2025 (8) TMI 1546 - HC - Indian Laws

Petition to quash cheque dishonour proceedings dismissed; accused must rebut Section 139 presumption with evidence; trial needed

BHAVESH P. GANDHI - EX-EXECUTIVE VICE CHAIRMAN & ANR. Versus HOUSING AND URBAN DEVELOPMENT CORPORATION LIMITED. & ANR.

BHAVESH P. GANDHI - EX-EXECUTIVE VICE CHAIRMAN & ANR. Versus HOUSING AND URBAN DEVELOPMENT CORPORATION LIMITED. & ANR. - TMI 1. ISSUES PRESENTED AND CONSIDERED 1. Whether proceedings under Section 138 read with Section 141 of the Negotiable Instruments Act can be quashed at the pre-trial stage on the ground that the drawer deposited the cheque amount with the trial court or otherwise paid the outstanding amount. 2. Whether cheques issued as post-dated cheques or expressly given to a payee as 'security' (with a condition that the payee must give prior notice before encashment) can, as a matter of law at the quashing stage, be held not to constitute an offence under Section 138 of the Negotiable Instruments Act. 3. Whether the High Court, exercising inherent jurisdiction under Section 482 Cr.P.C., may adjudicate disputed questions of fact (including whether a cheque was given as security or whether a subsisting liability existed) at the threshold and quash criminal proceedings that disclose a cognizable offence. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Power to quash where drawer deposits cheque amount before or during trial Legal framework: Section 138 of the Negotiable Instruments Act creates criminal liability for dishonour of a cheque; Section 143 provides that provisions of summary trial apply 'as far as may be' to trials under Section 138. The inherent jurisdiction of courts under Section 482 Cr.P.C. is narrowly circumscribed and to be exercised sparingly. Courts should not rewrite statutory provisions by importing powers not conferred by statute. Precedent treatment: An earlier line of authority had been interpreted to permit trial courts, in exercise of implied powers, to close proceedings where the accused deposited cheque amount with interest and costs. That view, however, was subsequently revisited and overruled by a larger bench which held that such implied power is not available to the trial court and that Section 258 Cr.P.C. cannot be read into Section 143 of the Negotiable Instruments Act. Interpretation and reasoning: The Court followed the later authoritative ruling which disapproved the notion that trial courts possess an inherent or implied power to discharge accused by merely accepting payment/compensation in complaints under Section 138. Reliance on the phrase 'as far as may be' in Section 143 to import Section 258 Cr.P.C. powers was held impermissible: a court must not read words into a statute or enlarge/shrink its scope. The statutory scheme does not confer a power to recall or review issuance of process in such complaints by allowing discharge on payment alone. Ratio vs. Obiter: Ratio - The trial court cannot be treated as having an implied power to discharge accused in Section 138 complaints merely because compensation is paid; earlier contrary precedent is overruled to that extent. Obiter - Policy observations on balancing rights of parties are explanatory but secondary to statutory interpretation. Conclusion: The contention that criminal proceedings under Section 138 must be closed because the cheque amount has been deposited does not survive; such a ground is not a legal basis for quashing at the pre-trial stage where cognizable offence is disclosed. Issue 2 - Effect of post-dated cheques or cheques given as 'security' and the operation of Section 139 presumption Legal framework: Section 139 of the Negotiable Instruments Act creates a rebuttable presumption that a cheque was issued for discharge of any debt or other liability. The accused bears the burden to rebut this presumption by adducing evidence. Principles limiting quashing under Section 482 require caution where legal presumptions operate and factual disputes exist. Precedent treatment: Earlier decisions have held that whether a cheque was given as security or in discharge of a subsisting liability is a question of fact to be determined at trial; quashing at threshold on such factual grounds is improper unless the defence is of unimpeachable character and established by documents of unimpeachable quality. Interpretation and reasoning: The Court applied settled principles that the presumption under Section 139 stands unless effectively rebutted. Where there are disputed factual issues-e.g., PDC status, stipulation requiring prior intimation before encashment, or contention that cheques were security-the High Court should not conduct a mini-trial. Documents relied upon by the accused must be of unimpeachable character to warrant quashing; mere assertions or controverted letters do not suffice to displace the statutory presumption at the threshold. Ratio vs. Obiter: Ratio - Disputed factual contentions that cheques were post-dated or given as security cannot ordinarily justify quashing of proceedings under Section 482; such issues are to be decided by the trial court after evidence. Obiter - Observations on the quality of documents necessary to rebut Section 139 are explanatory of the threshold to be met for exceptional quashing relief. Conclusion: The defence that the cheques were post-dated or given as security does not legally negate the offence under Section 138 at the pre-trial stage; such defences ought to be adjudicated at trial unless rebuttal is established by unimpeachable evidence. Issue 3 - Scope and limits of High Court's inherent jurisdiction under Section 482 Cr.P.C. in quashing complaints invoking Section 138 Legal framework: Section 482 confers extraordinary powers to prevent abuse of process or secure ends of justice, but such power is to be exercised sparingly and in rare cases. The courts must not usurp the role of the trial court or police where a cognizable offence is disclosed, nor embark upon enquiries into reliability/genuineness of allegations at the threshold. Precedent treatment: Established precedents caution against quashing at the stage when facts are disputed and the trial court has not had opportunity to weigh evidence. High Courts may only quash in narrow circumstances, e.g., when no offence is disclosed as a matter of law or where proceedings are manifestly mala fide or vexatious. Interpretation and reasoning: The Court reiterated that quashing under Section 482 cannot become a substitute for trial; allowing threshold quashing on contested facts would deprive complainant of opportunity to adduce evidence and would confer finality without trial. Where the FIR/complaint prima facie discloses an offence and statutory presumptions apply, the balance of convenience favors letting the trial process proceed. Ratio vs. Obiter: Ratio - The High Court must not quash criminal proceedings at the threshold on disputed factual grounds that require evidence; Section 482 should be exercised only in rare and exceptional cases to prevent abuse or where no offence is disclosed. Obiter - Illustrative cautions against mini-trials at quashing stage. Conclusion: The exercise of inherent jurisdiction to quash the criminal complaints in similar factual circumstances is impermissible; contested factual defences should be addressed by the trial court and do not warrant pre-trial quashing absent exceptional circumstances. Overall Conclusion The Court concluded that (i) payment/deposit of cheque amount does not mandate quashing of Section 138 proceedings at the pre-trial stage; (ii) claims that cheques were post-dated or given as security are disputed factual issues that cannot ordinarily be resolved by quashing under Section 482; and (iii) therefore, the petitions seeking quashing of the criminal complaints were dismissed as the matters are fit for trial and not for final adjudication at the threshold.