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SUPREME COURT OF INDIA
K.M. JOSEPH, HRISHIKESH ROY, JJ.
Rathish Babu Unnikrishnan – Appellant(s)
VERSUS
The State (Govt. of NCT of Delhi) & Anr. – Respondent(s)
CRIMINAL APPEAL NOS. 694-695 OF 2022 (Arising out of SLP (Crl) Nos.5781-5782 OF 2020)
Decided On : 26-04-2022
(A) Negotiable Instruments Act, 1881 – Section 138 – Companies Act, 2013 – Section 56(1) – Criminal Procedure Code, 1973 – Section 482 – Dishonour of cheques – Transactional arrangement between complainant and accused reveals nature of obligations that both had undertaken – Cheques in question were accepted by complainant for an agreed price consideration, for shares in appellant’s company – Transfer of securities of a company can take place only when a proper instrument of transfer is effectuated – Operation of legally transferring shares involves several distinct steps which also requires payment of price by prospective transferee to fulfil their promise first – Burden of proving that there is no existing debt or liability, is to be discharged in trial. (Paras 9 and 10)
(B) Negotiable Instruments Act, 1881 – Section 138 – Criminal Procedure Code, 1973 – Section 482 – Dishonour of cheques – Quashing of criminal proceeding – Legal presumption of cheque having been issued in discharge of liability must also receive due weightage – In a situation where accused moves Court for quashing even before trial has commenced, Court’s approach should be careful enough to not to prematurely extinguish case by disregarding legal presumption which supports complaint – At any rate, whenever facts are disputed truth should be allowed to emerge by weighing evidence – What is discernible is that a possible view is taken that cheques drawn were, in discharge of a debt for purchase of shares – In any case, when there is legal presumption, it would not be judicious for quashing Court to carry out a detailed enquiry on facts alleged, without first permitting Trial Court to evaluate evidence of parties – Quashing Court should not take upon itself, burden of separating wheat from chaff where facts are contested – Quashing proceedings must not become an expedition into merits of factual dispute, so as to conclusively vindicate either complainant or defence – When cheque and signature are not disputed by appellant, balance of convenience at this stage is in favour of complainant/prosecution, as accused will have due opportunity to adduce defence evidence during trial, to rebut presumption – To non-suit complainant, at the stage of summoning order, when factual controversy is yet to be canvassed and considered by trial court will not be judicious – Based upon a prima facie impression, an element of criminality cannot entirely be ruled out here subject to determination by trial Court – When proceedings are at a nascent stage, scuttling of criminal process is not merited – High Court rightly declined relief to accused, in quashing proceeding – Appeals dismissed. (Paras 11, 12, 13, 17, 18, 19 and 20)
(C) Criminal Procedure Code, 1973 – Section 482 – Quashing of criminal prosecution – Court should be slow to grant relief of quashing a complaint at a pre-trial stage, when factual controversy is in realm of possibility particularly because of legal presumption – Consequences of scuttling criminal process at a pre-trial stage can be grave and irreparable – Quashing proceedings at preliminary stages will result in finality without parties having had opportunity to adduce evidence and consequence then is that proper forum i.e., Trial Court is ousted from weighing material evidence – If this is allowed, accused may be given an un-merited advantage in criminal process. (Paras 16 and 17)
Facts of the case:
Challenge in these appeals is to the judgment and order dated 02.08.2019 in the Crl. M.C. No.414/2019 and Crl.M.A.No.1754/2019 whereby the Delhi High Court dismissed the application under Section 482 of the Code of Criminal Procedure, 1973 for quashing of the summoning order dated 1.6.2018 and the order framing notice dated 3.11.2018, issued against the appellant under Section 138 of Negotiable Instruments Act, 1881. High Court opined that the grounds agitated by the appellant are “factual defences” which should not be considered within parameters of limited enquiry permissible in a petition under Section 482 Cr.P.C. Accordingly, petition was dismissed but the accused’s liberty to raise his defence in the competent Court was safeguarded in impugned order. Issue to be answered here is whether summons and trial notice should have been quashed on the basis of factual defences.
Findings of Court:
To rebut legal presumption against him, the appellant must also get a fair opportunity to adduce his evidence in an open trial by an impartial judge who can dispassionately weigh the material to reach the truth of the matter.
Result : Appeals dismissed.
JUDGMENT
Hrishikesh Roy, J.
Leave granted.
2. The challenge in these appeals is to the judgment and order dated 02.08.2019 in the Crl. M.C. No.414/2019 and Crl.M.A.No.1754/2019 whereby the Delhi High Court dismissed the application under Section 482 of the Code of Criminal Procedure, 1973 (hereinafter referred to as “Cr.P.C”) for quashing of the summoning order dated 1.6.2018 and the order framing notice dated 3.11.2018, issued against the appellant under Section 138 of the Negotiable Instruments Act, 1881 (hereinafter referred to as the ‘N.I. Act’). On the criminal complaint instituted by one Satish Gupta (respondent no.2), the order under Section 251 of the Cr.P.C. was issued against the appellant by the Magistrate’s Court. The High Court on considering the rival contention opined that the grounds agitated by the appellant are “factual defences” which should not be considered within the parameters of limited enquiry permissible in a petition under Section 482 Cr.P.C. Accordingly, the petition was dismissed but the accused’s liberty to raise his defence in the competent Court was safeguarded in the impugned order.
3. For the appellant, Mr. Krishnamohan K., the learned counsel argues that without satisfying the essential ingredients for the offence under Section 138 of the N.I. Act to the effect that the dishonoured cheque received by the complainant is against “legally enforceable debt or liability”, the criminal process could not have been issued. Relying on few judgments, it is next argued that the ingredients necessary to constitute the offence under Section 138 of the N.I. Act is missing in the instant case and therefore the appellant cannot be prosecuted for the offence under the said provision. According to the appellant, the concerned post-dated cheques drawn by him in favour of the complainant were, contingent/security cheques for buyback of shares of AAT Academy (appellant’s company), held by the complainant, and therefore the cheques could not have been prematurely presented to the bank and should have been presented for encashment only after transfer of the complainant’s shareholding in the appellant’s company. In other words, as the complainant was still holding the shares of the appellant’s company when the cheques were presented, the complainant is not entitled to receive any payment at that stage, through encashment of the cheques, made available to him.
4. The complainant per-contra contends that when the cheque are issued and the signatures thereon are admitted, the presumption of a legally enforceable debt will arise in favour of the holder of the cheque. In a situation such as this, it is for the accused to rebut the legal presumption by adducing necessary evidence before the trial Court. Reading the provisions of Section 118 of the N.I. Act, it is submitted by Mr. K.M. Nataraj, learned ASG and Ms. Rebecca M. John the learned Senior Counsel for the complainant, that it is obligatory for the Court to raise the legal presumption against the accused when his cheque is dishonoured on presentation. The learned Magistrate therefore correctly drew such presumption which of course is rebuttable by the appellant, by adducing evidence in course of trial. It is specifically contended by the complainant that in share purchase transactions, the consideration is first paid to the seller as per the customary practice and only thereafter the formalities with respect to the share transfer is completed. In support of such contention, the respondent relies on Section 56 (1) of the Companies Act, 2013 and also the Form SH-4 in the said Act, relating to transfer of securities.
5. The records would show that there were transactions between the parties under which the complainant invested a substantial sum in the appellant’s company. At later stage, dispute arose amongst them but they resolved that the invested money would be returned to the complainant and the shares allotted to the complainant will be proportionately transferred to t
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