Payment Of Cheque Amount Before First Hearing Warrants Quashing Of NI Act Case: Telangana High Court

The Telangana High Court has quashed three cheque dishonour cases against a trust and its office-bearers, observing that the trust had paid the entire cheque amount before the first date of hearing and so continuation of the prosecutions would amount to abuse of process of law. Justice Tirumala Devi Eada observed:“It is pertinent to observe in this regard that the objective of the N.I. Act is to safeguard the interest of the business community, where under several transactions occur by giving and taking cheques and in case of their default in payment, the party who acts upon the said promise of payment should not be put to loss. In the present case, admittedly, the amounts covered under the cheques are already paid. The only contention of learned counsel for respondent No.2 is with regard to payment of interest/fine/ compensation".It referred to Supreme Court's decision in Meters and Instruments and another v. Kanchan Mehta, where it was held that even in the absence of consent for compounding, a court can, in the interests of justice, close proceedings and discharge the accused if it is satisfied that the complainant has been duly compensated.The court referred to Supreme Court's decision in Damodar S. Prabhu v. Sayed Babalal H. wherein guidelines were laid down by the Honourable Apex Court to facilitate speedy trials of the cases pertaining to the N.I. Act. One of them (guideline (1)(a) ) stated that directions can be given that the Writ of Summons be suitably modified making it clear to the accused that he could make an application for compounding of the offences at the first or second hearing of the case and that if such an application is made, compounding may be allowed by the court without imposing any costs on the accused"In the present cases, the amounts covered under the impugned cheques are already paid to respondent No.2-complainant as on the first date of hearing. Thus, in the light of above extracted guideline No.(i)(a) and keeping in view the purport of the above cited judgments, it is opined that continuation of proceedings against the petitioners would be an abuse of process of law.”Allowing the criminal petitions, the Court quashed the proceedings in the three calendar cases pending before the magistrates at Rajendranagar.The petitions were filed by Late Padmashree Dr. B.S. Choubey Memorial Trust and three others, seeking quashing of proceedings in C.C. Nos.1272, 1276 and 1277 of 2021 arising under Section 138 of the Negotiable Instruments Act, 1881. The petitioners also challenged the orders dated 11.05.2022 by which their applications had been dismissed by the trial courts.According to the complainant-company, the Trust had issued a purchase order for supply of 26 hemodialysis machines and Pure Water RO equipment worth Rs.1,65,98,400. The material was supplied, and the parties later entered into a written agreement dated 05.04.2019, under which the dues were to be cleared partly towards tax and partly through 24 equal monthly instalments, supported by post-dated cheques. When several of those cheques were dishonoured for “insufficient funds” or due to “stop payment instructions”, the parties entered into another agreement dated 16.01.2020, pursuant to which further post-dated cheques were issued towards the balance sale consideration. Out of those too, only one cheque was honoured, while the others were dishonoured, leading to initiation of proceedings under Section 138 NI Act.Before the High Court, counsel for the petitioners submitted that the amounts had already been paid even before the first hearing date, and that this was evident from the written submissions filed in the cases. It was argued that since the liability under the cheques stood fully discharged, continuation of the proceedings would only harass the petitioners. Counsel for the complainant, however, opposed the plea and contended that the payment had been made only after issuance of summons. It was argued that the complainant had suffered for nearly three years due to non-payment and that, even if the principal amount had been paid, the complainant was still entitled to interest, fine and compensation. It was further submitted that, if the proceedings were allowed to continue, the trial court could award appropriate compensation, including up to twice the cheque amount.The High Court noted that there was no dispute that Rs.78,55,898 was due from the petitioners to the complainant and that the cheque amounts had in fact been paid. The Court held that since the cheque amounts had already been paid by the first date of hearing, there was no reason to permit the Section 138 prosecutions to continue.Accordingly, the Court quashed the proceedings in all three cases and set aside the orders passed in the connected criminal miscellaneous petitions.Case Title: Late Padmashree Dr. B.S. Choubey Memorial Trust & Ors. v. State of Telangana & Anr.Case No.: Criminal Petition Nos.6561, 6562 and 6563 of 2022Bench: Justice Tirumala Devi...

Payment Of Cheque Amount Before First Hearing Warrants Quashing Of NI Act Case: Telangana High Court

Ananya Tangri

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