Mirza Harishali Baig vs State Of Orissa & Anr.

Dr. Sanjeeb K Panigrahi, J.

The Petitioner being a loanee, has prayed for quashing of the entire Criminal Proceedings initiated against him vide 1CC Case No.109 of 2025 pending before the Court of learned SDJM (S), Cuttack, for the offences punishable under Section 25(C) of the Payment and Settlement Systems Act, 2007 (51 of 2007).

In the year 2024, the Petitioner had applied for a loan in the Opposite Party No.2/ Bank. Upon sanctioning and disbursement of the loan amount, as per the terms and conditions of the loan agreement the Opposite Party No.2/Bank initiated Electronic fund transfer for a sum of Rs.19,969/-. Since the said attempt of the Bank was dishonoured due to insufficiency of funds, the Petitioner was, accordingly, communicated about the said issue on 07.01.2025. Despite multiple attempts and repeated communications since Petitioner failed to make necessary payment, a legal notice was issued to the Petitioner on 01.02.2025. Despite issuance of said notice, since the Petitioner did not keep necessary funds in his Bank account and due to failure of Electronic Fund Transfer pertaining to the loan availed by the Petitioner in multiple times, the above noted 1CC Case was instituted against the present Petitioner.

Accordingly, being aggrieved by the institution of the above noted 1CC Case, the Petitioner has preferred the present CRLMC.

Learned counsel for the Petitioner made the following submissions in support of his contentions:

The present case has been filed challenging institution of the proceeding vide 1CC Case No.109 of 2025 in the court of learned SDJM(S), Cuttack for the alleged offence under Section 25 (C) of the Payment and Settlement System Act, 2007. He contends that the complaint petition does not prima-face make out a case under Section 25 (C) of the Payment and Settlement System Act. The Opposite Party No.2/ Bank has filed 1CC Case No.109 of 2025 against the Petitioner. The complainant is a registered company under the Companies Act 1956 and Miss Smruti Smaranika Das is the power of Attorney Holder and Legal Manager of the said Bank. It is alleged that the Accused had approached the Bank for sanctioning of loan vide Loan Agreement No-127000077. As per the terms and conditions of the said agreement, the Petitioner was required to pay interest with others charges.

Accordingly, the complainant Bank initiated Electronic Funds Transfer of Rs.19969/- from Account No.20373390007 on 07.01.2025. The Electronic Funds Transfer was dishonoured due to insufficiency of funds in the said account, which was also intimated to the Accused/Petitioner. Though, the Petitioner assured that he will make arrangement of funds, he deliberately cheated the Complainant/Bank. Accordingly, on 01.02.2025, the Complainant issued legal notice to the Petitioner.

The provision under Section 25 (1) (C) of the Payment and Settlement Systems Act, 2007 stipulates that a dishonoured electronic funds transfer requires to be considered as an offence. The beneficiary must make a written demand for payment to the initiator within 30 days of receiving the notice of the dishonour. The beneficiary must issue a notice within 30 days of being informed by the Bank of the dishonour. This applies to the present electronic funds transfers that failed due to insufficiency of funds or exceeding agreed-upon limits. If payment is not made within 15 days of receiving the notice, the person who initiated the transfer can face penalties under the said Act. The offence can result in imprisonment for up to two years' with fine up to twice the amount of the transfer, or both and Section 25 is applicable to electronic transfers made to discharge a debt or liability.

As per the above provision the 30 days period is mandatory for repayment by way of demand notice. In the present case, the statutory provision has not been followed, the complainant bank is failed to fulfil the mandatory provision. Therefore, the proceeding is vitiated. The continuation of the proceedings would result in grave prejudice, harassment, and miscarriage of justice, and amounts to abuse of the criminal process. The present case is a fit case for exercise of inherent jurisdiction of this Court as the allegations, even if taken at face value, does not disclose the essential ingredients of the offences as alleged.

He, accordingly, prays for quashing the impugned proceeding.

Per contra, learned counsel for the State vehemently opposed the prayer made in the present petition and submitted that the material collected during investigation disclose a clear prima facie case against the Petitioner and that the role of the Petitioner is evident from the record and cannot be brushed aside at this stage and that the pleas raised by the Petitioner involve disputed questions of fact which require detailed examination during trial and cannot be adjudicated in proceedings under the inherent jurisdiction of this Court and that the present petition is an attempt to derail a legitimate prosecution which otherwise warrants trial and therefore, deserves to be dismissed.

Learned counsel for the Opposite Party No.2, in his opposition, submits that the Opposite Party No. 2 is body incorporated under the Companies Act, 2013 having license from the Reserve Bank of India and having its registered Office at Senapati Bapat, Lower Parel (West) Mumbai 13 and having its branch office at Shanti Niketan Building, Choudhury Bazar , Jhola Sahi Road , Cuttack , Odisha-753001.

During the course of business, the Petitioner had approached the Opposite Party No.2/Bank for a personal loan of Rs.9,18,432.00/-which was sanctioned and disbursed on 10.02.2022. The Petitioner while discharging his EMIs had initiated auto debit from his account through ECS. One of such EMI payment was dishonoured due to insufficient funds in the account of Petitioner. It is pertinent to mention here that the electronic fund transfers are governed under a special law i.e. the Payment and Settlement Systems Act 2007 and as per the provision of the said Act, any electronic funds transfer which gets dishonoured due to insufficient funds in the account of person initiating the electronic funds transfer, is liable for such dishonour under the said act.

The Petitioner has filed this application under Section 528 of the BNSS 2023 for quashing of the complaint case bearing 1CC Case No.109/2025 which is filed under Section 25(C) of the Payment and Settlement Systems Act, 2007 for dishonour of electronic funds transfer which is subjudiced before the Court of learned SDJM (Sadar) Cuttack.

It is further submitted that as per the Petitioner, the legal demand notice for dishonour of the electronic funds transfer for insufficiency of funds under Section 25(1)C of the Payment and Settlement Systems Act 2007 was issued on 01.02.2025.

The Opposite Party No.2 submits that the provision under Section 25(1) C clearly states that “The beneficiary makes a demand for the payment of the said amount of money by giving a notice in writing to the person initiating the electronic funds transfer within thirty days of the receipt of information by him from the bank concerned regarding the dishonour of the electronic funds transfer”. The Opposite Party No.2 was intimated regarding the dishonour of the ECS on 07.01.2025 as per the clearance memo. On being intimated regarding the dishonour of electronic funds transfer dated 07/01/2025, the Opposite party No. 2 issued a statutory demand notice as per the provision under Section 25(1) C of the Payment and Settlement Systems Act 2007 which was sent through registered post on 02/02/2025.

As per the act, the demand notice should be issued in writing to the person who has initiated the electronic funds transfer within 30 days of the receipt of information by the beneficiary from the bank concerned regarding the dishonour of the electronic fund transfer and in the present case, Opposite party No. 2 has issued a demand notice within 30 days. The dishonour of electronic fund transfer was intimated on 07.01.2025 and the notice was issued on 01.02.2025 and was sent on 02.02.2025 which is within 30 days. The Opposite Party No.2 has committed no illegality and the complaint case was filed after fulfilling all the statutory compliances.

The Opposite Party No.2 also contends that 15 days time was given to the Petitioner under Section 25(1) D of the Payment and Settlement System Act 2007 and after the compliance of the limitation of demand notice, the complaint case was filed within one month as per the provisions. Hence, the application filed under Section 528 of the BNSS 2023 is not maintainable. The Opposite Party No.2 has not abused the process of law and has also not committed any gross miscarriage of justice and the allegation and the grounds taken by the Petitioner is baseless. The Petitioner in order to escape from the loan liability has filed the present application before this Court.

It is a well-settled that, while exercising its inherent jurisdiction under Section 482 Cr.P.C. (now Section 528 of BNSS) this Court does not undertake a meticulous appreciation of evidence or conduct a mini-trial. The evaluation of the evidentiary worth of the prosecution case and the determination of guilt or innocence lie exclusively within the domain of the learned Trial Court upon a full-fledged trial

Heard learned counsel for the parties and perused the material on record. The question that falls for consideration here is a narrow one that is, does the complaint disclose the essential ingredients of an offence under Section 25(1)(c) of the Payment and Settlement Systems Act, 2007. The answer to this question must be found not in the rival rhetoric of the parties but in the dates and documents that constitute the spine of the complaint, tested against the provisions of the statute and the well-worn contours of this Court's inherent jurisdiction.

It is necessary, at the outset, to recall the discipline that governs the exercise of inherent jurisdiction under Section 528 of the Bharatiya Nagarik Suraksha Sanhita, 2023, a discipline that has remained remarkably constant across the transition from Section 561-A of the Code of 1898 to Section 482 of the Code of 1973, and now to its present incarnation. This jurisdiction is not a general reservoir of appellate power to be dipped into whenever a court is invited to form a provisional view on the probable outcome of a trial, it is rather a residual and extraordinary power which is required to be invoked sparingly with circumspection, and only in the rarest of the rare cases where the continuance of a criminal proceeding would constitute a patent abuse of the process of law or would not, upon the plainest reading of the record in order to serve the ends of justice. The guiding constellation of principles laid down in State of Haryana v. Bhajan Lal^{11.1992 Supp (1) SCC 335}, remains the polestar so far as the interference is warranted where the allegations in the complaint, even if accepted in their entirety and taken at face value, do not prima facie constitute the offence alleged. Where the allegations are so absurd or inherently improbable that no prudent person could ever reach to a conclusion of guilt; where there exists an express legal bar to the institution or continuance of the proceeding; or where the proceeding is manifestly attended with mala fide or has been instituted with an ulterior motive to wreak vengeance are some of the solid grounds prescribed for quashing a criminal proceeding.

What this jurisdiction emphatically does not countenance is a meticulous, evidence-by-evidence appraisal of the rival versions, or the conduct of what is, in substance, a trial in miniature at the interlocutory stage. The sifting and weighing of evidence, the assessment of credibility and the ultimate determination of guilt or innocence are functions committed exclusively to the trial court upon a full appreciation of evidence led before it. This Court's function, at this stage, is confined to a demurrer-like exercise to ask whether, on a plain and unstrained reading of the complaint and the documents accompanying it, the ingredients of the offence stand disclosed, without embarking upon an inquiry into which of the two competing narratives is, on balance, more probable.

Section 25 of the Payment and Settlement Systems Act, 2007 was engrafted onto the statute book in recognition of a simple economic truth that is as commerce migrated from paper instruments to electronic modes of transfer, the sanctity that the law had long extended to the dishonour of a cheque under Section 138 of the Negotiable Instruments Act, 1881 required an analogous extension to the dishonour of an electronic funds transfer, failing which the credibility of the electronic payment ecosystem which is the infrastructure on which a modern, increasingly cashless economy reposes would stand exposed and unprotected. The provision is, in its structure and its animating philosophy, a close congener of Section 138 of the N.I. Act, and it is appropriate that it be construed purposively, in a manner that gives full effect to that legislative design, while remaining faithful to the pre-conditions the legislature has chosen to impose as safeguards against its misuse.

Those pre-conditions, distilled from the language of Section 25(1)(c) and the provision that follows it, are cumulative and sequential that is, there must exist a debt or other liability, whether whole or in part, sought to be discharged by means of an electronic funds transfer initiated by the person against whom the complaint lies, that said transfer must be dishonoured on account of insufficiency of funds in the account of the initiator, or for having exceeded an arrangement made with the bank; the beneficiary, upon receipt of information of such dishonour from the bank concerned, must make a written demand for payment upon the initiator by issuing a notice within thirty days of receipt of that information. Further, the initiator must fail to make payment of the said amount within fifteen days of receipt of such notice. It is only upon the confluence of each of these elements that the offence, and with it the cause of action to prosecute, crystallises. The thirty-day period for issuance of notice, and the fifteen-day period for compliance thereafter, are not empty formality, they are the statute's own calibration of fairness, affording the initiator a real and meaningful opportunity to make good the default before the coercive machinery of the criminal law is set into motion.

Tested against this statutory architecture, the complaint on record discloses the following sequence, which is not seriously disputed between the parties, the electronic funds transfer towards discharge of the Petitioner's loan liability was dishonoured on account of insufficiency of funds for which intimation was received by the Opposite Party No.2/Bank on 07.01.2025; the statutory demand notice was thereupon issued on 01.02.2025 and despatched by registered post on 02.02.2025. On a plain computation, the notice was issued within twenty-six days of the Bank's receipt of intimation of dishonour which means comfortably within, and not in excess of, the thirty-day period prescribed by Section 25(1)(c). The Petitioner's principal contention that the mandatory thirty-day period for issuance of the demand notice stood breached, thereby vitiating the entire proceeding, does not, therefore, withstand the plain arithmetic of the very dates the Petitioner himself does not dispute.

A submission that invites this Court to find a statutory infraction where the record itself demonstrates compliance is not a submission this Court can accept merely because it is pressed with vehemence. In fact, jurisprudence built on assertion cannot prevail over arithmetic built on dates.

It further appears from the record that the statutorily mandated period of fifteen days within which the Petitioner was required to discharge the demanded amount upon receipt of the notice was allowed to elapse without compliance, whereafter the complaint came to be instituted. On the face of the complaint, therefore, each of the cumulative ingredients that Section 25(1)(c) exacts the underlying liability. The electronic funds transfer initiated to discharge it, its dishonour for insufficiency of funds, a demand notice issued within the outer limit of thirty days and the initiator's failure to pay within the succeeding fifteen days stands disclosed, not as a matter of inference or elaborate reconstruction, but as a matter of plain reading. Where a complaint, unaided by extrinsic material, itself narrates a chronology that satisfies every element the statute prescribed, it cannot be said that the allegations, even if accepted in their entirety, fail to constitute the offence; the first and most frequently invoked category identified in Bhajan Lal (supra) has, accordingly, no application to the case at hand.

To the extent the Petitioner seeks to raise questions touching the manner or adequacy of service of the notice or to controvert the dates asserted by the complainant Bank, such questions are by nature, disputed questions of fact which quintessentially the domain of evidence and not of demurrer. This Court, sitting in the exercise of its inherent jurisdiction, is neither equipped nor entitled to resolve such disputes by a preliminary weighing of competing assertions; that exercise belongs, as of right, to the trial court, which alone is seized of the forum, the procedure, and the evidentiary tools like the examination, cross-examination, and the appreciation of documentary proof which are necessary to arrive at a considered finding. If we do otherwise mean to convert a jurisdiction of exception into a jurisdiction of first appeal which is an inversion that the law does not sanction. Nor can it be said that the proceeding bears any of the other hallmarks that would attract interference. There is no legal bar, express or implied, to its institution. In fact, nothing on the record to suggest that the allegations are so inherently improbable that no prudent person could ever countenance them and no material has been placed to suggest that the complaint was actuated by mala fide or instituted as an instrument of private vendetta rather than as a legitimate assertion of a statutory remedy available to a lending institution against a defaulting borrower. What remains, when the rhetoric is set aside, is a borrower who has not repaid an admitted liability within the window the statute affords him, seeking now to arrest, at the threshold, a prosecution whose ingredients he cannot dislodge on the very facts he presents.

The inherent jurisdiction under Section 528 of the Bharatiya Nagarik Suraksha Sanhita, 2023 is a jurisdiction of exception, meant to guard the citizen against the oppression of an unfounded prosecution, and not a jurisdiction of convenience to be invoked by every litigant who would rather not stand trial.

Tested against that touchstone, the present petition fails. The complaint discloses, upon a plain and unstrained reading, every ingredient that Section 25(1)(c) of the Payment and Settlement Systems Act, 2007 which requires the statutory notice, far from being belated, was issued well within the thirty-day period the law prescribed and the residual grievances the Petitioner seeks to agitate are, in their essential character, disputed questions of fact reserved for determination at trial. None of the categories that would justify this Court's interference as enumerated in Bhajan Lal(supra) and consistently reaffirmed thereafter which stands attracted.

Accordingly, this Court finds no warrant, in law or on facts, to terminate the proceeding in ICC Case No.109 of 2025 pending before the learned S.D.J.M. (Sadar), Cuttack, and the prayer for quashing must fail. The petition, being devoid of merit, is dismissed, with the clarification that the observations made herein are confined to the limited purpose of testing the maintainability of this petition and shall not be construed as an expression of opinion on the merits of the prosecution case, which the learned Trial Court shall determine, uninfluenced by anything stated above upon a full and fair trial in accordance with law.

Interim order, if any, passed earlier stands vacated.