Quashing of cheque dishonour complaints refused where vicarious liability, security cheque claims, and FEMA objections depend on disputed facts.

Section 482 CrPC should not be used to quash Section 138 NI Act complaints where the objections turn on disputed facts. Specific averments for vicarious liability of company officers were noted, but the Court declined a detailed factual appraisal at the advanced evidence stage and left that question to trial. Claims that the cheques were only security cheques, or that no legally enforceable liability existed, likewise required evidence and could not defeat the prosecution at the quashing stage. The FEMA and RBI permission objections also involved factual controversy and did not show abuse of process, so the complaints were allowed to proceed.

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Issues: (i) whether the complaints under Section 138 of the Negotiable Instruments Act, 1881 could be quashed for want of specific averments to fasten vicarious liability on the director and chairman; (ii) whether the cheques were security cheques or unsupported by an existing legally enforceable liability so as to take the matter outside Section 138; (iii) whether the proceedings were liable to be quashed on the ground of alleged FEMA non-compliance and want of Reserve Bank of India permission.

Issue (i): whether the complaints under Section 138 of the Negotiable Instruments Act, 1881 could be quashed for want of specific averments to fasten vicarious liability on the director and chairman.

Analysis: Specific averments are ordinarily required where vicarious liability is sought to be imposed on officers of a company in a prosecution under Section 138. The complaints were examined against that settled principle, but the matter was already at an advanced stage of evidence. In proceedings under Section 482 of the Code of Criminal Procedure, 1973, the Court declined to undertake a meticulous factual appraisal to determine the precise role of the petitioners at that stage.

Conclusion: The complaint could not be quashed on this ground and the issue was left to be determined by the trial court.

Issue (ii): whether the cheques were security cheques or unsupported by an existing legally enforceable liability so as to take the matter outside Section 138.

Analysis: The nature of the cheques and the effect of the accompanying letter raised disputed questions of fact. Whether the cheques were issued as security or in discharge of an existing liability depended on evidence, including the surrounding commercial arrangement and the correspondence between the parties. At the stage of quashing, the Court found it inappropriate to pre-judge that controversy.

Conclusion: The proceedings could not be terminated on the plea that the cheques were only security cheques or that no enforceable liability existed.

Issue (iii): whether the proceedings were liable to be quashed on the ground of alleged FEMA non-compliance and want of Reserve Bank of India permission.

Analysis: The objection under the Foreign Exchange Management Act, 1999 turned on the nature of the underlying transaction and the applicability of the foreign exchange regulations governing guarantees and overseas transactions. That dispute again involved factual questions not fit for determination in a petition for quashing. The Court found a prima facie case for continuation of the criminal proceedings and held that the allegations did not show abuse of process.

Conclusion: No quashing was warranted on the FEMA objection.

Final Conclusion: The petitions for quashing were not entertained on merits, the complaints were allowed to proceed before the trial court, and the petitioners were left free to raise their defences at the appropriate stage of trial.

Ratio Decidendi: Inherent jurisdiction under Section 482 of the Code of Criminal Procedure, 1973 should not be used to quash a complaint under Section 138 of the Negotiable Instruments Act, 1881 where the objections depend on disputed facts, including the nature of the cheque, the existence of liability, or regulatory compliance, and the prosecution is already at an advanced stage of evidence.

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