Nitin Kishore Reddy vs Dinabandhu Mahakud

S.S. Mishra, J. The present petition has been filed under Section 482 of the Code of Criminal Procedure seeking quashing of the entire criminal proceeding in I.C.C. No.362 of 2021 pending before the learned S.D.J.M., Berhampur, for the alleged commission of offence punishable under Section 138 of the Negotiable Instruments Act, 1881.

Heard Mr. U.C. Mishra, learned counsel for the petitioner, and Mr. Sanjay Kumar Pradhan, learned counsel for the opposite party.

The prosecution case, as borne out from the complaint petition, is that the parties were admittedly having prior business dealings and disputes had arisen between them, resulting in institution of multiple proceedings, including Arbitration Petition (ARBP) No.31 of 2014 and other connected disputes. Besides I.C.C. No.143 of 2018, under Section 156(3) Cr.P.C. leading to registration of Baidyanathpur P.S. Case No.55 of 2019.

In order to amicably settle all the pending disputes, the parties executed a written Settlement Agreement dated 23.03.2019. Under the said agreement, the petitioner agreed to pay a consolidated amount of Rs.25,00,000/- towards full and final settlement of all disputes. It was stipulated that the said amount would be paid within eleven months, i.e., on or before 23.02.2020. It is not disputed that pursuant to the settlement, the petitioner paid a sum of Rs.10,50,000/- to the opposite party, leaving a balance amount of Rs.14,50,000/-.

According to the complainant, upon repeated demands for payment of the balance amount, the petitioner, on 25.05.2021, handed over the cheque in question bearing the amount of Rs.14,50,000/- and authorized the complainant to present the same on 01.10.2021. Accordingly, the cheque was presented before the banker on the stipulated date.

The complainant has further pleaded that upon presentation, the amount was not credited to his account. On enquiry, the complainant received the cheque along with a memo dated 25.10.2021 issued by the Branch Manager, Canara Bank, Komapalli containing the endorsement "Kindly contact with drawer and present again." Thereafter, the complainant issued statutory demand notice dated 30.10.2021 calling upon the petitioner to make payment within fifteen days. The petitioner replied to the notice but failed to make payment of the cheque amount. Consequently, the complaint under Section 138 of the Negotiable Instruments Act was instituted.

Aggrieved by continuation of the criminal proceeding, the petitioner has approached this Court invoking its inherent jurisdiction under Section 482 Cr.P.C., praying for quashing of the complaint proceeding.

Mr. Mishra, learned counsel for the petitioner, contended that the parties had entered into a comprehensive settlement agreement dated 23.03.2019 covering all existing disputes between them. Under the said settlement, the petitioner agreed to pay Rs.25,00,000/- towards full and final settlement of all pending litigations. Demonstrating his bona fides, the petitioner admittedly paid Rs.10,50,000/- to the complainant. However, despite receipt of the substantial amount, the complainant failed to withdraw any of the pending proceedings as allegedly agreed between the parties. It is argued that the complainant himself committed breach of the settlement and therefore cannot derive any advantage from his own default.

He further submitted that the cheque in question was admittedly handed over as a security cheque and not towards immediate discharge of any legally enforceable debt. Attention is invited to paragraph-3 of the complaint petition wherein, according to the petitioner, the complainant himself has admitted that the cheque was originally handed over undated as security. Once the settlement itself stood frustrated due to breach by the complainant, the security cheque could not subsequently be utilized for initiating criminal prosecution. paragraph-3 of the complaint petition is reproduced herein for ready reference:-

Mr. Mishra argued that a security cheque, issued merely as collateral assurance under a settlement agreement, does not automatically constitute a cheque issued in discharge of a legally enforceable debt or liability. The complainant cannot convert a purely civil dispute into criminal prosecution by presenting a security cheque. In support of the aforesaid proposition, he placed reliance upon the decision of the Hon'ble Supreme Court in Indus Airways P. Ltd. v. Magnum Aviation P. Ltd., reported in (2014) 12 S.C.R 539, wherein it has been held that where a cheque is issued merely as advance payment or security and not against an existing legally enforceable debt, dishonour thereof would not attract Section 138 of the Negotiable Instruments Act.

Learned counsel further submitted that the dishonour memo itself does not disclose insufficiency of funds. Instead, the endorsement made by the banker reads "Kindly contact the drawer and present again." According to the petitioner, such endorsement does not fall within the contingencies contemplated under Section 138 of the Negotiable Instruments Act. It is submitted that the complainant was under an obligation to re-present the cheque instead of directly issuing statutory notice and instituting prosecution. He placed reliance upon the judgment of the Madras High Court in Sathiya Murthi v. Kesava Narayanan reported in Crl.O.P. No.10406 of 2019, wherein proceedings under Section 138 were reportedly quashed in similar circumstances where the cheque return memo contained an endorsement directing the payee to contact the drawer and present the cheque again. It is thus submitted that continuation of the complaint proceeding would amount to abuse of the process of Court and deserves to be quashed in exercise of inherent jurisdiction under Section 482 Cr.P.C.

Per contra, Mr. Pradhan, learned counsel appearing for the opposite party submitted that the settlement agreement dated 23.03.2019 clearly stipulated payment of the entire settlement amount of Rs.25,00,000/- within eleven months. The obligation of the complainant to withdraw the pending litigations would arise only after receipt of the entire agreed amount and not upon receipt of any part payment. The petitioner admittedly paid only Rs.10,50,000/- and defaulted in payment of the remaining Rs.14,50,000/-. Consequently, the complainant never became obliged to withdraw any of the pending proceedings.

Mr. Pradhan argued that the petitioner has deliberately attempted to read isolated clauses of the settlement agreement while ignoring the document as a whole. The agreement must be construed harmoniously and conjointly. A combined reading of the relevant clauses clearly demonstrates that withdrawal of the pending proceedings was contingent upon receipt of the full settlement amount. Therefore, no breach can be attributed to the complainant. He further contended that the petitioner's assertion that the settlement was entered into "without prejudice" is wholly misconceived, as the expression "without prejudice" does not find place either in the written agreement or in the complaint petition and has been introduced for the first time in the present proceedings.

So far as the plea regarding the cheque being a security cheque is concerned, learned counsel submitted that the same raises disputed questions of fact which cannot be adjudicated in proceedings under Section 482 Cr.P.C. Whether the cheque was issued merely as security or towards discharge of an existing liability is a matter requiring evidence during trial. He placed reliance upon the judgment of the Hon'ble Supreme Court in Rathish Babu Unnikrishnan v. State (Govt. of NCT of Delhi) and another, reported in (2022) 87 OCR (SC) 311, wherein it has been held that the defence that a cheque was issued only as security and not towards discharge of legally enforceable debt constitutes a factual defence requiring appreciation of evidence and cannot ordinarily be examined while exercising jurisdiction under Section 482 Cr.P.C.

Mr. Pradhan further submitted that the cheque was admittedly signed and voluntarily handed over by the petitioner. Merely because the cheque was initially blank or undated does not invalidate its subsequent presentation. He relied upon the judgment of the Hon'ble Supreme Court in Bir Singh v. Mukesh Kumar, reported in 2019 (I) OLR 447, and the judgment of this Court in Maheswar Mishra v. State of Orissa, reported in 2010 (I) OLR 997, wherein it has been held that a voluntarily signed blank cheque handed over towards payment attracts the statutory presumption under Section 139 of the Negotiable Instruments Act and the burden lies upon the accused to rebut such presumption by leading evidence during trial.

This Court has heard learned counsel for the petitioner as well as learned counsel appearing for the opposite party at length and has carefully perused the pleadings, the complaint petition, the settlement agreement and the judgments relied upon by both sides.

The scope of interference under Section 482 Cr.P.C. is well settled. The inherent jurisdiction is to be exercised sparingly and with great circumspection to prevent abuse of the process of Court or to secure the ends of justice. At the stage of considering a prayer for quashing, this Court is not expected to conduct a meticulous appreciation of evidence or adjudicate disputed questions of fact which are required to be examined by the trial court on the basis of evidence adduced by the parties. It would be appropriate to rely on the case of CBI v. Aryan Singh, reported in (2023) 18 SCC 399, where the Honourable Supreme Court held thus:-

Upon consideration of the rival submissions, this Court finds determination of the controversy raised by the petitioner would necessarily require examination of the terms of the agreement, appreciation of documentary evidence and, if necessary, oral evidence led by the parties during trial. Such an exercise would travel beyond the limited jurisdiction available to this Court in proceedings under Section 482 Cr.P.C.

This Court is, therefore, of the considered opinion that no exceptional circumstance has been made out warranting exercise of the inherent jurisdiction to quash the criminal proceeding at its threshold. The petitioner shall be at liberty to raise all the defences available to him in law before the learned trial court, which shall consider the same independently on the basis of the evidence brought on record and in accordance with law.

Accordingly, the CRLMC is dismissed.