2022 (2) TMI 54 - HC - Indian Laws

Petition to Quash Section 138 NI Act Dismissed

Nandhi Dhall Mills, S.A. Kumar Versus M/s. Kotak Mahindra Bank Ltd.

The court dismissed the petition to quash the proceedings under Section 138 of the Negotiable Instruments Act, directing the trial court to expedite the ... Dishonor of Cheque - legally enforceable debt or not - excessive amount is shown in the possession notice - account classified as NPA - main contention of petitioner is that the cheque given as a security has been filled for excess amount and such cheque cannot be enforced in the eye of law - HELD THAT:- In the judgment in Angu Parameswari Textile [P] Ltd. v. Sri Rajam [2001 (1) TMI 1012 - MADRAS HIGH COURT] this Court has held that where any cheque was drawn for payment of any amount of money for the discharge in whole or any part of any debt or other liability and if the cheque is more than the amount of the debt due, Section 138 of the Negotiable Instruments Act cannot be attracted. In the judgment in M/s.Pawan Enterprises Vs. Satish H.Verma [2003 (1) TMI 757 - BOMBAY HIGH COURT], it has been held that the cheque issued for security purpose cannot be enforced. Whether or not, the cheque has been presented for excess liability is a matter of evidence. This Court while exercising the power under section 482 Cr.P.C. cannot make a roving enquiry into the disputed facts. Therefore, the contention of the learned Counsel for the petitioner that the cheque in question was filled for excess amount other than the liability cannot be gone into at this stage and the same cannot be a ground to quash the proceedings. Considering the judgments of the Apex Court and the fact that the liability is also admitted in one of the letter, whether or not cheque amount exceeds the liability are the disputed facts and the same can be gone into only during the trial and not in a petition filed under section 482 of Cr.P.C. In such view of this matter, merely there is a dispute with regard to the payment of interest and immovable properties have already been mortgaged and proceedings under the SARFAESI Act has also been initiated, those proceedings is no way relevant to quash the proceedings under section 138 of the Negotiable Instruments Act and this petition filed to quash the proceedings is liable to be dismissed. The trial Court is directed to expedite trial and dispose of the case in C.C.No.18 of 2014 within a period of four months from the date of receipt of a copy of this Order - petition dismissed. Issues Involved:1. Legality of the cheque issued as security under Section 138 of the Negotiable Instruments Act.2. Dispute over the amount payable and whether the cheque amount exceeds the liability.3. Applicability of the Reserve Bank of India circular regarding interest calculation on Non-Performing Assets (NPA).4. Relevance of proceedings under the SARFAESI Act to the case under Section 138 of the Negotiable Instruments Act.Issue-wise Detailed Analysis:1. Legality of the Cheque Issued as Security under Section 138 of the Negotiable Instruments Act:The petitioners argued that the cheque in question was undated and issued as security at the time of sanctioning the loan. They contended that the cheque was later filled for an excess amount and thus should not be enforceable under Section 138 of the Negotiable Instruments Act. The respondent countered that the cheque was issued for due payment of the loan, dishonoured upon presentation, and followed by a statutory notice, which was not replied to by the petitioners. The court noted that the prosecution is premised on the cheque being issued on 02.04.2013 for Rs. 2,90,81,000/-, which was dishonoured. The court referred to multiple judgments, including M.M.T.C. Ltd. vs. Medchl Chemicals and Pharma [P] Ltd. and Sampelly Satyanarayan Rao vs. India Renewable Energy Development Agency Limited, which held that cheques issued as security in loan transactions are enforceable if the loan amount is due.2. Dispute Over the Amount Payable and Whether the Cheque Amount Exceeds the Liability:The petitioners claimed that the actual amount payable was only Rs. 21,31,490/- and not Rs. 2,90,81,000/-. They argued that the cheque was filled for an excess amount, making the complaint under Section 138 not maintainable. The court observed that the statutory notice issued indicated the due amount, which was not disputed by the petitioners in their letter dated 22.05.2013. The court emphasized that whether the cheque amount exceeds the liability is a matter of evidence to be determined during the trial and cannot be a ground to quash the proceedings under Section 482 Cr.P.C. The court cited judgments like Angu Parameswari Textiles [P] Ltd. vs. Sri Rajam and Alliance Infrastructure Project Pvt. Ltd. vs. Vinay Mittal, which held that Section 138 is not attracted if the cheque amount exceeds the debt due, but this determination requires a trial.3. Applicability of the Reserve Bank of India Circular Regarding Interest Calculation on Non-Performing Assets (NPA):The petitioners argued that the RBI circular mandates that interest should not be charged once an account is classified as NPA, and thus the interest calculation was incorrect. The court referred to the RBI circular, which states that banks should reverse interest already charged and not collected on NPAs, but may continue to record such accrued interest in a memorandum account. The court concluded that the circular is a guideline for banks on recording interest and does not support the petitioners' contention that interest cannot be calculated once an account is classified as NPA.4. Relevance of Proceedings Under the SARFAESI Act to the Case Under Section 138 of the Negotiable Instruments Act:The petitioners highlighted that proceedings under the SARFAESI Act had been initiated, and possession notice was issued, indicating that the liability was only Rs. 2,16,77,293.27 as of 08.07.2013. They argued that these proceedings should impact the case under Section 138. The court held that proceedings under the SARFAESI Act and the existence of security by way of mortgages do not affect the maintainability of the complaint under Section 138. The court emphasized that the disputed facts regarding liability and interest calculation are to be resolved during the trial, not in a petition to quash proceedings.Conclusion:The court dismissed the petition to quash the proceedings under Section 138 of the Negotiable Instruments Act, directing the trial court to expedite the trial and dispose of the case within four months. The court also granted the petitioners' request to dispense with their personal appearance except for specific stages of the trial.Order:The Criminal Original Petition is dismissed, and the trial court is directed to expedite the trial. Personal appearance of the petitioners is dispensed with except for examination, questioning under Section 313 Cr.P.C., or other specific dates fixed by the trial court.