IMPORTANT POINTS
(1) HC erred in law in going into factual aspects of matter, which not admitted between parties.
(2) HC erred in observing that S. 138(b) of NI Act stood un-complied, even though respondent/accused admitted that he replied notice issued by complainant.
(3) Whether signatory of demand notice authorized by complainant company or not, could not examined by High Court in jurisdiction under S. 482 of Cr. PC, when such plea controverted by complainant before it.

JUDGMENT

Prafulla C. Pant, J.—These appeals are directed against judgment and order dated 25.2.2014 passed by the High Court of Kerala in Criminal M.C. No 2366 of 2008 and Criminal M.C. No. 2367 of 2008, whereby the said Court has allowed the petitions and quashed the proceedings of criminal complaint case Nos. 1790, 1791, 1792, 1793, 1794, 1795, 1796, 1824, 1825, 1826, 1827, 1828, 1829, 1830 and 1831 of 2007 pending in the Court of Judicial First Class Magistrate (Court No. IV), Kochi; and C.C. Nos. 1208, 1209, 1210, 1211 and 1212 of 2007, pending in the Court of Judicial First Class Magistrate (Court No. III), Kochi. All these criminal complaint cases were pertaining to offence punishable under Section 138 of the Negotiable Instruments Act, 1881 (hereinafter referred to as “the N.I. Act”).

2. We have heard learned counsel for the parties and perused the papers on record.

3. Succinctly stated, the appellant filed criminal complaint cases against respondent M.A. Abida stating that as many as 57 cheques dated 28.9.2006 were issued by her in discharge of outstanding liability towards the complainant/appellant (HMT Watches Ltd.). When the cheques were presented for collection the same were received back, dishonoured by bankers with the endorsement “payment stopped by the drawer”. Notice of demand dated 9.10.2006 was issued by the complainant to the respondent No.1 but she failed to make the payment of the amount mentioned in the cheques, i.e., total Rs.1,79,86,357. Instead, she sent reply to the notice disputing liability to pay. On this, complainant filed twenty criminal complaints mentioned above, against the respondent No.1 with regard to the offence punishable under Section 138 of the N.I. Act.

4. The accused M.A. Abida filed Criminal M.C. No. 2366 of 2008 and Criminal M.C. No. 2367 of 2008 challenging the proceedings initiated by the complainant on the ground that she was Re-Distribution Stockist (RDS) of watches manufactured by the appellant. The business with the appellant was done till September, 2003 on “cash and carry” basis. The accused further pleaded in the petitions filed before the High Court under Section 482 of the Code of Criminal Procedure, that after 2003 the appellant company used to collect cheques towards the amount covered by distinct invoices with respect to various consignments for securing payment of amount covered by the invoices.

5. The High Court accepted the plea of the accused (respondent No.1) and quashed the criminal complaint cases. Hence, these appeals through special leave.

6. On behalf of the appellant, it is argued before us that the High Court committed a grave error of law in quashing the proceedings of the criminal complaint cases on the factual pleas taken by the respondent No.1. On the other hand, learned counsel for the respondent No.1 contended that since the cheques were given as security, as such there was no liability to make the payment, and the ingredients of the offence punishable under Section 138 of the N.I Act were not made out.

7. Section 138 of the Negotiable Instruments Act, 1881 reads as under:

“138. Dishonour of cheque for insufficiency, etc., of funds in the accounts— Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provisions of this Act, be punished with imprisonment for “a term which may extend to two year”, or with fine which may extend to twice the amount of the cheque, or with both: Provided that nothing contained in this section shall apply