SAMPELLY SATYANARAYANA RAO v. · INDIANRENEWABLEENERGY. DEVELOPMENT AGENCY LIMITED

The Judgment of the Court was delivered by ADARSH KUMAR GOEL, J. I. This appeal has been preferred against the judgment and order dated 81h May, 2014 passed by the High E Court of Delhi at New Delhi in Writ Petition (Criminal) No.1170 of201 l.

2Copy pinpoint2. Question for consideration is whether in the facts of the present case, the dishonour of a post-dated cheque given for repayment of loan installment which is also described as "security" in the loan agreement is , covered by Section 138 of the Negotiable Instruments Act; 1881 ("the F Act"). .

3Copy pinpoint3. The appellant is Director of the company whose cheques have been dishonoured and who is also the co-accused. The company is engaged in the field of power generation. The respondent is engaged in development of renewable energy and is a Government of India ~nterprise. Vide the G loan agreement dated l S h March, 200 I, the respondent agreed to advance 1

loan of Rs.11.50 crores for setting up of 4.00 MW B,iomass based Power Project in the State ofAndhra Pradesh. The agreement recorded that post- dated cheques towards payment of installment of loan (principal and interest) were given by way of security. The text ofthis part of the agreement H

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A is quoted in the later part of this order. The cheques carried different dates depending on the dates when the installments were due and upon dishonour ~ thereof, c<;>mplaints including the one dated 27'h September, 2002 were filed by the respondent in the court of the concerned Magistrate at New Delhi.

4Copy pinpoint4. The appellant approached the High Court to seek quashing of the complaints arising out of 18 cheques of the value ofabout Rs. I0.3 crores. Contention of the appellant in support of his 'case was that the cheques wer-e given by way of security as mentioned in the agreement and that on the date the cheques were issued, no debt or liability was due. Thus, dishonour of post-dated cheques given by way of security did not fall c m1der Section 13_8 of the Act. Reliance was placed on clause 3.1 (iii) of the agreement to the effect that depQsit of post-dated cheques toward repayment of installments was by way of "security''. Even the first inst11llment as per the agreement became.due subsequent to the handing over of the post-dated cheque. Thus, contended the appellant, it was not towards discharge of debt or liability in presenti but for the amount payable D in future.

5Copy pinpoint5. The High Court did not accept the above contention and held :- "J 0. In the present case when the post-dated cheques were issued. the loan had been sanctioned and hence the same fall ·E in the first categ01y that is they were cheque issuedfor a debt '"'"' in present but payable in future. Hence, I find no reason to quash the complaints. However, these observations are only prima facie in nature and it will be open for the party to prove to the contrary during trial. "

6Copy pinpoint6. We have heard learned counsel for the parties. F

7Copy pinpoint7. It will be appropriate to reproduce the statutory provision in question which is as follows : · '" 138. Dlslto11our ofcltequefor lnsuffeclency, etc., offunds 111 tlte accou11t. - Where any cheque drall'n by a person on an account maintained by him with a banker forpayment ofany G amount ofmoney to another person from out ofthat account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount ofmoney standing to the credit ofthat account is insiifficient to honour the cheque or that it exceeds the amount H

SAMPELLY SATYANARAYANA RAOv. IND!AN RENEWABLE ENERGY 535 DEVELOPMENT AGENCY LIMITED [ADARSH KUMAR GOEL, J.]

arranged to be paidfi·om that accourrt by an agreement made A with that bank, such person shall be deemed to have committed an offence and sliall, without prejudice to any other previsions. ofthis Act. be punished with imprisonment for a term which may be extended to two years, or with fine which may extend to twice the amount ofthe cheque, or with both: B Provided that nothing contained in this section shall , apply uri!ess_~ (a) the cheque has been presented to the bank within a period ofsix months from the date on which it is drawn or within the period ofits validity, whiehever is earlier; c (b) the payee or the holder in due course ofthe cheque, as the case may be, makes a demand for the payment ofthe said amount ofmoney by giving a notice in writing, to the drawer of the cheque, within thirty days ofthe receipt ofinformation by D. him from the btmk regarding the 'return of the cheque as unpaid; and (c) the.drawer of such cheque fails to make the payment ofthe said amount ofmoney to the payee 01; as the case may be, to the holder in due course ofthe cheque, within fifteen days ofthe receipt of· the said notice. · Explanation. - For the purposes ofthis section, "debt or other liability" means a legally enforceable debt or other liability. " · 8. Clause 3.1 (iii) of the agreement may also be noted :- F "3.1 SECURITY FOR THE LOAN - The loan together with the interest, interest tax, liquidated damages, commitment fee, up front fee prima on repayment or ori redemption, costs, expenses and other monies shall be secured by ; G ~ (i) xxxxx (ii)xxxxx (iii) Deposit of Post dated cheques towards repayment of installments of principal of loan amount in accordance with H

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A agreed repayment schedule and installments of interest payable thereon."

9Copy pinpoint9. Reference may now be made to the decision of this Court in lndusAirways PrivateLimfied versus Magnum Aviation Private Limited', on which strong reliance has been placed by learned counsel for the appellant. B The question therein was whether post-dated cheque fasued by way of advance payment for a purchase order could be considered for discharge of legally enforceable debt. The cheque was issued by way of advance payment for the purchase order but the purchase order was cancelled and payment of the cheque was stopped. This Court held that while the purchaser may be liable for breach of the co-ntract,_when a contract provides c that the purchaser has to pay in advance and cheque towards advance payment is dishonoured, it will not give rise to criminal liability under Section 138 of the Act. Issuance of cheque towards advance payment could not be considered as discharge of any subsisting liability. View to this effect of the Andhra Pradesh High Court in Swastik Coaters (P) Ltd. versus Deepak Bros. 1 , Madras High Court in Bala.ii Seafoods Exports (India) D Ltd. versus Mac Industries Ltd.·', Gujarat High Court in Slu111ku .Co11cretes (P) Ltd. versus State ofGujarat and Kerala High Court in Supply House versus Ulla!>-' was held to be correct view as against the view of Delhi High Court in Mag11umAviatio11 (P) Ltd. versus State6 and Mojj Engg. Systems Ltd. versusA.B. Sugars Lttl.7 which was disapproved.

10Copy pinpoint10. We have given due consideration to th~ submission advanced on behalf of the appellant as well as the observations of this Court in llldus Airways (supra) with reference to the 'explanation to Section 138 of the Act and the expression "for discharge of any debt or other liability" occurring in Section 138 of the Act. We are of the view that th~ question r whether a post-dated cheque is for "discharge of debt or liability" depends on the nature of the transaction. Ifon the date of the cheque liability or debt exists or the amount has become legally recoverable, the Section vis attracted and not otherwise. ·

11Copy pinpoint11. Reference to the facts of the present case clearly shows that G 1 (2014) 12 sec 539 2( 1997) Crl. LJ 1942 (AP) 3 ( 1999) I CTC 6 (Mad) 4 (2000) Cr! LJ 1988 (Guj) ' (2006) Cr!. LJ 4330 (Ker) '(2010) 172 DLT 91: (2010) 118 DRJ 505 H ; (2008) 154 DLT 579

SAMPELLY SATYANARAYANA RAOv.INDIAN RENEWABLE ENERGY 537 DEVELOPMENT AGENCY LIMlTED [ADARSH KUMAR GOEL, J.]

though the word "security" is used in clause 3.1 (iii) of the agreement, the A. said expression refers to the cheques being towards repayment of install men ts. The repayment becomes due under !he agreement, the moment the loan is advanced and the installment falls due. It is undisputed that the loan was duly disbursed on 281h February, 2002 wliich was prior to the date of the cheques. Once the loan was disbursed and installments have B fallen nu;:; on 1h ~ date o{the cheque as per the agreement, dishonour of such cheques wc>'1ld fall under Section 138 of the Act: The cheques undoubtedly-represent the outstanding liability. . -

12Copy pinpoint12. Judgment in Tm/us Airways (supra) is clearly distinguishable. As already noted, it was held therein that liability arising out of claim for breach of contract under Section 138, which arises on account of dishonour c of cheque issued was not by itself at par with criminal liability towards discharge of acknowledged and admitted debt under a loan transaction. Dishonour of cheque issued for discharge oflater liability is clearly covered by the statute in question. Admittedly, on the date of the cheque there was a debt/liability in presenti in terms of the lofilTagreement, as against the case of bu/us Airways (supra) where the purchase order had been cancelled and cheque issued towards advance payment for the purchase order was dishonoured. In that case, it was found that the cheque had not been issued f<>_r, discharge of liability but as advance for the purchase order which was cancelled. Keeping in mind this fine but real distinction, the ~ said judgment cannot be applied to a case of present nature where the cheque was for repayment ofloan installment which had fallen due though such deposit of cheques towards repayment of installments. was also described as "security'' in the loan agreement. In applying the judgment in l~dus '1irways (supra), one cannot fose sight of the difference between a transaction of purchase order which is cancelled and that of a loaf! transaction where loan has actually been advanced and its repayment is due on the date of the cheque ..

13Copy pinpoint13. Crucial question to determine applicability of Section 138 of the Act is whether the cheque represents discharge of existing enforceabie debt or liability or whether it represents advance payment without there being subsisting debt or liability. While approving the views of different G High Courts noted earlier, this is the underlying principle as can be discerned from discussion of the said cases in the judgment of this Court.

14Copy pinpoint14. In Balaji Seafoods (supra), the High Court noted that the cheque was not handed over with the intention of discharging the subsisting H

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A liability or debt. There is, thus, no similarity in the facts of that case simply because in that case also loan was advanced. It was noticed speCifically therein - as was the admitted case of the parties - that the cheque was issued as "security" for the advance and was not intended to be in dis_charge of the liability, as in the prese[lt case.

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DEVELOPMENT AGENCY LIMITED [ADARSH KUMAR GOEL, J.]

"17. The parameters a/jurisdiction ofthe High Court in A exercising itsjurisdiction under Section 482 ofthe Code pfCriminal Procedure is now wel! settled. Although it is ofwide amplitude. a great deal ofcaution is also required in its exercise. What is required is application ofthe well- known legal principles involved in the matter. B ***

22. Ordinarily, a defence ofan accused although appears to be plausible should not be taken into consideration for exercise ofthesardjurisdiction. Yet again, the High .Court at that stage would npt ordinarily enter into a c disputed question offact. it, however, does not mean that documents of unimpeachable character should not be taken into consideration at any cost for the pitrpose ·of finding out as to whether continuance of the criminal proceedings would amount to an abuse ofprocess ofcourt or that the complaint petition ii filed for causing mere -o harassment to the accused. While we are not oblivious of the fact that although a large number ofdisputes should ordinarily be determine_d only by the civil courts, but · criminal cases ale flied only for achieving the ultimate goal, namely, to force the accused to pay the amount due to the complainant immediately. The courts on the one hand should 11.ot encourage such a practice; but, ·an the othe1; cannot also travel beyond its jurisdiction to inte1fere with the proceeding which is othenvise genuine. T'he cou;ts cannot also lose sight ofthe fact that in certain matters, both civil proceedings and criminal proceedings would be maintainable. " -

12. In Rallis India Ltd. v. Poduru Vidya Bhushan [(2011) 13 SCC 88), this Court expressed its views on this point as under: (SCC p. 93, para 12) ''.12. At the threshold, the High Court should not have interfered with the cognizance ofthe complaints having been taken by the trial court. Tlie High Court could not have discharged the respondents of the said liability"at the threshold. Unless the parties are given opportunit)i to

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A . l?ad evidence. it. is not possible to come to a definite conclusion as to what was"the date ·when the earlier partnership was dissolv~d and since what date the respondents ceased to be the.partners ofthe firm."

16Copy pinpoint16. We are in respectfuiagreement with the above observations. B In the present case, reference to the complaint (a copy of which is Annexures P-7) shows that as per the case of the complainant, the cheques Which were subject rhatter.9Jthe said complaint were towards the partial repayment of the dues under the loan agreement (para 5 of the complaint) .. J 7. As is clear from the above observations of this Court, it is well ·settled that while dealing with a quashing petition, the Court fias ordinarily c td proceed on the basis ofaverments in the compfaint. The defence of the accused cannot be con~idered at this stage. The court considering the - prayer for quashing does not adjudicate upon a disputed question of fact.

18Copy pinpoint18. In R"ng"ppti versus Sri Mo/um~, this Court held that once issuance of a cheque and signature thereon are admitted,' presumption of a D legally enforceable debt io favour of the holder of the cheque arises. his .for the accused to rebut the said presumption, though accused need not adduce his own evidence and can rely upon tlie material submitted by the. complainant. However, mere statement of the accused may_ not be sufficient to rebut the said presumption. A post dat~ cl'\eque .is a well recognized . E mode ofpaymentio.

19Copy pinpoint19. Thus,the question has to be answered in favourofthe respondent and against the appellant. Dishonour of cheque· in the present case being for discharge of existing liabtlity is covered by Section 138 of the Act, as rightly held by the High Court. ~

20Copy pinpoint20. Accordingly, w.e do not find any merit in t~is appeal and the . same is dismissed. Since we have only gone into-the questiop whethcr on admitted facts, case for quashing has not been made.put, the appellant will be at liberty to~contest the matter in trial court in accordance With law.

.. G Divya Pandey Appeal dismissed . . '

'(2010) 11sec441 H "'Goaplast (P) tut. versus Chico Ursula o· Souza (2003) 3 SCC 232