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2019 DIGILAW 731 (KER)

Swastika Enterprises v. State Of Kerala

2019-09-04

MARY JOSEPH

body2019
ORDER : In the petition on hand, petitioners/ accused Nos.1 and 2 are seeking to quash Annexure-A1 complaint in S.T.No.268 of 2018 on the files of Chief Judicial Magistrate Court, Kollam and all further proceedings initiated against the petitioners therein. Annexure-A1 is the copy of the complaint filed by the 2nd respondent to prosecute the petitioners under Section 142 of the Negotiable Instruments Act, 1881 (for short 'the N I Act') for an offence punishable under Section 138 NI Act. 2. The allegations in Annexure-A1 complaint are to the following effect: In the month of October, 2015, the 2nd accused on behalf of the 1st accused made the complainant believe that they would provide 100 metric tons of raw cashew nuts for a sum of Rs.30,00,000/-. High Seas Sale Contract dated 13.10.2015 was executed by petitioners in favour of the complainant. Believing the representations made by the accused, the complainant paid a sum of Rs.30 lakhs as per the agreement through RTGS to the account of the accused on 17.10.2015. The accused violated the terms of agreement by failing to deliver the raw cashew nuts as promised, despite the payment made. Thereafter, 2nd accused demanded Rs.10 lakhs more, and the complainant paid the said amount also through RTGS on 17.05.2016. Evenafter making the second payment, cashew nuts were not delivered as agreed. Demands were made for delivery of cashew nuts severally to which the accused responded by expressing his inability to perform his part. He has agreed to make payment in parts. The accused repaid Rs.6 lakhs, by paying Rs.4 lakhs and 2 lakhs through bank transactions respectively dated 21.11.2016 and 15.12.2016. Thereafter, towards balance payment of Rs.30 lakhs, cheque No.110673 dated 20.06.2018 was drawn from ICICI Bank Rohini Branch, New Delhi and issued. The cheque was presented for encashment but the same was returned with a memo referring reason 'funds insufficient'. Thereafter, statutory notice was issued on 13.07.2018 in the address of the 2nd accused. It was returned unserved on 21.07.2018, for the reason, “door locked in long time”. Neither any reply notice was issued by the accused nor any payment was made as demanded by the notice. Thereupon, complaint was filed before the Chief Judicial Magistrate Court, Kollam to prosecute the petitioners, copy of which is appended to the petition on hand as Annexure-A1, and that is now sought to be quashed in the proceedings on hand. 3. Neither any reply notice was issued by the accused nor any payment was made as demanded by the notice. Thereupon, complaint was filed before the Chief Judicial Magistrate Court, Kollam to prosecute the petitioners, copy of which is appended to the petition on hand as Annexure-A1, and that is now sought to be quashed in the proceedings on hand. 3. Sri.Abraham P George, the learned counsel on behalf of the petitioners has contended that Annexure-A1 complaint in view of the illegality involved therein is not sustainable in law. According to him, the allegations in Annexure-A1 are insufficient to attract the offence under Section 138 N I Act and those being purely of civil nature, it is unnecessary to drag the petitioners to the criminal court to be prosecuted based on the same. 4. The learned counsel has also contended that cognizance was taken by the court below based on photocopies of the documents produced alongwith Annexure-A1 complaint. According to him, cognizance was taken on an incomplete document. The contention of the learned counsel was that an endorsement was made on the reverse side of the disputed cheque, based on which the prosecution was initiated, that it is a security cheque, and for that reason the court ought not have taken cognizance of it. Accordingly, the order taking cognizance of the offence by the Chief Judicial Magistrate Court, Kollam is also sought to be set aside for the reason that the petitioners have played fraud on the court. It is also stated in the petition on hand that the cheque which formed basis for the prosecution was one misused by the 2nd respondent/complainant to launch the prosecution. It was a cheque given as a security and a prosecution under Section 142 N I Act will not lie on its basis. According to the learned counsel, eventhough, it is disclosed from the pleadings in the complaint that the liability to discharge the amount covered by the cheque was originated from the proposed transaction of supply of cashew nuts, in fact, it was utilised lateron, for purchase of stones based on some understanding between the parties. Therefore, the complainant cannot turn around and contend that the liability under the disputed cheque arose out of purchase of cashew nuts. Therefore, the complainant cannot turn around and contend that the liability under the disputed cheque arose out of purchase of cashew nuts. In order to substantiate the contentions raised by the learned counsel, he has also produced certain documents alongwith the petition on hand as Annexures A2 to A8. The learned counsel has also contended that a perusal of the documents produced as Annexures-A2 to A8 would show that believing the words of the 2nd respondent and for satisfying his partners that the petitioners issued cheque in question in good faith. 5. Annexure-A2 is the extract of the whats app conversation made among the parties to the prosecution. Annexure-A3 is the true copy of High Seas Sale Contract executed by the parties to the prosecution. Annexure-A4 is the true copy of bill of lading for Ocean Transport or Multimodal Transport. Annexure-A5 is also whats app conversation. Annexure-A6 is true copy of gmail sent to the petitioners/accused by the complainant. Annexure-A7 is nothing but copy of a plaint, filed before the District Judge (Central), Delhi by the accused as plaintiff against the complainant/2nd respondent and Annexure-A8 is the reply sent by the accused in response to the legal notice issued by the complainant. 6. It is contended by the learned counsel that going by Annexure-A2 whats app conversation, it is evidenced that the money advanced was utilised for purchase of stones, a transaction totally different from the one pleaded by the complainant in Annexure-A1. According to him, it is evidenced from Annexure-A3 that though the contract was entered for purchase of raw cashew nuts, lateron based on an understanding among the parties the money was utilised for purchase of stones and the cheque which formed basis for launching the prosecution was the one given as security by the accused towards purchase of cashew nuts and misused by the complainant. According to the learned counsel, the said factum is evidenced from Annexure-A6, gmail communication. The learned counsel has also relied on Harshendra Kumar D. v. Rebatilata Koley and Others [2011 (1) KHC 837 (SC)] to contend that the courts are empowered to quash proceedings in exercise of jurisdiction under Section 482 Cr.P.C, based on materials produced by the accused. According to the learned counsel, the said factum is evidenced from Annexure-A6, gmail communication. The learned counsel has also relied on Harshendra Kumar D. v. Rebatilata Koley and Others [2011 (1) KHC 837 (SC)] to contend that the courts are empowered to quash proceedings in exercise of jurisdiction under Section 482 Cr.P.C, based on materials produced by the accused. It is contended by the learned counsel that in the case on hand, Apex Court has upheld the exercise of jurisdiction conferred under Section 482 Cr.P.C by the High Court to quash proceedings relying on documents produced before it by the accused. The learned counsel has relied on Paragraphs 21 and 22 of the judgment to rest the aforesaid contention. The Paragraphs relied on by the learned counsel are extracted hereunder for easy reference. “21. In our judgment, the above observations cannot be read to mean that in a criminal case where trial is yet to take place and the matter is at the stage of issuance of summons or taking cognizance, materials relied upon by the accused which are in the nature of public documents or the materials which are beyond suspicion or doubt, in no circumstances, can be looked into by the High Court in exercise of its jurisdiction under S.482 or for that matter in exercise of revisional jurisdiction under S.397 of the Code. It is fairly settled now that while exercising inherent jurisdiction under S.482 or revisional jurisdiction under S.397 of the Code in a case where complaint is sought to be quashed, it is not proper for the High Court to consider the defence of the accused or embark upon an enquiry in respect of merits of the accusations. However, in an appropriate case, if on the face of the documents-which are beyond suspicion or doubt-placed by accused, the accusations against him cannot stand, it would be travesty of justice if accused is relegated to trial and he is asked to prove his defence before the Trial Court. In such a matter, for promotion of justice or to prevent injustice or abuse of process, the High Court may look into the materials which have significant bearing on the matter at prima facie stage. 22. Criminal prosecution is a serious matter, it affects the liberty of a person. No greater damage can be done to the reputation of a person than dragging him in a criminal case. 22. Criminal prosecution is a serious matter, it affects the liberty of a person. No greater damage can be done to the reputation of a person than dragging him in a criminal case. In our opinion, the High court fell into grave error in not taking into consideration the uncontroverted documents relating to appellant's resignation from the post of Director of the Company. Had these documents been considered by the High Court, it would have been apparent that the appellant has resigned much before the cheques were issued by the Company. As noticed above, the appellant resigned from the post of Director on March 2, 2004. The dishonoured cheques were issued by the Company on April 30, 2004, i.e., much after the appellant had resigned from the post of Director of the Company. The acceptance of appellant's resignation is duly reflected in the resolution dated March 2, 2004. Then in the prescribed form (Form No.32), the Company informed to the Registrar of Companies on March 4, 2004 about appellant's resignation. It is not even the case of the complainants that the dishonoured cheques were issued by the appellant. These facts leave no manner of doubt that on the date the offence was committed by the Company, the appellant was not the director, he had nothing to do with the affairs of the Company. In this view of the matter, if the criminal complaints are allowed to proceed against the appellant, it would result in gross injustice to the appellant and tantamount to an abuse of process of the Court.” 7. The learned counsel has also relied on Paragraph 15 of Indus Airways Private Limited and Others v. Magnum Aviation Private Limited and Another [ (2014) 12 SCC 539 ], which is also extracted hereunder: “15. The above reasoning of the Delhi High court is clearly flawed inasmuch as it failed to keep in mind the fine distinction between civil liability and criminal liability under Section 138 of the NI Act. If at the time of entering into a contract, it is one of the conditions of the contract that the purchaser has to pay the amount in advance and there is breach of such condition then purchaser may have to make good the loss that might have occasioned to the seller but that does not create a criminal liability under Section 138. For a criminal liability to be made out under Section 138, there should be legally enforceable debt or other liability subsisting on the date of drawal of the cheque. We are unable to accept the view of the Delhi High Court that the issuance of cheque towards advance payment at the time of signing such contract has to be considered as subsisting liability and dishonour of such cheque amounts to an offence under Section 138 of the N I Act. The Delhi High court has travelled beyond the scope of Section 138 of the N I Act by holding that the purpose of enacting Section 138 of the NI Act would stand defeated if after placing orders and giving advance payments, the instructions for stop payments are issued and orders are cancelled. In what we have discussed above, if a cheque is issued as an advance payment for purchase of the goods and for any reason purchase order is not carried to its logical conclusion either because of its cancellation or otherwise and material or goods for which purchase order was placed is not supplied by the supplier, in our considered view, the cheque cannot be said to have been drawn for an existing debt or liability.” 8. The said dictum was produced by the learned counsel in order to draw a distinction on how a criminal liability and civil liability would arise. According to the learned counsel, if at the time of entering into a contract, as per one of the conditions of the contract, if the purchaser has to pay some amount in advance and lateron when there is breach, then the purchaser may have to make good the loss that might have occasioned to the seller and that does not create a criminal liability under Section 138 NI Act. It is contended by the learned counsel based on the dictum that for a criminal liability to arise under Section 138 N I Act, there should be a legally enforceable debt or other liability that subsists as on date of drawal of the cheque. It is contended by the learned counsel based on the dictum that for a criminal liability to arise under Section 138 N I Act, there should be a legally enforceable debt or other liability that subsists as on date of drawal of the cheque. According to the learned counsel, the dictum can safely be applied to the facts of the case and being only a civil liability or in other words for want of materials to establish that the cheque was issued towards discharge of a legally enforceable debt or liability, the prosecution initiated as Annexure-A1 against the petitioners will not sustain. 9. Per contra, Sri.Alan Papali, the learned counsel for the 2nd respondent has contended that sufficient and satisfactory pleadings are available in Annexure-A1 complaint and those are adequate to sustain a prosecution under Section 138 N I Act both legally and factually. According to him, the sworn statement recorded from the complainant based on Annexure-A1 complaint and the documents produced alongwith that formed basis for the Chief Judicial Magistrate Court, Kollam to take cognizance on Annexure-A1. According to him, though the documents produced are photocopies, there is no bar in taking cognizance, since the subjective satisfaction of the Magistrate regarding existence of a prima facie case alone is required for the purpose. According to him, the Chief Judicial Magistrate has arrived at the subjective satisfaction based on the sworn statement of the complainant and photocopies of the documents produced before it and the order taking cognizance is not liable to be challenged in a petition filed under Section 482 Cr.P.C. The learned counsel has contended that though there is no bar for the courts to rely on matters not directly connected with the prosecution to quash proceedings, in the decision cited by the learned counsel and referred to supra, the Apex Court has clearly distinguished the documents which are relevant for consideration and liable to be relied on while exercising jurisdiction to quash a proceeding under Section 482 Cr.P.C. It is contended by the learned counsel that the Apex Court has directed in the dictum extracted supra that High Courts are free to place reliance upon public documents or documents absolutely reliable or based on which a suspicion is unlikely to arise, while exercising jurisdiction to quash proceedings. 10. 10. It is also contended by the learned counsel that the allegations levelled by the 2nd respondent in Annexure-A1 complaint would prima facie attracts an offence under Section 138 N I Act. According to him, materials available prima facie indicate that the cheque was issued for a legally enforceable debt or liability. Whether the debt alleged is actually a legally enforceable one or not will depend upon the evidence that would be adduced by the complainant during trial. Therefore, the contention of the learned counsel was that only if a trial is held on the basis of the allegations in the complaint, the court will be convinced of the sustainability of the prosecution. It is contended that the documents produced by the learned counsel for petitioners as Annexures A2 to A8, to any stretch of imagination, are public documents or documents totally reliable by this Court. Accordingly, the learned counsel urged not to place reliance on those documents to quash AnnexureA1. 11. Though generally while exercising jurisdiction under Section 482 Cr.P.C, the High Courts will look into the documents produced by the prosecution to see whether prima facie case is made out against the accused or not, but, it being the duty of the court exercising jurisdiction under Section 482 Cr.P.C to prevent abuse of process of any court or to secure the ends of justice, there is nothing wrong in relying on materials produced by the accused, which are of the nature of public documents or documents which from the very reading of it create no doubt as to its existence or relevance. Therefore, documents, though extraneous to the prosecution case, if are in the nature of public documents or reliable without any further enquiry being conducted, which are liable to tell about the falsity involved in the case can be relied on by the courts exercising jurisdiction under Section 482 Cr.P.C. This Court had already referred to the documents produced as Annexures A2 to A8. It may be that the documents have relevance in the context. But the documents cannot be categorised as public documents or documents which are liable to be relied on without any doubt. Annexures A2 to A8 may be used by the petitioners for the purpose of defending the prosecution. But in order to be received in evidence, further probe is required. But the documents cannot be categorised as public documents or documents which are liable to be relied on without any doubt. Annexures A2 to A8 may be used by the petitioners for the purpose of defending the prosecution. But in order to be received in evidence, further probe is required. Those cannot be relied on straight away, but need to be put in confrontation of the complainant and that could be done only during trial. None of the documents produced as Annexures A2 to A8 gain colour of a public document or document liable to be accepted without any doubt as held in the case cited supra so as to form basis for granting the relief sought. The documents must be put to the witness during trial and those could be relied on by the court subject to confrontation by the opposite party. None of the documents are liable to be accepted blindly for the purpose of quashing Annexure-A1. In Harshendra Kumar's case supra, the Apex Court has specifically stated that extraneous documents of the nature of public documents or documents which are not liable to create doubt, alone can be relied on by courts while exercising jurisdiction under Section 482 Cr.P.C to quash the proceedings. Other kinds of documents cannot form basis for exercising jurisdiction under Section 482 Cr.P.C to quash proceedings. In the context, trial must proceed in the case. In the aforesaid circumstances, this Court finds no reason to invoke the jurisdiction under Section 482 Cr.P.C to quash Annexure-A1 complaint based on the grounds projected by the petitioners and the documents marked alongwith the petition on hand. The petitioners could produce all these documents in the trial proposed to be held, for establishing the defence of the accused. With that liberty kept reserved for the petitioners, the Crl.M.C. stands dismissed.