2017 (3) TMI 1006 - HC - Indian Laws

Court upholds complaint, affirms negotiability of cheque, and emphasizes Section 139 presumption. Trial to address interpretation.

The court upheld the maintainability of the complaint, rejecting objections regarding authorization and the existence of debt at the time of the cheque ... Maintainability of complaint under Section 138 NI Act - presumption under Section 139 NI Act - effect of bank guarantee/ SBLC on primary liability - negotiability of cheque and effect of separate letter - authority of company's authorised signatory/Power of Attorney to file complaint - admissibility of extraneous documents and role of trial evidenceAuthority of company's authorised signatory/Power of Attorney to file complaint - maintainability of complaint under Section 138 NI Act - Objection that the complaint was not maintainable because it was not filed by a duly authorised person was rejected. - HELD THAT: - The Court examined the complaint and accompanying Board resolution/Power of Attorney dated 7th July, 2016 which named the authorised signatory and conferred competence to sign, verify and file complaints under Section 138. Reliance on A.C. Narayan was considered: a power of attorney holder can file and depose in a Section 138 complaint provided he has requisite knowledge of the transaction. The complaint averred that the authorised signatory had requisite knowledge based on company records. Further, precedent permits rectification or opportunity to cure defects in authority. On these bases the plea that the complaint lacked due authority was rejected and the complaint held maintainable. [Paras 10, 11]Objection to maintainability for want of authority is rejected; complaint is maintainable.Effect of bank guarantee/ SBLC on primary liability - presumption under Section 139 NI Act - Argument that no liability existed at the time of cheque issuance because SBLC (standby letter of credit) covered the obligation was rejected. - HELD THAT: - The Assignment Agreement and its clause entitling the assignor to invoke the SBLC on assignee's default show the SBLC operated as a guarantee, ancillary to the principal obligation. A guarantee does not extinguish the principal obligation; it is triggered upon default. Accordingly, the existence of a valid SBLC on presentation of the cheque did not negate the existence of a debt. Moreover, Section 139 raises a statutory presumption that the cheque was issued for discharge of liability, which must be rebutted at trial; such issues of discharge or partial discharge are for trial consideration and cannot be decided in exercise of Section 482 jurisdiction. [Paras 12, 13, 14, 16, 17]Contention that SBLC eliminated any liability and thus ousted Section 138 proceedings is rejected; presumption under Section 139 applies and merits trial.Negotiability of cheque and effect of separate letter - admissibility of extraneous documents and role of trial evidence - presumption under Section 139 NI Act - Contention that the cheque became non-negotiable by virtue of the separate letter dated 21st March, 2016 was rejected for the purpose of quashing; factual questions about meaning and acceptance of the letter and signatures to be decided at trial. - HELD THAT: - The Court observed that alteration of negotiability requires endorsement on the instrument or on a paper annexed thereto. Here the letter was a separate document not annexed to the cheque and no endorsement appeared on the cheque; therefore the letter did not per se change the cheque's negotiable character vis-a -vis third parties. Further, whether the authorised representative's signature amounted to acceptance of the letter's substantive terms or merely acknowledgement of receipt is a factual dispute not amenable to resolution under Section 482 at the pre-evidence stage. The statutory presumption under Section 139 again operates and can only be rebutted by evidence at trial. The Court also noted that extraneous documents not part of trial court record cannot be gone into in the petition, and implied acceptance or admission issues require evidence at trial. [Paras 19, 20, 21, 22, 23]Argument that the separate letter rendered the cheque non-negotiable or that its terms were admitted by silence is rejected at this stage; these are factual issues for trial.Final Conclusion: The petition under Section 482 Cr.P.C. seeking quashing of the order summoning the petitioners and the complaint under Section 138 NI Act is dismissed; objections as to lack of authority, extinguishment of liability by SBLC, and non-negotiability of the cheque were rejected or held to be matters for trial, and the summons/order are upheld. Issues Involved:1. Maintainability of the complaint due to authorization.2. Existence of debt or liability at the time of issuance of the cheque.3. Nature of the cheque as a negotiable instrument.4. Interpretation of the letter dated 21st March, 2016.5. Presumption under Section 139 of the NI Act.Detailed Analysis:1. Maintainability of the Complaint:The petitioners argued that the complaint was not filed by a duly authorized person. They relied on the Supreme Court decision in A.C. Narayan Vs. State of Maharashtra & Anr., which mandates that a criminal complaint must be filed by an employee duly authorized by a resolution of the company and that the employee must have personal knowledge of the facts. However, the court noted that the complaint explicitly stated that Ankur Gupta was the authorized signatory on behalf of the complainant, supported by a Board Resolution/Power of Attorney dated 7th July, 2016. The court also referenced the Supreme Court decision in Haryana State Cooperative Supply and Marketing Federation Limited Vs. Jayam Textiles and Anr., which allows for correction of any error in the authority to swear or affirm the facts. Thus, the objection regarding the complaint's maintainability was rejected.2. Existence of Debt or Liability:The petitioners contended that no debt or liability existed when the cheque was issued due to the validity of the Standby Letter of Credit (SBLC) until 22nd June, 2016. They cited Indus Airways Private Limited & Ors. Vs. Magnum Aviation Private Limited & Anr. to support their claim. However, the court emphasized that the SBLC was a guarantee and not a discharge of liability. Clause 2.3(c) of the Assignment Agreement allowed Religare to invoke the SBLC if Strategic failed to pay the outstanding balance. Therefore, the court held that the complaint was maintainable, rejecting the argument that there was no existing liability.3. Nature of the Cheque as a Negotiable Instrument:The petitioners argued that the cheque was a non-negotiable instrument based on the letter dated 21st March, 2016. They referenced Sections 13 and 130 of the NI Act and cited M. Ethirajulu vs. Rangam Adinarayana and Others, and Hibernian Bank Limited vs. Gysin & Hanson. However, the court noted that the letter was separate and not annexed to the cheque, meaning it did not change the cheque's character to a non-negotiable instrument. The court concluded that the letter did not affect the cheque's negotiability.4. Interpretation of the Letter Dated 21st March, 2016:The letter dated 21st March, 2016 was central to the arguments, with the petitioners claiming it made the cheque conditional. The court stated that the issue of whether the signatures of Ankur Gupta on the letter were an acknowledgment of receipt or acceptance of its terms was a matter for trial. The court rejected the argument that the letter should be read as it is without oral evidence, emphasizing that this determination must occur during the trial.5. Presumption under Section 139 of the NI Act:The court reiterated that once a cheque is issued, a presumption of liability arises under Section 139 of the NI Act. This presumption can only be rebutted during the trial. The court cited Hiten P. Dalal Vs. Bratindranath Banerjee, which states that the presumption places the evidential burden on the accused to prove that the cheque was not issued for discharging any liability. The court also referenced Goa Plast Pvt. Ltd. vs. Chico Ursula D’Souza, which held that there is no obligation to reply to a letter under the scheme of Section 138 of the NI Act.Conclusion:The court found no reason to quash the complaint or set aside the summoning order. The petition and application were dismissed, and the issues raised by the petitioners were deemed matters to be determined during the trial.