2025 (10) TMI 725 - HC - Indian Laws

Section 482 Cr.P.C. quashes Section 138 NI Act complaint: stop-payment pre-issuance and no 15-day notice proof

Gaurav Agarwal Versus State of Uttarakhand and Another

The HC allowed the Section 482 Cr.P.C. application and quashed the Section 138 NI Act complaint. The court found the applicant had given stop-payment ... Dishonour of Cheque - insufficient funds - gross abuse of the process of law - misuse of cheque which was already the subject of stop-payment instructions - pre-mature complaint - respondent no.2/complainant has failed to prove the date of service of the statutory notice - invocation of presumption under Section 139 of NI Act - HELD THAT:- Upon perusal of the material on record, this Court finds that the continuation of proceedings against the applicant would be wholly unwarranted in law. It stands admitted on record that the applicant had lodged a stop- payment request with his banker on 12.07.2016 in respect of the cheques in question, much prior to the alleged date of issuance i.e. 05.12.2016. The bank’s contemporaneous report dated 15.07.2016 confirms that the stop-payment instructions had been acted upon and charges debited. In such circumstances, the subsequent presentation of the cheque in December 2016, resulting in dishonour on the ground of “insufficient funds,” cannot be treated as valid dishonour attracting the penal consequences of Section 138 NI Act. This Court is of the considered opinion that allowing the proceedings to continue would amount to abuse of process of law. The complaint is suffers both on account of absence of a valid cause of action and failure to satisfy the essential ingredients of Section 138 NI Act - the criminal miscellaneous application under Section 482 Cr.P.C. deserves to be allowed. The ratio of Raj Kumar Khurana v. State (NCT of Delhi), [2009 (5) TMI 533 - SUPREME COURT], squarely applies. Once the cheque had been rendered incapable of encashment before the alleged date of issue, there is in the eye of law no “issuance,” and therefore no offence under Section 138 can be said to be made out. This Court also finds merit in the contention that the complaint is premature and not maintainable. The respondent alleged dispatch of statutory notice dated 20.12.2016, but no proof of service such as acknowledgment due card or postal receipt showing actual delivery has been brought on record. Even if the date of dispatch is accepted, the 15-day statutory period for making payment would have expired only after 03.02.2017, and cause of action would have arisen thereafter. However, the complaint was instituted on 16.01.2017, much prior to accrual of cause of action. The law laid down in Yogendra Pratap Singh v. Savitri Pandey, [2014 (9) TMI 1129 - SUPREME COURT], clearly holds that a complaint filed prior to expiry of the 15-day period is premature and liable to be dismissed. The present complaint, having been instituted before accrual of cause of action, is thus legally unsustainable. The reliance placed by the respondent on presumptions under Section 139 NI Act is misconceived. The presumption arises only when a cheque is shown to have been issued in discharge of a legally enforceable debt or liability. In the present case, the admitted and undisputed fact of stop-payment prior to the alleged date of issuance, coupled with the absence of proof regarding service of statutory notice, negates the foundational requirements of Section 138. Consequently, the presumption under Section 139 cannot be invoked to the prejudice of the applicant. The criminal miscellaneous application under Section 482 Cr.P.C. deserves to be allowed - Application allowed. 1. ISSUES PRESENTED AND CONSIDERED Issue A: Whether proceedings under Section 138, Negotiable Instruments Act, 1881 are maintainable where the drawer had given stop-payment instructions to the bank prior to the alleged date of issuance/presentation of the cheque. Issue B: Whether a complaint under Section 138 NI Act filed before expiry of the statutory 15-day period from service of the demand notice is premature and non-maintainable. Issue C: Whether the statutory presumption under Section 139 NI Act can be invoked where contemporaneous bank records show stop-payment prior to the alleged issuance and where proof of service of the demand notice is absent. Issue D: Whether alleged procedural omissions (failure to file list of prosecution witnesses under Section 204(2) Cr.P.C., or defects in proof of service) and the existence of alternative remedies bar exercise of inherent jurisdiction under Section 482 Cr.P.C. 2. ISSUE-WISE DETAILED ANALYSIS Issue A - Maintainability where stop-payment preceded alleged issuance Legal framework: Section 138 NI Act criminalises issuance of a cheque which is dishonoured for insufficiency of funds where it was issued for discharge of a legally enforceable debt/liability; concept of 'issuance' and ability to present a cheque depend on the cheque being capable of encashment at the time relevant. Precedent treatment: The Court follows and applies the principle in Raj Kumar Khurana v. State (NCT of Delhi) that where a cheque is reported lost and stop-payment instructions are given prior to alleged issuance/presentation, there is no 'issuance' in law and therefore no offence under Section 138. Interpretation and reasoning: The admitted contemporaneous bank report confirming stop-payment on 12.07.2016 and debiting of stop-payment charges means the cheque was rendered incapable of encashment well before the alleged date of presentation (05.12.2016). A subsequent presentation and return marked 'insufficient funds' cannot convert the misused/stolen instrument into a validly issued cheque attracting penal consequences. The Court treats the bank's contemporaneous record as decisive on the foundational fact of incapability of encashment. Ratio vs. Obiter: Ratio - Where stop-payment instructions were given and acted upon before alleged issuance/presentation, there is no issuance in law and Section 138 liability does not arise. This is applied as a binding principle in the present facts. Obiter - ancillary remarks on collusion between complainant and bank officials are speculative and treated as contextual, not essential to the legal holding. Conclusion: Proceedings under Section 138 cannot be sustained where contemporaneous bank records show stop-payment prior to alleged issuance; continuation of proceedings is an abuse of process on this ground. Issue B - Prematurity: complaint filed before expiry of 15-day period after demand notice Legal framework: The proviso to Section 138 requires service of a demand notice and a 15-day period for payment to elapse before a complaint can be validly instituted; a complaint filed before expiry of this period does not disclose a cause of action. Precedent treatment: The Court follows Yogendra Pratap Singh v. Savitri Pandey and the exposition in Raj Kumar Khurana (citing Kusum Ingots & Alloys) that a complaint filed prior to the expiry of the 15-day statutory period is premature and the court is barred from taking cognizance. Interpretation and reasoning: The complainant alleges dispatch of statutory notice dated 20.12.2016 but has not produced proof of service (acknowledgment due card or postal evidence of delivery). Even accepting dispatch, the 15-day period would expire after 03.02.2017; the complaint was filed on 16.01.2017 - prior to accrual of cause of action. Absence of proof of service makes the filing date even more unsustainable. Ratio vs. Obiter: Ratio - A complaint under Section 138 filed before expiry of the 15-day period from valid service of the demand notice is premature and not maintainable. Obiter - observations on hypothetical modes of service are ancillary and not necessary to the core holding. Conclusion: The complaint is premature and legally unsustainable for being instituted before the statutory period lapsed; this justifies quashing the proceedings. Issue C - Applicability of Section 139 presumption in the circumstances Legal framework: Section 139 creates a presumption that when the accused is shown to have drawn the cheque, it was issued for discharge of a legally enforceable debt or liability; presumption is rebuttable. Precedent treatment: The Court recognises Section 139 but applies it in light of the foundational facts; where contemporaneous evidence establishes lack of issuance/capability to encash, the presumption cannot be invoked to override such record. Interpretation and reasoning: The presumption under Section 139 operates only when a cheque is shown to have been issued for discharge of debt/liability. Here, the admitted stop-payment prior to the alleged issuance and the absence of proof of a valid demand notice negate the foundational conditions for applying the presumption. The statutory presumption cannot be used to prejudice the drawer where primary facts demonstrate non-issuance or incapacity to encash. Ratio vs. Obiter: Ratio - Section 139 presumption is not available to support conviction where contemporaneous bank records and absence of valid notice show that the cheque could not legally have been issued or presented as alleged. Obiter - general comments on burden shifting are explanatory. Conclusion: Section 139 presumption is inapplicable to defeat the applicant's defence on the admitted record; it does not salvage the complaint. Issue D - Procedural omissions, alternative remedies and exercise of Section 482 jurisdiction Legal framework: Section 204(2) Cr.P.C. requires furnishing a list of prosecution witnesses at time of complaint; inherent jurisdiction under Section 482 may be exercised to prevent abuse of process or where continuation would be wholly unwarranted; existence of alternative remedies is a factor but not an absolute bar to exercise of inherent jurisdiction. Precedent treatment: The Court considers decisions relied upon by both sides: Kishore Sharma (noted for treating factual disputes over service/remarks as trial issues) and M/s Ajeet Seeds Ltd. (noting technical omissions do not always invalidate complaints). The Court distinguishes those authorities where disputed facts required trial adjudication from the present case where the admitted contemporaneous record removes any triable dispute on the core issue. Interpretation and reasoning: The applicant's contention regarding failure to file list of prosecution witnesses under Section 204(2) was raised but the decisive grounds for quashing are (i) stop-payment prior to alleged issuance and (ii) premature filing before expiry of the 15-day period. The availability of revision before the Sessions Judge or other remedies does not preclude exercise of inherent jurisdiction where continuation would amount to abuse of process - particularly when admitted documentary material demonstrates absence of essential ingredients of the offence. Ratio vs. Obiter: Ratio - Inherent jurisdiction under Section 482 may be exercised to quash proceedings where admitted contemporaneous records demonstrate absence of essential ingredients of the offence and continuation would be an abuse of process, despite existence of alternate remedies. Obiter - procedural non-compliances (e.g., Section 204(2)) are contextually relevant but not determinative where primary legal defects exist. Conclusion: Given the admitted bank records, absence of proof of valid service within the statutory period, and resulting lack of cause of action, continuation of proceedings would be an abuse of process; exercise of Section 482 jurisdiction to quash is justified despite alternative remedies.