Dadia v. State of Gujarat — 1998 DIGILAW 47 (GUJ)

JUDGMENT : M.H. Kadri, J. 1. Rule. Learned Assistant Government Pleader, Mr. P.B. Bhatt, waives service of Rule on behalf of opponent No. 1, whereas learned Advocate Mr. H.C. Modi waives service of Rule on behalf of opponent No. 2- original complainant. By the consent of the learned Advocates for the parties this group of Criminal Misc. Applications is taken up for final hearing. 2. Applicant No. 1 is a partnership firm and applicant Nos. 2 to 6 are its partners, who have filed Criminal Misc. Application Nos. 6519 of 1997 and 6520 of 1997; whereas Applicant No. 1, a partnership firm and applicant Nos. 2 to 7, partners of the said firm filed Criminal Misc. Application No. 6521 of 1997. 3. As the common questions of law and facts are involved in this group of Criminal Misc. Applications, they are disposed of by the common judgment. 4. The applicants, by way of filing these three applications, under Section 482 of the Code of Criminal Procedure ("Code" for short), have prayed to quash the complaints filed by opponent No. 2, against the applicants, and the criminal proceedings, being Criminal Case Nos. 3039/96, 3040/96, and 3041/96, pending before the learned Metropolitan Magistrate, Court No. 15, Ahmadabad (hereinafter referred to as 'Trial Court') for the offences punishable under Section 138 of the Negotiable Instruments Act, 1881 ('Act' for short) and Section 420 of the Indian Penal Code. Criminal Misc. Application No. 6519 of 1997 5. The brief facts leading to filing of this application are that opponent No. 2 filed Criminal Case No. 3040 of 1996 in the Trial Court, alleging that, opponent No. 2 has paid loan amount to the applicants in the year 1993 and the applicant-firm had issued post-dated cheque towards the surety thereof. As the complainant demanded repayment of the entire loan amount, the applicant- firm issued cheque, bearing No. 816142, dated April 1, 1996, for Rs. 73,303/- in favour of opponent No. 2, drawn on Indian Bank, Ghatkopar Branch, Mumbai. When the said cheque was presented by the complainant on August 29, 1996 for realisation, the same was dishonoured, with endorsement "not arranged for", by the bankers of the applicants. Thereafter, on September 20, 1996, a statutory notice was served by the complainant to the applicants. 73,303/- in favour of opponent No. 2, drawn on Indian Bank, Ghatkopar Branch, Mumbai. When the said cheque was presented by the complainant on August 29, 1996 for realisation, the same was dishonoured, with endorsement "not arranged for", by the bankers of the applicants. Thereafter, on September 20, 1996, a statutory notice was served by the complainant to the applicants. However, the applicants have not made the payment and, hence, Criminal Case No. 3040 of 1996 came to be filed, as stated above. Criminal Misc. Application No. 6520 of 1997 6. The brief facts leading to filing of this application are that opponent No. 2 filed Criminal Case No. 3041 of 1996 in the Trial Court, alleging that, opponent No. 2 had paid loan amount to the applicants in the year 1993 and the applicant-firm had issued post-dated cheque towards the surety thereof. As the complainant demanded repayment of the entire loan amount, the applicant- firm issued cheque, bearing No. 816145, dated April 1, 1996, for Rs. 1,09,953/- in favour of opponent No. 2, drawn on Indian Bank, Ghatkopar Branch, Mumbai. When the said cheque was presented by the complainant on August 29, 1996, for realisation, the same was dishonoured with endorsement "not arranged for" by the bankers of the applicants. Thereafter, on September 20, 1996, a statutory notice was served by the complainant to the applicant. However, the applicants have not made the payment and, hence, Criminal Case No. 3041 of 1996 came to be filed, as stated above. Criminal Misc. Application No. 6521 of 1997 7. The brief facts leading to filing of this application are that opponent No. 2 filed Criminal Case No. 3039 of 1996 in the Trial Court, alleging that, opponent No. 2 had paid loan amount to the applicants in the year 1993 and the applicant-firm had issued post-dated cheque towards the surety thereof. As the complainant demanded repayment of the entire loan amount, the applicant- firm issued cheque, bearing No. 824874 dated April 1, 1996, for Rs. 2,63,891/- in favour of opponent No. 2, drawn on Indian Bank, Ghatkopar Branch, Mumbai. When the said cheque was presented by the complainant on August 29, 1996 for realisation, the same was dishonoured with endorsement "not arranged for" by the bankers of the applicants. Thereafter, on September 20, 1996, a statutory notice was served by the complainant on the applicants. 2,63,891/- in favour of opponent No. 2, drawn on Indian Bank, Ghatkopar Branch, Mumbai. When the said cheque was presented by the complainant on August 29, 1996 for realisation, the same was dishonoured with endorsement "not arranged for" by the bankers of the applicants. Thereafter, on September 20, 1996, a statutory notice was served by the complainant on the applicants. However, the applicants have not made the payment and, hence, Criminal Case No. 3039 of 1996 came to be filed, as stated above. 8. All the above three criminal cases came to be filed on October 28, 1996 in the Trial Court. After verifying the contents of the complaints, the Trial Court took cognizance of the offence and, by order dated October 28, 1996, issued process against the applicants. 9. The accused Nos. 4 to 7 in Criminal Case No. 3039 of 1996 filed application for dropping proceedings against them. The said application came to be dismissed by the Trial Court on October 20, 1997. Similarly, accused Nos. 3 to 6, in Criminal Case No. 3040 of 1996 and Criminal Case No. 3041 of 1996, filed applications for dropping proceedings against them. The said applicants were also dismissed by the Trial Court on October 20, 1997. 10. Thereafter, the present Criminal Misc. Applications are filed before this Court for quashing the complaints, as stated herein above. All the three applications were placed for admission hearing before the Court (Coram : M.S. Parikh, J.) on December 10, 1997, and the following common order was passed : "Leave to amend and produce necessary documents. Mr. N.S. Desai, learned Advocate, seeks to withdraw this petition insofar as petitioner Nos. 1 and 2 are concerned with a view to move an appropriate application before the learned Magistrate. Insofar as petitioner Nos. 3 to 6 are concerned, notice returnable on December 24, 1997. It will be open to the petitioners to pray for exemption before the learned Magistrate." 11. Mr. N.S. Desai, learned Advocate appearing for the applicants, in all the three applications, has raised the following points. (i) The complainant had presented cheques, despite intimation by the applicants not to deposit cheques before the first week of September, 1996. It will be open to the petitioners to pray for exemption before the learned Magistrate." 11. Mr. N.S. Desai, learned Advocate appearing for the applicants, in all the three applications, has raised the following points. (i) The complainant had presented cheques, despite intimation by the applicants not to deposit cheques before the first week of September, 1996. (ii) The dispute involved in the criminal cases is purely of a civil nature, and the complaints are filed by the complainant to bring pressure on the applicants, which is a sheer abuse of process of law. (iii) On September 5, 1996, the applicants have instructed their Bankers to stop payment of the cheques in question. (iv) Applicant Nos. 3 to 6 in Criminal Misc. Application Nos. 6519/97 and 6520/97 and Applicants Nos. 3 to 7 in Criminal Misc. Applications No. 6521/97, were not in-charge of the business of the firm and, therefore, the complaints against them are not maintainable and liable to be quashed. 12. Mr. H.C. Modi, learned Advocate appearing for opponent No. 2-original complainant, has vehemently submitted that, in the applications filed under Section 482 of the Code, the Court is only required to see the contents of the complaints to find out whether the ingredients of Section 138 of the Act are satisfied or not. It is further submitted by the learned Advocate for opponent No. 2 that, while exercising the inherent powers under Section 482 of the Code, the Court should not enter into the arena of disputed question fact. It is further submitted by the learned Advocate for opponent No. 2 that, unless the parties to the proceedings adduce oral evidence at the trial, the disputed question of fact raised by the applicants cannot be decided in the present proceedings under Section 482 of the Code. It is further submitted by the learned Advocate for opponent No. 2 that the applicants, in these applications, which are filed under Section 482 of the Code, cannot produce new material or documents, which are not on the record of the case, pending in the trial Court. It is, lastly, submitted by the learned Advocate for opponent No. 2 that the applicants have resorted to filing frivolous and vexatious applications with the sole object of preventing trial on merit and, therefore, these applications deserve to be dismissed. 13. It is, lastly, submitted by the learned Advocate for opponent No. 2 that the applicants have resorted to filing frivolous and vexatious applications with the sole object of preventing trial on merit and, therefore, these applications deserve to be dismissed. 13. The submission of the learned Advocate for the applicants that the applicants had instructed the complainant not to present the cheques for realisation before the first week of September, 1996, is devoid of any merit. The cheques in question were issued on April 1, 1996. No evidence is produced by the applicants indicating that they had instructed the complainant not to present the cheques for encashment before the first week of September 1996. The complainant had presented the cheques in question on August 29, 1996, in her Bank, namely, Bank of India, Ellisbridge, Ahmadabad. On presentation of the said cheques to the drawee Bank, namely, Indian Bank, Ghatkopar Branch, Mumbai, the said cheques were dishonoured and returned unpaid to the bankers of the complainant. The endorsement of the Indian Bank, Ghatkopar Branch, Mumbai, is dated September 4, 1996, wherein, it is stated that the cheques were returned as 'not arranged for'. Even for the sake of argument if it is believed that the applicants had instructed the complainant not to deposit the cheques before the first week of September 1996, then also the applicants had not made arrangement for the funds as on September 4, 1996, so that the cheques may be cleared. Whether or not the applicants had instructed the complainant not to present the cheques in question before the first week of September, 1996, involves disputed question of fact, which cannot be gone into, at this stage, while deciding the present applications under Section 482 of the Code. 14. The submission of the learned Advocate for the applicants that the dispute involves in the criminal cases is purely of a civil nature and the complaints are filed by the complainant to bring pressure on the applicants, which is a sheer abuse of process of law, is also devoid of any merit. The complainant has come out with a clear case, in her complaints, that she lent and advanced diverse amounts as and by way of loan carrying interest at the rate of 18% per annum to applicant No. 1-firm. The complainant has come out with a clear case, in her complaints, that she lent and advanced diverse amounts as and by way of loan carrying interest at the rate of 18% per annum to applicant No. 1-firm. Applicant No. 1-firm had also paid TDS and deducted out of interest paid or credited to the account of the complainant in the year 1995-96. It is alleged in the complaints that, in the first week of March, 1996, when the complainant demanded repayment of loan at the end of March, 1996, as she was badly in need of fund, applicant No. 2 agreed to repay the outstanding amount of loan amount as on March 31, 1996. Thereafter, applicant No. 1-firm has issued cheques dated April 1, 1996, for the outstanding amounts of loan amount and interest amount, in favour of the complainant. Looking to the allegations made in the complaints, it cannot be, at this stage, said that the complainant had filed the above stated complaints just to bring pressure on the applicants and the dispute involved in the present case is purely of civil nature. Looking to the allegations made in the complaints, it, prima facie, appears that the applicants had, after settling their accounts with the complainant, issued cheques in question. The object of bringing Section 138 of the Act on the Statute is to inculcate faith in the efficacy of banking operations and credibility in transacting business on negotiable instruments. Despite civil remedy, Section 138 intended to prevent dishonesty on the part of the drawer of negotiable instrument to draw a cheque without sufficient funds in his account maintained by him in a Bank and induce the payee or holder in due course to act upon it. If the cheques in question are returned by the Bank with endorsement like, (i) refer to drawer, (ii) exceeds arrangement, (iii) instruction for stoppage of payment and like other usual endorsements, it amounts to dishonour within the meaning of Section 138 of the Act and, therefore, even after issuance of notice, if the payee or holder does not make the payment within the stipulated period, the statutory presumption would be dishonest intention exposing to criminal liability. [See : Electronics Trade & Technology Development Corporation Limited, Secunderabad v. Indian Technologists & Engineers (Electronics) (P) Ltd., 1996(2) Supreme Court Cases 739 : 1996(1) RCR(Crl.) 593. [See : Electronics Trade & Technology Development Corporation Limited, Secunderabad v. Indian Technologists & Engineers (Electronics) (P) Ltd., 1996(2) Supreme Court Cases 739 : 1996(1) RCR(Crl.) 593. Thus, dishonour of cheques is an offence as per the provisions of Section 138 of the Act and, therefore, the submission of the learned Advocate for the applicants that the dispute involved in the present case is purely of civil nature and, on that count, the complaints should be quashed, is also devoid of any merit. 15. The submission of the learned Advocate for the applicants that, by intimation dated September 5, 1996, the applicants had instructed their bankers to 'stop payment' of the cheques in question, is also devoid of any merit. The applicants, after dishonour of the cheques in question, were served with statutory notices on September 20, 1996. After receipt of the said statutory notices, the applicants' Advocate has replied to the said notices on September 30, 1996. In the reply to the notice, the applicants' advocate has not stated that the banker of the applicants was, by intimation dated September 5, 1996, instructed to 'stop payment' of the cheques in question. No such written intimation to the Banker was produced with the reply to the statutory notices by the applicants. There was no reason to issue instruction to the Banker to 'stop payment' of the cheques in question, because the applicants had come out with a clear case that they had instructed the complainant to deposit the cheques in question in the first week of September, 1996. In fact, the cheques were deposited on August 29, 1996, in the Bank, at Ahmadabad, by the complainant, which were sent for encashment to the applicants' Bank at Mumbai. The said cheques were returned unpaid on September 4, 1996, as the applicants had not made arrangement in their account. It appears that the applicants have come out with false case that they had instructed their Banker to stop payment with a view to get out of the clutches of Section 138 of the Act. The intimation letter of the applicants' Bank dated September 4, 1996 does not indicate such endorsement that the payment of the cheques was stopped on the instruction of the drawer. The intimation letter of the applicants' Bank dated September 4, 1996 does not indicate such endorsement that the payment of the cheques was stopped on the instruction of the drawer. As per the decision of the Supreme Court in the case of K.K. Sidharthan v. T.P. Paveena Chandra and another, 1996(5) Supreme Court Cases 369, if the cheque is returned with endorsement 'insufficient funds', then the provisions of Section 138 of the Act would be applicable. In fact, no such instruction or intimation was given to the Bank to stop the payment of the cheques in question. Therefore, the submission of the learned Advocate for the applicants that they had instructed the Bank to stop payment, is liable to be rejected. 16. The learned advocate for the applicants has further submitted that applicant Nos. 3 to 6 in Criminal Misc. Application Nos. 6519/97 and 6520/97 and applicant Nos. 3 to 7 in Criminal Misc. Application No. 6521/97, were not in-charge of the business of the firm and, therefore, the complaints against them are not maintainable and liable to be quashed. The learned Advocate for the applicants, after obtaining leave to amend and to produce necessary documents, has produced xerox copy of the notice dated Sept. 20, 1996, issued by learned Advocate Mr. H.C. Modi, and xerox copy of general power of attorney by applicant Nos. 3 to 6 giving their powers as partner of the firm to applicant No. 2, Mahendra Amrutlal Dadia. 17. Learned Advocate Mr. Modi, appearing for opponent No. 2 has seriously objected to the amendment and production of additional documents on the ground that, in exercise of powers under Section 482 of the Code, the allegation made in the complaints constituting offences shall be the sole criterion to find out whether any offence is made out or not. He further submitted that, at the stage of quashing complaint under Section 482 of the Act, no additional material produced by the accused is permissible. In support of the above submission, the learned Advocate for opponent No. 2 has placed reliance on the decision of the Supreme Court in the case of Chand Dhawan v. Jawahar Lal, 1993(2) Recent Criminal Reports 545 (SC) : 1992 Crl.L.J. 1956. In support of the above submission, the learned Advocate for opponent No. 2 has placed reliance on the decision of the Supreme Court in the case of Chand Dhawan v. Jawahar Lal, 1993(2) Recent Criminal Reports 545 (SC) : 1992 Crl.L.J. 1956. The Supreme Court, in the facts of the said case, has held that, when the Magistrate was satisfied that an offence had been disclosed and, accordingly, the summons had been issued, the High Court was not justified in reaching the conclusion that the proceedings were liable to be quashed on the basis of additional materials produced by the accused as those were required to be proved, particularly when those materials were not accepted by the complainant. In my opinion, the observation of the Supreme Court in the case of Chand Dhawan (supra), would apply in all fours to the facts of the present case. At the stage of quashing complaint under Section 482 of the Code, the Court is required to see the allegations made in the complaint. The learned Metropolitan Magistrate was also satisfied with the allegations made in the complaints and took cognizance of the offences under Section 138 of the Act. From a bare perusal of the complaints, it is specifically stated that all the accused were partners of the accused No. 1- firm and they jointly manage the affairs of the firm. The allegations and averments made in the complaints, prima facie, show that all the accused- partners were managing the affairs of the accused No. 1-firm and, therefore, at this stage, it cannot be said that accused Nos. 3 to 6, or accused Nos. 3 to 7, as the case may be, were merely sleeping partners and they cannot be held liable for the acts of the firm. Whether or not applicant Nos. 3 to 6 in Criminal Misc. Application Nos. 6519/97 and 6520/97 and applicant Nos. 3 to 7 in Criminal Misc. Application No. 6521/97, were responsible for the acts of the firm, cannot be decided at this stage. It requires leading of evidence at the trial, and, therefore, at this stage, it cannot be said that applicant Nos. 3 to 6 in Criminal Misc. Application Nos. 6519/97 and 6520/97 and applicant Nos. 3 to 7 in Criminal Misc. Application No. 6521/97, were not responsible for the acts of the firm. 18. It requires leading of evidence at the trial, and, therefore, at this stage, it cannot be said that applicant Nos. 3 to 6 in Criminal Misc. Application Nos. 6519/97 and 6520/97 and applicant Nos. 3 to 7 in Criminal Misc. Application No. 6521/97, were not responsible for the acts of the firm. 18. The learned advocate for applicants has placed reliance on the decision of the Punjab & Haryana High Court, in the case of Anita v. Anil K. Mehra and others, 1996(1) Crimes 412 (H.C.), wherein, it is held that cheque issued by one partner on behalf of a firm was bounced and, since there was no assertion in the complaint that respondent Nos. 2 and 3 were in- charge and responsible to the firm for conduct of business of the said firm, the complaint cannot proceed against these two partners. In my opinion, looking to the facts of the present case, the judgment of the Punjab & Haryana High Court in the case of Anita (supra) is not applicable to the facts of the present case. In the complaints, the complainant has come out with specific allegation that all the accused- partners of the firm were managing the affairs of applicant No. 1-firm. 19. The learned Advocate for opponent No. 2-original complainant - has placed reliance on the decision of the Madras High Court in the case of Saj Flight Services (P) Ltd. v. P.T. Gopala Raja, 88 Co. Cases 344, wherein, it is held that, for the purpose of proving offence under Section 138 of the Act, necessary and proper party must be added, and, when the debt was incurred for and on behalf of the firm, all the persons concerned, inclusive of the other directors or the partners must be jointly and severally liable, for which every one has to be added as party. The allegations made in the complaints, prima facie, show that all the partners of applicant No. 1- firm were taking part in the management of the firm and, therefore also, at this stage, it cannot be said that applicant Nos. 3 to 6 in Criminal Misc. Application Nos. 6519/97 and 6520/97 and applicant Nos. 3 to 7 in Criminal Misc. Application No. 6521/97, were not responsible for the acts of the firm. 20. 3 to 6 in Criminal Misc. Application Nos. 6519/97 and 6520/97 and applicant Nos. 3 to 7 in Criminal Misc. Application No. 6521/97, were not responsible for the acts of the firm. 20. The learned Advocate for opponent No. 2 has further submitted that the applications were not sworn by applicant No. 2 and this Court may compare signature of applicant No. 2 in vakalatnama and the signature in the applications. I am afraid, this Court cannot compare, at this stage, the signatures of Applicant No. 2 as appearing in the vakalatnama and in the affidavit in support of the applications. In my opinion, it would be hazardous to compare signature of the applicant No. 2 at the stage of deciding applications under Section 482 of the Code. It is also submitted by the learned Advocate for opponent No. 2 that the applicants have tried to interfere with the administration of justice which amounts to Contempt of the Court as per the decision of the Supreme Court in the case of Dhananjay Sharma v. State of Haryana, AIR 1995 Supreme Court 1795, and, therefore, notice for contempt, under the Contempt of Courts Act, may be issued against the applicants. In my opinion, this submission of the learned Advocate for opponent No. 2 cannot be entertained in the present proceedings. However, it would be open to opponent No. 2 to initiate appropriate proceedings under the Contempt of Courts Act. It is, lastly submitted by the learned Advocate for opponent No. 2 that opponent No. 2 should be awarded compensatory costs of these three applications. In my opinion, awarding of cost is discretionary and, in view of the facts and circumstances of the case,I do not find it necessary to award costs in favour of opponent No. 2. 21. As a result of foregoing discussion, I do not find any substance in these three applications, and they are dismissed. Rule is discharged. Applications dismissed.