Sunil Gupta vs Bank Of India

Virender Singh, J

Petitioner-Sunil  Gupta  has  filed  the  present petition,  under  Section  482  of  the  Code  of  Criminal Procedure (hereinafter referred to as ‘CrPC’), for quashing of complaint, bearing No.160-III/17/14, titled as ‘Bank of India Vs. Sunil Gupta’, filed under Section 138 of the Negotiable Instruments Act, 1881 (hereinafter referred to as the ‘NI Act’), by the respondent-Bank, before the Court of learned Chief Judicial Magistrate, Mandi, H.P. (hereinafter referred to as the ‘trial Court’).

In the present petition, following substantive relief has been claimed by the petitioner:-

‘It is, therefore, prayed that the petition may be allowed and the complaint under Section 138 of NI Act, instituted by complainant-respondent bearing Case No.160-III/17/14 Registration No.1573/13, complaint No.66-III f 2014, CNR No.020501040952014 may be rdered to be quashed with cos s thr ughout upon complainant-respondent.”

The relief has been sought, on the ground that the respondent-Bank is a Nationalized Bank, having its Head Office at Mumbai and also having its Branch at Mandi Town, Mandi, H.P.

The petitioner is stated to have approached respondent-Bank for grant of financial assistance to his proprietorship firm i.e. M/s Sun Steel Fabricates in the form of Cash Credit Limit with monthly rests under different Cash Credit Limit/loan accounts from the respondent-Bank and in this regard, requisite documents were executed.

According to the petitioner, terms and conditions for the repayment of the loan amount were incorporated, under the Loan Agreement, which was signed by the petitioner-accused and his guarantor.

It is the case of the petitioner that the respondent-Bank, on the basis of its record, came to the conclusion that the petitioner-accused has failed to operate the Cash Credit Limited account, as well as, the loan account and as such, the acc unt became irregular in operation and thus, the proceedings, under the Securitisation and Reconst uction of Financial Assets and Enforcement of Sec rity Interest Act, 2002 (hereinafter referred to as the ‘SARFAESI Act’), were initiated.

It is the further case of the petitioner that as per the case, set up by the respondent-Bank, before the learned trial Court, the petitioner-accused had issued cheque No.017074 dated 20.07.2014, for a sum of Rs.50,00,000/- (hereinafter referred to as the ‘cheque in question’), drawn out of his Savings Account towards payment of outstanding dues of the proprietorship concern i.e. M/s Sun Steel Fabricators, in its loan/Cash Credit Account. The said cheque, allegedly presented by the respondent-Bank, had been dishonoured and thereafter, the proceedings, under Section 138 of NI Act, were initiated. Those proceedings are stated to be not maintainable and as such, the relief of quashing has been sought on the grounds, as taken in the petition.

It is the further case of the petitioner that the cheque in question was issued from the Savings Bank Account of petitioner-accused-Sunil Gupta. The said bank account was in operation since 2004 and still in existence. The firm i.e. M/s Sun Steel Fabrica ors came into existence in the year 2001-02 and the account of M/s Sun Steel Fabricators was with State Bank of India, Mandi, H.P., from which, Cash Credit Limit/working capital of Rs.50,00,000/- was availed. Thereafter, a request was made to the said Bank to enhance the working capital, but, t e said request was not acceded to and hence, the said account was shifted to Bank of India (respondent-Bank), in the year 2004 and in the year 2010, the account of the proprietorship concern i.e. M/s Sun Steel Fabricators was declared as Non-Performing Asset (hereinafter referred to as the ‘NPA’).

As per the petitioner, thereafter, the proceedings, under the SARFAESI Act, were initiated and during the pendency of those proceedings, according to the petitioner, the signed blank cheques, obtained by the respondent-Bank, were used and presented for encashment and on account of dishonour of such cheques, statutory notice was issued and the proceedings, under Section 138 of NI Act, have been initiated.

According to the petitioner-accused, in order to succeed in the proceedings, under Secti n 138 of NI Act, it was for the respondent-Bank o sa isfy the requirement of its being holder of the cheque in question, in due course, as, no authority has been vested with the respondent-Bank to have either presented the cheque or to initiate the proceedings.

Heavily relying upon the provisions of Sections 8, 9, 18, 138, 139 and 142 of the NI Act, it is the case of the petitioner-accused that the respondent-Bank is neither the holder of the cheque, nor holder in due course and as such, the complaint is not maintainable and the proceedings are stated to be without jurisdiction.

The relief, as claimed, has further been sought on the ground that bare perusal of the cheque in question would reveal that the same has been drawn from the Savings Bank Account of the petitioner-accused, in favour of Bank of India A/c Sun Steel Fabricators and relying upon the endorsement, as made on the cheque, the respondent-Bank has no authority to claim itself to be the holder or holder in due course.

Highlighting the fact that the cheque in question was issued in the name of Bank of India A/c Sun Steel Fabricators, it is the case f the petitioner-accused that neither, M/s Sun Steel Fabricators has been arrayed as a party, nor any proceedings have been initiated against M/s Sun Steel Fabricators. In the absence of any proceedings, against M/s Sun Steel Fabricators, the proceedings, which were initiated against the petitioner-accused, are stated to be not maintainable.

On the basis of above facts, a prayer has been made to allow the petition, as claimed for.

The petitioner has filed the present petition, under Section 482 of the CrPC for quashing of the complaint, filed under Section 138 of NI Act, pending before the learned trial Court.

Scope of Section 482 Cr.P.C. has elaborately been discussed by the Hon’ble Supreme Court, in the year 1992, in the case titled as State of Haryana Vs. Chaudhary Bhajan Lal & Others, reported as 1992 CrLJ, 527, in which, the Hon’ble Supreme Court has formulated the guidelines for exercising the powers under Section 482 Cr.P.C. Relevant paragraph 107 of the judgment is reproduced, as under:-

“107. In the backdrop of the interpretation of the various relevant provisions of the Code under Chapter XIV and of the principles of law enunciated by this Court in a series of decisions relating to the exercise of the extraordinary power under Article 226 or the inherent powers under section 482 of he Code which we have extracted and ep oduced above, we give the following categories of cases by way of illustration wherein such power could be exercised either to prevent abuse of the process of any C urt r otherwise to secure the ends of justice, th ugh it may not be possible to lay down any precise, clearly defined and sufficiently channelised and inflexible guidelines or rigid formulae and to give an exhaustive list of myriad kinds of cases wherein such power should be exercised.

Where the allegations made in the First Information Report or the complaint, even if they are taken at their face value and accepted in their entirety do not prima facie constitute any offence or make out a case against the accused.

Where the allegations in the First Information Report and other materials, if any, accompanying the FIR. do not disclose a cognizable offence, justifying an investigation by police officers under Section 156 (1) of the Code except under an order of a Magistrate with the purview of Section 155(2) of the Code.

Where the uncontroverted allegations made in the FIR or complaint and the evidence collected in support of the same do not disclose the commission of any offence and make out a case against the accused.

Where, the allegations in the FLR do not constitute a cognizable offence but constitute only. a non-cognizable offence, no investigation is permitted by a police officer without an order of a Magistrate as contemplated under Section 155(2) of the Code.

Where the allegations made in the FIR or complaint are so absurd and inherently improbable on the basis of which no prudent person can ever reach a just c nclusion that there is sufficient ground f r pr ceeding against the accused.

Where there is an express legal bar engrafted in any of the p ovisions of the Code or the concerned Act ( nder which a criminal proceeding is instit ted) to the institution and continuance f the proceedings and/or where there is a specific provision in the Code or the concerned Act, providing efficacious redress for the grievance of the aggrieved party.

Where a criminal proceeding is manifestly attended with mala fide and/or where the proceeding is maliciously instituted with an ulterior motive for wreaking vengeance on the accused and with a view to spite him due to private and personal grudge.”

This view has again been reiterated by a three Judge Bench of the Hon’ble Supreme Court in Neeharika Infrastructure Pvt. Ltd. Versus State of Maharashtra & Others, reported as 2021 SCC Online SC 315. Relevant paragraph 38 of the judgment is reproduced, as under:-

In the case of Golconda Lingaswamy (supra), after considering the decisions of this Court in the cases of R.P. Kapur (supra) and Bhajan Lal (supra) and other decisions on the exercise of inherent powers by the High Court under Section 482 Cr.P.C., in paragraphs 5, 7 and 8, it is observed and held as under:

“5. Exercise of power under Section 482 of the Code in a case of this nature is the exception and not the rule. The section does not confer any new powers on the igh Court. It only saves the inherent power which the Court possessed be ore the enactment of the Code. It envisages three circumstances under which the inherent jurisdiction may be exercised, namely: (i) to give effect to an order under the Code, (ii) to prevent abuse of he process of court, and (iii) to otherwise secure the ends of justice. It is neither possible nor desirable to lay down any inflexible rule which would govern the exercise of inherent jurisdiction.

No legislative enactment dealing with procedure can provide for all cases that may p ssibly arise. Courts, therefore, have inherent powers apart from express provisions of law which are necessary for proper discharge of functions and duties imposed upon them by law. That is the doctrine which finds expression in the section which merely recognises and preserves inherent powers of the High Courts. All courts, whether civil or criminal, possess in the absence of any express provision, as inherent in their constitution, all such powers as are necessary to do the right and to undo a wrong in course of administration of justice on the principle quando lex aliquid alique concedit, conceditur et id sine quo res ipsa esse non potest (when the law gives a person anything, it gives him that without which it cannot exist). While exercising powers under the section, the Court does not function as a court of appeal or revision. Inherent jurisdiction under the section though wide has to be exercised sparingly, carefully and with caution and only when such exercise is justified by the tests specifically laid down in the section itself. It is to be exercised ex debito justitiae to do real and substantial justice for the administration of which alone courts exist. Authority of the court exists for advancement of justice and if any attempt is made to abuse that authority so as to produce injustice, the court has power to prevent such abuse. It would be an abuse of the process of the court to allow any action which would result in injustice and prevent promotion of justice. In exercise of the powers court would be justified to quash any proceeding if it finds that initiation or continuance f it amounts to abuse of the process of court or quashing of these proceedings would otherwise serve the ends of jus ice. When no offence is disclosed by the complaint, the court may examine the q estion of fact. When a complaint is so ght to be quashed, it is permissible to look into the materials to assess what the complainant has alleged and whether any offence is made out even if the allegations are accepted in toto.

In dealing with the last category, it is important to bear in mind the distinction between a case where there is no legal evidence or where there is evidence which is clearly inconsistent with the accusations made, and a case where there is legal evidence which, on appreciation, may or may not support the accusations. When exercising jurisdiction under Section 482 of the Code, the High Court would not ordinarily embark upon an enquiry whether the evidence in question is reliable or not or whether on a reasonable appreciation of it accusation would not be sustained. That is the function of the trial Judge. Judicial process, no doubt should not be an instrument of oppression, or, needless harassment. Court should be circumspect and judicious in exercising discretion and should take all relevant facts and circumstances into consideration before issuing process, lest it would be an instrument in the hands of a private complainant to unleash vendetta to harass any person needlessly. At the same time the section is not an instrument handed over to an accused to short-circuit a prosecution and bring about its sudden death…..

As noted above, the powers possessed by the High Court under Section 482 of the Code are very wide and the very plenitude of the power requires great caution in its exercise. Court must be care ul to see that its decision in exercise f this power is based on sound principles. The inherent power should not be exercised to stifle a legitimate p osecu ion. High Court being the highest cou t 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 n t been c llected and produced before the C urt 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 proceeding at any stage. [See Janata Dal v. H.S. Chowdhary [(1992) 4 SCC 305 : 1993 SCC (Cri) 36 : AIR 1993 SC 892] and Raghubir Saran (Dr.) v. State of Bihar [AIR 1964 SC 1 : (1964) 1 Cri LJ 1] .] 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 be erroneous to assess the material before it and conclude that the complaint cannot be proceeded with. In a proceeding 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 cognisance has been taken by the Magistrate, it is open to the High Court to quash the same in exercise of the inherent powers under Section 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/FIR has to be read as a whole. If it appears that on c nsideration of the allegations in the light f the statement made on oath of he complainant or disclosed in the FIR hat the ingredients of the offence or offences are disclosed and there is no mate ial to show that the complaint/FIR is mala fide, frivolous or vexatio s, in that event there would be no justificati n for interference by the High Court. When an information is lodged at the p lice stati n 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 court which decides the fate of the accused person. The allegations of mala fides against the informant are of no consequence and cannot by themselves be the basis for quashing the proceeding.”

It is no longer res integra that at the time of deciding the petition, under Section 482 Cr.PC, this Court cannot assume the powers of the appellate/revisional Court, nor, this Court can act as trial Court. While holding so, the view of this Court is being guided by the decision of Hon’ble Supreme Court in Chilakamarthi Venkateswarlu & Another versus State of Andhra Pradesh & Another, reported as (2019) 10 SCALE 239. Relevant paragraph 15 of the judgment is reproduced, as under:-

“15. In exercising jurisdiction under Section 482 it is not permissible for the Court to act as if it were a trial Court. The Court is only to be prima facie satisfied about existence of sufficient ground for proceeding against the accused. For that limited purpose, the Court can evaluate materials and documents n rec rd, but it cannot appreciate the evidence to c nclude whether the materials produced are sufficient or not for convicting the accused.”

Similar view has also been taken by the Hon’ble Supreme Court in S.W. Palanitkar & Others versus State of Bihar & Another, reported as (2002) 1 Supreme Court Cases 241.

Judging the facts and circumstances of the present case, in the light of the above settled proposition of law, now, this Court will proceed to discuss, as to whether the petitioner-accused is entitled for the relief, as claimed in the petition or not.

In this case, record of the learned trial Court was requisitioned and the same was perused.

Perusal of the record shows that the respondent-Bank had initiated the proceedings, under Section 138 of NI Act, against the petitioner-accused, on the ground that the accused (petitioner) had approached the complainant-Bank (respondent) for grant of financial assistance to him and his sole proprietorship firm M/s Sun Steel Fabricators in the form of Cash Credit Limit to the extent of Rs.4,81,00,000/-, on interest, with monthly rests, under different CC Limit/loan accounts. Requisite documents were also stated to be executed. Since, the accused (petitioner) could not operate the CC account/loan accounts regularly, nor, he could make regular repayments of the loan, as per the terms and conditions, settled between the petiti ner-accused and the respondent-Bank, as such, as per the complaint, the proceedings, under SARFAESI Act, were initiated against the property, mortgaged by the petitioner-accused, his wife Kamini Gupta and his brother Dalip Kumar and his companies.

As per further contents of the complaint, filed before the learned trial Court, when, those proceedings were pending, respondent-Bank has further asserted that the petitioner-accused had issued cheques, including the “cheque in question”, out of his Savings Account, towards payment of outstanding dues of M/s Sun Steel Fabricators in its loan/CC accounts.

The said cheque, according to the respondent-Bank, was issued with an assurance that as and when, the same will be presented for encashment, petitioner-accused will have sufficient funds in his Savings Bank Account On such representation and assurance, Bank has presented the cheque in question for encashment, within a period of validity of the cheque and the said cheque was received back un-cashed, on the ground hat the person, who had issued the same, is not having sufficient funds, in his account. The return memo dated 22.07.2014 has been relied upon by the Bank. Thereafter, the respondent-Bank allegedly telephonically informed the petitioner-accused with regard to the said fact.

As per further case of the respondent-Bank, thereafter, the requisite notice was issued to the petitioner-accused on 08.08.2014, which was posted on 09.08.2014. The said notice was stated to be duly served on 14.08.2014 and after waiting for the requisite period, complaint, under Section 138 of NI Act, has been filed, as, the petitioner-accused has neither replied to the notice, nor made any payment.

On the basis of above facts, a prayer has been made to summon/convict/punish the petitioner-accused for the offence, punishable under Section 138 of the NI Act.

Mr. Neeraj Gupta, learned Senior Advocate, assisted by Mr. Ajeet Pal Singh Jaswal, Advocate, appearing for the petitioner-accused, has drawn the attention of this Court towards the fact that in the cheque in question, it has specifically been mentioned that the same has been issued in the name of Bank of India A/c M/s Sun Steel Fabricators.

On the basis of the contents of the documents (cheque in question), it has been argued by learned Senior Advocate, appearing for the petitioner-accused, that the c eque in question was issued with an intention to deposit the same in the account of M/s Sun Steel Fabricators and since, the account has been maintained with Bank of India, as such, the cheque in question has been issued with the endorsement “Bank of India A/c M/s Sun Steel Fab”. All these facts have been highlighted to show that the Bank, from no stretch of imagination, can be said to be the holder or holder in due course.

In order to buttress his contention, learned Senior Advocate, appearing for the petitioner-accused, has relied upon the decision of the Bombay High Court in Criminal Writ Petitions No.1541 and 1542 of 1999, titled as ‘M/s Credential Finance Ltd. Vs. State of Maharashtra’.

Relying upon the said judgment, it has been argued that in the case, before the B mbay High Court, a similar situation had arisen, as, in the said case, the cheque in question was issued and in the payee column, the words “Indusind Bank Ltd. A/c Credential Finance Ltd. or Bearer” were written and the Bombay High Court has allowed those writ petitions, which were preferred against the order, passed by the Revisional Court, setting aside the order, passed by the Judicial Magistrate, by virtue of which, the accused persons were discharged in a case, filed, under Section 138 of NI Act, by holding that the Bank cannot be said to the holder in due course.

Learned Senior Advocate, appearing for the petitioner-accused has also relied upon para No.8 of the said judgment and argued that the mandatory conditions, as enumerated, under Section 138 of NI Act, have not been complied with, in the present case and as such, the petitioner-accused is entitled for the relief, as claimed, in this case.

Per contra, Mr. Deepak Bhasin, learned Senior Advocate, assisted by Mr. Sambhav Bhasin, Advocate, appearing for the respondent-Bank, has argued that since, the facility of CC Limit was extended by the respondent-Bank, in favour of M/s Sun Steel Fabricat rs, as such, the cheque in question was issued in discharge of the existing liability of the petitioner-accused in favour of complainant-Bank and the Bank is in its competence to initiate the proceedings, under Section 138 of NI Act.

Learned  Senior  Advocate,  appearing  for  the respondent-Bank, has further argued that when, the c eque in question was presented for encashment, the same has been dishonoured and even, despite service of requisite notice, upon the petitioner-accused, he has not paid the amount, as mentioned in the cheque in question.

On the basis of above facts, a prayer has been made to dismiss the present petition.

Perusal of record shows that the cheque in question was issued by the petitioner-accused on 20.07.2014 for a sum of Rs.50,00,000/-, in favour of “Bank of India A/c M/s Sun Steel Fabricators”.

As stated above, this Court, while exercising the powers, under Section 482 of CrPC, neither assumes the role of the Appellate Court or Revisional Court, nor, mini-trial is to be conducted, in these proceedings. Only the allegations, as made in the complaint, are to be seen, at this stage.

Although, by way of the present petition, the relief of quashing the complaint, as well as, the subsequent proceedings has been s ught, but, in order to decide the present petition, this Court can look into the documents, relied upon, by the complainant (respondent), as well as, t e documents, which are not disputed by the parties.

As per the stand, taken by the respondent-Bank, the cheque in question was issued by the petitioner-accused, out of his account, maintained with Bank of India, in discharge of his liability.

As per the stand of the respondent-Bank, the petitioner-accused, being the proprietor of M/s Sun Steel Fabricators, had availed the CC Limit to the extent of Rs.4,81,00,000/-, on interest, with monthly rests under different CC Limit/loan account.

As per the complaint, filed under Section 138 of NI Act, by the respondent-Bank, before the learned trial Court, petitioner-accused was having the Cash Credit Limit to the extent of Rs.4,81,00,000/- and the said loan facility was availed for the sole propriet rship firm i.e. M/s Sun Steel Fabricators, by the pe i ioner -accused.

As per the stand, taken by respondent-Bank of India, the accused had obtained the Cash Credit Limit. The Cash Credit Limit is a facility, which is provided by the Bank to its consumers, i.e. a short-term loan to meet their working capital requirement.

In other words, it can be said that it is a facility, ven by the Bank to the applicant, who had applied for the same by reserving a particular amount with it, so that the person, in whose favour, the said Cash Credit Limit has been sanctioned i.e. petitioner’s firm M/s Sun Steel Fabricators, may withdraw the amount, as per its requirement. The Bank is permitted to determine its lending rates taking into account its cost of funds, transaction costs etc.

As per the stand, taken by the Bank, the Cash Credit Limit of Rs.4,81,00,000/- on interest with monthly rests under different CC Limit/loan accounts, was sanctioned. As stated earlier, the said amount has readily been kept by the complainant-Bank for being utilized by the borrower i.e. M/s Sun Steel Fabricators. The cheque in question has been issued in the name f Bank of India A/c M/s Sun Steel Fabricators, by he accused.

In such situation, considering the stand of the complainant-Bank (respondent herein), cheque in question was issued by the accused in lieu of the existing liability, or, in other words, in discharge of his existing legal liability, as, the proprietorship firm of accused, M/s Sun Steel Fabricators had availed the Cash Credit Limit/loan account of Rs.4,81,00,000/-.

The definition of term ‘payee’ has been given in Section 7 of the NI Act, which is reproduced, as under:-

“The person named in the instrument, to whom or to whose order the money is by the instrument directed to be paid, is called the “Payee”.”

Similarly, the term ‘holder’ has duly been defined in Section 8 of NI Act, which is reproduced as under:-

“Holder”.—The “holder” of a promissory note, bill of exchange or cheque means any person entitled in his own name to the possession thereof and to receive or recover the amount due thereon from the parties thereto.

Where the note, bill or cheque is lost or destroyed, its holder is the person so entitled at the time of such loss or destruction.”

The term ‘holder in due course’ as has been defined in Section 9 of the NI Act, is reproduced, as under:-

“Holder in due course”.—“H lder in due course” means any pers n who f r consideration became the possessor of a promissory note, bill of exchange or cheque if payable to bearer, or the payee or endo see the eof, if payable to order, before the amo nt mentioned in it became payable, and witho t having sufficient cause to believe that any defect existed in the title of the pers n fr m whom he derived his title.”

As per Section 9 of the NI Act, the holder in due course means any person, who, for consideration, became t e possessor of cheque. There is no legal requirement that n order to claim a right to an instrument as a holder in due course, the same should have been drawn in the name of a person, who is in the possession of the instrument, whereas, in this case, cheque in question was issued in the name of Bank of India A/c M/s Sun Steel Fabricators.

As stated above, at the time of exercising the power, under Section 482 of CrPC, for quashing of the complaint, under Section 138 of NI Act, the probable defence, which is not based upon the admitted documents or the documents, veracity of which is not in dispute, cannot be taken into consideration.

If, bare reading of the complaint does not make out a case, by taking the allegations from its face value, then, the Court must exercise the power, under Section 482 of CrPC.

As per the record, he cheque in question was deposited in the account of accused, which was, later on, dishonoured. Dishono r memo was issued by the banker of the accused to Bank of India and the same is on the record as Ex. W1/C. Thereafter, the legal notice was issued and subsequently, complaint, under Section 138 of NI Act, as been filed.

Even, as per Section 14 of the NI Act, endorsement is not the only mode, by which, a cheque could be negotiated. Relevant provisions of Section 14 of the NI Act are reproduced, as under:-

“14. Negotiation - When a promissory note, bill of exchange or cheque is transferred to any person, so as to constitute that person the holder thereof, the instrument is said to be negotiated.”

The cheque in question was delivered to the Bank and even, the delivery of the said cheque for consideration can be said to be valid negotiation.

The Hon’ble Supreme Court in ‘Anil Sachar & Anr. Vs. Shree Nath Spinners Private Limited & Ors.’, reported in (2011) 13 SCC 148, has elaborately discussed the provisions of Sections 138, 139 and 141 of NI Act. Relevant paragraphs 18 to 22 of the said judgment are reproduced, as under:-

“18. According to the provisions of the aforestated section, there is a presumption with regard to c nsideration when a cheque has been paid by the drawer of the cheque. In the instant case, M/s. A.T. Overseas Ltd. paid the cheque which had been duly signed by one of its Directors, namely, Munish Jain. Munish Jain is also a Director in M/s. Shree Nath Spinners Pvt. Ltd.. As stated hereinabove, both are sister concerns having common Directors. Extracts of books of accounts had been produced before the trial court so as to show that both the companies were having several transactions and the companies used to pay on behalf of each other to other parties or their creditors. The above fact strengthens the presumption to the effect that M/s. A.T. Overseas Ltd. had paid the cheques to the complainants, which had been signed by Munish Jain, in consideration of goods supplies to M/s Shree Nath Spinners Pvt. Ltd. Of course, the presumption referred to in Section 139 is rebuttable. In the instant case, no effort was made by Munish Jain or any of the Directors of M/s. A.T. Overseas Ltd. for rebuttal of the aforestated presumption and, therefore, the presumption must go in favour of the holder of the cheques. Unfortunately, the trial court did not consider the above facts and came to the conclusion that there was no consideration for the cheques which had been given by M/s. A.T. Overseas Ltd. to the complainants.

It is true that a limited company is a separate legal entity and its directors are different legal persons. In spite of the aforestated legal position, in view of the provisions of Section 139 of the Act and the understanding which had been arrived at among the complainants and the accused, one can safely come to a conclusion that the cheques signed by Munish Jain had been given by M/s. A.T. Overseas Ltd. to the c mplainants in discharge of a debt or a liability, which had been incurred by M/s Shree Na h Spinners Pvt. Ltd.

We may also efer to the judgment delivered by this Court in the case of ICDS Ltd. (supra). In the said j dgment this Court has referred to the nature f liability which is incurred by the one who is a drawer of the cheque. If the cheque is given t wards any liability or debt which might have been incurred even by someone else, the person who is a drawer of the cheque can be made liable under Section 138 of the Act. The relevant observation made in the aforestated judgment is as under:

"The words "any cheque" and "other liability" occurring in Section 138 are the two key expressions which stand as clarifying the legislative intent so as to bring the factual context within the ambit of the provisions of the statute. These expressions leave no manner of doubt that for whatever reason it may be, the liability under Section 138 cannot be avoided in the event the cheque stands returned by the banker unpaid. Any contra-interpretation would defeat the intent of the legislature. The High Court got carried away by the issue of guarantee and guarantor's liability and thus has overlooked the true intent and purport of Section 138 of the Act.

......

The language, however, has been rather specific as regard the intent of the legislature. The commencement of the section stands with the words "where any cheque". The above noted three words are of extreme significance, in particular, by reason of the user of the word "any" - the first three words suggest that in fact for whatever reason if a cheque is drawn on an account maintained by him with a banker in favour of another person or the discharge of any debt or other liability, the highlighted words if read with the irst three words at the commencement f Secti n 138, leave no manner of doubt that f r whatever reason it may be, the liabili y under this provision cannot be avoided in the event the same stands retu ned by he banker unpaid. The legislature has been careful enough to record not only discharge in whole or in part of any debt b t the same includes other liability as well. This aspect of the matter has n t been appreciated by the High Court, neither been dealt with or even referred to in the impugned judgment."

Looking to the facts of the case and law on the subject, we are of the view that all the four cheques referred to in both the complaints are presumed to have been given for consideration. The presumption under Section 139 of the Act has not been rebutted by the accused and, therefore, we are of the view that the trial court wrongly acquitted the accused by taking a view that there was no consideration for which the cheques were given by Munish Jain to the complainants. The aforesaid incorrect view was wrongly confirmed by the High Court. We, therefore, set aside the acquittal order and convict accused Munish Jain under Section 138 of the Act.

In view of the aforestated facts and legal position, in our opinion, the accused ought to have been held guilty, especially accused no. 4, Munish Jain who had signed all the cheques for M/s A.T. Overseas Ltd. We, therefore, hold Munish Jain, accused no. 4 and respondent no. 4 herein, in both the cases guilty of the offence under Section 138 of the Act.”

(self-emphasis supplied)

So far as the case law, relied upon by the learned Senior Counsel, appearing for petitioner-Sunil Gupta, i.e. Criminal Writ Petitions No.1541 and 1542 of 1999, titled as ‘M/s Credential Finance Ltd. Vs. State of Maharashtra’, laid d wn by the Bombay High Court, is concerned, this Court is unable to concur with the same, as hyper-technical approach, in the matters, under Section 138 of NI Act, is against the intention of the Legislature.

The true import of the concept of Cash Credit Limit as to be taken into consideration in the present case, as, t e said amount has been kept for being used by the account holder/borrower, as per his requirement and in lieu of the said utilization, the Bank is entitled for the interest.

From no stretch of imagination, it can be said that the amount, so kept by the Bank for being used by the Cash Credit Limit holder, belongs to the borrower. It is the amount of the Bank, which, on certain terms and conditions, has been permitted to be withdrawn by the borrower.

Admittedly, the said amount belongs to the Bank and utilization rights have been given to the borrower on certain terms and conditions, including rate of interest etc. The person, who intends to use this limit, is also bound to provide collateral security by way of mortgage of his property or in any mode. Merely, a limit has been set for a particular amount, as, in this case, in favour of M/s Sun Steel Fabricators, does not mean that on the amount of Rs.4,81,00,000/-, the Bank has no right. The amount belongs to Bank and it is being permitted to be used by the borrower and when, the cheque in question was issued by t e accused in favour of Bank of India A/c M/s Sun Steel Fabricators, then, in view of the law, laid down by the Hon’ble Supreme Court in Anil Sachar’s case (supra), the Bank falls within the definition of ‘holder in due course’.

Even, the conditions, sine qua non for maintaining the complaint, under Section 138 of NI Act, as laid down by the Bombay High Court in M/s Credential Finance Ltd.’s case (supra), are duly fulfilled in the present case. Those conditions, as enumerated in paragraph 8 of the said judgment, are reproduced, as under:-

“8. Therefore, what is argued by the Counsel for the petitioner is that by issuing cheque Exh "A" it is never drawn in favour of the respondent Bank. In fact it was dran in favour of himself and directed the respondent bank to credit in his account maintained in that bank. The Revisional Court has considered this aspect and noted that respondent bank has carried out this direction of the petitioner and credited the amount in his account and thereafter when the cheque was dishonoured, the am unt was debited. Therefore, respondent bank cannot argue that the cheque is issued in i s his favour. If that be so, there is no necessity for them to credit the amount in the petitioner's account. Therefore, it is crystal clear that the cheque was drawn in all practical and legal sense in petitioner's own name by the petitioner on Federal Bank to be dep sited in the account of petitioner which he maintains in the respondent bank. Therefore, by any stretch of imagination, the cheque cannot be treated as the cheque issued by the petitioner in favour of the respondent bank. If the cheque is not issued by the petitioner in favour of the respondent bank, the question whether that was issued for discharge of liability of the petitioner with the respondent bank or was it dishonoured for want of fund etc. became otiose. As is well settled that in order to maintain a complaint under section 138 of the said Act, five main factors have to be established by the complainant before the Magistrate :

"(i) The cheque in question should have been issued in discharge of whole or in part of a debt or liability.

(ii) The cheque in question should be presented for payment within six months or its specific validity period, whichever is earlier.

(iii) The payee or holder should give notice of demand within 15 days of receiving information of dishonour which may be due to insufficient funds or the amount payable excess the arrangement.

(iv) The drawer gets 15 days time after receipt of the notice to make the payment and only if he fails to pay, he is liable to be prosecuted

(v) Complaint can be made only by payee or the holder in due course within one month of the arising of the cause of action."

Considering the stand of the complainant-Bank, the amount of Cash Credit Limit was utilized. Thereafter, when, the account became NPA, proceedings, under the SARFAESI Act, we e initiated and accused-petitioner, in discharge of his liability, had issued the cheque in questi n. Certainly, the cheque in question, when presented, was dishonoured and the dishonour memo was issued in favour of Bank of India. Subsequently, statutory legal notice was given and after the statutory period, the complaint, under Section 138 of NI Act, has been filed.

The CCL facility, by no stretch of imagination, can be said to be the account of the accused or his firm. It is the facility, which was provided to him by the Bank. He can withdraw the amount for being utilized in his business on certain conditions, but, against the security, provided by him, by way of mortgaging or providing any collateral.

As held in the earlier portion of the judgment, at the time of deciding the petition, under Section 482 of CrPC, only the prima facie case is to be seen. If the facts and circumstances of the present case are seen, in the light of the decision of the Hon’ble Supreme Court in ‘Modi Cements Ltd. Vs. Kuchil Kumar Nandi’, reported in (1998) 3 SCC 249, the cognizance, which has been taken by the learned trial Co rt, does not require any interference. Relevant paragraphs 9 and 21 of the said judgment are reproduced, as under:-

“9. The High Court has laid much stress in its judgment to emphasize that a petition under Section 482 Cr. P.C. is tenable when no offence even prima facie was made out in the complaint. There can be no dispute regarding that legal proposition but the application thereof will depend upon the averment made in the complaint. But the second reasoning of the High Court is contrary to the decision of this Court (rendered by a Bench of two Judges) in Electronics Trade & Technology Development Corporation Ltd., Secunderabad vs. Indian Technologists & Engineers (Electronics) (P) Ltd., & & Anr. 1996 (2) SCC 739. While interpreting Section 138 of the Act, it firstly observed as under:

"It would thus be clear that when a cheque is drawn by a person on an account maintained by him with the banker for payment of any amount of money to another person out of the account for the discharge of the debt in whole or in part or other liability is returned by the bank with the endorsement like (1) in this case, "refer to the drawer" (2) "instructions for stoppage of payment" and stamped (3) " exceeds arrangement", it amounts to dishonor within the meaning of Section 138 of the Act On issuance of the notice by the payee or the holder in due course after dishonor, to the drawer demanding payment within 15 days from the date of the receipt of such a notice. if he does to pay the same, the statutory presumption of dishonest intention, subject to any other liability, stands satisfied".

It is needless o emphasize that the Court taking cognizance of the complaint under Section 138 of he Act is required to be satisfied as to whether a prima facie case is made o t nder the said provision. The drawer of the cheque undoubtedly gets an opp rtunity under Section 139 of the Act to rebut the presumption at the trial. It is for this reas n we are of the considered opinion that the complaints of the appellant could not have been dismissed by the High Court at the threshold.”

In view of the discussions, made hereinabove, there is no occasion for this Court to accept the prayer, so made in the petition. Consequently, the same is dismissed.

Parties, through their counsel, are directed to appear, before the learned trial Court, on 15.07.2025 at 10:00 am.

Pending miscellaneous application(s), if any, shall also stand disposed of accordingly.

Record be returned to the quarter concerned.