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2007 Supreme(Cal) 311
High Court Of Calcutta
Before Mr. Justice Pravendu Narayan Sinha
LUSTURE AGENCIES PRIVATE LIMITED - Appellant
Versus
MAGMA LEASING LIMITED - Respondent
C. R. R. 853 Of 2007
Decided On : 04/26/2007
Ashim Kumar Routh, S.S.ROY, SANDIPAN GANGULY
Stop payment instructions do not obviate the offense under Section 138 of the NIA if otherwise made out.
Headnote:
NEGOTIABLE INSTRUMENTS ACT - ARBITRATION AWARD - SECTION 138 - CRIMINAL PROCEEDING - QUASHING - STOP PAYMENT INSTRUCTION - VALIDITY - LIABILITY UNDER SECTION 138 - PRESUMPTION UNDER SECTION 139 - REBUTTAL BY ACCUSED.
Fact of the Case:
The petitioners approached the court seeking to quash a criminal proceeding initiated against them under Sections 138 and 141 of the Negotiable Instruments Act (NIA) for dishonoring cheques. They argued that an arbitration award had already been passed covering the entire dues, including the dishonored cheques, and that a parallel proceeding was not permissible. The petitioners also claimed that they had instructed the bank to stop payment of the cheques and had informed the complainant about the same.
Finding of the Court:
The court held that the existence of an arbitration award did not bar the criminal proceeding under Section 138 of the NIA. It further held that the instruction to stop payment and the intimation to the complainant about the same did not absolve the petitioners from criminal liability. The court relied on the Supreme Court's decision in Modi Cements Ltd. v. Kuchil Kumar Nandi, which held that stop payment instructions cannot obviate the offense under Section 138 of the NIA if otherwise made out.
Issues: 1. Whether the existence of an arbitration award covering the dishonored cheques bars the criminal proceeding under Section 138 of the NIA? 2. Whether the instruction to stop payment and the intimation to the complainant about the same absolve the petitioners from criminal liability under Section 138 of the NIA?
Ratio Decidendi: 1. The existence of an arbitration award does not bar the criminal proceeding under Section 138 of the NIA because the arbitration award adjudicates the claim between the parties over the hypothecation agreement, while the criminal proceeding determines whether the petitioners committed an offense under Section 138 of the NIA. 2. The instruction to stop payment and the intimation to the complainant about the same do not absolve the petitioners from criminal liability under Section 138 of the NIA because such instructions cannot obviate the offense if otherwise made out.
Final Decision: The court dismissed the revisional application and held that the criminal proceeding could not be quashed. The court also observed that the complainant was entitled to the presumption under Section 139 of the NIA and the petitioners were required to rebut such presumption in the trial by leading proper evidence.
( 2 ) MR. Ashim Kumar Routh, the learned Advocate for the petitioners submitted that the complainant referred the matter of dispute between the financer complainant and hirer petitioners to the Arbitrator and the Arbitrator also passed an award which covered all the points including the dues of the complainant. The award was passed on the basis of claim application filed by the O. P. No. 1 under the Arbitration and Conciliation Act. Another application under Section 9 of the Arbitration and Conciliation Act was filed by the O. P. No. 1 before the learned 6th Judge, City Civil Court at ' Calcutta in Misc. Case No. 2076 of 2005. The petitioner has challenged the award no doubt by tiling a petition for setting aside the award. By the order of the learned Judge of the City Civil Court receiver was appointed to take possession of the vehicle. There was one hire purchase agreement between the petitioners and O. P. No. 1. The vehicle of the petitioner was stolen from Bihar and the driver lodged FIR at concerned police station in bihar. The petitioners submitted their claim before the Insurance Company. The claim of the petitioners before the Insurance Company is still pending. The petitioners requested the O. P. No. 1 to wait for few months and informed him that he would make the payment after receiving their claim amount from the Insurance Company. At the time of taking loan from the O. P. No. 1, they issued some post dated cheques and thereafter, they sent instruction to the Bank for "stop payment" and also informed the matter to o. P. No. 1. The O. P. No. 1 suppressed everything before the City Civil Court and obtained order and also suppressing everything lodged the complaint against the petitioners.
( 3 ) MR. Routh further submitted that five cheques were dishonoured as the petitioners clearly stated that after the award was passed by the learned Arbitrator the cheques cannot be encashed. After the award was passed by the Arbitrator there cannot be any further liability of the petitioners for payment of dues of complainant. There was no element of section 138 as well as Section 141 of the N.. Act against the petitioners. Before lodging of complaint the petitioners duly informed the bank and the complainant about their instruction of "stop payment".
( 4 ) MR. Routh next contended that a parallel proceeding is not permissible. The award was passed on 13. 1. 06. In the month of February, 2006 the complaint was filed suppressing material facts. In the complaint the arbitration clause as well as passing of the award were not mentioned. After the award there was no existing liability or legal debt or subsisting dues. The petitioners filed an application before the learned Magistrate for discharge contending that in view of the aforesaid facts and circumstances there was no element of Sections 138/141 of the N.. Act against the petitioners and there was no ground to issue process but, the learned Magistrate without considering the facts and circumstances as well as principles of law dismissed the petition. In the award passed in favour of the complainant/o. P. No. 1, the learned Arbitrator has covered the entire amount of the loan including the amount of cheques which were dishonoured due to instruction of "stop payment". Continuation of the criminal proceeding is an abuse of the process of law as complaint was filed suppressing material facts and the proceeding should be quashed. In support of his contention Mr. Routh placed reliance on the decisions in sfafe of A. P. v. Golconda Linga Swami, reported in 2004 (6) SCC 522, sfafe of Karnataka v. Pastor P. Raju, reported in
