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Judgment
N. Ananda
The petitioners in these petitions are arrayed as accused in the respective cases shown in the preamble of order, which are pending trial for an offence punishable u/s 138 of the Negotiable Instruments Act.
In these petitions, petitioners and respondent are common. The contentions urged and points for determination are identical. Therefore, these petitions are taken up for consideration and decision by this common order. The petitioners have sought for quashing the proceedings mteralia contending that the averments of complaint and documents annexed to complaint accepted at their face value do not constitute an offence punishable u/s 138 of the Negotiable Instruments Act; the financial transactions referred to in the complaint would indicate that there has been violation of Foreign Exchange Management Act (for short ''FEMA'') by respondent. As financial transactions are contrary to the provisions of FEMA, therefore, the cheques upon which the complaints are initiated were not issued to discharge legally enforceable debt or liability;
Apart from Mr. Naveen Sriram, other petitioners were not the Directors of company when the alleged offences were committed and they had ceased to be the Directors of the company and they were not in-charge of day-to-day affairs of the company; the averments of complaint do not bring them within the purview of Section 141 of the Negotiable Instruments Act.
I have heard Sri. K.G. Raghavan, learned Senior Counsel, Sri. S. Srivatsa, learned Senior counsel, Sri. C.K. Nandakumar, Sri. Kumar Ram and Arun Srikumar, learned counsel for petitioners and Sri. Kiran S. Javali and K. Chandrashekara, learned counsel for common respondent.
The relevant averments of complaints are as follows: M/s. Future Metals Private Limited and M/s. Future Exim (India) Private Limited are sister concerns. The petitioners herein are the Directors of the said companies. The said companies wanted to engage in overseas merchandising trade for which purpose, they approached the respondent with a request to open Letters of Credit in favour of buyers/traders in the foreign countries. In that connection, they had entered into a tripartite agreement wherein, they had agreed to enter into an agreement called ''Back to Back Contract" in respect of which Letters of Credit were opened by the respondent to facilitate overseas merchandising trade by the companies namely M/s. Future Metals Private Limited (for short ''FMPL and M/s. Future Exim India Private Limited (for short ''FEIPL). The complainant opened Letters of Credit to facilitate the aforestated transactions. The opening of Letters of Credit stated in the complaints were preceded by execution of ''Back to Back contract for merchandising trade" as agreed to between the parties in the tripartite agreement. The cheques for the dishonour of which the instant complaints were filed were issued for payment of the amount covered under the Letters of Credit which devolved on the respondent for the failure of petitioners to remit the amounts as agreed in the ''Back to Back Contract''.
It is the contention of petitioners that, the averments of complaint accepted at their face value, would disclose that the cheques were issued as collateral security in case if the petitioners were to fail to fulfill the financial obligations in relation to Letters of Credit opened by the respondent to enable petitioners to carry on their merchandising trade in foreign countries.
It is the case of complainant that the petitioners did not discharge their financial obligations, as a result, the Letters of Credit opened by respondent at instance of petitioners devolved upon respondent. Therefore, respondent had presented the cheques, which were dishonoured as stop payment orders had been issued by petitioners.
The details of cheques furnished by the petitioners and the corresponding criminal petitions indicated by me in column No. 4 are stated thus:
SI. No.
Favouring Name
Cheque No.
INR Value
Crl.P.Nos.
1
STCL Ltd.,
004623
271,400,000.00
2
STCL Ltd.,
004624
271,400,000.00
3
STCL Ltd.,
005881
81,144,000.00
1536/2012& 2897/2011
4
STCL Ltd.,
005882
81,144,000.00
5
STCL Ltd.,
005883
81.144.000.00
1536/2012& 2897/2011
6
STCL Ltd.,
005884
81,144,000.00
1536/2012 & 2897/2011
7
STCL Ltd.,
005885
81,144,000.00
1532/2012 & 2874/2011
8
STCL Ltd.,
005896
71,620,500.00
1557/2012& 5747/2010
9
STCL Ltd.,
005895
82,929,000.00
1557/2012& 5747/2010
10
STCL Ltd.,
005899
79,159,500.00
1557/2012& 5747/2010
11
STCL Ltd.,
005802
86,698,500.00
12
STCL Ltd.,
005803
82,929,000.00
13
STCL Ltd.,
005804
79,159,500.00
14
STCL Ltd.,
005805
75,390,000.00
15
STCL Ltd.,
005806
71,620,500.00
16
STCL Ltd.,
005819
95,497,500.00
1551/2012& 5745/2010
17
STCL Ltd.,
005820
91.677,600.00
1551/2012& 5745/2010
18
STCL Ltd.,
005821
87,857,700.00
1527/2012 & 2887/2011
19
STCL Ltd.,
005822
84,037,800.00
1545/2012& 3218/2011
20
STCL Ltd.,
005823
80,217,900.00
1545/2012& 3218/2011
21
STCL Ltd.,
005824
76.398,000.00
1545/2012& 3218/2011
22
STCL Ltd.,
005825
72,578,100.00
1551/2012& 5745/2010
23
STCL Ltd.,
005826
95,497,500.00
1553/2012& 5748/2010
24
STCL Ltd.,
005827
91,677,600.00
1532/2012& 2874/2011
25
STCL Ltd.,
005828
87,857,700.00
1555/2012& 5746/2010
26
STCL Ltd.,
005829
84,037,800.00
1532/2012& 2874/2011
27
STCL Ltd.,
C05330
80,217,900.00
1555/2012& 5746/2010
26
STCL Ltd.,
005831
76,398,000.00
1555/2012& 5746/2010
29
STCL Ltd.,
005832
72,578,100.00
1553/2012& 5748/2010
30
STCL Ltd..
005833
95,497,500.00
1525/2012
31
STCL Ltd.,
005834
57,298,500.00
1527/2012& 2887/2011
32
STCL Ltd.,
005835
95,497,500.00
1527/2012& 2887/2011
33
STCL Ltd.,
005836
91,677,600.00
1525/2012
34
STCL Ltd.,
005837
87,857,700.00
1525/2012
35
STCL Ltd.,
005838
84,037,800.00
1558/2012& 5750/2010
36
STCL Ltd.,
005839
80,217,900.00
1558/2012& 5750/2010
37
STCL Ltd.,
005840
76,398,000.00
1558/2012& 5750/2010
38
STCL Ltd.,
005841
95.497,500.00
1553/2012& 5748/2010
39
STCL Ltd.,
005842
9?,677,600.00
1562/2012& 2892/2011
40
STCL Ltd.,
005843
87,857,700.00
1562/2012& 2892/2011
41
STCL Ltd.,
C05844
84,037,800.00
1533/2012& 2895/2011
42
STCL Ltd.,
005845
80,217,900.00
1562/2012 & 2892/2011
43
STCL Ltd.,
005846
76,398,000.00
1533/2012& 2895/2011
44
STCL Ltd.,
005847
95,497,500.00
1531/2012& 2886/2011
45
STCL Ltd.,
005848
91,677,600.00
1531/2012& 2886/2011
46
STCL Ltd.,
005849
87,857,700.00
1531/2012& 2886/2011
47
STCL Ltd.,
005850
84,037,800.00
1537/2012
& 2890/2011
48
STCL Ltd.,
006051
80,217,900.00
1537/2012 & 2890/2011
49
STCL Ltd.,
006052
76,398,000.00
1537/2012 & 2390/2011
50
STCL Ltd.,
006053
95,497,500.00
1534/2012& 1563/2012& 2385/2011
51
STCL Ltd.,
006054
91,677,600.00
1534/2012& 1563/2012& 2885/2011
52
STCL Ltd.,
006055
87,857,700.00
1533/2012& 2895/2011
53
STCL Ltd.,
006056
84,037,800.00
1534/2012& 1563/2012 & 2885/2011
54
STCL Ltd.,
006057
80,217,900.00
1529/2012& 2880/2011
55
STCL Ltd.,
006058
76,398,000.00
1529/2012 & 2880/2011
56
STCL Ltd..
006059
95,497,500.00
1556/2012& 2891/2011
57
STCL Ltd.,
006060
91,677,600.00
1556/2012& 2891/2011
58
STCL Ltd.,
006061
87,857,700.00
1543/2012
59
STCL Ltd.,
006062
84,037,800.00
1543/2012
60
STCL Ltd.,
006063
80,217,900.00
1543/2012
61
STCL Ltd..
006064
76,398,000.00
1556/2012
2891/2011
62
STCL Ltd..
006065
75,537,000.00
1528/2012
63
STCL Ltd.,
006066
72.103,500.00
1528/2012
64
STCL Ltd.,
006067
68,670,000.00
1529/2012& 2830/2011
65
STCL Ltd.,
006068
68,670,000.00
1522/2012& 2883/2011
66
STCL Ltd.,
006069
68,670,000.00
1526/2012& 3217/2011
67
STCL Ltd.,
006070
68,670,000.00
1522/2012& 2883/2011
68
STCL Ltd.,
006071
68,670,000.00
1522/2012& 2883/2011
69
STCL Ltd..
006072
77,910,000.00
1528/2012
70
STCL Ltd.,
006073
74,793,600.00
2894/2011
71
STCL Ltd ,
006074
71,677,200.00
2894/2011
72
STCL Ltd.,
006075
68,560,800.00
2894/2011
73
STCL Ltd..
006076
65,444,400.00
1524/2012& 2873/2011
74
STCL Ltd.,
006079
107,100,000.00
75
STCL Ltd.,
006080
81,690,000.00
1524/2012& 2873/2011
76
STCL Ltd.,
006081
76,860,000.00
1526/2012& 3217/2011
77
STCL Ltd..
006082
73,785,600.00
1526/2012
& 3217/2011
78
STCL Ltd.,
006083
70,711,200.00
2888/201 &
1530/2012
79
STCL Ltd.,
006084
67,636,800.00
2888/2011& 1530/2012
80
STCL Ltd.,
006085
64,562,400.00
2880/2011& 1530/2012
81
STCL Ltd.,
006086
6i,488,000.00
1540/2012 5751/2010
82
STCL, Ltd.,
006087
76,860,000.00
1540/2012& 5751/2010
83
STCL Ltd.,
006088
73,785,600.00
84
STCL Ltd..
006089
70,711,200.00
1544/2012& 3216/2011
85
STCL Ltd.,
006090
125,664,000.00
1524/2012& 2873/2011
86
STCL Ltd.,
006091
125,664,000.00
1547/2012& 5743/2010
87
STCL Ltd.,
006092
125,664,000.00
1547/2012& 5743/2010
88
STCL Ltd.,
006093
125,664,000.00
1547/2012& 1554/2012& 5743/2010
89
STCL Ltd.,
006094
125,664,000.00
1554/2012& 2876/2011& 2882/2011
90
STCL Ltd.,
006095
110,420,100.00
1544/2012& 3216/2011
91
STCL Ltd.,
006096
107,172,450.00
1544/2012& 3216/2011
92
STCL Ltd.,
006097
126,840,000.00
1548/2012\\& 5744/2010
93
STCL Ltd.,
006098
126,840,000.00
1548/2012& 5744/2010 1548/2012& 5744/2010
94
STCL Ltd.,
006099
126,840,000.00
95
STCL Ltd.,
006005
74,859,882.50
1554/2012& 2876/2011& 2882/2011
96
STCL Ltd.,
C06006 006007
74,859,882.50
1554/2012& 2876/2011& 2882/2011
97
STCL Ltd.,
74,859,882.50
1650/2012& 5749/2010
96
STCL Ltd.,
006008
74,859,882.50
1650/2012& 5749/2010
99
STCL Ltd.,
006009
74,859,882.50
1650/2012& 5749/2010
100
STCL Ltd.,
006010
74,859,882.50
1552/2012& 3213/2011
101
STCL Ltd.,
006011
74,859,882.50
1552/2012& 3213/2011
102
STCL Ltd.,
006012
74,859,882.50
1541/2012 3215/2011
103
STCL Ltd.,
006013
74,859,882.50
1541/2012 3215/2011
104
STCL Ltd.,
006014
69,514,875.00
1549/2012& 3220/2011
105
STCL Ltd.,
006015
67,970,100.00
1541/2012& 3215/2011
106
STCL Ltd.,
006016
63,425,325.00
1542/2012& 3214/2011
107
STCL Ltd.,
006017
64,880,550.00
1542/2012& 3214/2011
108
STCL Ltd.,
006018
63,335,775.00
1552/2012& 3213/2011
109
STCL Ltd.,
006019
61,791,000.00
1542/2012& 3214/2011
110
STCL Ltd.,
006020
69,514,875.00
1559/2012& 2875/2011
111
STCL Ltd.,
006021
67,970,100.00
1523/2012& 2877/2011
112
STCL Ltd.,
006022
66,425,325.00
1559/2012& 2875/2011
113
STCL Ltd.,
006023
64,880,550.00
1559/2012& 2875/2011
114
STCL Ltd.,
006024
64,677,375.00
1549/2012& 3220/2011
115
STCL Ltd.,
006025
64,677,375.00
1538/2012 & 3219/2011
116
STCL Ltd.,
006026
64,677,375.00
117
STCL Ltd.,
006027
63,240,100.00
118
STCL Ltd.,
006028
63,240,100.00
1538/2012& 3219/2011
119
STCL Ltd.,
006029
63,240,100.00
120
STCL Ltd.,
006030
61.802,825.00
1538/2012& 3219/2011
121
STCL Ltd.,
006031
61,802,825.00
1549/2012& 3220/2011
122
STCL Ltd.,
006032
65,913,750.00
1539/2012& 2879/2011
123
STCL Ltd.,
006033
65,913,750.00
1523/2012& 2877/2011
124
STCL Ltd.,
006034
65,913,750.00
1539/2012
& 2879/2011
125
STCL Ltd.,
006035
64,449,000.00
1523/2012& 2877/2011
126
STCL Ltd.,
006036
64,449,000.00
1539/2012& 2879/2011
127
STCL Ltd.,
006037
64.449,000.00
1550/2012& 2887/2011
128
STCL Ltd.,
006038
60,054,750.00
1560/2012& 2884/2011
129
STCL Ltd.,
006039
58,320,000.00
1559/2012& 2884/2011
130
STCL Ltd.,
006040
58,320,000.00
1535/2012& 3211/2011
131
STCL Ltd.,
006041
58,320,000.00
132
STCL Ltd.,
006042
58,320,000.00
133
STCL Ltd.,
006043
58,320,000.00
134
STCL Ltd.,
006044
58,905,000.00
1546/2012& 2893/201]
135
STCL Ltd.,
006045
58,905,000.00
1546/2012& 2893/2011
136
STCL Ltd.,
006046
58,905,000.00
1546/2012& 2893/2011
137
STCL Ltd.,
006047
58,905,000.00
138
STCL Ltd.,
006048
58,905,000.00
1521/2012& 3212/2011
139
STCL Ltd.,
006049
58,905,000.00
140
STCL Ltd.,
006050
58,905,000.00
141
STCL Ltd., 005901
58,905,000.00
142
STCL Ltd.,
005902
58,905,000.00
143
STCL Ltd.,
005903
58,905,000.00
1550/2012& 2889/2011
144
STCL Ltd.,
005904
58,905,000.00
145
STCL Ltd.,
005905
58,905,000.00
1561/2012& 2896/2011
146
STCL Ltd.,
005906
58,905,000.00
147
STCL Ltd.,
005907
58,905,000.00
1550/2012& 2887/2011
148
STCL Ltd.,
005908
58,905,000.00
149
STCL Ltd.,
005909
58,905,000.00
The averments of complaint and annexed documents accepted on their face value would Indicate that the respondent had opened the Letters of credit to enable the petitioners to carry on merchandising trade in foreign countries.
As per the averments of complaints, cheques were dishonoured as the petitioners had notified the drawee bank to stop payment.
Sri. K.G. Raghavan, learned Senior Counsel for petitioners has made following submissions:
1) The averments of complaints and contents of documents annexed to complaints at their face value would establish that cheques were not issued for discharging the existing debt or liability. Therefore. Section 138 of the Negotiable Instruments Act is not attracted.
2) As per averments of complaints. Letters of credit were opened by respondent and cheques were issued bindian cony petitioners in relation to financial transactions. The averments of complaint would indicate that there has been contravention of provisions of FEMA. Therefore, cheques were not issued for discharge of legally recoverable debt or liability.
3) The averments of complaints accepted at their face value would indicate that the contract entered into between the parties is void-ab-initto and cannot be enforced u/s 23 of the Indian Contract Act.
The learned Senior counsel has relied on following decisions:
1) M.S. Narayana Menon @ Mani Vs. State of Kerala and Another,
2) 2000 (3) Crimes 602
3) Collage Culture and Others Vs. Apparel Export Promotion Council,
4) 2007 Crl. LJ 2262
5) II (2010) BC 481
6) AIR 1932 SC 604
The learned counsel for respondent has made folic wing submissions:
1) These petitions are filed against order of issuance of process for an offence punishable u/s 138 of the Negotiable Instruments Act. The petitioners at this stage cannot dispute that the cheques were drawn by the petitioners. Therefore, presumptions u/s 118 (a) and 139 of the Negotiable Instruments Act are available to respondent.
2) This court in exercise of power u/s 482 Cr.P.C., cannot interfere with the order of trial court unless the averments of complaints accepted on their face value do not constitute an offence punishable u/s 138 of the Negotiable Instruments Act.
The learned counsel for respondent has relied on following decisions:
1) 2009 AIR SCW 4071
2) 2011 SAR (Cri) 740
The petitioners are before this court, against the order of issuance of process for an offence punishable u/s 138 of the Negotiable Instruments Act. In these petitions filed u/s 482 Cr.P.C., against the order of issuance of process u/s 204 Cr.P.C., the scope of examination is limited. It would be useful to refer to the following decisions:
In a decision reported in AIR 1992 SC 604( in the case of State of Haryana and Others -vs-Ch. Bhajan Lal and others) the Supreme Court has held:
In the backdrop of the interpretation of the various relevant provisions of the Code under Chapter XTV 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 u/s 482 of the Code which we have extracted and reproduced 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 Court or otherwise to secure the ends of justice, though 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.
(1) 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.
(2) Where the allegations in the first information report and other materials, if any, accompanying the F.I.R. do not disclose a cognizable offence, justifying an investigation by police officers u/s 156(1) of the Code except under an order of a Magistrate within the purview of Section 155(2) of the Code.
(3) 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.
(4) Where, the allegations in the F.I.R. 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 u/s 155(2) of the Code.
(5) 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 conclusion that there is sufficient ground for proceeding against the accused.
(6) Where there is an express legal bar engrafted in any of the provisions of the Code or the Act concerned (under which a criminal proceeding is instituted) to the institution and continuance of the proceedings and/or where there is a specific provision in the Code or the Act concerned, providing efficacious redress for the grievance of the aggrieved party.
(7) Where a criminal proceeding is manifestly attended with malafide 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.
In a decision reported in Union of India (UOI) and Others Vs. Ramesh Gandhi, , the Supreme Court referring to the earlier decisions reported in R.P. Kapur Vs. The State of Punjab, has held:
Coming to the question of the scope of the jurisdiction to quash an FIR, either in the exercise of statutory jurisdiction u/s 482 Cr.P.C. or under Article 226 of the Constitution of India, the law is well settled and this Court in a catena of decisions laid down clear principles and indicated parameters which justify the quashing of an FIR. We do not propose to catalogue all the cases where the issue was examined but notice only two of them and indicate the consistent principles laid down by this Court in this regard.
In R.P. Kapur Vs. State of Punjab, this Court at 6 AIR 869
6..... It is well-established that the inherent jurisdiction of the High Court can be exercised to quash proceedings in a proper case either to prevent the abuse of the process of any court or otherwise to secure the ends of justice. Ordinarily criminal proceedings instituted against an accused person must be tried under the provisions of the Code, and the High Court would be reluctant to interfere with the said proceedings at an interlocutory stage. It is not possible, desirable or expedient to lay down any inflexible rule which would govern the exercise of this inherent jurisdiction. However, we may indicate some categories of cases where the inherent jurisdiction can and should be exercised for quashing the proceedings. There may be cases where it may be possible for the High Court to take the view that the institution or continuance of criminal proceedings against an accused person may amount to the abuse of the process of the court or that the quashing of the impugned proceedings would secure the ends of justice. If the criminal proceeding in question is in respect of an offence alleged to have been committed by an accused person and it manifestly appears that there is a legal bar against the institution or continuance of the said proceeding the High Court would be justified in quashing the proceeding on that ground. Absence of the requisite sanction may, for instance, furnish cases under this category. Cases may also arise where the allegations in the first information report or the complaint, even if they are taken at their face value and accepted in their entirety, do not constitute the offence alleged; in such cases no question of appreciating evidence arises; it is a matter merely of looking at the complaint or the first information report to decide whether the offence alleged is disclosed or not. In such cases it would be legitimate for the High Court to hold that it would be manifestly unjust to allow the process of the criminal court to be issued against the accused person. A third category of cases in which the inherent jurisdiction of the High Court can be successfully invoked may also arise. In cases falling under this category the allegations made against the accused person do constitute an offence alleged but there is either no legal evidence adduced in support of the case or evidence adduced clearly or manifestly fails to prove the charge. In dealing with this class of cases 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 manifestly and clearly inconsistent with the accusation made and cases where there is legal evidence which on its appreciation may or may not support the accusation in question. In exercising its jurisdiction u/s 561-A the High Court would not embark upon an enquiry as to whether the evidence in question is reliable or not. That is the function of the trial Magistrate, and ordinarily it would not be open to any party to invoke the High Court''s inherent jurisdiction and contend that on a reasonable appreciation of the evidence the accusation made against the accused would not be sustained. Broadly stated that is the nature and scope of the Inherent jurisdiction of the High Court u/s 561-A in the matter of quashing criminal proceedings....
In State of Haryana Vs. Bhajan Lal this Court after reviewing large number of cases on the question of quashing the FIR held at AIR 108 109 as follows: (SCC 378-79, 102-103)
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 u/s 482 of the Code which we have extracted and reproduced 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 Court or otherwise to secure the ends of justice, though 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.
(1) 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.
(2) Where the allegations in the first information report and other materials, if any, accompanying the F.I.R. do not disclose a cognizable offence, justifying an investigation by police officers u/s 156(1) of the Code except under an order of a Magistrate within the purview of Section 155(2) of the Code.
(3) 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.
(4) Where, the allegations in the F.I.R. 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 u/s 155(2) of the Code.
(5) 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 conclusion that there is sufficient ground for proceeding against the accused.
(6) Where there is an express legal bar engrafted in any of the provisions of the Code or the Act concerned (under which a criminal proceeding is instituted) to the institution and continuance of the proceedings and/or where there is a specific provision in the Code or the Act concerned, providing efficacious redress for the grievance of the aggrieved party.
(7) 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.
We also give a note of caution to the effect that the power of quashing a criminal proceeding should be exercised very sparingly and with circumspection and that too in the rarest of rare cases; that the court will not be justified in embarking upon an enquiry as to the reliability or genuineness or otherwise of the allegations made in the F.I.R. or the complaint and that the extraordinary or inherent powers do not confer an arbitrary jurisdiction on the court to act according to its whim or caprice.
In the case on hand, we are concerned with the order of issuance of process u/s 204 Cr.P.C., against the petitioners for an offence punishable u/s 138 of the Negotiable Instruments Act.
The law is fairly well settled that the trial court while passing an order u/s 204 Cr.P.C., need not pass a detailed order however, the order should indicate that the trial court is prima-facie satisfied that averments of complaint would constitute an offence alleged in the complaint. When the matter comes up before this court u/s 482 Cr.P.C., this court has to examine the order of trial court and the contentions raised by the parties in the light of settled principles of law regarding exercise of powers and scope of examination u/s 482 Cr.P.C.,
In the earlier paragraphs, I have narrated the facts as averred in the complaints. The petitioners have seriously contended that the cheques were not issued for discharge of legally enforceable debt or liability.
The first contention is that there was no existing debt or liability on the date when the cheques were issued.
The second contention is that the financial transactions referred to in the complaint and opening of Letters of credit by respondent to enable the petitioners to carry or, merchandising trade in foreign countries involved violation of certain provisions of FEMA. The contract entered into between the parties is opposed to the provisions of Section 22 of the Indian Contract Act, 1872. Therefore, cheques were not issued to discharge legally enforceable debt or liability.
In the petitions mentioned in Page 10 of the order, petitioners have contended that other than Mr. Naveen Sriram other petitioners had ceased to be the Directors of the company. There are no averments in the complaints that they were in-charge of day-to-day affairs of the company and were responsible for the conduct of business of the company. The averments of complaints accepted at their face value do not bring the petitioners within the purview of Section 141 of the Negotiable Instruments Act.
In view of the contentions raised by the parties, following points would arise for determination:-
1) Whether the cheques in question were issued for discharge of any debt or other liability or they were issued as collateral security for debt or liability which was to accrue on a future date ?
2) Whether financial transactions in respect of which cheques were issued involved violation of provisions of FEMA. thus, the contract entered into between the parties is void-ab-initio and unenforceable u/s 23 of the Indian Contract Act, 1872 ?
3) Whether the petitioners except Naveen Sriram had ceased to be the Directors of the company as on the date of transaction and averments of complaints do not bring them within the purview of Section 141 of the Negotiable Instruments Act ?
My findings on the above points and reasons thereof are as follows:
The averments of complaint and annexed documents accepted at their face value would disclose that the cheques were issued to discharge the liability, which the petitioners had incurred, consequent to the Letters of Credit opened by the respondent to facilitate the petitioners to carry on the merchandising trade in foreign countries.
In these petitions filed u/s 482 Cr.P.C., the scope of examination is very much limited.
In a decision reported in M.S. Narayana Menon @ Mani Vs. State of Kerala and Another, the Supreme Court while dealing with presumption available u/s 118 (a) and 139 of the Negotiable Instruments Act has held:
In view of the aforementioned backdrop of events, the questions of law which had been raised before us will have to be considered. Before we advert to the said questions, we may notice the provisions of Sections 118 (a) and 139 of the Act which read as under:
Presumptions as to negotiable instruments - Until the contrary is proved, the following presumptions shall be made-
(a) of consideration - that every negotiable instrument was made or drawn for consideration and that every such instrument when it has been accepted, indorse, negotiated or transferred, was accepted, indorse, negotiated or transferred for consideration;
Presumption in favour of holder - It shall be presumed, unless the contrary is proved, 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, of any debt or other liability.
Presumptions both under Sections 118 (a) and 139 of the Act are rebuttable in nature.
What would be the effect of the expressions "may presume", ''shall presume'' and ''conclusive proof has been considered by this Court in Union of India v. Pramod Gupta in the following terms: SCC pp. 30-31. para 52
It is true that the legislature used two different phraseologies ''shall be presumed* and ''may be presumed'' in Section 42 of the Punjab Land Revenue Act and furthermore although provided for the mode and manner of rebuttal of such presumption as regards the right to mines and minerals said to be vested in the Government vis-a-vis the absence thereof in relation to the lands presumed to be retained by the landowners but the same would not mean that the words ''shall presume'' would be conclusive. The meaning of the expressions ''may presume'' and ''shall presume'' have been explained in Section 4 of the Evidence Act, 1872, from a perusal whereof it would be evident that whenever it is directed that the court shall presume a fact it shall regard such fact as proved unless disproved. In terms of the said provision, thus, the expression ''shall presume'' cannot be held to synonymous with ''conclusive proof.
In terms of Section 4 of the Evidence Act whenever it is provided by the Act that the court shall presume a fact, it shall regard such fact as proved unless and until it is disproved. The words "proved" and "disproved" have been defined in Section 3 of the Evidence Act (the interpretation clause) to mean:
"Proved"- A fact is to be proved when, after considering the matters before it the court either believes it to exist, or considers its existence to probable that a prudent man ought, under the circumstances of the particular case, to act upon the supposition that it exists.
"Disproved" - A fact said to be disproved when, after considering the matters before it, the court either believes that it does not exist, or considers its non-existence so probable that a prudent man ought, under the circumstances of the particular case, to act upon the supposition that it does not exist.
Applying the said definitions of "proved" or ''disproved" to the principle behind Section 118 (a) of the Act, the court shall presume a negotiable instrument to be for consideration unless and until after considering the matter before it, it either believes that the consideration does not exist or considers the non-existence of the consideration so probable that a prudent man ought, under the circumstances of the particular case, to act upon the supposition that the consideration does not exist. For rebutting such presumption, what is needed is to raise a probable defence. Even for the said purpose, the evidence adduced on behalf of the complainant could be relied upon.
A Division Bench of this court in Bharat Barrle & Drum Mfg. Co. v. Amin Chand Pyarelal albeit in a civil case laid down the law in the following terms (SCC pp.50-51, para 12)
Upon consideration of various judgments as noted hereinabove, the position of law which emerges is that once execution of the promissory note is admitted, the presumption u/s 118 (a) would arise that it is supported by a consideration. Such a presumption is rebuttable. The defendant can prove the non-existence of a consideration by raising a probable defence. If the defendant is proved to have discharged the initial onus of proof showing that the existence of consideration was improbable or doubtful or the same was illegal, the onus would shift to the plaintiff who will be obliged to prove it as a matter of fact and upon its failure to prove would disentitle him to the grant of relief on the basis of the negotiable instrument. The burden upon the defendant of proving the non-existence of the consideration can be either direct or by bringing on record the preponderance of probabilities by reference to the circumstances upon which he relies. In such an event, the plaintiff is entitled under law to rely upon all the evidence led in the case including that of the plaintiff as well. In case, where the defendant fails to discharge the initial onus of proof by showing the non-existence of the consideration, the plaintiff would invariable be held entitled to the benefit of presumption arising u/s 118 (a) in his favour. The court may not insist upon the defendant to disprove the existence of consideration by leading direct evidence as the existence of negative evidence is neither possible nor contemplated and even if led, is to be seen with a doubt.
This court, therefore, clearly opined that it is not necessary for the defendant to disprove the existence of consideration by way of direct evidence.
The standard of proof evidently is preponderance of probabilities. Inference of preponderance of probabilities can be drawn not only from the materials on record but also by reference to the circumstances upon which he relies.
Presumption drawn under a statute has only an evidentiary value Presumptions arc raised in terms of the Evidence Act. Presumption drawn in respect of one fact may be an evidence even for the purpose of drawing presumption under another.
In terms of Section 118 (a) of the Negotiable Instruments Act, until the contrary is proved, the court shall presume that every negotiable instrument was made or drawn for consideration, and that every such instrument when it has been accepted, indorsed, negotiated or transferred, was accepted, indorsed, negotiated or transferred for consideration.
Under Section 139 of the Negotiable Instruments Act, the court shall presume, unless contrary is proved, 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, of any debt or other liability.
In the case on hand, petitioners have not disputed that the respondent is the holder of cheques. Therefore, the court shall presume until the contrary is proved that the cheques were drawn for consideration. u/s 139 of the Negotiable Instruments Act, the court shall presume that the respondent had received the cheques for discharge in whole or part of any debt or other liability.
In a decision reported in (2006) 6 SCC 29, the Supreme Court has held:
In terms of Section 4 of the Evidence Act whenever it is provided by the Act that the court shall presume a fact, it shall regard such fact as proved unless an until it is disproved.
In the aforestated judgment, at Para 30, the Supreme Court has held:
For rebutting such presumption, what is needed is to raise a probable defence. Even for the said purpose, the evidence adduced on behalf of the complainant could be relied upon.
The contention of petitioners that the averments of complaints and documents annexed to the complaint accepted at their face value do not establish that the cheques were issued for discharge of debt or liability cannot be considered at this stage of the case.
The law mandates that presumptions available in favour of the complainant under Sections 118 (a) and 139 of the Negotiable Instruments Act shall be drawn. During trial, the accused can rebutt such presumption by raising probable defence or relying on the evidence adduced by prosecution.
In a decision reported in (2006) 6 SCC the Supreme Court has held:
In terms of Section 4 of the Evidence Act whenever it is provided by the Act that the court shall presume a fact, it shall regard such fact as proved unless and until it is disproved. The words "proved" and "disproved" have been defined in Section 3 of the Evidence Act [the interpretation clause) to mean: "Proved"- A fact is said to be proved when, after considering the matters before it, the court either believes it to exist, or considers its existence so probable that a prudent man ought, under the circumstances of the particular case, to act upon the supposition that it exists.
"Disproved" - A fact said to be disproved when, after considering the matters before it, the court either believes that it does not exist, or considers its non-existence so probable that a prudent man ought, under the circumstances of the particular case, to act upon the supposition that it does not exist.
Applying the said definitions of ''proved" or "disproved" to the principle behind Section 118 (a) of the Act, the court shall presume a negotiable instrument to be for consideration unless and until after considering the matter before it, it either believes that the consideration does not exist or considers the non-existence of the consideration so probable that a prudent man ought, under the circumstances of the particular case, to act upon the supposition that the consideration does not exist. For rebutting such presumption, what is needed is to '' raise a probable defence. Even for the said purpose, the evidence adduced on behalf of the complainant could be relied upon.
In view of what has been held in the aforestated judgement, the presumption available in favour of the respondent/complainant u/s 118 (a) and 139 of the Negotiable Instruments Act will have to be rebutted by, the petitioners/accused as provided u/s 4 of the Evidence Act. At this stage, the petitioners relying upon certain documents cannot contend that they have rebutted the presumptions available in favour of respondent. Therefore, presumptions available in favour of the respondent u/s 118 (a) and 139 of the Negotiable Instruments Act cannot be rebutted by petitioners without going for a trial.
In these petitions filed u/s 482 Cr.P.C., this court cannot record a finding of fact when the trial is yet to take place before the court below. Therefore, the submission of learned Senior Counsel for petitioners that the cheques were not issued to discharge existing legally enforceable debt or liability cannot be accepted.
As could be seen from the averments of complaint, as on the date of presentation of cheques, the Letters of Credit had been opened by respondent to facilitate merchandising trade of petitioners. The petitioners had not discharged their financial obligations. Therefore, the Letters of Credit opened by respondent had devolved upon respondent.
At this juncture, it is useful to refer to the letter addressed to respondent by the petitioners on 05.01.2009 wherein, the first petitioner has stated that:
Due to unprecedented, unexpected and sudden global recession; the overseas buyers are unable to clear the consignments after due payments as per your back to back sale agreements. The said situation has arisen without any fault on our part and such acts over which we have no control have been covered under Force Maejure Clause of the aforesaid agreements. We hereby invoke the Force Maejure Clause in respect of each one of the agreements that have been entered into with you by us and request you to act in accordance with the said clause. Notwithstanding the same, we are in the process of identifying alternate methods to liquidate the outstanding which you are well aware.
In this letter first petitioner has pleaded that the cheques issued by them shall not be presented for collection and respondent is bound to perform certain obligations and non-performance of which, would disentitle respondent to present post dated cheques, which petitioners had given as security. The first petitioner has also stated that instructions are being issued by the petitioners to the Standard Chartered Bank (Bankers of the petitioners) to stop payment. Along with this letter, the petitioners had enclosed the details of cheques extracted supra.
The first petitioner had addressed this letter on 05.01.2009 after instructing its bankers to stop payment.
The main reason pleaded in this letter for nonpayment as per back to back agreement was due to unprecedented, unexpected and sudden global recession. The petitioners have also contended that they have light to invoke Force Maejure Clause. The petitioners have also stated that they are in the process of identifying alternate methods to liquidate the outstanding which was to the knowledge of respondent. The petitioners have also contended that respondent was to perform certain obligations under the back to back agreement, for non performance of the same, respondent is not entitled to present the cheques, which the petitioners had given as security.
The petitioners have annexed copies of this letter to petitions filed by the company and its Director namely Sri. Naveen Sriram. At this stage, petitioners cannot disown the contents of this letter. In this letter, petitioners have pleaded several circumstances to disown their liability. The: contents of this letter will have to be established by the petitioners before the trial court. Therefore, the questions raised by the petitioners regarding existence of debt or liability can be decided only after trial of the case. In these petitions u/s 482 Cr.P.C. the petitioners cannot urge these grounds to quash the proceedings.
In a decision reported in Collage Culture and Others Vs. Apparel Export Promotion Council, , the Delhi High Court has held:
A post dated cheque may be issued under two circumstances. Under circumstance one, it may be issued for a debt in present but payable in future. u/s circumstance it may be issued for a debt which may become payable in future upon the occurrence of a contingent event.
As per the averments of complaint, the petitioners had incurred liability to be discharged in favour of respondent. The Letters of Credit had been opened for a period of 90 days, for the failure of petitioners to make payment, Letters of Credit devolved upon respondent and in order to discharge the said liability, cheques were issued by petitioners. Therefore, at this stage of the case, there is prima-facie material to hold that cheques were issued to discharge liability, which had already accrued and not to discharge liability, which had to accrue on a future date on the happening of a contingent event.
The learned Senior counsel for petitioners has relied on the judgment of Supreme Court reported in 2007 CRL.LJ 2262 (in the case of Virender Singh -us- Laxmi Narain and another). The aforestated judgment was rendered in an appeal filed against judgment of conviction. The facts therein were rather peculiar. The complainant had advanced a sum of Rs. 80,000/- to the accused who had assured the complainant to secure a job for his brother. In the above judgment, the Delhi High Court has found that, the purpose for which cheque was issued was contrary to the provisions of law and the agreement to the knowledge of both parties was void-ab-initio.
In the case on hand, the petitioners have alleged that, in the financial transactions entered into between the petitioners and the complainant and issuance of cheques in the Indian Currency to discharge the liability which had fastened due to devolution of Letters of Credit on the respondent for the failure of petitioners to make remittance in US Dollar was in contravention of certain provisions of Foreign Exchange Management Act (FEMA).
As per "Back to Back" agreements entered into between the parties, the respondent had opened Letters of Credit in order to facilitate the petitioners to carry on merchandising trade in foreign countries. Whether these activities would attract violations of provisions of the Foreign Exchange Management Act (FEMA) or not is a matter for consideration before the trial court. There is no prima-facie material to indicate that contract entered into between the parties is void-ob-initio or it is forbidden by law.
In these petitions u/s 482 Cr.P.C. it is not permissible for this court to embark into an enquiry to record a finding as to the nature of contract entered into between the parties and alleged violations of the Foreign Exchange Management Act (FEMA). Even if these contentions are available to petitioners, they will have to establish the same before the trial court
The learned counsel for petitioners have contended that except Mr. Naveen Sriram, other petitioners had seized to be the Directors of company and they cannot be prosecuted for an offence u/s 138 of the Negotiable Instruments Act. The petitioners have contended that there are no allegations in the complaint that petitioners were in-charge of day-to-day affairs of the company. The respondent has disputed these facts.
In Para 15 of the complaint, it is stated thus:
The complainant submits that accused No. 2 to 8 being Directors of Accused No. 1 Company and having authorised the execution of Back to Back Contract for Merchandising Trade with complainant and further having also authorised the execution and providing the complainant with Deed of Personal and Corporate Guarantee being persons who at the time the offence was committed to be incharge of and responsible to the Accused No. 1 company and for the conduct of the business of the Accused No. 1 company are liable to be proceeded against u/s 141 of the N.I. Act.
It is also stated in the complaints that the statutory documents available with the Registrar of Companies clearly reveal that petitioners were the Directors of the company as on the date when offence was committed and respective cheques were issued and became due. The contention of petitioners that they had ceased to be the Directors of the company is an attempt to avoid the consequences of law.
At this stage, there are no reasons to suspect the averments of complaint and this court cannot resolve the factual controversies as to whether petitioners had ceased to be the Directors of company as on the date of transaction.
As regards averments necessary to attract an offence u/s 141 of the Negotiable Instruments Act, it is stated in complaints and annexed documents that accused No. 2 on behalf of the company and also on behalf of the other Directors namely accused No.3 to 8 had entered into ''Back to Back Contract'' for merchandising trade in foreign countries and also providing Deed of Personal and Corporate Guarantee to the complainant and they are responsible for the debt or liability.
The complainant has stated that, as the cheques were issued in furtherance of ''Back to Back Contract'' and also in furtherance of Deed of Personal and Corporate Guarantee executed by the Managing Director (accused No. 2) on behalf of all the Directors.
It is further averred by the complainant that accused No. 2 to 8 being the Directors of accused No. 1 had authorised accused No.2 to execute ''Back to Back Contract'' and had also authorised accused No. 2 to execute Deed of Personal and Corporate Guarantee. Thus, accused No. 2 to 8 were in-charge of and responsible to the first accused company for conduct of business of the first accused company are liable to be proceeded against and punished u/s 138 of the Negotiable Instruments Act.
In view of these allegations and contents of documents annexed to the complaint, at this stage, it is not possible to hold that the respondent cannot proceed against the petitioners other than Mr. Naveen Sriram u/s 138 of the Negotiable Instruments Act.
At this stage, learned counsel for petitioners submit that some of the petitioners have aged parents and they have personal inconvenience to attend the court on every date of hearing. In the result, I pass the following:
ORDER
The petitions are dismissed.
It is made clear that observations made herein are restricted for decision of these petitions. The learned trial judge shall not be influenced by the same during subsequent stages of the cases. If petitioners have personal inconvenience to attend the court on every hearing date, they are at liberty to invoke the provisions of Section 317 Cr.P.C.