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Chhattisgarh High Court · body

2014 DIGILAW 296 (CHH)

Rajkumar Sharma v. Shriram Finance Co. Ltd.

2014-08-07

P.SAM KOSHY

body2014
ORDER (1) With the consent of the learned counsel for both the sides, heard the matter finally at motion stage itself. (2) By way of the instant Petition under Section 482 of Cr PC, the Petitioner intends to challenge the proceedings initiated under Section 138 of the Negotiable Instruments Act (hereinafter referred to as the N.I. Act) by the Respondent-Complainant against the Petitioner through Complaint Case No. 246 of 2008 filed before the Court of Chief Judicial Magistrate, Korba. (3) Facts leading to the instant case are that the Petitioner had entered into a hire-purchase agreement with the Respondent and had obtained loan for the purchase of a Truck and, subsequently, the Petitioner had purchased a Truck, bearing Registration No.CG04-JA/2383. As per the said agreement, the Petitioner had to make installments, and by way of security the Petitioner had also given postdated cheques in the form of security to the Respondent so that the same could be utilized by the Respondent in the event if the Petitioner defaults in paying the monthly installments. That, in the month of January 2008, the Respondent on account of an alleged default on the part of the Petitioner in paying the installments, suddenly without any intimation/ notice, forcefully seized the vehicle which was in the possession of the Petitioner and neither did the Respondent give any intimation of the seizure of the vehicle to the Petitioner. Further it is also suggested and learnt from the letter issued by the Respondent that the Respondent has also further sold the said vehicle and have realized the sale value of the said vehicle towards meeting the loan repayment. Thereafter, it is learnt that the Respondent have filled up the cheque bearing No.016252 drawn on UTI Bank, Korba, in favour of the Respondent and have presented the said cheque for clearance to its account in Oriental Bank of Commerce, Korba, on 12.2.2008. The said cheque was returned back with reasons assigned as insufficiency of funds. Thereafter, the Respondent in a typical arm-twisting method of a financial institution initiated proceedings under Section 138 of the N.I. Act against the Petitioner. The said complaint case was filed before the Court of Chief Judicial Magistrate, Korba, which was registered as Complaint Case No. 246 of 2008. Thereafter, the Respondent in a typical arm-twisting method of a financial institution initiated proceedings under Section 138 of the N.I. Act against the Petitioner. The said complaint case was filed before the Court of Chief Judicial Magistrate, Korba, which was registered as Complaint Case No. 246 of 2008. It is this registration of the said complaint case under Section 138 of the N.I. Act, which has been challenged by the Petitioner by way of the instant Petition under Section 482 of Cr PC seeking for quashment of the said complaint case. (4) Learned Counsel for the Petitioner submits that the complaint of the Respondent itself is not maintainable for the reason that the parties to the dispute i.e. the Respondent and the Petitioner, have entered into a hire-purchase agreement and the said hire-purchase agreement stands automatically terminated the moment the vehicle, for which the hire-purchase agreement was entered into, was forcefully seized by the Respondent and the moment the hire-purchase agreement stands terminated, the Respondent would not be entitled to sue the Petitioner under the provisions of the N.I. Act. A cheque issued as a security put to clearance after termination of the agreement is perhaps not permissible under the eye of law nor can the said presentation of the cheque for clearance be said to be in connection with a live transaction as the contract between the two parties had come to an end. Learned Counsel for the Petitioner further submits that the initiation of the complaint case under Section 138 of the N.I. Act itself is malicious and is nothing but an abuse of process of law on account of the fact that the Respondent has not filed the said complaint case with clean hands inasmuch as in the said complaint case itself the Respondent has not disclosed the fact to the Court below in respect of the Respondent having forcefully seized the vehicle and also suppressed the material fact about the said vehicle having been sold and sale proceeds also having been realized against the consideration received on account of the loan amount. It is also submitted by the learned Counsel for the Petitioner that once when the vehicle has been forcefully repossessed by the Respondent and that subsequently the vehicle also having been sold and this fact having been suppressed from the Court below at the time of registration of the said complaint case itself vitiates the entire trial proceedings and for the said reason the learned Counsel for the Petitioner prays for the quashing of the said complaint case itself as the same is not maintainable. (5) Per contra, learned counsel for the Respondent submits that the proceedings under Section 138 of the N.I. Act has nothing to do with the seizure of the vehicle by the Respondent or recovering the sale proceeds of the vehicle after seizure of the same. According to the learned Counsel for the Respondent, all that is required under the proceedings of Section 138 of the N.I. Act is the fact that the accused has given a cheque towards discharge of his liabilities and when the said cheque towards discharge of the liability is presented for clearance, the cheque is dishonoured assigning the reason of insufficiency of funds. As per the learned Counsel for the Respondent, in the instant case also admittedly the Petitioner had given a cheque to the Respondent for using the same towards encashment of their unpaid liabilities and that for the said encashment of the unpaid liability, the Respondent had put the cheque for clearance which got dishonoured for insufficiency of funds and as such the complaint case cannot be said to be malicious or is vitiated on any of the technicalities. In response to the submissions of the learned Counsel for the Petitioner in respect of the said complaint case not being maintainable on account of the fact that the vehicle has already been seized prior to the filing of the complaint case and that the vehicle also has been sold and the sale proceeds have been recovered, learned Counsel for the Respondent submits that the Respondent has only put the cheque in respect of the amount which now stands outstanding against the Petitioner as unpaid loan, that is to say the difference of the entire loan amount after adjusting the amount recovered by way of sale proceeds of the vehicle and, therefore, it cannot be said to be either illegal or not maintainable. For all these reasons, learned Counsel for the Respondent submits that the instant Petition under Section 482 of Cr PC being devoid of merits is liable to be rejected. (6) Having considered the rival contentions advanced by either side, it is necessary to refer to a couple of decisions rendered by a few High Courts in this regard where on similar set of facts the proceedings under Section 138 of the N.I. Act was challenged. One of the decisions in this regard was a judgment passed by the High Court of Kerala on 2.4.2004 in the case of Sudha Beevi vs. State of Kerala, IV (2004) BC 71, 2004 Cri LJ 3418, wherein under similar factual background, the High Court of Kerala had held that if the hire-purchase agreement involved in the case between the financial institution and the hirer stood determined by the act of parties, the cheques which were accepted by the financial institution towards advance for repayment of the hire would become instruments without consideration and that they will be instruments for which consideration had failed and under the said circumstances the remedy available to the financial institution is only to realize the balance hire due by filing appropriate suit for damages on account of breach of terms of agreement. It was also held that since the financial institution had admittedly got repossession of the vehicle and that the said repossession was even before the filing of the complaint case, the hire-purchase agreement between the parties stood determined ipso facto. Thus, as a consequence of the seizure of vehicle the financial institution had exercised one of the options available to him under the agreement and as such the cheques in its hands given as a security thereafter becomes instruments for which a consideration had failed and if presented for payment and gets dishonoured, no offence punishable under Section 138 of the N.I. Act would be attracted. It is also pertinent to mention that in order to attract the penal provisions under the N.I. Act debt or other liability must be a legally enforceable debt or liability. If the said instrument is not supported by consideration, there is no question of attracting Section 138 of the N.I. Act. It is also pertinent to mention that in order to attract the penal provisions under the N.I. Act debt or other liability must be a legally enforceable debt or liability. If the said instrument is not supported by consideration, there is no question of attracting Section 138 of the N.I. Act. In the instant case it is all the more necessary to take note of the fact that apart from taking repossession of the said vehicle, the Respondent has also sold the vehicle and have adjusted the sale proceeds of the vehicle against the liabilities of the Petitioner and which also leaves the Respondent with the only remedy for realization of the balance amount from the hirer is by way of filing a suit for damages or a suit for recovery, as the case may be. (7) The said view taken by the Kerala High Court has been further relied upon by the Madurai Bench of Madras High Court in the case of N. Rajangan vs. Centurion Bank Ltd. decided on 13.10.2009, wherein also the Madurai Bench of Madras High Court reached to the conclusion that once the financier had exercised the option of seizure of vehicle, the postdated cheques cannot be permitted for encashment, particularly, after the seizure of the vehicle and the only recourse available to the said financier is to initiate appropriate legal remedy for recovery of the balance amount. Likewise, the Punjab and Haryana High Court at Chandigarh also in a recent decision made on 31.7.2013 in the case of M/s Guru Nanak Tractors vs. Swarn Singh, took the same view that as per the Section 138 of the N.I. Act in order to attract the penal provision the debt or other liability must be legally enforceable debt or liability and if the instrument is not supported by consideration, there is no question of attracting the provisions of Section 138 of the N.I. Act. (8) The decisions of the High Courts referred to above is further fortified by the recent decision of the Hon'ble Supreme Court in the case of M/s. Indus Airways Pvt. Ltd. and others vs. M/s Magnum Aviation Pvt. Ltd. and another, 2014 (3) M.P.H.T. 28 (SC). (8) The decisions of the High Courts referred to above is further fortified by the recent decision of the Hon'ble Supreme Court in the case of M/s. Indus Airways Pvt. Ltd. and others vs. M/s Magnum Aviation Pvt. Ltd. and another, 2014 (3) M.P.H.T. 28 (SC). (9) In light of the aforesaid decisions rendered by the different High Courts and in respectful agreement to the ratio laid down in these judgments, in the instant case also, as is evident from the document (Annexure A-3) filed by the Petitioner issued by the Respondent, the Respondent has taken repossession of the vehicle and has also further sold it and realized the sale proceeds and, under the said circumstances, I am of the opinion that the hire-purchase agreement entered into between the Petitioner and the Respondent gets determined ipso facto. (10) Section 138 of the N.I. Act treats dishonoured cheque as an offence, if the cheque has been issued in discharge of any debt or other liability. The Explanation leaves no manner of doubt that to attract an offence under Section 138, there should be legally enforceable debt or other liability subsisting on the date of drawal of the cheque. The very fact that the Respondent has taken repossession of the vehicle and has also sold the said vehicle and the sale value of the said vehicle has also been adjusted for meeting the loan repayment, the agreement on the basis of which the postdated cheques were issued cannot be put for clearance for the reason that the Respondent by virtue of the two acts on their part; firstly, of taking possession of the vehicle and, secondly, of sale/auctioning the said vehicle, stood determined. Therefore, the cheques which have been subsequently put for clearance and got dishonoured would not fall within the ambit of legally enforceable debt or other liability. (11) For the foregoing reasons, the Petition under Section 482 of Cr PC is allowed and the complaint case initiated by the Respondent against the Petitioner deserves to be and is hereby quashed. There shall be no order as to costs.