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G.S. Sistani, J.—Two Petitions have been filed u/s 482 of the Code of Criminal Procedure, 1973 (hereinafter referred to as, "Cr.P.C") for quashing of the Criminal Complaint Nos. 837/06 & 838/06 u/s 138 read with section 141 of the Negotiable Instruments Act, 1881 pending in the Court of Metropolitan Magistrate in case entitled as, "STC of India vs. Bishanswarup Ram Krishan Agro Pvt. Ltd. and Ors." and for setting aside the summoning order dated 09.06.2006, passed by learned Metropolitan Magistrate against the petitioners. Both these petitions raise identical question of law and arise out of one transaction of Rs. 150.0 crores and have been heard together. Learned counsel for the parties agree that both these petitions be disposed of by a common order.
Facts necessary for the disposal of the petition are noticed as under. An E-auction was floated by M/s MSTC Ltd., Bangalore, offering sale of the Fertilizer Plant and Machinery of M/s Neyvli Lignite Corporation Ltd. (hereinafter referred to as "NLC"). In the E-auction, M/s MMT Machinery Traders (herein after referred to as "MMT") was accepted as the highest bidder. In order to execute the contract, MMT proposed to enter into an agreement with M/s State Trading Corporation of India Ltd. (hereinafter referred to as "STC"), the respondent herein (complainant before the Trial Court) for disposing of/marketing the entire ferrous and non-ferrous scrap of the above referred plant and machinery of NLC. Accordingly, an agreement was arrived at between MMT and the respondent and the said agreement was styled as "MOU" signed on 28th April, 2005, along with other agreements, so as to enable MMT to purchase the said fertilizer, plant and machinery of NLC.
Learned senior counsel for the petitioners submits that as per the complaint of the respondent, in pursuance of the alleged financial agreements entered into between MMT and STC, the former was to provide two corporate guarantees for the refund of Rs. 150 crores (total) claimed by the respondent. In these circumstances, M/s Bishan Swarup Ram Kishan Agro Pvt. Ltd. through its Chairman-cum-Managing Director and Director Sh. Ram Kishan and Gyanchand, executed a guarantee in favour of the respondent for reimbursing the respondent in case of failure of clearance of dues on account of the financial arrangement entered upon between MMT and the respondent. The said guarantees are stated to have been secured by a post dated cheque bearing No. 472815 for Rs. 75 crores as per CRL. M.C. 3940/2007; and cheque bearing No. 310910 for Rs. 75 crores, dated 30.01.2006 as per CRL. M.C. No. 2/2008, and referred to in the Deed of Corporate Guarantee dated 28th April, 2005.
The main thrust of arguments of learned senior counsel for the petitioners is that the complaint filed by the respondent before the trial court is not maintainable as the cheques in question were issued only as a security and not for any debt due.
It is submitted by learned senior counsel for the petitioners that as referred to in the Deed of Corporate Guarantee itself, the cheque of Rs. 75 crores each was issued in lieu of a liability, which may arise in future, and also to indemnify STC against all losses, damages, costs and claims which STC may suffer on account of any default on the part of MMT, arising out of or in connection with the agreement dated 28th/29th April, 2005. In support of his plea, learned counsel for the petitioner has drawn the attention of this court to the complaint and other relevant documents filed along with the complaint by the respondent before the trial court.
Learned senior counsel for the petitioner in support of his argument that if a cheque is issued as a security or any such other purpose, the same would not come within the purview of Section 138, has placed reliance upon the case of M.S. Narayana Menon @ Mani Vs. State of Kerala and Another, . The relevant para 52 is reproduced below:
We, in the facts and circumstances of this case, need not go into the question as to whether even if the prosecution fails to prove that a large portion of the amount claimed to be a part of the debt was not owing and due to the complainant by the accused and only because he has issued a cheque for a higher amount, he would be convicted if it is held that existence of debt in respect of large part of the said amount has not been proved. The appellant clearly said that nothing is due and the cheque was issued by way of security. The said defence has been accepted as probable. If the defence is acceptable as probable the cheque therefore cannot be held to have been issued in discharge of the debt as, for example, if a cheque is issued for security or for any other purpose the same would not come within the purview of section 138 of the Act.
Counsel for the petitioners has also relied upon a judgment of the Single Judge of this court in Criminal Misc. No. 3011/04, M/s Collage Culture & Ors. vs. Apparel Export Promotion Council & Anr.
The present petition is opposed by the learned senior counsel appearing for the respondent primarily on the ground that this is not a fit case for the court to exercise its extra ordinary jurisdiction vested u/s 482 of Cr. P.C. He submits that the complaint ordinarily cannot be quashed or interfered with at the threshold and a criminal trial should not be nipped in the bid as the merits and demerits of the case can only be crystallized when the evidence is recorded and witnesses are examined and cross-examined, after hearing the arguments. He submits that by interfering at this stage, this court would in fact be conducting a pre trial before the actual trial and which cannot be permitted especially when the documents are yet to be proved. It is next contended by the learned senior counsel that there is no infirmity in the summoning order dated 09.06.2006, and at the stage of summoning, the Magistrate is only entitled to read the complaint as a whole and the defence of the accused cannot to considered in a detailed manner.
Learned senior counsel for the respondent further relies upon section 118 read with section 139 of the NI Act, in support of his plea that unless the contrary is proved, there is a presumption that the holder of a cheque received the cheque of the nature referred to in section 138 for the discharge, in whole or in part, or any debt or other liability. Learned senior counsel also submits that all the basic ingredients of section 138 of NI Act are readily fulfilled and point out against the petitioners and once the ingredients have been made, this court cannot, at this stage, entertain the present petition. Learned counsel has strongly urged before this court that there is no evidence before the Magistrate to come to the conclusion that the cheque was issued only as a security. And in fact, one of the partners of the petitioner in a proceeding before an Arbitrator has raised a dispute with respect to the correctness of the documents.
Learned senior counsel for the respondent has relied upon the case of State of Bihar and Another Vs. P.P. Sharma, IAS and Another, , wherein it was held that :
The annexure'' to the writ petition challenging criminal proceedings against accused were neither part of the police-reports nor were relied upon by the investigating officer. These documents were produced by the accused before the High Court along with the writ petitioners. By treating ''the annexure'' and affidavits as evidence and by converting itself into a trial Court the evidence and by converting itself into a trial Court the High Court cannot declare the accused to be innocent and quashed the proceedings. The appreciation of evidence is the functions of the Criminal Courts. The High Court, under the circumstances, could not have assumed jurisdiction and put an end to the process of investigation and trial provided under the law.
It would thus be appropriate to reproduce the relevant portion of the complaint, MOU and the notice issued by respondent to the petitioner herein u/s 138 of the Negotiable Instruments Act. Some of the relevant paragraphs of the complaint, reads as under:
6 That it was agreed by M/s Metro Machinery Traders that they would furnish two corporate guarantees for the complainant''s funding of Rs. 150 crore (Rupees One hundred fifty Crore.) The accused No. 1 M/s Bishan Saroop Ram Kishan Agro Pvt. Ltd. stood as one of the Corporate Guarantors on behalf of the said M/s Metro Machinery Traders for a sum of Rs. 75 crore. The accused No. 2 Shri Ram Kishan is the Chairman-cum-Managing Director of M/s Bishan Saroop Ram Kishan Agro Pvt. Ltd. All the other directors of Bishan Saroop Ram Kishan Agro Ltd. are/were as the material time, in-charge of the business of the said company M/s Bishan Saroop Ram Kishan Agro Pvt. Ltd. The said Directors of M/s. Bishan Saroop Ram Kishan Agro Pvt. Ltd. under the Chairmanship of the accused No. 2 passed a resolution as Board Members authorizing the Chairman cum Managing Director, the accused No. 2 to execute a Deed of Corporate Guarantee on behalf of M/s Bishan Saroop Ram Kishan Agro Pvt. Ltd. in favour of the State Trading Corporation of India Ltd. to the effect "to reimburse all outstanding amounts, losses and expenses, if any which are due to STC arising out of or in connection with M/s Metro Machinery Traders, (hereinafter referred to as the MMT) ''s failure to perform its obligations under the MOU dated 28/29.04.2005 and sale agreement dated 29.04.2005. The liability of the guarantor shall not exceed Rs. 75 Crores. This guarantee was secured by a post dated Cheque bearing No. 472815 of Rs. 75 Crores only drawn on State Bank of Mysore in favour of STC. The said accused No. 1 M/s Bishan Saroop Ram Kishan Agro Pvt. Ltd. as Corporate Guarantor, issued, signed the cheque for Rs. 75 crore on behalf of the Accused No. 1 Company by its Chairman cum Managing Director Mr. Ram Kishan. The said guarantee was executed as per Resolution of Board of Directors dated 27.04.2005. The guarantor agrees to indemnify and STC indemnified against all losses, damages, costs, claims and expenses, whatsoever, which STC may suffer, pay or incur by reason of or in connection with any such default on the part of M/s Metro Machinery Traders, including legal proceedings taken against it, or the guarantor for recovery of money. The said guarantee was unconditional and irrevocable and a continuous one and shall remain in force and effect such time all the dues are discharged by MMT to the satisfaction of STC.
That the complainant states that said M/s Metro Machinery Traders miserably failed to perform its obligations under the said MOU and sale Agreement and consequently under the said guarantee the company M/s Bishan Saroop Ram Kishan Agro Pvt. Ltd. and all the Directors of the said company became liable to the said amount of Rs. 75 Crore only because of losses, damages and other expenses costs, etc. suffered by the complainant STC by reasons of or in connection with such default on the part of M/s Metro Machinery Traders. By issuing the said Cheque for Rs. 75 the accused person accepted and admitted the liability for payment to the complainant the said amount.
Relevant portion of Memorandum of Understanding dated 28th April, 2005 is being reproduced below:-
AND WHEREAS, MMT have offered STC to enter into a collaboration for executing the Sale order awarded by MSTC Ltd, Bangalore, to MMT for dismantle and disposal of entire Fertilizer Plan belonging to NLC.
NOW, THEREFORE, IT IS HEREBY AGREED BETWEEN THE PARTIES AND DECLARED AS FOLLOWS:
CLAUSE 1: STC will make payment of the total sum of Rs. 149,79,96,511 (Rs. One Hundred Forty Nine Crores, Seventy Nine Laths, Ninety Six Thousand, Five Hundred and Eleven Only) by way of Demand draft Drawn in favour of Neyveli Lignite Corporation Ltd, payable at Neyveli. The above payment will be made by two separate Bank Drafts, one for Rs. 1,38,71,16,511/- and the other for Rs. 11,08,80,000/-
Clause 3: Sureties to STC : The two firms, M/s Bishan Swarup Ram Kishan Agro Pvt. Ltd. and M/s Mahesh Agro Pvt. Ltd, owned and managed by two major partners, Mr. Ram Kishan and Mr. Mahesh Kumar respectively will each Chairman-cum-Managing Directors, duly authorized by Resolutions passed by their Board of Directors along with a post dated Cheques of Rs. 75.0 cr each. In addition to this, each Partner of MMT will give a personal Guarantee Bond by way of Affidavit. The aforesaid Guarantees shall be duly executed to ensure the sale of the entire stock of NLC Plant by STC with the assistance of MMT.
Clause 11: Mode of Sales and Disposal of Goods: MMT shall be responsible for the successful sale of the entire stock of NLC Plant on behalf of STC. The entire stocks of NLC Plant will be sold and disposed of by STC to the parties selected by MMT against the price approved by MMT. However, STC will issue Delivery Orders to the Parties nominated by MMT only against the receipt of full sale value of the materials in advance.
Clause 12 Settlement of Account: STC Will recover its entire investment including Out of Pocket expenses D/D charges, BG charges, interest, taxes if any demurrages penalties, VAT if applicable, or further sales by STC, along with their Trading Margins calculated at the rate as stated above on the total funding arranged by them out of Sales Proceeds of the Scraps obtained from the Fertilizer Plant and Machinery and release the Balance Payment/Stocks to MMT as soon as its investments stand recovered within the periods specified in clause 10.
Clause 13 Completion of Project: Neyveli Lignite Corporation Ltd. has given 370 days to complete the entire job of dismantle and disposal without charging any extra ground rent. However, MMT will try to complete the work within 270 days. In case MMT fails to complete the work within the prescribed period of 370 days all consequential penalties and expenses will be exclusively to the A/c of MMT. Notwithstanding what is stated in clause 10 onwards, STC reserves the right to directly dispose of materials at the end of 9th month, to recover its outstanding dues. This is expressly understood by MMT.
Clause 16 Settlement of Dispute: MMT agrees that in the event of any dispute/differences between the parties hereto arising out of or in connection with the Agreement, the same would, at the first instance, be resolved through arbitration by a Sole Arbitrator to be appointed by the Indian Council of Arbitration. The arbitration proceedings shall be conducted in New Delhi in accordance with the provisions of the Arbitration and Conciliation Act, 1996.
Further, clause 1, 3, 5, 11, 12 and 13 of the MOU having already been extracted above, it would as well be relevant to cull out portion of the Deed of Guarantee and the Statutory Notice issued by the respondent to the petitioner :
DEED OF CORPORATE GUARANTEE
In consideration of State Trading Corporation of India Ltd. (hereinafter called STC) having its corporate office at Jawahar Vyapar Bhawan, 1, Tolstoy Marg, New Delhi-110001 agreeing to provide finance to M/s Metro Machinery Traders (hereinafter called MMT) for Grant of Financial Assistance for purchase and Marketing of the entire Fertilizer Plant and Machinery belonging to Nevyeli Lignite Corporation Ltd. in accordance with the terms and conditions of the MOU signed between STC and MMT on 28.4.2005 M/s Bishan Swaroop Ram Kishan Agro Pvt. Ltd., 5584, Lahori Gate, Delhi-110006 through its Chairman-cum-Managing Director (hereinafter referred to as the "GUARANTOR") herein execute his Deed of Corporate Guarantee in favour of STC.
In witness whereof, I, Ram Kishan, hereby guarantee in my capacity as Chairman-cum-Managing Director and on behalf of M/s Bishan Swaroop, Ram Kishan, Agro Pvt. Ltd. to reimburse all outstanding amounts, losses and expenses, if any, which are due to STC and MMT arising out of or in connection with MMT/s failure to perform its obligations under the MOU dated 28.4.2005 and Sale Agreement dated 29th April, 2005. The liability of the Guarantor under this guarantee shall not exceed Rs. 75 crores. This guarantee is secured by a post dated cheque bearing No. 472815 for Rs. 75 crores drawn on State Bank of Mysore in favour of STC.
I, hereby declare that this guarantee has been execute as per Resolution dated 27.04.2005.
The Guarantor agree to indemnify and keep STC indemnified against all losses in damages, costs, claim and expenses, whatsoever, which STC may suffer, pay or insure by reason of or in connection with any such default on the part of MMT including legal proceedings taken against it or the Guarantor for recovery of money.............
The Statutory Notice reads thus :
Registered with A/D/By Courier/Under Certificate of Posting
May 12, 2006
To
M/s Bishan Saroop Ram Kishan Agro (P) Ltd. 5584, Lahori Gate Delhi - 110006
...........
Sub : Statutory Notice u/s 138 read with Section 141 of NI Act to pay immediately Rs. 15.40 Crore (Rupees fifteen crore forty lakh only) by Bank/Pay Order within the statutory period because of dishonour of your Cheque No. 472919 by State Bank of Mysore, Naya Bazar, Delhi - 110006.
Dear Sir
Under instructions of our client, M/s State Trading Corporation of India Limited, a Government of India Enterprise, having its office at Jawahar Vyapar Bhawan, Tolstoy Marg, New Delhi, I would like to address you as follows:
You, the company and the Chairman-cum-Managing Director, respectively under Resolution (P) Ltd.., executed a Deed of Corporate Guarantee in favour of my client the State Trading Corporation of India Limited to the effect, "to reimburse all outstanding amounts, losses and expenses, if any, which are due to STC arising out of or in connection with M/s AG Agro (P) Ltd. (AGAPL) is failure to perform its obligation under the MOU dated 30.05.2005 and Sale Agreement dated 30.05.2005. The liability of the guarantor shall not exceed Rs. 15.40 Crore (Rupees fifteen crore forty lakh only). This guarantee is secured by a post dated cheque bearing no. 472919 for Rs. 15.40 Crore (Rupees fifteen crore forty lakh only) drawn on State Bank of Mysore in favour of STC". The said guarantee was executed as per Resolution taken by the company dated 28.05.2005. "The guarantor agrees to indemnify and keep STC indemnified against all losses, damages, costs, claims and expenses, whatsoever, which STC may suffer, pay or incur by reason or in connection with any such default on the part of AGAPL.....
The respondent in support of its complaint also filed affidavit by way of evidence, oath on affidavit Relevant portion of which reads as under:
This guarantee is secured by a post dated Cheque bearing No. 472815 for Rs. 75,00,00,000 (Rupees Seventy five crore) drawn on State Bank of Mysore, in favour of STC," The guarantor agrees to indemnify STC against all losses, damages, costs, claims and expenses, whatsoever, which STC may suffer, pay or incur by reason of or in connection with any such default on the part of MMT including of any legal proceedings taken against it, or the guarantor for recovery of money.
The Deed of Corporate Guarantee as well as the Statutory Notice issued by the respondent (complainant) to the petitioner herein, were also annexed by the complainant along with his complaint.
The only question which arises for consideration is whether the cheques in the sum of Rs. 75.0 crores each were issued for a debt which was in existence at the time of issuance of cheque or whether this cheque was issued as a guarantee to secure future debt and to indemnify against losses and damages. To buttress his argument that the cheque, subject matter of the complaint, was issued merely as a security, learned counsel for the petitioner contends that the cheque in question was issued on 28th April, 2005. Admittedly at that point of time, the financial assistance had yet not been rendered and thus at the time when the cheques were issued there was no debt due to the respondent. It is contended by him that since the cheques were issued as a security and not towards any legally enforceable debt, the same cannot create a cause of action u/s 138 of the Negotiable Instruments Act, 1881. The said section is reproduced below:
Dishonour of cheque for insufficiency, etc. of funds in the account-Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from the account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provision of this Act, be punished with imprisonment for [a term which may be extended to two years], or with fine which may extend to twice the amount of the cheque, or with both :
Provided that nothing contained in this section shall apply unless-
(b) The cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier;
(c) The payee or the holder in due course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving a notice in writing, to the drawer of the cheque, [within thirty days] of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and
(d) The drawer of such cheque fails to make the payment of the said amount of money to the payee or as the case may be, to the holder in due course of the cheque within fifteen days of the receipt of the said notice.
Explanation--For the purposes of this section, "debt or other liability" means a legally enforceable debt or other liability.
I have heard learned counsel for the parties and carefully gone through the complaint and documents filed with the complaint by the respondent herein. It is not in dispute that under sections 118 read with 139 of the NI Act, there is a presumption in favour of the holder of the cheque that he holds the cheque, for discharge, in whole or in part, of any debt or any liability. However it is also to be borne in mind that before passing an order summoning the accused persons u/s 138 of the NI Act, the court is duty bound to carefully look into the complaint and the supporting documents, to see if prima-facie any case is made out against the accused persons or not. In the case of DCM Financial Services Ltd. Vs. J.N. Sareen and Another, , the Apex Court has held:
The underlying purpose for which Parliament enacted section 138 of the Act is not in doubt or dispute. What, however, is necessary to be borne in mind is the distinction between a civil proceeding and a criminal proceeding. What is also necessary to be borne in mind is the standard of proof in a civil suit and a criminal case.
Averments made in the complaint petition supported by the statements of the complainant form the basis for taking cognizance of an offence by the Magistrate. Application of mind on the averments made in the complaint petition vis-a-vis the order which is required to be passed for summoning the witnesses is imperative.
In view of the observations of the Apex Court in the case of DCM Financial Services (supra), it is thus to be seen in the facts of this case, whether a bare reading of the complaint and the documents annexed with the complaint by the complainant (respondent herein), before the trial court, would show that the cheques in question were issued in discharge of a debt or whether the cheques were issued as a collateral security, payment of which was to be made on the happening of an event, or not. Admittedly, the cheque in question was issued at a time when no loan was disbursed. Apt herein, it would be to reproduce relevant portion of para 6 of the complaint, wherein it has been stated:
That it was agreed by M/s Metro Machinery Traders that they would furnish two corporate guarantees for the complainant''s funding of Rs. 150 crore (Rupees One hundred fifty Crore).....The said Directors of M/s Bishan Saroop Ram Kishan Agro Pvt. Ltd. under the Chairmanship of the accused No. 2 passed a resolution as Board Members authorizing the Chairman cum Managing Director, the accused No. 2 to execute a Deed of Corporate Guarantee on behalf of M/s Bishan Saroop Ram Kishan Agro Pvt. Ltd. in favour of the State Trading Corporation of India Ltd. to the effect "to reimburse all outstanding amounts, losses and expenses, if any which are due to STC arising out of or in connection with M/s Metro Machinery Traders. (hereinafter referred to as the MMT)''s failure to perform its obligations under the MOU dated 28/29.04.2005 and sale agreement dated 29.04.2005. The liability of the guarantor shall not exceed Rs. 75 Crores. This guarantee was secured by a post dated Cheque bearing No. 472815 of Rs. 75 Crores only drawn on State Bank of Mysore in favour of STC......... The guarantor agrees to indemnify and STC indemnified against all losses, damages, costs, claims and expenses, whatsoever, which STC may suffer, pay or incur by reason of or in connection with any such default on the part of M/s Metro Machinery Traders, including legal proceedings taken against it, or the guarantor for recovery of money. .....
A bare reading of the complaint shows that the corporate guarantees were to be issued in response to the funding of Rs. 150.0 crores by the complainant (respondent herein) and the petitioner herein stood as one of the corporate guarantor.
Relevant portion of the MOU, Deed of Guarantee and Statutory Notice clearly and categorically confirm that the cheque of Rs. 75 crores each were issued as a collateral security for a debt which was yet to accrue. Furthermore, I am afraid, that the judgment in the case of P.P. Sharma (supra), relied upon by the respondent (complainant before the trial court,) cannot come to his aid and rescue, as in the present case, the above mentioned documents sought to be relied upon by the petitioner, were annexed by the respondent themselves before the trial court and thus are not required to be proved as the petitioners have also placed reliance on them. The respondent (complainant before the trial court) has taken a stand that the cheques were issued as collateral security. The question of taking up this defence by the petitioner comes at the next stage. The complaint, statutory notice issued by the complainant (respondent herein) as well as the MOU and Deed of Corporate Guarantee filed along with the complaint and relied upon by the complainant himself does not require to be proved, for the reason that these are the documents which have been signed and executed by the complainant themselves, filed by them, relied upon by them and relevant portions of these documents have also been extracted in the complaint itself. Thus the complainant/respondent herein is bound by these documents. The cheque in question was to be encashed on the failure of MMT in performing its part of the obligations, and it cannot be said that it was issued for a debt in present, but payable in future, or that it was a debt which was in existence at the time of issuance of the cheque. Thus the learned trial judge committed a manifest error in issuing summons to the petitioners herein, in as much as he failed to read the complaint and the documents relied upon by the complainant (respondent herein) carefully, in terms of the precedent established as per DCM Financial Service (supra).
Further it is settled position of law that a cheque issued as a security cannot give rise to a cause of action u/s 138 of the NI act. A bare reading of section 138 (reproduced above) of the NI Act would show that the statute does not cover cases wherein a cheque is drawn by a person as security for payment of any loan. I am in respectful agreement of the opinion expressed by the learned Single Judge of this court in Criminal Misc. No. 3011/04, M/s Collage Culture & Ors. vs. Apparel Export Promotion Council & Anr., wherein the learned Single Judge has held that a cheque which is issued for a debt which may become payable in future or which become payable upon the occurrence of a contingent event would be a cheque by way of a security. And a cheque issued not for an existing due, but issued by way of security, would not attract section 138 of the NI Act, for it has not been issued for a debt which has come into in existence. Further the law stands settled by the Apex Court in the case of M/s Naravana Menon @ Mani vs. State of Kerala and Ors. The Apex Court opined:
The appellant clearly said that nothing is due and the cheque was issued by way of security. The said defence has been accepted as probable. If the defence is acceptable as probable the cheque therefore cannot be held to have been issued in discharge of the debt as, for example, if a cheque is issued for security or for any other purpose the same would not come within the purview of Section 138 of the Act.
In the case of V.Y. Jose and Another Vs. State of Gujarat and Another, , the Apex Court on the point of exercise of inherent powers u/s 482 of Cr.P.C., has held as under:
15..........Section 482 of the Code of Criminal Procedure, saves the inherent power of the court. It serves a salutary purpose viz. a person should not undergo harassment of litigation for a number of years although no case has been made out against him.
It is one thing to say that a case has been made out for trial and as such the criminal proceedings should not be quashed but it is another thing to say that a person should undergo a criminal trial despite the fact that no case has been made out at all.
(emphasis supplied)
Before parting, however, we may notice a decision of this Court in from State of Madhya Pradesh Vs. Awadh Kishore Gupta and Others, whereupon strong reliance has been placed by Mr. Jain. This Court, therein upon referring to Bhajan Lal (supra) opined as under:
As noted above, the powers possessed by the High Court u/s 482 of the Code are very wide and the very plenitude of the power requires great caution in its exercise. Court must be careful to see that its decision in exercise of this power is based on sound principles. The inherent power should not be exercise to stifle a legitimate prosecution. The High Court being the highest court of a State should normally refrain from giving a prima facie decision in a case where the entire facts are incomplete and hazy, more so, when the evidence has not been collected and produced before the Court and the issues involved, whether factual or legal, are of magnitude and cannot be seen in their true perspective without sufficient material. Of course, no hard-and-fast rule can be laid down in regard to cases in which the High Court will exercise its extraordinary jurisdiction of quashing the proceedings at any stage. (See Janata Dal vs. H.S. Chowdhary and Raghubir Saran (Dr.) vs. State of Bihar) It would not be proper for the High Court to analyse the case of the complainant in the light of all probabilities in order to determine whether a conviction would be sustainable and on such premises, arrive at a conclusion that the proceedings are to be quashed. It would he erroneous to assess the material before it and conclude that the complaint cannot be proceeded with. In proceedings instituted on complaint exercise of the inherent powers to quash the proceedings is called for only in a case where the complaint does not disclose any offence or is frivolous, vexatious or oppressive. If the allegations set out in the complaint do not constitute the offence of which cognizance has been taken by the Magistrate, it is open to the High Court to quash the same in exercise of the inherent powers u/s 482 of the Code. It is not, however, necessary that there should be meticulous analysis of the case before the trial to find out whether the case would end in conviction or acquittal. The complaint has to be read as a whole. If it appears that on consideration of the allegations in the light of the statement made on oath of the complainant that the ingredients of the offence or offences are disclosed and there is no material to show that the complaint is mala fide, frivolous or vexatious, in that event there would be no justification for interference by the High Court. When an information is lodged at the police station and an offence is registered, then the mala fides of the informant would be of secondary importance. It is the material collected during the investigation and evidence led in the court which decide the fate of the accused person. The allegations of mala fides against the informant are of no consequence and cannot by itself be the basis for quashing the proceedings.
(Emphasis in original)
No exception can be taken to the aforementioned principles of law, as therein also it has categorically been held that exercise of inherent power u/s 482 is permissible where allegations set out in the complaint do not constitute the offence for which cognizance has been taken by the Magistrate. It is evidently a case of that nature.
A bare reading of the documents relied upon and relevant portion of which has been reproduced above (statutory notice issued by the respondent to the petitioners, the complaint and the affidavit by way of evidence, Deed of Corporate Guarantee and the Memorandum of Understanding of Understanding dated 28th April, 2005), leave no scope for any doubt that the cheques in question were not issued against a debt which was in existence at the time of issuance of cheque. The cheques were issued not for an existing debt due, but issued by way of security.
For the reasons aforestated, the trial judge patently failed to read the complaint and the documents annexed along with it, carefully and further failed to see the error apparent on the fact of it, and issued summons without proper application of mind; In my considered opinion, in view of the principles affirmed in the case of V.Y. Jose (supra), the present petitions must succeed. Accordingly, Criminal Complaint Nos. 837/06 and 838/06 u/s 138 read with section 141 of the Negotiable Instruments Act, 1881, pending before the learned Metropolitan Magistrate, are quashed and the summoning order dated 9.06.2006 in CC No. 837/06 and order dated 9.06.2006 in CC No. 838/06, are set aside. Petitions are disposed of, accordingly.