Back
IN THE HIGH COURT OF BOMBAY
Prakash D. Naik, J.
Mohan India Pvt. Ltd. - Appellant
Versus
National Spot Exchange Ltd. - Respondent
Criminal Application N.194 of 2022 With
Decided On : 04-08-2022
N.I. Act - Negotiable Instruments Act, 1881 - Sec. 138, Sec. 141, Sec. 202 of Cr.P.C - The court discussed the provisions of Sec. 138 of the N.I. Act, which penalizes dishonor of cheques issued for discharge of a legally enforceable debt. The court interpreted that the existence of a legally enforceable debt is essential for the application of Sec. 138. It also examined the mandatory nature of Sec. 202 of Cr.P.C regarding inquiries when the accused resides outside the jurisdiction of the court, concluding that the inquiry is necessary to prevent harassment through false complaints. The court emphasized that the issuance of cheques, even if post-dated or issued as security, could still constitute an enforceable liability depending on the circumstances surrounding the transaction.
Fact of the Case:
The applicants were prosecuted under Sec. 138 of the N.I. Act for issuing cheques that were returned unpaid. The cheques were issued in the context of a settlement agreement between the complainant, a company, and the accused, which included a significant outstanding amount due to payment defaults. The accused challenged the issuance of process, arguing that the cheques were not issued for a legally enforceable debt due to the lack of approval from the Forward Market Commission for the settlement agreement.
Finding of the Court:
The court found that the cheques were issued in discharge of a liability, and the arguments regarding the enforceability of the debt were matters for trial. The court held that the issuance of process was justified based on the materials available, including the complaint and verification statement. It concluded that the mandatory inquiry under Sec. 202 of Cr.P.C was complied with, and the order issuing process was valid.
Issues: Whether the cheques were issued for a legally enforceable debt under Sec. 138 of the N.I. Act; whether the inquiry mandated by Sec. 202 of Cr.P.C was properly conducted given the accused's residence outside the jurisdiction of the court.
Ratio Decidendi: The court reiterated that the existence of a legally enforceable debt is a prerequisite for prosecution under Sec. 138 of the N.I. Act. It also clarified that the inquiry under Sec. 202 of Cr.P.C is mandatory when the accused resides outside the jurisdiction, aimed at preventing harassment through false complaints. The court emphasized that the determination of whether a cheque was issued in discharge of a debt is a factual issue to be resolved at trial.
Final Decision: The court rejected the applications challenging the issuance of process under Sec. 138 of the N.I. Act, affirming that the trial should proceed expeditiously.
JUDGMENT/ORDER
1. The applicants in all these applications are prosecuted for offence under Sec. 138 of Negotiable Instruments Act, 1881 ('N.I.Act' for short). The applicants are aggrieved by order issuing process passed by learned Magistrate for offence u/s.138 of N.I. Act and the order passed by Sessions Court rejecting the Revision Applications challenging the order of process.
2. The complaints in all the cases were similar. The complainant is a company incorporated under The Companies Act and carries on business as a Spot Exchange providing for an electronic trading platform for spot contracts in commodities and compulsory delivery basis. The accused M/s.Mohan India Pvt.Ltd Company is a tradingcum-clearing member of the complainant. The other accused are Directors of accused no.1. The accused no.1 was a trading-cumclearing member admitted by the complainant and had been conferred with rights to trade and clear through clearing house of complainant and was allowed to make deals for himself as well as on behalf of his clients and clear and settle such deals. The Government of India directed complainant to furnish an undertaking that all existing contracts will be settled on due dates and no fresh contracts will be launched. The complainant submitted undertaking on 15/7/2013 shortening the delivery period to 10 days in all contracts. In order to safeguard interests of all participants and market in general, the complainant issued Circular dtd. 31/7/2013 suspending all the transactions on the exchange with effect from 31/7/2013 by merging the delivery and settlement of all pending contracts and differing it for a period of 15 days. Consequently it was directed that the positions outstanding in the contracts would be settled by way of delivery and payment after expiry of 15 days. In view of the outstanding with respect to accused no.1 and its sister concerns, vis-a-vis 'Tavishi Enterprises Pvt. Ltd; Brinda Commodity Pvt. Ltd' the whole of the amount payable at the exchange platform, in view of the various transactions of sugar amounted to Rs.922.00crores. Since payment crisis had arisen due to default in payment, with a view to solve the issue settlement agreement was executed on 30/10/2013. As per settlement agreement amount payable by the accused is Rs.771.00 crores and the amount was payable by accused in installments Rs.250.00 crores payable by accused on or before 30/6/2014 was defaulted and an amount of Rs.221.15 crores remained unpaid on 24/8/2014. The accused issued post dated cheques. The complainant deposited cheques. The cheques were returned unpaid with memo with remarks "funds insufficient". Demand notice was sent. Complaints were filed for the offence under Sec. 138 of Negotiable Instruments Act ('N.I.Act'). Verification statement was recorded. Process was issued against the accused.
3. The accused challenged the order issuing process by preferring Criminal Revision Applications before the Court of Sessions for Greater Bombay. Vide common order dtd. 30/10/2021, the applications were rejected.
4. Learned Senior Advocate Mr.Setalwad appearing for applicants submitted as under :
(ii) The settlement agreement was subject to approval of Forward Market Commission and it is admitted position that Forward Market Commission refused to grant approval to settlement agreement. Since Forward Market Commission did not approve the said agreement vide letter 11/4/2014, there was no legally enforceable debt arising from the said settlement agreement in favour of complainant;
(iii) The Revisional Court has mechanically rejected the revision applications without considering the legal issues in
The court established that the issuance of a cheque, even if post-dated or issued as security, can constitute a legally enforceable debt under Sec. 138 of the N.I. Act, and that the inquiry under Sec....
Point of Law : Postponement of issue of process - The dictum is when Magistrate holds inquiry himself, it is not compulsory that he should examine The witnesses and in suitable cases Magistrate can e....
(1) Dishonour of cheque – A post-dated cheque issued after debt has been incurred would be covered by definition of ‘debt’ – However, if sum payable depends on a contingent event, then it takes colou....
The court established that the amendment to Section 202(1) of the Cr.P.C. requires an inquiry only when the accused resides outside the jurisdiction, but if sufficient grounds are evident from the re....
Issuance of summons without conducting inquiry under Section 202 of the Cr.P.C. is impermissible, making the cognizance under Section 138 of the N.I. Act unsustainable.
The court cannot inquire into the reliability of the allegations in summary proceedings and no further inquiry is necessary if the summoning order demonstrates prima facie findings.
The court emphasized the limited scope of inquiry at the stage of issuance of summons under Section 138 of the NI Act and the applicability of the rebuttable presumption under Section 139 of the NI A....
For summoning under Section 138 of the NI Act, recording of statements under Sections 200 and 202 Cr.P.C. is not required, and the evidence of the complainant may be given by affidavit as per Section....
Payment of a part or whole of the sum represented on a cheque between the period when the cheque is drawn and when it is encashed upon maturity reduces the legally enforceable debt on the date of mat....
Compliance under Sec. 202 of the Code of Criminal Procedure, when the accused is residing beyond the jurisdiction of the Magistrate, is mandatory.
An indispensable Tool for Legal Professionals, Endorsed by Various High Court and Judicial Officers
Please visit our Training & Support
Center or Contact Us for assistance
Scan Me!
India’s Legal research and Law Firm App, Download now!
For Daily Legal Updates, Join us on :
Back to top
