Judgment :- 1. Respondent filed a private complaint under S.200 of Cr.P.C. read with S.138 of the Negotiable Instruments Act, 1881 (for short “the Act”) against the petitioners alleging commission of an offence punishable under S.138 of the Act. After filing of an affidavit and recording sworn statement of the complainant, cognizance was taken by the learned Magistrate on 21.04.2005 and case was ordered to be registered. Accordingly, CC No.268/2009 for an offence punishable under S. 138 of the Act was registered and process was issued to the accused. This petition is for quashing of the said order. 2. Brief facts of the case as per the averments contained in the complaint are: Complainant is a partnership firm engaged in the business of Pharmaceutical products. Accused-1 is engaged in the business of distribution of Pharmaceutical products. Accused -2 is the Managing Director. In pursuance of an agreement dated 19.2.2003, accused agreed to acquire Brand Names/ Trade Marks owned and possessed by the complainant along with its `Goodwill’ for consideration of Rs.10,00,000/-and on the same day paid advance money of Rs.01.00 lakh under a demand draft. Accused assured to pay the balance amount of Rs.9,00,000/-in instalments commencing from May, 2003 towards which post dated cheques were issued. A Deed of Assignment was executed on 19.2.2003, for transfer of `Title’ pending payment. It is alleged that, accused were due to pay the complainant a total sum of Rs. 5,00,000/-and at the instance of the accused, the complainant delayed presentation of 2 cheques for enchashment. When presented, the cheques were returned with bankers’ endorsement dated 23.9.2004 `Payment stopped by the Drawer’. Complaint served notice dated 20.10.2004 to which a reply dated 2.11.2004 was sent. It was stated in the said reply notice that, a Tripartite Memorandum of Understanding (MOU) dated 11.4.2003 has been executed between the parties, in terms of which, certain amount needs to be given set off and hence, the accused is not liable to pay any amount to the complainant and accordingly, the accused stopped the payment of 2 cheques. Not satisfied with the reply, said private complaint was filed on 27.11.2004, the cognizance of which was taken and summons was issued to the accused. 3. Sri. Shivakumar.S. Badawadagi, Learned Advocate appearing for the petitioners/accused, raised three contentions. Firstly, matter brought before the learned Magistrate is a civil dispute and hence, cognizance could not have been taken and process issued. Not satisfied with the reply, said private complaint was filed on 27.11.2004, the cognizance of which was taken and summons was issued to the accused. 3. Sri. Shivakumar.S. Badawadagi, Learned Advocate appearing for the petitioners/accused, raised three contentions. Firstly, matter brought before the learned Magistrate is a civil dispute and hence, cognizance could not have been taken and process issued. Secondly, in view of the agreement between the parties, which provides for arbitration of the disputes, complaint is not maintainable. Thirdly, in view of the settlement arrived at on 01.09.2003, accused was entitled to recover Rs.4,43,648.36 which was debited to the account of the complainant, because, Mr. Raghuveer Kolle was the partner of the firm and Director of both the companies. Therefore, in view of the Tripartite MOU as at Annexure-F, accused was not liable to pay any amount to the complainant. Therefore, the accused stopped payment of the two cheques of Rs.2,50,000/-each, since there was dispute with reference to the expired drugs and damaged goods and recoverable amount as per the MOU. The transaction being not an independent transaction, there is no liability of accused under S.138 of the Act. 4. Sri. Ajay Patil, learned Advocate appearing for the respondent/complainant, on the other hand, repudiating the said contentions, contended that, since there is element of criminal offence involved in the matter, the lawful proceedings initiated in the Court of the Magistrate, cannot be permitted to be defeated by way of the present petition. He submitted that, arbitration clause in the MOU would enure to the benefit of accused, only in settling the civil proceedings and not with reference to the criminal offence which has been committed by them. He further submitted that, amount with regard to the alleged adjustment and the terms of agreement/MOU is a disputed fact and since it is the defence which has been sought to be put forth to the complaint by accused, the same cannot be made the defence to quash the proceedings. 5. Indisputably, accused have entered into an agreement dated 19.2.2003 under which they agreed to acquire the Trade Marks/ Brand Names owned by the complainant, for sale consideration of Rs.10,00,000/-by way of assignment along with `Good Will’ and that on the same day, they paid a sum of Rs.1,00,000/-and promised to pay the balance amount of Rs.9,00,000/-in 9 monthly instalments commencing from May, 2003 vide post dated cheques. Complainant executed a Deed of Assignment dated 19.2.2003 in favour of the accused for smooth transfer of `Title’ pending payment. In furtherance of the said transaction, under a letter dated 26.8.2003, accused tendered the cheques totally amounting to Rs.8,50,000/-drawn in favour of the complainant. Subsequently, accused delivered demand drafts for Rs.1,00,000/-and Rs.2,50,000/-and obtained back from the complainant two cheques for Rs.1,00,000 and Rs. 2,50,000/-respectively. A Tripartite MOU between M/s. Shivani Pharmatech Pvt. Ltd., and M/s. Shivani Surgicals Pvt. Ltd., respresented by its Director Mr. Raghuveer Kolle and the accused was entered into. It is alleged by accused that, after entering into the said MOU, several drugs of different brands manufactured and sold by the complainant prior to entering into the Deed of Assignment, were returned as the drugs had expired and found to be damaged pharmaceutical products. The accused contends that, a letter dated 21.9.2004 was addressed to M/s. Shivani Pharmatech Pvt Ltd., indicating that, the accused are unable to receive or recover payment of certain supplied bills from various parties. Therefore, they claim that they are entitled to recover from the complainant Rs.4,4,3,648.36. The accused also raised a dispute with regard to the Brand Name/ Trade Mark `RHINORIL’ and contended that there is a dispute. It was claimed that, accused are entitled to debit the said amount of Rs.4,43,648.36 from the account of the complainant as agreed upon, in the MOU and hence, they stopped payment in respect of 2 cheques for Rs. 2,50,000/-each and as such, there is no legally recoverable debt or liability. It is on the basis of the said reply notice and with reference to the said MOU dated 11.4.2003, it is contended that, since the MOU has a clause to the effect that, in case of any disputes, the same shall be referred to arbitration and the award shall be final and binding on all, the complaint is not maintainable. 6. Keeping in view the rival contentions and the record the point for consideration is; Whether, the cognizance of the complaint taken and the process issued to the accused is illegal in view of the agreement and MOU between the parties, which provides for arbitration of the disputes? 7. In the case of Trisuns Industry vs. Rajesh Agarwal and Others ( 1999(8) SCC 686 ), a complaint was filed alleging commission of certain offences including the offence of cheating. 7. In the case of Trisuns Industry vs. Rajesh Agarwal and Others ( 1999(8) SCC 686 ), a complaint was filed alleging commission of certain offences including the offence of cheating. The Magistrate forwarded the complaint for investigation under S. 156(3) of Cr. P.C. The accused thereupon moved the High Court U/sec.482 of the Code for quashing of the complaint. Petition was allowed and the complaint was quashed. Main contention which had found favour in the High Court was that, dispute being purely of a civil nature, no prosecution should have been permitted. To arrive at the said finding, the High Court had referred to a specific clause in the memorandum of understanding arrived at between the parties, that disputes, if any, were to arise between them in respect of any transaction can be resolved through arbitration. The said order was challenged in the Apex Court. Taking exception to the order made by the High Court, it was held as follows:- “7. Time and again this Court has been pointing out that quashing of FIR or a complaint in exercise of the inherent powers of the High Court should be limited to very extreme exceptions (vide State of Haryana V.Bhajan Lal and Rajesh Bajaj V. State NCT of Delhi). 8. In the last referred case this Court also pointed out that merely because an act has a civil profile is not sufficient to denude it of its criminal outfit. We quote the following observations: (SCC 263, para 10) “10. It may be that the facts narrated in the present complaint would as well reveal a commercial transaction or money transaction. But that is hardly a reason for holding that the offence of cheating would elude from such a transaction. In fact, many a cheatings were committed in the course of commercial and also money transactions”. We are unable to appreciate the reasoning that the provision incorporated in the agreement for referring therefore, disputes to arbitration is an effective substitute for a criminal prosecution when the disputed act is an offence/Arbitration is a remedy for affording reliefs to the party affected by breach of the agreement but the arbitrator cannot conduct a trial of any act which amounted to an offence albeit the same act may be connected with the discharge of any function under the agreement. Hence, those are not good reasons for the High Court to axe down the complaint at the threshold itself. The investigating agency should have had the freedom to go into the whole gamut of the allegations and to reach a conclusion of its own. Pre-emption of such investigation would be justified only in very extreme cases as indicated in State of Haryana V. Bhajan Lal”. (Emphasis supplied by me) 8. In the case of Sri Krishna Agencies vs. State of Andhra Pradesh and another, 2009 (1) SCC 69 , the background facts were that, a complaint under S.138 of the Act was filed on account of stop payment orders with regard to the cheques. A petition was filed in the High Court to quash the proceedings in the complaint contending that, since the complainant had already taken recourse to arbitration proceedings, the dispute was obviously of a civil nature, and the criminal complaint could not be proceeded with. Accepting the contention of the accused, the High Court quashed the proceedings in the complaint. Complainant challenged the said order in the Apex Court on the ground that, since the cheques were dishonoured, a separate liability arose in terms of S.138 of the Act, whereas the arbitration proceedings were under the agreement signed between the parties and that the commencement and the continuance of the arbitration proceedings could in no way affect the criminal proceedings taken separately. While allowing the appeal and setting aside the order passed by the High Court and directing the restoration of the complaint to be proceeded by the Magistrate in accordance with law, it was held as follows: “7. We are also of the view that there can be no bar to the simultaneous continuance of a criminal proceeding and a civil proceeding if the two arise from separate causes of action. The decision in Trisuns Chemical Industry case appears to squarely cover this issue as well.” 9. In the case of SH. VISHNU DUTT SHARMA VS. SMT DAYA SAPRA (2009 AIR SCW 5341), the background facts were that, a complaint was filed on 29.1.2000 by the appellant against the respondent for alleged commission of offences under S.138 of the Act and S.420 IPC. He also filed a suit for recovery of Rs.2,04,000/-on or about 19.10.2002 in the Civil Court. VISHNU DUTT SHARMA VS. SMT DAYA SAPRA (2009 AIR SCW 5341), the background facts were that, a complaint was filed on 29.1.2000 by the appellant against the respondent for alleged commission of offences under S.138 of the Act and S.420 IPC. He also filed a suit for recovery of Rs.2,04,000/-on or about 19.10.2002 in the Civil Court. The defence raised by the respondent was that, she had not taken any loan from the appellant as alleged and the cheque issued by her was not in respect of repayment of the loan. Learned Sessions Judge acquitted the respondent. Thereafter, an application was filed in the Civil suit for rejection of the plaint on the ground that the criminal complaint has already been dismissed. The application was dismissed inter alia, opining that the findings of a Criminal Court in the proceedings under S.138 of the Act would not operate as `res judicata’ in the civil suit for recovery of money as the nature of proceedings in both the cases was different. Said order was questioned by the respondent by filing a writ petition. High Court allowed the writ petition by applying the principles of res judicata and also opining that, the suit was nothing but an abuse of process of law. The said order was challenged in the Apex Court by the complainant, wherein while allowing the appeal and setting aside the order passed by the High Court, it was held as follows: “11. There cannot be any doubt or dispute that a creditor can maintain a civil and criminal proceeding at the same time. Both the proceeding, thus, can run paralelly. The fact required to be proved for obtaining a decree in the civil suit and a judgment of conviction in the criminal proceedings may be overlapping but the standard of proof in a criminal case vis-à-vis a civil suit, indisputably is different. Whereas in a criminal case the prosecution is bound to prove the commission of the offence on the part of the accused beyond any reasonable doubt; in a civil suit `preponderance of probability’ would serve the purpose for obtaining a decree. 12. S. 138 of the Negotiable Instruments Act provides that dishonour of a cheque subject to fulfillment of condition precedent laid down in the proviso appended thereto is a cognizable offence. 13. 12. S. 138 of the Negotiable Instruments Act provides that dishonour of a cheque subject to fulfillment of condition precedent laid down in the proviso appended thereto is a cognizable offence. 13. The cause of action for institution of the civil suit was grant of loan whereas that of the criminal case was return of a cheque inter alia on the premise that the account of the accused was insufficient to honour it or that it exceeded the amount arranged to be paid from that account by an agreement with the bank. 14. S. 138 of the Act contains a non-obstante clause. In terms of S. 139 of the Act, a presumption in favour of the holder of the cheque may be raised that he had received the cheque of the nature referred to in S.138 for the discharge, in whole or in part, of any debt or other liability”. 10. S.118 of the Act is regarding Presumptions as to negotiable instruments. S.138 of the Act has 3 ingredients viz.,(i) that there is a legally enforceable debt, (ii) that the cheque was drawn from the account of bank for discharging whole or any part, of any debt or other liability, which presupposes a legally enforceable debt and (iii) that the cheque so issued had been returned due to insufficiency of funds. 11. Indisputably, accused issued the 2 cheques in question to the complainant. The cheques were returned by the banker of the accused with endorsement `payment stopped by drawer’. The complainant made demand for payment of the amount of money involved in the cheques by giving a notice to the drawer of the cheques/accused and the accused did not make the payment of the money payable under the cheques. The defence for non payment is the one noticed supra. Their defence is that, the matter has a civil profile and in view of the agreement/MOU between the parties providing for resolution of disputes by having recourse to arbitration, the complaint is not maintainable. 12. I do not find merit in the contention. No doubt, the MOU between the parties has a clause for resolution of disputes by arbitration. A civil dispute can be resolved by having recourse to arbitration, when there is an agreement between the parties. Criminal prosecution in respect of an offence cannot be resolved by having recourse to arbitration. 12. I do not find merit in the contention. No doubt, the MOU between the parties has a clause for resolution of disputes by arbitration. A civil dispute can be resolved by having recourse to arbitration, when there is an agreement between the parties. Criminal prosecution in respect of an offence cannot be resolved by having recourse to arbitration. The arbitrator cannot conduct a trial of any Act, which amounts to an offence, even though the Act may be connected with discharge of any function under the agreement/MOU between the parties. Since there is no bar for simultaneous continuance of criminal and civil proceedings, if the two arise from separate cause of action, in view of the ratio of law declared by the Hon’ble Apex Court in the decisions referred to supra, I do not find any merit in the first and second contentions advanced by learned counsel for the petitioners, since, the causes of action for arbitration of the disputes and the prosecution under the Act are not the same, but, are different. 13. It is now trite that, for quashing of an order relating to the taking cognizance, an accused cannot be permitted to use the material which would be available to him only as his defence. Since the issue of cheques by the accused, which are the subject matter of consideration in the Trial Court is not in dispute, payment of amount under the cheques by the bank having been stopped by the accused, which was followed by an issue of mandatory notice by complainant and the reply by the accused, wherein, the defence has been set up regarding the alleged adjustment to an extent of Rs.4,43,648.36, the said defence should be left to be considered by the learned Magistrate. If any defence or facts has to be raised, it cannot be made a ground for quashing of proceedings, being a disputed question of fact. It is for the accused to substantiate the defence in the Trial Court with regard to the alleged adjustment to the said extent and their liability being limited only to the extent of Rs.46,000/-. In the said view of the matter, the third contention is also devoid of merit. 14. Allegations made in the complaint, when given face value, do disclose the commission of an offence by the accused under S.138 of the Act. In the said view of the matter, the third contention is also devoid of merit. 14. Allegations made in the complaint, when given face value, do disclose the commission of an offence by the accused under S.138 of the Act. In their defence, the Court will be left to consider and weigh materials on record placed by the parties. The jurisdiction of the Court at the initial stage i.e., taking cognizance, is to find out whether there is a prima facie case made out to issue the process. Taking into consideration, the facts which are not in dispute, noticed supra, the learned Magistrate has not committed any error and hence, the impugned order is not liable to be quashed. 15. I do not take this discussion any further, as it may prejudice the case of either of the parties at the trial. It is for the Trial Court which is seized of the matter, to decide the case, both on facts and in law, uninfluenced by any of the observations made herein, which are limited for the purpose of deciding the point formulated supra. It is made clear that the observations made herein shall not be construed as an expression of final opinion on merits of the matter. All contentions of both parties are left open. Since the matter has been pending from 2005, the learned Magistrate is directed to expedite the trial and disposal of the case. The parties are directed to appeal before the Trial Court on 7.12.2009 and obtain further orders from the Trial Court, which is directed to dispose of the case before 24.4.2010. In the said view of the matter, the petition being devoid of merit, stands dismissed subject to the observations.