DELHI HIGH COURT HOLDS ISSUES IN COMPLAINTS FILED UNDER NEGOTIABLE INSTRUMENTS ACT 1881 WERE TRIABLE IN NATURE AND AS SUCH CANNOT BE QUASHED AT PRE-TRIAL STAGE
The High Court of Delhi, comprising of a single Judge Bench of Justice Swarana Kanta Sharma, passed a Judgment dated 17.10.2023, in a recent case of Rajendra Prasad Mittal And Anr. v. Manish Garg and Anr. CRL.M.C. No 5315/2023 & CRL.M.A. 20212/2023, and held that the issues in the Complaints filed under Sections 138 and 141 of Negotiable Instruments Act 1881 (NI Act) were triable in nature and hence, such proceedings under NI Act ought not to be quashed at pre-trial stage.
(i) In the present case, the Directors of the Accused No. 1, Aarcity Infrastructure Pvt. Ltd (Accused Company), the Accused No. 2 / Petitioner No. 2 herein- Rajendra Prasad Mittal and the Accused No. 3 / Petitioner No. 3 herein- Arun Mittal (Accused-Petitioners), filed a Petition for quashing of Complaint Case No. 5892/2020, titled Manish Garg v. Aarcity Infrastructure Pvt. Ltd. & Ors., which is pending before the Ld. Metropolitan Magistrate, North West, Rohini Courts, Delhi (Trial Court), and also sought for setting aside of an Order dated 25.08.2022, which was passed against the Accused- Petitioners herein under Section 251 of the Code of Criminal Procedure, 1973 (P.C.) (Substance of accusation to be stated).
(ii) The Complainant, Manish Garg, Director of Parker Builders Pvt. Ltd (Complainant), filed Complaints under Section 138 of NI Act (Dishonour of Cheque for insufficiency, etc., of funds in the account), Section 141 of NI Act (Offences by companies), Section 142 of NI Act (Cognizance of offences) and Section 143A of the NI Act (Power to direct interim compensation) before the Trial Court.
(iii) The Accused-Petitioners herein, along with Smt. Saroj Mittal, Smt. Akanksha Mittal, and R.P. Mittal HUF, who were the owners of Units Nos. 301-305, Krishna Apra Business Square, Plot Nos. 4, 5 and 6, Wazirpur District Centre, Netaji Subhash Place, Pitampura, Delhi (Property), approached the Complainant about their intention to sell the aforementioned Property because they were in urgent need of money.
(iv) The Accused- Petitioners had represented that the said units were free from all encumbrances, legal defects, etc. except a pending loan of Rs. 4,10,11,438/- with M/s. Dewan Housing Finance Ltd. (‘DHFL’). Based on the claims by Accused, the Complainant expressed interest in purchasing the aforementioned Property. As a result, the parties signed a Sale Agreement on 06.04. 2018, for a sum of Rs. 45,00,000/-.
(v) Thereafter, the Complainant, complied with the provisions of the Agreement by paying an earnest money of Rs. 40,00,000/- to the Accused-Petitioners and other mentioned Property owners, and by agreeing to pay DHFL the remaining amount of Rs. 4,10,00,000. The
Complainant subsequently repaid the loan from the Complainant Company’s account to DHFL for a total of Rs. 96,83,738/-.
(vi) Thereafter, the Accused-Petitioners informed the Complainant about their disinterest to continue the sale of the Property as they were getting more consideration for the same Property from some other buyer. The Accused- Petitioner promised the Complainant that they shall refund the earnest money of Rs.40,00,000/- and also refund the sum of Rs.96,83,738/- along with interest @ 24% per annum from the date of its payment, from the sale proceeds of sale of the Property.
(vii) Upon Accused’s assurances and representation, the Complainant had handed over the possession of the Property to the Petitioners and had also cooperated in its sale to third party.
(viii) Thereafter, in discharge of the liability of Rs.96,83,738/-, the Accused had refunded a sum of Rs.27,37,000/- on 12.02.2019 and Rs.27,37,695/- on 21.02.2019 to the Complainant Company- Parker Builders Pvt. Ltd and further, issued Cheques bearing no. 944327 and 944329 dated 31.03.2020, drawn on Indian Bank, Pitampura, Delhi, in favour of the Complainant Company for a sum of Rs.58,50,000/- and 40,00,000/- respectively from the account of the Accused no. 1 Company.
(ix) However, upon presentation, both the Cheques got dishonored for the reasons “Funds Insufficient” vide Return Memo(s) dated 06.06.2020.
(x) Thereafter, the Complainant had issued statutory Legal Notices dated 25.06.2020 to the Accused-Petitioners and Accused Company calling upon them to make the payment.
(xi) Upon failure of Accused persons to make payment, the Complainant filed Case No. 5892/2020 and Case No. 5888/2020 for dishonor of Cheques of Rs.40,00,000/- and Rs.58,50,000/-.
(xii) Thereafter, the Ld. Trial Court issued summons to the Accused and a notice under Section 251 of Cr.P.C. was framed against the Accused- Petitioners vide Orders dated 25.08.2022 in both the cases.
(xiii) Aggrieved by the Order of the Ld. Trial Court, the Accused- Petitioners filed a Quash Petition under Section 482 of P.C. (Saving of inherent power of High Court) before the High Court of Delhi. The High Court, vide Order dated 17.10.2023, observed as follows:
Analysis and Findings of the High Court
(1) In Dashrathbhai Trikambhai Patel v. Hitesh Mahendrabhai Patel (2023) 1 SCC 578, the Supreme Court held that an offence under Section 138 of NI Act is constituted as follows:
“11. Section 138 of the Act provides that a drawer of a cheque is deemed to have committed the offence if the following ingredients are fulfilled: (i) A cheque drawn for the payment of any amount of money to another person; (ii) The cheque is drawn for the discharge of the “whole or part” of any debt or other liability. “Debt or other liability” means legally enforceable debt or other liability; and (iii) The cheque is returned by the bank unpaid because of insufficient funds. However, unless the stipulations in the proviso are fulfilled the offence is not deemed to be committed. The conditions in the proviso are as follows: (i) The cheque must be presented in the bank within six months from the date on which it was drawn or within the period of its validity; (ii) The holder of the cheque must make a demand for the payment of the “said amount of money” by giving a notice in writing to the drawer of the cheque within thirty days from the receipt of the notice from the bank that the cheque was returned dishonoured; and (iii) The holder of the cheque fails to make the payment of the “said amount of money” within fifteen days from the receipt of the notice…”
(2) In Rathish Babu Unnikrishnan v. State (NCT of Delhi) 2022 SCC OnLine SC 513, the Apex Court observed that with respect to whether or not a cheque was issued in discharge of legally recoverable debt is to decided during the course of trial and the proceedings under Section 138 of NI Act ought not to be quashed on such grounds at pre-trial stage.
(3) In the present case, the Accused-Petitioners herein have not disputed the issuance of Cheques in question including the signatures on the Cheque, date on the Cheque as well as the amount mentioned in the Cheques, though they have disputed the purpose or reason behind issuance of Cheques.
(4) In Basalingappa v. Mudibasappa (2019) 5 SCC 418, the Supreme Court held that in respect to the presumption under Sections 118(a) of NI Act (Presumptions as to negotiable instruments) and 139 of NI Act (Presumption in favour of holder) shall be in favour of complainants, since the issuance of cheques is not disputed and it has to be presumed that the cheques in question had been issued towards some legally enforceable debt.
Thus, based on the aforesaid observations, the High Court held that, the issues are triable in nature and can only decided on the basis of evidence and on the touchstone of examination and cross-examination of witnesses during the course of trial. As a result, the Quash Petition filed by the Accused – Petitioners under Section 482 Cr.P.C. were dismissed.
Suneel Kumar Jaiswal
The Indian Lawyer