A Complaint for Dishonour of Cheque [S.138 NI Act] cannot be quashed on the ground that ‘Cheque was issued as Security’; SC [Read the Judgment]

A Complaint for Dishonour of Cheque [S.138 NI Act] cannot be quashed on the ground that ‘Cheque was issued as Security’; SC [Read the Judgment]

A two Judge Bench of the Supreme Court in HMT Watches Ltd. Vs. Abida [Crl. Appeal  No;472 of 2015] it is held that a complaint filed U/S 138 of Negotiable Instrument Act for ‘dis-honour of Cheque’ cannot be quashed by High Court on the ground that ‘Cheque was issued as Security’, invoking the power U/S 482 of Criminal Procedure Code .

While reversing a Judgment from High Court of Kerala the Bench comprising of Justice DIpak Mishra and Justice Prafulla C. Pant had held as follows;

“Having heard learned counsel for the parties, we are of the view  that the accused (respondent no.1) challenged the proceedings  of  criminal complaint cases  before  the  High  Court,  taking  factual  defences. Whether the cheques were given as security or not,  or  whether  there was outstanding liability or not is a question  of  fact  which  could have been determined only by the trial court after recording  evidence of the parties. In  our  opinion,  the  High  Court  should  not  have expressed its view on the disputed questions of  fact  in  a  petition under Section 482 of the Code of Criminal  Procedure,  to  come  to  a conclusion that the offence is not made out.  The High Court has erred in law in going into the factual aspects of the matter which were  not admitted between  the  parties.

The  High  Court  further  erred  in observing that Section 138(b)  of  N.I.  Act  stood  uncomplied,  even though the respondent no.1 (accused) had admitted that he replied  the notice issued by the complainant.  Also, the fact, as to whether  the signatory of demand notice was authorized by the  complainant  company or not, could not  have  been  examined  by  the  High  Court  in  its jurisdiction under Section 482 of the Code of Criminal Procedure  when such plea was controverted by the complainant before it.”

The Bench relied on the following observation of Supreme Court in Suryalakshmi Cotton Mills Limited v. Rajvir Industries Limited and Others[.....................] “Ordinarily, a defence of an accused although appears  to  be plausible should not be taken into consideration for exercise of the said jurisdiction. Yet again, the High Court at  that  stage would not ordinarily enter into a disputed question of fact. It, however, does not mean that documents of unimpeachable character should not be taken into  consideration  at  any  cost  for  the purpose of finding out as to whether continuance of the criminal [pic]proceedings would amount to an abuse of process of court or that the complaint petition is filed for causing mere harassment to the accused. While we are not  oblivious  of  the  fact  that although  a  large  number  of  disputes  should  ordinarily  be determined only by the civil  courts,  but  criminal  cases  are filed 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 not encourage such a practice; but, on the other, cannot also travel beyond its jurisdiction to interfere with the proceeding which is  otherwise  genuine. The courts cannot also lose  sight  of  the  fact  that  in  certain matters, both civil proceedings and criminal  proceedings  would be maintainable.'

The Bench allowed the Appeal by holding that the High Court exceeded its jurisdiction by  giving  its  opinion on disputed questions of fact, before the trial court.

Read the Judgment here.