.

6. The learned counsel for the appellant would contend

that the respondent No.2 taking advantage of the

acquaintance with the family of the appellant, had

borrowed the amount which was to be repaid and the

cheque issued was towards discharge of the said amount.

In the said circumstance, when the cheques issued was for

discharge of the legally recoverable debt and it had been

dishonoured, the provisions of Section 138 of N.I. Act would

get attracted. Therefore, the complaint filed by the

appellant is in accordance with law. It is his further

contention that in the present case since respondent No.2

had gained the confidence of the appellant due to the

acquaintance with his daughter and in that circumstance

when the amounts which had been taken by him earlier

had been repaid so as to gain the confidence and having

received substantial amount had at that stage not made

arrangement for sufficient funds in the bank despite having

issued the cheques to assure payment, the same would

amount to the respondent No.2 cheating the appellant by

design and therefore would attract Section 420 IPC. It is

contended that towards the amount received, the same had

been acknowledged by subscribing the signature to the

loan agreement. Further, when there was an undertaking to

repay the same, the cheque was issued towards such

discharge of legally recoverable debt and the cheque on

presentation after the agreed due date for repayment of the

loan was dishonoured, the same would constitute an

offence. In that regard, it is contended that the learned

Judicial Magistrate having taken note of the complaint and

the sworn statements recorded by the appellant and his

witnesses had taken cognizance and issued summons. In

such event, the order passed by the learned Judicial

Magistrate for taking cognizance and also to reject the

discharge petition filed by the respondent No.2 was in

accordance with law. It is contended that the learned

Judge of the High Court had in fact committed an error in

arriving at the conclusion that the cheque issued by the

respondent No.2 was towards ‘security’ and that the same

could not have been treated as a cheque issued towards the

discharge of legally recoverable debt. It is contended that

the learned Judge has proceeded at a tangent and

committed an error and as such the order passed by the

High Court calls for interference.

7. To contend that the cheque issued towards discharge

of the loan and presented for recovery of the same cannot

be construed as issued for ‘security’ has relied on the

decision of this Court in the case of Sampelly

Satyanarayana Rao vs. Indian Renewable Energy

Development Agency Ltd., (Criminal Appeal No.867 of

2016) and in M/s Womb Laboratory Pvt. Ltd. vs. Vijay

Ahuja and Anr. (Criminal Appeal No.13821383 of 2019).

Hence, it is contended that the observation contained in the

order of the High Court that a cheque issued towards

security cannot attract the provision of Section 138 of N.I.

Act is erroneous and the reference made by the High Court

to the decision in Sudhir Kr. Bhalla vs. Jagdish Chand

and Others 2008 7 SCC 137 is without basis. The learned

counsel therefore contends that the order passed by the

High Court is liable to be set aside and the criminal

complaint be restored to file to be proceeded in accordance

with law.

8. Mr. Keshav Murthy, learned counsel for respondent

No.2 would contend that the learned Judicial Magistrate

without application of mind to the fact situation had taken

cognizance and issued summons and had not appropriately

considered the case put forth by the respondent No.2

seeking discharge. He would contend that the High Court

on the other hand, has taken note of the entire gamut of

the case and has arrived at the conclusion that the offence

alleged both under Section 420 IPC and Section 138 of the

N.I. Act has not been made out. It is contended that the

claim for the sum of Rs. 2 crores as made in the complaint

is without basis. It is his case that the respondent No.2 has

issued a comprehensive reply disputing the claim put forth

by the appellant. It is contended that from the very

complaint and the statement of witnesses recorded by the

learned Judicial Magistrate it is evident that no criminal

offence is made out in the instant case. Even if the case as

put forth in the complaint is taken note, at best the

transaction can be considered as an advancement of loan

for business purpose and even if it is assumed that the said

amount was not repaid it would only give rise to civil

liability and the appellants could have only filed a civil suit

for recovery of the loan. The statement of the witnesses,

more particularly the daughter of the complainant would

indicate the longstanding relationship between the parties

and also the monetary transaction which in any event does

not constitute a criminal offence. It is contended that under

any circumstance, the offence as alleged under Section 420

of IPC cannot be sustained. Insofar as the offence alleged

against the respondent No.2 under section 138 of N.I. Act,

the same would also not be sustainable when the

complainant himself has relied on the loan agreement

wherein reference is made to the cheque being issued as

security for the loan. The learned counsel contends that the

High Court in fact has taken note of these aspects,

proceeded in its correct perspective and has arrived at a

just conclusion, which does not call for interference. He

therefore, contends that the above appeals be dismissed.

9. In the light of the rival contentions, a perusal of the

appeal papers would disclose that it is the very case of the

appellant that he has advanced substantial amount of Rs.

2 crores to the respondent No.2 by way of financial

assistance for business purpose. While taking note of the

nature of the transaction and also the proceedings

initiated, it is necessary for us to remain conscious of the

fact that the proceedings between the parties is at the

preliminary stage and any conclusive findings rendered in

relation to the dispute between the parties would affect

their case if ultimately the appellants were to succeed

herein and the criminal proceedings are to be restored for

further progress. Therefore, what is necessary to be

examined herein is, as to whether the appellant has prima

facie established a transaction under which there is a

legally recoverable debt payable to the appellant by the

respondent No.2 and as to whether the cheques in question

relating to which the complaint has been filed by the

appellant is issued towards discharge of such legally

recoverable debt. In that regard, what is necessary to be

considered is also as to whether the cheques in question

are still to be considered only as ‘security’ for the said

amount and whether it was not liable to be presented for

recovery of the legally recoverable debt. The question

which would also arise for consideration is as to whether

the complaint filed by the appellant should be limited to a

proceeding under Section 138 of N.I. Act or on the facts

involved, whether the invoking of Section 420 IPC was also

justified.

10. While considering the above aspects, it is evident

that the learned Magistrate having referred to the complaint

and sworn statement of the complainant and the witnesses

has taken cognizance, issued summons and has

consequently arrived at the conclusion that the discharge

as sought by the respondent No.2 cannot be accepted. The

High Court on the other hand having referred to the rival

contentions has concluded as follows:

“20. From the aforesaid facts and from the documents

of the complainant, this Court finds that long

standing 'business transaction and inability of

refunding a loan has been given a colour of criminal

offence of cheating punishable under Section 420 of

the Indian Penal Code. A breach of trust with mens

rea gives rise to a criminal prosecution. In this case

when I go through the evidence before charge of the

complainant and the documents of the complainant, I

find that there were long standing business

transactions between the parties. Since 2011 money

was advanced by the complainant and his family

members to the accused and the complainant witness

admits that money was also transferred from the

account of the accused to the account of daughter of

the complainant. From the evidence, I find that there

is no material to suggest existence of any mens rea.

Thus, this case becomes a case of simplicitor case of

nonrefunding of loan, which cannot be a basis for

initiating criminal proceeding. The Hon'ble Supreme

Court in the case of Samir Sahay alias Sameer Sahay

versus State of UP & Anr. reported in (2018) 14 SCC

233 held that when the dispute between the parties

was ordinarily a civil dispute resulting from a breach

of contract on the part of the appellant by nonrefunding of amount advanced, the same would not

constitute an offence of cheating. In this case also, I

find that it is true case that the amount of loan has

not been refunded, thus, this cannot come within the

purview of cheating, though the complainant by

suppressing the material facts, has tried to give a

different colour. Thus, I find that no case punishable

under Section 420 of the Indian Penal Code can be

made out in this case.

21. Further, I find that it is the documents of the

complainant, which show that the cheques were given

by way of security. Even if I do not believe the

statement of the accused, the documents of the

complainant cannot be brushed aside. As held earlier,

supported by the decision of the Hon'ble Supreme

Court in the case of "Sudhir Kumar Bhalla" (supra) a

cheque given by way of security cannot attract

Section 138 of the Negotiable Instruments Act. Since

the cheques were given by way of security, which is

evident from the complainant's documents (though

this fact has also been suppressed in the complaint

petition), I find that Section 138 of the Negotiable

Instruments Act is also not attracted in this case.”

11. In the background of what has been taken note by us

and the conclusion reached by the High Court, insofar as

the High Court arriving at the conclusion that no case

punishable under Section 420 IPC can be made out in

these facts, we are in agreement with such conclusion. This

is due to the fact that even as per the case of the appellant

the amount advanced by the appellant is towards the

business transaction and a loan agreement had been

entered into between the parties. Under the loan

agreement, the period for repayment was agreed and the

cheque had been issued to ensure repayment. It is no

doubt true that the cheques when presented for realisation

were dishonoured. The mere dishonourment of the cheque

cannot be construed as an act on the part of the

respondent No.2 with a deliberate intention to cheat and

the mens rea in that regard cannot be gathered from the

point the amount had been received. In the present facts

and circumstances, there is no sufficient evidence to

indicate the offence under Section 420 IPC is made out and

therefore on that aspect, we see no reason to interfere with

the conclusion reached by the High Court.

12. Having arrived at the above conclusion and also

having taken note of the conclusion reached by the High

Court as extracted above, it is noted that the High Court

has itself arrived at the conclusion that the instant case

becomes a simpliciter case of nonrefunding of loan which

cannot be a basis for initiating criminal proceedings. The

conclusion to the extent of holding that it would not

constitute an offence of cheating, as already indicated

above would be justified. However, when the High Court

itself has accepted the fact that it is a case of nonrefunding of the loan amount, the first aspect that there is

a legally recoverable debt from the respondent No.2 to the

appellant is primafacie established. The only question that

therefore needs consideration at our hands is as to whether

the contention putforth on behalf of respondent No.2 that

an offence under Section 138 of the N.I. Act is not made out

as the dishonourment alleged is of the cheques which were

issued by way of ‘security’ and not towards discharge of any

debt.

13. In order to consider this aspect of the matter we have

at the outset taken note of the four loan agreements dated

13.08.2014 which is the subject matter herein. Under each

of the agreements, the promise made by respondent No.2 is

to pay the appellant a sum of Rs.50 lakhs. Thus, the total

of which would amount to Rs.2 crores as contended by the

appellant. Towards the promise to pay, the repayment

agreed by the respondent No.2 is to clear the total amount

within June/July 2015. Para 5 of the loan agreement

indicates that six cheques have been issued as security.

The claim of the appellant has been negated by the High

Court only due to the fact that the agreement indicates that

the cheques have been given by way of security and the

complainant has also stated this fact in the complaint.

Though the High Court has taken note of the decision in

the case of Sudhir Kumar Bhalla (supra) to hold that the

cheque issued as security cannot constitute an offence, the

same in our opinion does not come to the aid of the

respondent No.2. There is no categorical declaration by this

Court in the said case that the cheque issued as security

cannot be presented for realisation under all

circumstances. The facts in the said case relate to the

cheques being issued and there being alterations made in

the cheques towards which there was also a counter

complaint filed by the drawer of the cheque. Hence, the

said decision cannot be a precedent to answer the position

in this case and the High Court was not justified in placing

reliance on the same.

14. In fact, it would be apposite to take note of the

decision of this Court in the case of Sampelly

Satyanarayana Rao (supra) wherein this Court while

answering the issue as to what constitutes a legally

enforceable debt or other liability as contained in the

Explanation 2 to Section 138 of N.I. Act has held as

hereunder:

“10. We have given due consideration to the

submission advanced on behalf of the appellant as well

as the observations of this Court in Indus Airways

(supra) with reference to the explanation to Section 138

of the Act and the expression "for discharge of any debt

or other liability" occurring in Section 138 of the Act.

We are of the view that the question whether a

postdated cheque is for "discharge of debt or

liability" depends on the nature of the transaction.

If on the date of the cheque liability or debt exists

or the amount has become legally recoverable, the

Section is attracted and not otherwise.

11. Reference to the facts of the present case clearly

shows that though the word "security" is used in

Clause 3.l (iii) of the agreement, the said expression

refers to the cheques being towards repayment of

instalments. The repayment becomes due under the

agreement, the moment the loan is advanced and the

instalment falls due. It is undisputed that the loan

was duly disbursed on 28th February, 2002 which

was prior to the date of the cheques. Once the loan

was disbursed and instalments have fallen due on

the date of the cheque as per the agreement,

dishonour of such cheques would fall under

Section 138 of the Act. The cheques undoubtedly

represent the outstanding liability.

12. Judgment in Indus Airways (supra) is clearly

distinguishable. As already noted, it was held therein

that liability arising out of claim for breach of contract

under Section 138, which arises on account of

dishonour of cheque issued was not by itself at par

with criminal liability towards discharge of

acknowledged and admitted debt under a loan

transaction. Dishonour of cheque issued for discharge

of later liability is clearly covered by the statute in

question. Admittedly, on the date of the cheque there

was a debt/liability in presenti in terms of the loan

agreement, as against the case of Indus Airways

(supra), where the purchase order had been cancelled

and cheque issued towards advance payment for the

purchase order was dishonoured. In that case, it was

found that the cheque had not been issued for

discharge of liability but as advance for the purchase

order which was cancelled. Keeping in mind this fine

but real distinction, the said judgment cannot be

applied to a case of present nature where the

cheque was for repayment of loan instalment

which had fallen due though such deposit of

cheques towards repayment' of instalments was

also described as "security" in the loan agreement.

In applying the judgment in Indus Airways (supra),

one cannot lose sight of the difference between a

transaction of purchase order which is cancelled

and that of a loan transaction where loan has

actually been advanced and its repayment is due

on the date of the cheque.

13. Crucial question to determine applicability of

Section 138 of the Act is whether the cheque

represents discharge of existing enforceable debt

or liability or whether it represents advance

payment without there being subsisting debt or

liability. While approving the views of different

High Courts noted earlier, this is the underlying

principle as can be discerned from discussion of

the said cases in the judgment of this Court.”

(emphasis supplied)

The said conclusion was reached by this Court while

distinguishing the decision of this Court in the case of Indus

Airways Pvt. Ltd. Vs. Magnum Aviation Pvt. Ltd. (2014) 12

SCC 539 which was a case wherein the issue was of dishonour

of postdated cheque issued by way of advance payment against

a purchase order that had arisen for consideration. In that

circumstance, it was held that the same cannot be considered

as a cheque issued towards discharge of legally enforceable

debt.

15. Further, this Court in the case of M/s Womb

Laboratories Pvt. Ltd. (supra) has held as follows:

“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 for the discharge of

any debt or any liability is also a matter of defence.

The relevant facts to countenance the defence will

have to be proved that such security could not be

treated as debt or other liability of the accused.

That would be a triable issue. We say so because,

handing over of the cheques by way of security per

se would not extricate the accused from the

discharge of liability arising from such cheques.

6. Suffice it to observe, the impugned judgment of

the High Court cannot stand the test of judicial

scrutiny. The same is, therefore, set aside.”

16. A cheque issued as security pursuant to a

financial transaction cannot be considered as a

worthless piece of paper under every circumstance.

‘Security’ in its true sense is the state of being safe and

the security given for a loan is something given as a

pledge of payment. It is given, deposited or pledged to

make certain the fulfilment of an obligation to which the

parties to the transaction are bound. If in a transaction,

a loan is advanced and the borrower agrees to repay the

amount in a specified timeframe and issues a cheque as

security to secure such repayment; if the loan amount is

not repaid in any other form before the due date or if

there is no other understanding or agreement between

the parties to defer the payment of amount, the cheque

which is issued as security would mature for

presentation and the drawee of the cheque would be

entitled to present the same. On such presentation, if

the same is dishonoured, the consequences

contemplated under Section 138 and the other

provisions of N.I. Act would flow.

17. When a cheque is issued and is treated as

‘security’ towards repayment of an amount with a time

period being stipulated for repayment, all that it ensures

is that such cheque which is issued as ‘security’ cannot

be presented prior to the loan or the instalment maturing

for repayment towards which such cheque is issued as

security. Further, the borrower would have the option of

repaying the loan amount or such financial liability in

any other form and in that manner if the amount of loan

due and payable has been discharged within the agreed

period, the cheque issued as security cannot thereafter

be presented. Therefore, the prior discharge of the loan or

there being an altered situation due to which there would

be understanding between the parties is a sine qua non

to not present the cheque which was issued as security.

These are only the defences that would be available to the

drawer of the cheque in a proceedings initiated under

Section 138 of the N.I. Act. Therefore, there cannot be a

hard and fast rule that a cheque which is issued as

security can never be presented by the drawee of the

cheque. If such is the understanding a cheque would also

be reduced to an ‘on demand promissory note’ and in all

circumstances, it would only be a civil litigation to

recover the amount, which is not the intention of the

statute. When a cheque is issued even though as

‘security’ the consequence flowing therefrom is also

known to the drawer of the cheque and in the

circumstance stated above if the cheque is presented and

dishonoured, the holder of the cheque/drawee would

have the option of initiating the civil proceedings for

recovery or the criminal proceedings for punishment in

the fact situation, but in any event, it is not for the

drawer of the cheque to dictate terms with regard to the

nature of litigation.

18. If the above principle is kept in view, as already

noted, under the loan agreement in question the

respondent No.2 though had issued the cheques as

security, he had also agreed to repay the amount during

June/July 2015, the cheque which was held as security

was presented for realization on 20.10.2015 which is after

the period agreed for repayment of the loan amount and the

loan advanced had already fallen due for payment.

Therefore, prima facie the cheque which was taken as

security had matured for payment and the appellant was

entitled to present the same. On dishonour of such cheque

the consequences contemplated under the Negotiable

Instruments Act had befallen on respondent No.2. As

indicated above, the respondent No.2 may have the defence

in the proceedings which will be a matter for trial. In any

event, the respondent No.2 in the fact situation cannot

make a grievance with regard to the cognizance being taken

by the learned Magistrate or the rejection of the petition

seeking discharge at this stage.

19. In the background of the factual and legal position

taken note supra, in the instant facts, the appellant cannot

be nonsuited for proceeding with the complaint filed under

Section 138 of N.I. Act merely due to the fact that the

cheques presented and dishonoured are shown to have

been issued as security, as indicated in the loan agreement.

In our opinion, such contention would arise only in a

circumstance where the debt has not become recoverable

and the cheque issued as security has not matured to be

presented for recovery of the amount, if the due date agreed

for payment of debt has not arrived. In the instant facts, as

noted, the repayment as agreed by the respondent No.2 is

during June/July 2015. The cheque has been presented by

the appellant for realisation on 20.10.2015. As on the date

of presentation of the cheque for realisation the repayment

of the amount as agreed under the loan agreement had

matured and the amount had become due and payable.

Therefore, to contend that the cheque should be held as

security even after the amount had become due and

payable is not sustainable. Further, on the cheques being

dishonoured the appellant had got issued a legal notice

dated 21.11.2015 wherein interalia it has been stated as

follows:

“You request to my client for loan and after accepting

your word my client give you loan and advanced loan

and against that you issue different cheque all

together valued Rs. One crore and my client was also

assured by you will clear the loan within June/July

2015 and after that on 26.10.2015 my client produce

the cheque for encashment in H.D.F.C. Bank all

cheque bearing No.402771 valued Rs. 25 Lakh,

402770 valued Rs.25 lakh, 402769 valued Rs. 50

lakh, (total rupees one crore) and above numbered

cheques was returned with endorsement "In sufficient

fund". Then my client feel that you have not fulfil the

assurance.”

20. The notice as issued indicates that the appellant has

at the very outset after the cheque was dishonoured,

intimated the respondent no.2 that he had agreed to clear

the loan by June/July 2015 after which the appellant had

presented the cheque for encashment on 26.10.2015 and

the assurance to repay has not been kept up.

21. In the above circumstance, the cheque though issued

as security at the point when the loan was advanced, it was

issued as an assurance to repay the amount after the debt

becomes due for repayment. The loan was in subsistence

when the cheque was issued and had become repayable

during June/July 2015 and the cheque issued towards

repayment was agreed to be presented thereafter. If the

amount was not paid in any other mode before June/July

2015, it was incumbent on the respondent No.2 to arrange

sufficient balance in the account to honour the cheque

which was to be presented subsequent to June/July 2015.

22. These aspects would primafacie indicate that there

was a transaction between the parties towards which a

legally recoverable debt was claimed by the appellant and

the cheque issued by the respondent No.2 was presented.

On such cheque being dishonoured, cause of action had

arisen for issuing a notice and presenting the criminal

complaint under Section 138 of N.I. Act on the payment not

being made. The further defence as to whether the loan had

been discharged as agreed by respondent No.2 and in that

circumstance the cheque which had been issued as

security had not remained live for payment subsequent

thereto etc. at best can be a defence for the respondent

No.2 to be put forth and to be established in the trial. In

any event, it was not a case for the Court to either refuse to

take cognizance or to discharge the respondent No.2 in the

manner it has been done by the High Court. Therefore,

though a criminal complaint under Section 420 IPC was

not sustainable in the facts and circumstances of the

instant case, the complaint under section 138 of the N.I Act

was maintainable and all contentions and the defence were

to be considered during the course of the trial.

23. In that view, the order dated 17.12.2019 passed by

the High Court of Jharkhand in Cr.M.P No.2635 of 2017

with Cr.M.P No.2655 of 2017 are set aside. Consequently,

the order dated 04.07.2016 and 13.06.2019 passed by the

Judicial Magistrate are restored. The complaint bearing

C.C. No.1839 of 2015 and 1833 of 2015 are restored to the

file of the Judicial Magistrate, limited to the complaint

under Section 138 of N.I. Act to be proceeded in accordance

with law.

24. All contentions of the parties on merit are left open.

We make it clear that none of the observations contained

herein shall have a bearing on the main trial. The trial

court shall independently arrive at its conclusion based on

the evidence tendered before it.

25. The appeals are allowed in part with no order as to

costs.

26. Pending application, if any, shall also stand disposed

of.

…………………….J.

(M.R. SHAH)

…………………….J.

(A.S. BOPANNA)

New Delhi,

October 28, 2021

Wednesday, December 15, 2021

quashing the Chargesheet Sections 498-A, 323, 504, 506, 304-B of IPC and Sections 3 & 4 of the D.P. Act = It is the well-settled principle laid down in cases too numerous to mention, that if the FIR did not disclose the commission of an offence, the court would be justified in quashing the proceedings preventing the abuse of process of law. Simultaneously, the courts are expected to adopt a cautious approach in matters of quashing, especially in cases of matrimonial disputes whether the FIR in fact discloses commission of an offence by the relatives of the principal accused or the FIR prima facie discloses a case of overimplication by involving the entire family of the accused at the instance of the complainant, who is out to settle her scores arising out of the teething problem or skirmish of domestic bickering while settling down in her new matrimonial surrounding.”

SLP(Crl.) No. 2786 of 2019

REPORTABLE

IN THE SUPREME COURT OF INDIA

CRIMINAL APPELLATE JURISDICTION

CRIMINAL APPEAL NO. 1628 OF 2021

(Arising out of SLP (Crl.) No.2786 OF 2019)

Mirza Iqbal @ Golu & Anr. ...Appellant(s)

vs.

State of Uttar Pradesh & Anr ...Respondent(s)

J U D G M E N T

R. SUBHASH REDDY,J.

1. Leave granted.

2. This Criminal Appeal is filed aggrieved by the

order dated 10.12.2018 passed by the High Court of

Judicature at Allahabad in Application No.44475 of

2018.

3. The aforesaid application was filed before the

High Court under Section 482 of Cr.P.C. for quashing

the Chargesheet No.01 of 2018 dated 12.10.2018 and

order of Chief Judicial Magistrate, taking cognizance

of the case vide order dated 22.10.2018 for the

SLP(Crl.) No. 2786 of 2019

offences punishable under Sections 498-A, 323, 504,

506, 304-B of IPC and Sections 3 & 4 of the Dowry

Prohibition Act, 1961 (D.P. Act) in Case Crime

No.0136 of 2018 registered on the file of PS-Kotwali,

District Gorakhpur.

4. The 2nd respondent – complainant Shri Nisar Ullah

father of the deceased, Rushda Nisar has lodged a

complaint on 25.07.2018 at 09:31 p.m. at PS-Kotwali,

District Gorakhpur to the effect that his younger

daughter namely Rushda Nisar was married to Mirza

Ismail Beg alias Amir s/o Zaki Ullah r/o MohallaMuftipur of Gorakhpur District on 25.12.2015. After

the solemnization of marriage, the accused persons

Mirza Ismail Beg alias Amir (husband), brother-in-law

(devar) Mirza Iqbal alias Golu (1st Appellant herein),

sister-in-law (nanad) Hifza alias Chinki and motherin-law (saas) Sammi (2nd Appellant) continuously used

to demand a four-wheeler vehicle and Rs.10,00,000/-

in cash as dowry. It is alleged that as the said

demands were not met, they used to beat his daughter

and threatened to kill her. It is, further, alleged

that ten days prior to the date of incident, all the

accused persons with a common intention had severely

SLP(Crl.) No. 2786 of 2019

beaten up his daughter and threatened to kill, if the

demands of dowry of cash and car were not met. On

being compelled, he had also given an amount of

Rs.2,70,000/- cash from his business earning, in

spite of the same, accused was adamant in demanding

the car. On 24.07.2018 at about 8 p.m., the accused

persons with a common intention beat his daughter,

killed her by putting a noose around her neck and

hanged her. On coming to know of the incident, he

went along with his son from Surat and he was shocked

to see his daughter in such a state. When the

situation has become slightly normal, he has lodged a

report to take necessary action and to initiate legal

proceedings against the accused. Based on the

aforesaid complaint, a case was registered against

all the named accused including the appellants

herein, who are brother-in-law and mother-in-law of

the deceased for the alleged offences under Sections

498-A, 323, 504, 506, 304-B of IPC and Sections 3 & 4

of the D.P. Act.

5. When the appellants have filed quash petition

before the High Court, it was disposed of by impugned

order directing the appellants to surrender before

SLP(Crl.) No. 2786 of 2019

the Court below and apply for grant of bail and the

same was directed to be considered in accordance with

law.

6. Pursuant to the complaint, crime was registered

and after registration, investigation was taken up

and after completing the investigation, final report

was filed on 12.10.2018 and the same was taken

cognizance by learned Chief Judicial Magistrate by

order dated 22.10.2018.

7. We have heard Ms. Vibha Datta Makhija, learned

Senior Counsel appearing on behalf of the appellants

and Mr. Sahdev Singh, learned counsel for State of

Uttar Pradesh and Mohd. Asad Khan, learned counsel

for the respondent no.2/Complainant.

8. Learned senior counsel appearing for the

appellants has contended that the 1st Appellant

herein, is brother-in-law of the deceased is working

as a Cashier in ICICI Bank, Khalilabad. On the date

of incident i.e. on 24.07.2018, he was on duty. It is

submitted that he resides at Khalilabad in view of

his employment in ICICI Bank and his mother–2nd

Appellant Shamima Bano alias Sammi is also living

SLP(Crl.) No. 2786 of 2019

with him at Khalilabad since 2017. It is submitted

that even as per the case of the prosecution, the

incident has taken place at about 8 p.m. at

Gorakhpur, which is 40 kms away from Khalilabad. On

the date of incident, he was on duty at ICICI Bank

and entered the branch at 09:49 a.m. and came out at

06:25 p.m. In spite of the same, on vague and bald

allegations, appellants are sought to be prosecuted,

without any specific allegations either in complaint

or in the chargesheet. It is submitted that during

the pendency of investigation, the appellant has

filed affidavit before the Senior Superintendent of

Police, District Gorakhpur, stating that he was in

the Bank on the date of incident and requested to

investigate by looking into the call details of his

mobile number and also CCTV footage of the bank. It

is submitted that his sister-in-law i.e. the deceased

was under mental depression and was undergoing

treatment for the same. It is submitted that in spite

of such an affidavit filed by the appellants without

any investigation, in a casual and routine manner,

final report was filed with vague and omnibus

allegation against the appellants. It is submitted

SLP(Crl.) No. 2786 of 2019

that in absence of any specific allegations against

the appellants disclosing their active involvement,

the learned Chief Judicial Magistrate has taken

cognizance in a routine and mechanical manner. It is

submitted that as there is no material or any

specific allegations against the appellants/accused

and if they are allowed to face the trial, it is

nothing but abuse of the process of law. Learned

counsel has submitted that it is evidently a fit

case to quash the proceedings, by allowing the

appeal.

9. On the other hand, learned counsel appearing for

st respondent-State and 2nd respondent-Complainant,

have submitted that in view of specific mention of

the names in the complaint as well as in the

chargesheet, it is not a case to quash the

proceedings at this stage. It is submitted that the

appellants have to prove their innocence in the

trial. It is submitted that all the accused were

demanding dowry of Rs.10,00,000/- and a car from the

deceased and on 24.07.2018 with a common intention,

all of them caused injuries to the deceased and

ultimately killed her. It is submitted that as the

SLP(Crl.) No. 2786 of 2019

postmortem report clearly reveals cause of death as

asphyxia, there are no grounds to quash the

proceedings. Further, it is submitted that the quash

petition filed by the sister-in-law of the deceased

was dismissed by this Court vide order dated

15.04.2019.

10. Having heard the learned counsels on both the

sides, We have carefully perused impugned order,

other material placed on record and counter

affidavits filed on behalf of 1st Respondent–State as

well as on behalf of 2nd Respondent–complainant.

11. The appellants are brother-in-law and mother-inlaw respectively of the deceased. A perusal of the

complaint filed by the 2nd respondent, pursuant to

which a crime was registered, does not indicate any

specific allegations by disclosing the involvement of

the appellants. It is the specific case of the 1st

appellant that he was working as a cashier in ICICI

Bank at Khalilabad branch, which is at about 40 kms

from Gorakhpur. The alleged incident was on

24.07.2018 at about 8 p.m. When the investigation was

pending, the 1st appellant has filed affidavit before

Senior Superintendent of Police on 08.08.2018, giving

SLP(Crl.) No. 2786 of 2019

his employment details and stated that he was falsely

implicated. It was his specific case that during the

relevant time, he was working at ICICI Bank,

Khalilabad branch, Gorakhpur and his mother was also

staying with him. The Branch Manager has endorsed his

presence in the branch, showing in-time at 09:49 a.m.

and out-time at 06:25 p.m. Even in the statement of

nd respondent recorded by the police and also in the

final report filed under Section 173(2) of Cr.P.C.,

except omnibus and vague allegations, there is no

specific allegation against the appellants to show

their involvement for the offences alleged. This

Court, time and again, has noticed making the family

members of husband as accused by making casual

reference to them in matrimonial disputes. Learned

senior counsel for the appellants, in support of her

case, placed reliance on the judgment of this Court

in the case of Geeta Mehrotra and Anr. v. State of

Uttar Pradesh and Anr.1. In the aforesaid case, this

Court in identical circumstances, has quashed the

proceedings by observing that family members of

husband were shown as accused by making casual

(2012) 10 SCC 741

SLP(Crl.) No. 2786 of 2019

reference to them. In the very same judgment, it is

held that a large number of family members are shown

in the FIR by casually mentioning their names and the

contents do not disclose their active involvement, as

such, taking cognizance of the matter against them

was not justified. It is further held that taking

cognizance in such type of cases results in abuse of

judicial process. Paras 18 and 25 of the said

judgment, which are relevant for the purpose of this

case, read as under:

“18. Their Lordships of the Supreme

Court in Ramesh case [(2005)3 SCC

507 : 2005 SCC (Cri) 735] had been

pleased to hold that the bald

allegations made against the sisterin-law by the complainant appeared to

suggest the anxiety of the informant

to rope in as many of the husband's

relatives as possible. It was held

that neither the FIR nor the chargesheet furnished the legal basis for

the Magistrate to take cognizance of

the offences alleged against the

appellants. The learned Judges were

pleased to hold that looking to the

allegations in the FIR and the

contents of the charge-sheet, none of

the alleged offences under Sections

498-A, 406 IPC and Section 4 of the

Dowry Prohibition Act were made

against the married sister of the

complainant's husband who was

undisputedly not living with the

family of the complainant's husband.

Their Lordships of the Supreme Court

SLP(Crl.) No. 2786 of 2019

were pleased to hold that the High

Court ought not to have relegated the

sister-in-law to the ordeal of trial.

Accordingly, the proceedings against

the appellants were quashed and the

appeal was allowed.

25. However, we deem it appropriate to

add by way of caution that we may not

be misunderstood so as to infer that

even if there are allegations of overt

act indicating the complicity of the

members of the family named in the FIR

in a given case, cognizance would be

unjustified but what we wish to

emphasise by highlighting is that, if

the FIR as it stands does not disclose

specific allegation against the

accused more so against the co-accused

specially in a matter arising out of

matrimonial bickering, it would be

clear abuse of the legal and judicial

process to mechanically send the named

accused in the FIR to undergo the

trial unless of course the FIR

discloses specific allegations which

would persuade the court to take

cognizance of the offence alleged

against the relatives of the main

accused who are prima facie not found

to have indulged in physical and

mental torture of the complainant

wife. It is the well-settled principle

laid down in cases too numerous to

mention, that if the FIR did not

disclose the commission of an offence,

the court would be justified in

quashing the proceedings preventing

the abuse of process of law.

Simultaneously, the courts are

expected to adopt a cautious approach

in matters of quashing, especially in

cases of matrimonial disputes whether

the FIR in fact discloses commission

of an offence by the relatives of the

principal accused or the FIR prima

SLP(Crl.) No. 2786 of 2019

facie discloses a case of

overimplication by involving the

entire family of the accused at the

instance of the complainant, who is

out to settle her scores arising out

of the teething problem or skirmish of

domestic bickering while settling down

in her new matrimonial surrounding.”

12. From a perusal of the complaint filed by the 2nd

respondent and the final report filed by the police

under Section 173(2) of Cr.P.C., We are of the view

that the aforesaid judgment fully supports the case

of the appellants. Even in the counter affidavits

filed on behalf of respondent nos.1 and 2, it is not

disputed that the 1st appellant was working in ICICI

Bank at Khalilabad branch, but merely stated that

there was a possibility to reach Gorakhpur by 8 p.m.

Though there is an allegation of causing injuries,

there are no other external injuries noticed in the

postmortem certificate, except the single ante-mortem

injury i.e. ligature mark around the neck, and the

cause of death is shown as asphyxia. Having regard to

the case of the appellants and the material placed on

record, we are of the considered view that except

vague and bald allegations against the appellants,

there are no specific allegations disclosing the

involvement of the appellants to prosecute them for

SLP(Crl.) No. 2786 of 2019

the offences alleged. In view of the judgment of this

Court in the case of Geeta Mehrotra and Anr.1, which

squarely applies to the case of the appellants, we

are of the view that it is a fit case to quash the

proceedings.

13. For the aforesaid reasons, this appeal is allowed

and the impugned order dated 10.12.2018 passed in

Application No.44475 of 2018 by the High Court, is

set aside. Consequently, the chargesheet no.01 dated

12.10.2018 filed in FIR No.136 of 2018 on the file of

PS-Kotwali, District Gorakhpur for the offences under

Sections 498-A, 323, 504, 506, 304-B of IPC and

Sections 3 & 4 of the D.P. Act and the consequential

order dated 22.10.2018, passed by the Chief Judicial

Magistrate, Gorakhpur, is hereby quashed.

………………………………………………J

[R. Subhash Reddy]

………………………………………………J

[Hrishikesh Roy]

New Delhi.

December 14, 2021

“65. Levy of market fees:= We also endorse the view in the aforesaid judgments but in the case on hand respondent is a buyer as defined under sub-section (2) of Section 65 of the Act and we cannot ignore the second proviso 14 and Explanation to Section 65(2) of the Act. It is not a case where the respondent is denying sale of the imported agricultural produce within the market area of the appellant after processing. In that view of the matter it is not entitled for exemption from payment of market fees.

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 7706 OF 2021

(Arising out of Special Leave Petition(C) No.18761 of 2013)

APMC Yashwanthapura

through its Secretary ...Appellant

vs.

M/s. Selva Foods

through its Managing Partner ...Respondent

J U D G M E N T

R. SUBHASH REDDY, J.

1. Leave granted.

2. This appeal is filed aggrieved by the judgment

and order dated 11.01.2013 passed in Writ Appeal

No.18000 of 2011, dismissing the intra-court appeal

filed by the appellant herein by confirming the order

of the learned Single Judge allowing the Writ

Petition in W.P. No.11816 of 2009 on 22.08.2011,

filed by the respondent herein.

3. The respondent herein is a trader engaged in the

business of selling cleaned and processed spices in

the name and style of M/s. Selva Foods within the

market area of the appellant. They buy spices like

turmeric, chilli, coriander, methi and mustard seeds

etc., from the market areas of various Agricultural

Market Committees within the State of Karnataka and

they also import such spices from outside the State.

After importing such agricultural produce, they

undertake cleaning and processing of the spices and

sell the processed items within the market area of

the appellant.

4. During the year 2008, authorities of the Market

Committee have inspected the records of the

respondent and found that respondent had purchased

methi and mustard seeds from outside the State of

Karnataka and after importing they sold the processed

goods within the market area of the appellant and has

not paid the market fee. When At first instance,

order dated 12.08.2008 was passed by the appellantAPMC cancelling the licence of the respondent on the

ground that the market fee of Rs.28,422/- and the

penalty amount was not paid. When such order was

questioned in Writ Petition No.11211 of 2008 the High

Court has allowed the writ petition on the ground

that the respondent was not given proper opportunity

and remitted the matter back for fresh consideration,

to the appellant. Further it was observed, the amount

of Rs.28422/- which was paid pursuant to interim

order would be subject to decision of the authority.

5. Subsequently after giving opportunity, order

dated 24.03.2009 was passed confirming the earlier

demand and directed the payment of Rs.85,266/- which

was payable out of the total demand of Rs.1,13,688/-.

Questioning such demand again writ petition was filed

in the High Court in W.P. No.11816 of 2009 which is

allowed by the learned Single Judge of the High court

as against which the appellant Market Committee has

preferred intra-court appeal in Writ Appeal No.18000

of 2011 which is dismissed by the impugned judgment

and order dated 11.01.2013. As against the same this

appeal is preferred.

6. We have heard Dr. Nanda Kishore, learned counsel

for the appellant and Mr. Haris Beeran, learned

counsel for the respondent.

7. Having heard the learned counsel for the

parties, we have perused the impugned judgment and

other material placed on record. Before we deal with

the rival contentions of both sides, we deem it

appropriate to refer to the relevant provisions of

the Karnataka Agricultural Produce Marketing

(Regulation and Development) Act of 1966. Section 65

of the Act reads as under:

“65. Levy of market fees:-

(2) The market committee shall levy

and collect market fees from every

buyer in respect of agricultural

produce bought by such buyer in the

market area, at such rate as may be

specified in the bye-laws which shall

not be more than two rupees per one

hundred rupees of the value of such

produce bought except in case of

livestock where the market fee shall

not be more than five rupees per head

of cattle other than sheep or goat, and

in the case of sheep or goat such fee

shall not be more than one rupee per

head in such manner and at such times

as may be specified in the bye-laws:

Provided that in the case of any cooperative society doing business in

agricultural produce within a market

yard, market fee shall be levied and

collected at the rate of eighty per

cent of the market fee payable under

this Act:

Provided further that, if on any

agricultural produce market fee has

already been levied and collected under

sub-section (2) in any market area

within the State and such agricultural

produce is processed and sold in any

other market area within the State or

exported outside the State it shall be

exempted from the levy of market fee:

Explanation. – Nothing in this proviso

shall apply to –

(i) any processed agricultural produce

imported from outside the State and

sold in any market area within the

State; or

(ii) any agricultural produce imported

or caused to be imported by any person

either on his own account or as an

agent for another person, from outside

the State into any market area within

the State for the purpose of processing

or manufacturing except for one’s own

domestic consumption.

Provided also that in case of a buyer

in a spot exchange established by a

licensee or a licensee for direct

purchase of notified agricultural

produce or a contract farming sponsor

buying from a contract farming

producer, market fee shall be levied

and collected at the rate of seventy

per cent of the market fee payable

under this Act:

Provided also that in case of any

private markets established under

Section 72-A of the Act, market fee

shall be levied and collected at the

rate of thirty three percent of market

fee payable under this Act, provided

that no market fee is leviable on

flowers, fruits and vegetables.

Instead the Market committee may

collect user charges in respect of the

above articles, user charges for such

services provided by the Market

Committee from the buyer of the produce

at such rates as may be specified in

the bye-laws as approved by the

Director of Agricultural Marketing.

(2-A) The market fee payable under

this section shall be realised as

follows namely.-

(i) if the produce is sold through a

commission agent, the commission agent

shall realise the market fee from the

purchaser and shall be liable to pay

the same to the committee;

(ia) if the produce is sold by an

importer to the purchaser, the importer

shall realise the market fee from the

purchaser and shall be liable to pay

the same to the committee;

(ii) if the produce is purchased

directly by a trader from a producer

the trader shall be liable to pay the

market fee to the committee;

(iii) if the produce is purchased by a

trader from another trader, the trader

selling the produce shall realise it

from the purchaser and shall be liable

to pay the market fee to the committee;

and

(iv) in any other case of sale of such

produce, the purchaser shall be liable

to pay the market fee to the committee.

(2-B) The market fee payable under

clause (i), (ia), (ii) or (iii) of subsection (2-A) shall be paid to the

market committee within such time as

may be specified in the bye-laws.”

8. Dr. Nanda Kishore, learned counsel for the

appellant, has contended that as per sub-sections (2)

and (2-A) of Section 65 of the Act, market fee is

payable on the agricultural produce, which is

purchased from outside the State as an importer and

sell the processed goods within the area of the

Market Committee. It is submitted that agricultural

produce, which is subject matter of the petition is a

scheduled item, as such, after processing market fee

is leviable on such processed goods. It is submitted

that as per Section 65 of the Act the Market

Committee shall levy and collect market fee from

every buyer in respect of the agricultural produce

bought by such buyer in the market area at such rate

as may be specified in the bye-laws. It is submitted

that as per the second proviso to Section 65(2) of

the Act, if on agricultural produce, the market fee

has already been levied and collected under subsection (2) in any market area within the State and

such agricultural produce is processed and sold in

any other market area within the State or exported

outside the State, it is exempted from levy of the

market fee. However, in view of the explanation, it

is clear that any agricultural produce, imported or

caused to be imported by any person either on his own

account or as an agent for any other person from

outside the State into any market area within the

State for the purpose of processing or manufacturing,

except for one’s own domestic consumption, is liable

for market fee.

9. It is submitted that exemption under second

proviso to Section 65(2) of the Act, is not

applicable for the importers, on processed goods and

sales within the market area as per the explanation.

It is further submitted that in view of clause (ia)

of sub-section (2-A) of Section 65 of the Act, if the

produce is sold by an importer to the purchaser, the

importer shall realise the market fee from the

purchaser and shall be liable to pay the same to the

committee. It is submitted that the interpretation

of the relevant provisions by the learned Single

Judge, as confirmed by the Division Bench of the High

Court, is erroneous and runs contrary to the plain

reading of the Section 65 of the Act. The learned

counsel also placed reliance on the judgment of this

Court in the case of G. Giridhar Prabhu and others

v. Agricultural Produce Market Committee1.

10. On the other hand, the learned counsel appearing

for the respondent has strenuously contended that

since the respondent has purchased the agricultural

(2001) 3 SCC 405

produce from outside the State of Karnataka as and

when such produce is processed within the market area

of the appellant and sell, they are not liable to pay

market fee. By referring to amendments made to the

Act (by Act 22 of 2004), it is submitted that Section

65(2) of the Act is the charging Section and a

reading of the said provision makes it clear that

market fee can not be collected on the produce which

the respondent has purchased from outside the State

as an importer and processed within the area of the

appellant Market Committee. In support of his

contentions, the learned counsel has placed reliance

on the judgment in the case of Gujarat Ambuja

Exports Limited and Another v. State of Uttarakhand

and Others2 and also the judgment in the case of ITC

Ltd., v. State of Karnataka and Others3.

11. In this case, it is not in dispute that the

respondent is a trader as defined under provisions of

the Act and has purchased spices, which are notified

(2016) 3 SCC 601

2005 SCC OnLine Kar 86 : 2005 AIHC 2950

as agricultural produce, not only from market areas

within the State of Karnataka but also from outside

the State of Karnataka. After such imports, they

process the goods and sell the processed goods within

the market area. Even the processed goods are

notified items as per the schedule under the Act.

12. A reading of Section 65 of the Act, which is the

charging section, it is clear that, the Market

Committee shall levy and collect the market fees from

every buyer in respect of agricultural produce bought

by such buyer in the market area, at such rate as may

be specified in the bye-laws. As per the second

proviso to Section 65(2) of the Act, if on any

agricultural produce market fee has already been

levied and collected under sub-Section (2) in any

market area within the State and such agricultural

produce is processed and sold in any other market

area within the State or exported outside the State,

it shall be exempted from the levy of market fee.

However, a reading of the explanation, makes it

clear, the applicability of second proviso excluded

to any agricultural produce imported from outside the

State and processed and sold in any market area

within the State; or any other agricultural produce

imported or caused to be imported by any person

either on his own account or as an agent for another

person, from outside the State into any market area

within the State for the purpose of processing or

manufacturing except for one’s own domestic

consumption. Further, as per Section (2-A)(ia), if

the produce is sold by an importer to the purchaser,

the importer to realise the market fee from the

purchaser and shall be liable to pay the same to the

committee. A harmonious reading of the Section 65(2)

of the Act, its second proviso, and explanation to

the same and clause (2-A)(ia), makes it clear that if

any dealer imports agricultural produce from outside

the State into any market area within the State of

Karnataka for the purpose of processing and sale, the

applicability of second proviso to sub-section (2) of

Section 65 of the Act stands excluded. The

explanation to sub-section (2) of Section 65 of the

Act, makes it clear that even the processed items

from the agricultural produce imported from outside

the State of Karnataka, attract market fee on sales

within the market area of the appellant – Market

Committee. It is also clear from the aforesaid

Section, it is the obligation of the importer to

realise the market fee from the purchaser and pay the

same to the Market Committee.

13. In the case of G. Giridhar Prabhu & Ors.1 while

interpreting the provisions of Karnataka Agricultural

Produce Marketing Regulation Act, 1966 this Court has

held that a person purchasing the raw cashew nuts,

then extracting cashew kernels by means of

manufacturing process for the purpose of sale in

domestic and international market, is held to be a

trader within the meaning of sub-section (2) of

Section 48 or importer under Section 2(14-A) of the

Act, therefore, would be liable to collect the market

fee from his buyers and to pay such fees to the

Marketing Committee.

14. In the case of Gujarat Ambuja Exports Limited &

Anr.2 while considering the provisions of Uttarakhand

Agricultural Produce Marketing (Development and

Regulation) Act, this Court has held that

agricultural produce which is brought into market

area not for the purpose of sale, but only for the

purpose of manufacture or further processing

activities, cannot be subjected to market fees.

Similarly, in the case of ITC Ltd.3

, learned Single

Judge of the High Court of Karnataka has held that

mere activity of stocking and processing of even the

imported notified agricultural produces, which are

imported into the market area do not attract payment

of market fees.

15. We also endorse the view in the aforesaid

judgments but in the case on hand respondent is a

buyer as defined under sub-section (2) of Section 65

of the Act and we cannot ignore the second proviso

and Explanation to Section 65(2) of the Act. It is

not a case where the respondent is denying sale of

the imported agricultural produce within the market

area of the appellant after processing. In that view

of the matter it is not entitled for exemption from

payment of market fees. At the same time we make it

clear that if one merely imports notified

agricultural produce from outside the State for the

purpose of cleaning and processing without selling

the processed produce within the market area is not

liable to pay market fee. As much as in this case

without disputing the factum of sale within the

market area post the import, the respondent has

defended the proceedings only on the ground that once

the agricultural produce is processed it will not

attract market fee as such the same cannot be

accepted. It is the sale within the market area that

attracts levy of market fee, and not the first

purchase that was outside the market area. Notably

the goods sold are also notified agricultural produce

specified in the Schedule. Validity of the item

under the Schedule is not under challenge.

16. For the aforesaid reasons, the appeal is

allowed. The impugned judgment and order passed in

W.A. No.18000/2011 dated 11.01.2013 is set aside.

Consequently, the Writ Petition No.11816 of 2009

stands dismissed. No order as to costs.

.....................J.

[R. SUBHASH REDDY]

.....................J.

[SANJIV KHANNA]

New Delhi

December 14, 2021.

whether the limitation period under Section 13(2)3 of the Consumer Protection Act 1986 could not be extended beyond the statutorily prescribed period of forty-five days as held by New India 1 “NCDRC” 2 Assurance Company Limited v. Hilli Multipurpose Cold Storage Private Limited . = In the present case, before the decision of the Constitution Bench, the delay was condoned by the NCDRC by furnishing reasons for the exercise of such discretion. Having regard to the prospective effect of the judgment of the Constitution Bench in New India Assurance Company Limited (supra) and the orders of this Court in Reliance General Insurance Company Limited (supra) and Bhasin Infotech-2018 (supra), which had recognized an element of discretion pending the reference, we are of the considered view that no case for interference is made in the order of the NCDRC allowing the application for condonation of delay on merits.

Reportable

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

Civil Appeal No. 7546 of 2021

Diamond Exports & Anr. ....Appellants

Versus

United India Insurance Company Limited & Ors. .... Respondents

J U D G M E N T

Dr Dhananjaya Y Chandrachud, J

1 This appeal arises from a judgment dated 25 February 2020 of the National

Consumer Disputes Redressal Commission1

2 While entertaining IA Nos 15390 of 2019, 15391 of 2019 and 18307 of 2019

in Consumer Complaint No 2645 of 2018, the NCDRC has condoned the delay of

100 days in filing a written statement. The order of the NCDRC was a few days

before the judgment of a Constitution Bench dated 4 March 2020, in New India

1 “NCDRC”

Assurance Company Limited v. Hilli Multipurpose Cold Storage Private

Limited 2 which held that the limitation period under Section 13(2)3 of the Consumer

Protection Act 1986 could not be extended beyond the statutorily prescribed period

of forty-five days.

3 The appellants filed a consumer complaint before the NCDRC on 3 December

2018 based on two insurance policies. The claim is on the ground of an alleged fire

that took place at the factory of the appellant. On 6 December 2018, the NCDRC

passed the following order:

“Heard. Complaint is admitted, subject to just exceptions.

Issue notice to Opposite Parties under Section 13(2) of the

Consumer Protection Act, 1986 making it clear that if the

Opposite Parties wish to contest the allegations in the

Complaint, they may file the Written Statements within 30

days of the receipt of notice in the Complaint, failing which

their right to file Written Statement may be closed."

4 The respondent received the summons on 20 May 2019 together with the

order of the NCDRC and a complete set of papers consisting of the consumer

complaint and documents. The respondent filed its written statement on 23

2 (2020) 5 SCC 757 [“New India Assurance Company Limited”] 3 “13 (2) The District Forum shall, if the complaint 54[admitted] by it under Section 12 relates to goods in respect of

which the procedure specified in sub-section (1) cannot be followed, or if the complaint relates to any services,—

(a) refer a copy of such complaint to the opposite party directing him to give his version of the case within a period of

thirty days or such extended period not exceeding fifteen days as may be granted by the District Forum;

(b) where the opposite party, on receipt of a copy of the complaint, referred to him under clause (a) denies or

disputes the allegations contained in the complaint, or omits or fails to take any action to represent his case within the

time given by the District Forum, the District Forum shall proceed to settle the consumer dispute,—

(i) on the basis of evidence brought to its notice by the complainant and the opposite party, where the opposite party

denies or disputes the allegations contained in the complaint, or

(ii) ex parte on the basis of evidence brought to its notice by the complainant where the opposite party omits or fails to

take any action to represent his case within the time given by the Forum;

either dismiss the complaint for default or decide it on merits.”

September 2019 together with IA No 15390 of 2019 for condonation of a delay of

100 days. The appellant filed IA No 15391 of 2019 for the dismissal of the complaint.

5 On 26 September 2019, the NCDRC permitted the appellants to file their reply

to the respondent’s application for condoning the delay. The appellants contested

the respondent’s application for condonation of delay. The NCDRC, by its order

dated 25 February 2020, condoned the delay subject to the respondent paying costs

of Rs 50,000.

6 Mr Salil Paul, learned counsel appearing on behalf of the appellant, has

submitted that given the judgment of the Constitution Bench in New India

Assurance Company Limited (supra), a delay in excess of the period which is

stipulated in Section 13(1)(a) read with Section 13(2)(a) of the Consumer Protection

Act 1986, i.e. thirty days extendable by fifteen days, could not have been condoned.

The provisions of Section 13 are made applicable to proceedings before the NCDRC

by Section 22.

7 On the other hand, it has been urged on behalf of the respondent that (i) the

decision in New India Assurance Company Limited (supra) has been given

prospective effect; (ii) before the decision in New India Assurance Company

Limited (supra) and during the pendency of the reference to the Constitution Bench,

a two-judge bench of this Court in Reliance General Insurance Company Limited

v. Mampee Timbers and Hardwares Private Limited4 held the field in pursuance

4 (2021) 3 SCC 673 [“Reliance General Insurance Company Limited”]

of which the consumer fora were permitted to accept written statements filed beyond

the stipulated time of 45 days in an appropriate case on suitable terms; and (iii) in

the present case, the NCDRC has exercised its discretion while condoning the

delay, prior to the decision of the Constitution Bench; (iv) hence, the order would not

merit interference in appeal. More so because the NCDRC noted that the delay was

occasioned due to the respondent filing a criminal case alleging fraud and forgery

against the second surveyor.

8 The judgment of the Constitution Bench in New India Assurance Company

Limited (supra) has held that the outer limit of time for filing a written statement in

Section 13 of the Consumer Protection Act 1986 is binding. The conclusion in the

decision of the Constitution Bench is extracted below:

“62. To conclude, we hold that our answer to the first

question is that the District Forum has no power to extend the

time for filing the response to the complaint beyond the period

of 15 days in addition to 30 days as is envisaged under

Section 13 of the Consumer Protection Act; and the answer to

the second question is that the commencing point of limitation

of 30 days under Section 13 of the Consumer Protection Act

would be from the date of receipt of the notice accompanied

with the complaint by the opposite party, and not mere receipt

of the notice of the complaint.

63. This judgment to operate prospectively. The referred

questions are answered accordingly.”

Significantly, in paragraph 63, it has been clarified by the Constitution Bench that the

judgment would operate prospectively.

9 Prior to the judgment of the Constitution Bench in New India Assurance

Company Limited (supra), there was a judgment of a three-judge Bench of this

Court in Dr J J Merchant v. Shrinath Chaturvedi5 which held that to ensure a

speedy trial, the legislative mandate of not granting more than forty-five days to

submit the written statement requires adherence, failing which the purpose of the

statute would not be fulfilled. Several conflicting decisions of this Court6 led to a

reference to the Constitution Bench. Eventually, as noted above, the Constitution

Bench in New India Assurance Company Limited (supra) held that the District

Forum has no power to condone a delay beyond a discretionary period of fifteen

days, in addition to thirty days as envisaged in Section 13 of the Consumer

Protection Act 1986. However, given the conflicting decisions which previously held

the field, the judgment has been made prospective.

10 The issue in the present appeal pertains to a situation where prior to the

decision of the Constitution Bench, the NCDRC had condoned a delay for a period

beyond the prescribed statutory outer limit. In the present case, the NCDRC had

exercised its discretion on 25 February 2020 to condone the delay prior to the

decision of the Constitution Bench on 4 March 2020. In Reliance General

Insurance Company Limited (supra), a two-Judge Bench of this Court had, on 10

February 2017, issued directions to the consumer fora as regards applications for

5 (2002) 6 SCC 635 [“Dr. J J Merchant”] 6 Topline Shoes Ltd. v. Corporation Bank, (2002) 6 SCC 33; Kailash v. Nanhku, (2005) 4 SCC 480; Salem Advocate

Bar Assn. (2) v. Union of India, (2005) 6 SCC 344; J.J. Merchant v. Shrinath Chaturvedi, (2002) 6 SCC 635; New

India Assurance Co. Ltd. v. Hilli Multipurpose Cold Storage (P) Ltd., (2015) 16 SCC 20.

condonation during the pendency of the reference to the Constitution Bench. The

Court observed thus:

“5. We consider it appropriate to direct that pending decision

of the larger Bench, it will be open to the Fora concerned to

accept the written statement filed beyond the stipulated time

of 45 days in an appropriate case, on suitable terms,

including the payment of costs, and to proceed with the

matter.”

Similarly, during the pendency of the reference to the Constitution Bench, on 11

February 2016, a two-judge Bench of this Court in Bhasin Infotech and

Infrastructure Private Limited v. Grand Venezia Buyers Association 7 had

permitted parties to file written statements beyond the prescribed limitation period,

subject to payment of appropriate costs:

“4. Stay of the proceedings before the National Commission

would in our opinion not only result in procrastination but also

cause prejudice to the complainant. The proper course in our

opinion is to permit the appellant Company to file its

response, which was delayed by just about one day. We

accordingly permit the appellant to file its reply before the

National Commission within two weeks from today subject to

payment of Rs 50,000 as costs to be paid to the opposite

party. The Commission can upon deposit of costs proceed

with the trial of the complainant on merits after receiving the

reply filed by the respondent. The pendency of present

proceedings shall not be an impediment for the Commission

to do so. This however is subject to the condition that the

respondent complainant is ready and willing to take the

proceedings forward on the conditions aforementioned. In

case the respondent complainants have any objection to the

continuance of the proceedings before the Commission they

shall be free to seek stay of such proceedings pending

7 (2018) 17 SCC 255 [“Bhasin Infotech-2018”]

disposal of these appeals in which event the proceedings

shall remain stayed till disposal of the present appeals.”

11 Subsequently, there was another judgment of a two-judge Bench of this Court

in Daddy’s Builders Private Limited v. Manisha Bhargava8

. The decision was

rendered on 11 February 2021 after the judgment of the Constitution Bench in New

India Assurance Company Limited (supra). That was a case where the NCDRC in

a judgment dated 4 September 2020, had confirmed the order of the Karnataka

State Consumer Disputes Redressal Commission dated 26 September 2018

rejecting an application seeking condonation of delay in filing the written statement.

The decision of the two-judge Bench in Reliance General Insurance Company

Limited (supra) was cited before the Court. Referring to the said decision, this Court

observed that in the order dated 10 February 2017 pronounced in Reliance General

Insurance Company Limited (supra), it was specifically stated that it would be

open to the fora concerned to accept written statements filed beyond the stipulated

period of 45 days in an appropriate case on suitable terms including the payment of

costs. Referring to the above order, this Court in Daddy’s Builders (supra)

observed that ultimately it was left to the concerned fora to accept written

statements beyond the stipulated period of 45 days in an appropriate case. The

Court held that the NCDRC had found no reason to condone the delay on its merits:

“6. Now so far as the reliance placed upon the order passed

by this Court dated 10-2-2017 in Reliance General Insurance

Co. Ltd. [Reliance General Insurance Co. Ltd.v. Mampee

8 (2021) 3 SCC 669 [“Daddy’s Builders”]

Timbers & Hardwares (P) Ltd., (2021) 3 SCC 673] is

concerned, the same has been dealt with in detail by the

National Commission by the impugned order [Daddy's

Builders (P) Ltd. v. Manisha Bhargava, 2020 SCC OnLine

NCDRC 697] while deciding the first appeal. As rightly

observed by the National Commission, there was no mandate

that in all the cases where the written statement was

submitted beyond the stipulated period of 45 days, the delay

must be condoned and the written statement must be taken

on record. In order dated 10-2-2017 [Reliance General

Insurance Co. Ltd. v. Mampee Timbers & Hardwares (P) Ltd.,

(2021) 3 SCC 673] , it is specifically mentioned that it will be

open to the Fora concerned to accept the written statement

filed beyond the stipulated period of 45 days in an appropriate

case, on suitable terms, including the payment of costs and to

proceed with the matter. Therefore, ultimately, it was left to

the Fora concerned to accept the written statement beyond

the stipulated period of 45 days in an appropriate case.”

The Court also referred to the decision of the Constitution Bench in the following

terms:

“7. As observed by the National Commission that despite

sufficient time granted the written statement was not filed

within the prescribed period of limitation. Therefore, the

National Commission has considered the aspect of

condonation of delay on merits also. In any case, in view of

the earlier decision of this Court in J.J. Merchant [J.J.

Merchant v. Shrinath Chaturvedi, (2002) 6 SCC 635] and the

subsequent authoritative decision of the Constitution Bench of

this Court in New India Assurance Co. Ltd. v. Hilli

Multipurpose Cold Storage (P) Ltd. [New India Assurance Co.

Ltd. v. Hilli Multipurpose Cold Storage (P) Ltd., (2020) 5 SCC

757 : (2020) 3 SCC (Civ) 338] , Consumer Fora have no

jurisdiction and/or power to accept the written statement

beyond the period of 45 days, we see no reason to interfere

with the impugned order [Daddy's Builders (P) Ltd. v. Manisha

Bhargava, 2020 SCC OnLine NCDRC 697] passed by the

learned National Commission.”

12 A few months after the decision in Daddy’s Builders (supra), on 8 July 2021,

a two-judge Bench of this Court in Dr A Suresh Kumar v. Amit Agarwal 9

considered a factual situation where the NCDRC summarily dismissed an

application for condonation of delay filed before the decision of the Constitution

Bench in New India Assurance Company Limited (supra). The Court in Dr A

Suresh Kumar (supra) held that since the decision of the Constitution Bench was to

operate with prospective effect, applications for condonation of delay filed before 4

March 2020 ought to be considered on merits:

“2. In our view, since the application for condonation of delay

was filed prior to the judgment of the Constitution Bench,

which was delivered on 4-3-2020 [New India Assurance Co.

Ltd. v. Hilli Multipurpose Cold Storage (P) Ltd., (2020) 5 SCC

757 : (2020) 3 SCC (Civ) 338] , the said application for

condonation of delay ought to have been considered on

merits and should not have been dismissed on the basis of

the Constitution Bench judgment in New India Assurance Co.

Ltd. [New India Assurance Co. Ltd. v. Hilli Multipurpose Cold

Storage (P) Ltd., (2020) 5 SCC 757 : (2020) 3 SCC (Civ) 338]

because the said judgment was to operate prospectively and

the written statement as well as the application for

condonation of delay had been filed much prior to the said

judgment. Accordingly, the impugned order [Amit Agrawal v.

A. Suresh Kumar, 2020 SCC OnLine NCDRC 927] of Ncdrc

deserves to be, and is, hereby set aside.”

The decision in Dr A Suresh Kumar (supra) did not notice the observation of a prior

bench of co-equal strength in Daddy’s Builders (supra).

13 The divergence between the positions in Dr A Suresh Kumar (supra) and

Daddy’s Builders (supra) in interpreting the prospective effect of the decision of the

9 (2021) 7 SCC 466 [“Dr. A Suresh Kumar”]

Constitution Bench in New India Assurance Company Limited (supra) was

recently noticed on 6 December 2021 by a two-judge Bench of this Court in Bhasin

Infotech and Infrastructure Private Ltd. v. Neema Agarwal and Others10. The

Court was considering a consumer complaint and an application for condonation of

delay which were filed before 4 March 2020 but decided after the decision of the

Constitution Bench. The Court noted the conflicting positions in the following terms:

“9. Two contrary views have emerged as regards what would

be meant by the phrase….. “This judgment to operate

prospectively” mandated in the Constitution Bench judgment.

In the case of Daddy's Builders Private Limited (supra), the

application for condonation of delay had been rejected by the

State Commission prior to the Constitution Bench opinion on

the aspect of power and jurisdiction of the consumer fora to

condone delay beyond the stipulated 45 days in filing written

submission/reply. The appeal against that decision was

rejected by the NCDRC on 4th September, 2020, following

the Constitution Bench decision. On prospective operation of

the Constitution Bench Judgment, opinion of the Coordinate

Bench in the case of Daddy's Builders Private Limited (supra)

was that the prospective operation of the judgment would

apply only in cases where delay stood condoned on a date

prior to 4th March, 2020. In expressing this view, the

Coordinate Bench noted that one of the members of the

Bench was also a party to the said Constitution Bench

decision. The position, as regards composition of the Bench

is similar in the case of Dr. A. Suresh Kumar (supra) and in

that judgment, a more liberal approach has been adopted.

The prospectivity of the Constitution Bench decision has been

held to cover cases where an application for condonation of

delay was filed prior to the judgment of the Constitution

Bench, but whose outcome was yet to be determined at the

time the Constitution Bench judgment was delivered.”

10 2021 SCCOnLine SC 1186 [“Bhasin Infotech-2021”]

The two-judge Bench in Bhasin Infotech-2021 (supra) followed the line of

precedent in Dr A Suresh Kumar (supra) and noted that the prospective effect of

the Constitution Bench would preserve the benefit of the position laid down in

Reliance General Insurance Company (supra) concerning applications for

condonation that had been pending or decided as of 4 March 2020:

“10. In our view, the prospective operation of the Judgment in

the case of New India Assurance Company Limited (supra)

ought to cover both sets of the cases in which delay in filing

written reply stood condoned after accepting the application

for condonation of delay in filing written statement/reply as

well as the cases where the decision on condonation of delay

in filing written replies were pending on 4th March, 2020.

Once an application is filed for condonation of delay, there

may be cases where such applications are decided upon on

dates earlier than applications already filed but yet to be

determined. We do not have any laid down administrative

mechanism to decide in what manner applications of this

nature would be decided and the consumer fora or the Courts

apply their own discretion on the basis of various relevant

factors involved in individual cases, to prioritise their hearing.

In our opinion, it would be artificial distinction to distinguish

between applications for condonation of delay already

decided before 4th March, 2020 and the applications for

condonation of delay pending on that date. So far as persons

with pending applications for condonation of delay in filing

written replies are concerned, their right to have their

applications for condonation of delay in filing written replies to

be considered, would stand crystallised on 4th March, 2020.

Such right has also been recognised in the case of Reliance

General Insurance Company Limited (supra). Such right

could be extinguished only by specific legal provisions. In the

event the Constitution Bench judgment had altogether

negated the right to have delay in filing written statement

condoned beyond the period of 45 days, the right of such

applicants could stand extinguished. But as the judgment of

the Constitution Bench is to operate prospectively, in our

understanding of the said judgment, those with pending

applications for condonation of delay would retain their right

to have their applications considered. But we refrain from

expressing any definitive opinion on this point as the two

Benches of equal strength have taken differing views on the

manner in which the prospective application of the

Constitution Bench judgment would be affected. In our

opinion, this issue ought to be decided by a larger Bench.”

However, in view of the conflicting position in Daddy’s Builders (supra), the twojudge Bench in Bhasin Infotech-2021 (supra) sought the reference of the matter to

a larger bench.

14 To recapitulate, in Daddy’s Builders (supra), this Court refused to interfere in

a decision of the NCDRC which had affirmed the judgment of the SCDRC rejecting

the application for condonation. The application for condonation had not been

entertained on merits. However, there are observations in Daddy’s Builders

(supra), based on the decision of the Constitution Bench, which state that a delay

beyond the outer limit prescribed by Section 13 could not have been condoned.

While this is the position which emerges from the decision of the Constitution Bench,

the decision has been made prospective. In Daddy’s Builders (supra) the

application for condonation had been filed before the decision of the Constitution

Bench and had been rejected on merits. Strictly speaking, the observations in

Daddy’s Builders (supra) were not necessary for its decision since, even on merits,

no case for condonation had been found by the NCDRC in that case. As noted

above, this Court in Daddy’s Builders (supra) after noticing the decision in

Reliance General Insurance Company (supra) held that it left the discretion to be

exercised by the fora during the pendency of the reference to the Constitution Bench

and in that case, the NCDRC found no reason to condone the delay. The

subsequent observation of this Court in Daddy’s Builders (supra) which implies that

the principle laid down by the Constitution Bench will even apply to applications for

condonation filed prior to the decision of the Constitution Bench were unnecessary

(once it had been held that even on merits there was no case for condonation).

Moreover, those observations are with respect not consistent with the legal position

that the Constitution Bench gave prospective effect to its decision.

15 The discretion for condonation of delay under Section 13 of the Consumer

Protection Act 1986 is specifically circumscribed by the statute. Similar statutory

provisions exist in the Arbitration and Conciliation Act 2015 and the Insolvency and

Bankruptcy Code 2016 though in a different statutory context – facilitating the

sanctity of the arbitral process in the former and the legislative intent of ensuring

timely disposal and corporate rehabilitation in the latter. The Consumer protection

Act 1986 and its successor are social welfare legislations designed to protect the

interests of consumers. The Constitution Bench had thus noted:

“28. It is true that “justice hurried is justice buried”. But in the

same breath it is also said that “justice delayed is justice

denied”. The legislature has chosen the latter, and for a good

reason. It goes with the objective sought to be achieved by

the Consumer Protection Act, which is to provide speedy

justice to the consumer. It is not that sufficient time to file a

response to the complaint has been denied to the opposite

party. It is just that discretion of extension of time beyond 15

days (after the 30 days' period) has been curtailed and

consequences for the same have been provided under

Section 13(2)(b)(ii) of the Consumer Protection Act. It may be

that in some cases the opposite party could face hardship

because of such provision, yet for achieving the object of the

Act, which is speedy and simple redressal of consumer

disputes, hardship which may be caused to a party has to be

ignored.”

This was owing to the social welfare intention of the consumer protection legislation,

which essentially seeks to protect the rights of consumers who avail of myriad goods

and services. The welfare of litigating consumers has been the guiding principle for

interpreting several procedural and substantive questions arising out of the

Consumer Protection Act 1986. Recently, a two-judge Bench considered the effect

of the Consumer Protection Act 2019 which amended the pecuniary jurisdiction of

consumer fora, on pending proceedings. In arriving at its decision, the Court noted:

“82. It would be difficult to attribute to Parliament, whose

purpose in enacting the Act of 2019 was to protect and

support consumers with an intent that would lead to financial

hardship, uncertainty and expense in the conduct of

consumer litigation….”

A similar principle is inherent in the decision of the Constitution Bench in New India

Assurance Company Ltd. (supra). However, given the conflicting decisions

concerning the nature of such discretion, the Constitution Bench considered it

appropriate to give prospective effect to the decision. It did not make a distinction

between applications for condonation which had been decided and those which

were pending on the date of the decision. Thus, the decision in Daddy’s Builders

(supra) would not affect applications that were pending or decided before 4 March

2020. Such applications for condonation would be entitled to the benefit of the

position in Reliance General Insurance Company Limited (supra) which directed

consumer fora to render a decision on merits. We have expounded on the above

principles in order to adopt a bright-line standard which obviates uncertainty on the

legal position before the consumer fora and obviates further litigation.

16 In the present case, before the decision of the Constitution Bench, the delay

was condoned by the NCDRC by furnishing reasons for the exercise of such

discretion. Having regard to the prospective effect of the judgment of the

Constitution Bench in New India Assurance Company Limited (supra) and the

orders of this Court in Reliance General Insurance Company Limited (supra) and

Bhasin Infotech-2018 (supra), which had recognized an element of discretion

pending the reference, we are of the considered view that no case for interference is

made in the order of the NCDRC allowing the application for condonation of delay

on merits.

17 Learned counsel for the appellant states that the payment of costs of Rs

50,000 could not be effected because of the lockdown, but a demand draft is ready.

The amount shall be transmitted into the account stipulated by the NCDRC within

two weeks.

18 Liberty is granted to the appellants to file their replication within a period of

four weeks.

19 The appeal is accordingly disposed of.

20 Pending applications, if any, stand disposed of.

…….…………………………...............................J.

[Dr Dhananjaya Y Chandrachud]

…….…………………………...............................J.

[Surya Kant]

…….…………………………...............................J.

[Vikram Nath]

New Delhi;

December 14, 2021

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