Dismissed

M/S Kamal Enterprises and Another v. State of U.P. and Another

Allahabad HC11 Jul 2024A482/16751/2024

Case brief

AI extract

What is this about?

The High Court dismissed an application under Section 482 Cr.P.C. seeking quashing of summoning orders in a cheque bounce case. The Court held that the claim of part-payment was not substantiated by evidence requiring endorsement under Section 56 NI Act, thus the offence was attracted.

What did the court decide?

The application under Section 482 Cr.P.C. seeking quashing of summoning orders and complaint proceedings was dismissed.

M/S Kamal Enterprises and Another vs State of U.P. and… — Cheque Dishonour | Allahabad HC (2024)

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Neutral Citation No. - 2024:AHC:116530 HIGH COURT OF JUDICATURE AT ALLAHABAD

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(Sl.No.17)

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Court No. - 79

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Case :- APPLICATION U/S 482 No. - 16751 of 2024

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Applicant :- M/S Kamal Enterprises And Another Opposite Party :- State of U.P. and Another Counsel for Applicant :- Gulab Chandra,Rupesh Kumar Singh Counsel for Opposite Party :- G.A.

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Hon'ble Anish Kumar Gupta,J.

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Heard Sri Gulab Chandra, Learned counsel for the applicants and Sri Kamlesh Kumar Tripathi, learned AGA for the State.

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The instant application under Section 482 Cr.P.C. has been filed seeking quashing of the summoning orders dated 24.03.2023 and 02.11.2023 as well as the entire proceeding of Complaint Case No. 343 of 2023, under Section 138 of Negotiable Instruments Act, P.S. Lalpur (Pandeypur), District Varanasi.

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Learned counsel for the applicants submits that there were a business relationship between the applicants and the opposite party no.4. In pursuance thereof, the applicant herein had issued some cheques as security to the opposite party no.2. Learned counsel for the applicants submits that though the applicant has made several payments during business transactions and without making endorsement thereof, the cheques have been presented by the opposite party no.2 and on dishonour thereof with remark "payment stopped" and after completing the necessary formalities, the instant complaint under Section 138 of the Negotiable Instruments Act has been filed by opposite party no.2 on 04.07.2022. Learned counsel for the applicants relying on the judgment of Dashrathbahi Tikambhai Patel vs. Hitesh Mahendrabhai Patel and another, 2023 (1) SCC 578 specifically relying on paragraph-30 thereof submits that once the part payment has been made by the applicant, then the cheque must endorse the said part payment. He has also relied upon Section 56 of the Negotiable Instruments Act.

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Per contra, learned AGA submits that there is no evidence available on record that any amount has been paid by the applicants herein, after the dates of the cheques issued. Therefore, the provisions of Section 56 of the N.I.Act would not be attracted in the instant case nor the judgment of Apex Court in Dashrathbhai Tikambhai (supra), which has been relied on by the applicant is applicable in the instant case. So far as the challenge to the order dated 02.11.2023 is concerned, the aforesaid order was passed on an application moved by the applicants under Section 258 Cr.P.C. read with Section 143 of the N.I.Act seeking discharge. However, Section 258 Cr.P.C. is not applicable in the complaint case. Therefore, the trial court has rightly rejected the discharge application filed by the applicant under Section 258 Cr.P.C. Therefore, the submissions made by learned counsel for the applicants are not sustainable and

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no interference is called for in the instant case.

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Having heard the rival submissions made by learned counsel for the parties, this Court has carefully gone through the record of the case. From the record of the case, it is apparent that there was a business relationship between the applicant and the opposite party no.2 and in pursuance of the said business relationship between them, the cheques were issued by the applicant as security cheques with an intention that if any payment remains due on the part of the applicants, the opposite party no.2 will be at liberty to encash the cheque for the said unpaid amount. Accordingly, the aforesaid cheques were utilized by the opposite party no.2. However, the same were dishonoured with remark 'payment stopped.' Thereupon a written demand notice was duly served on the applicants on 13.06.2022, which was replied by the applicants but payments were not made. In view thereof, the instant complaint case under Section 138 of the N.I. Act was filed by the opposite party no.2 on 04.07.2022. Thereupon, vide order dated 24.03.2023, the trial court after recording its satisfaction that a prima facie case has been made out against the applicant, has summoned the applicants herein. Subsequent thereto, the applicants have appeared before the the trial court and filed an application under Section 258 Cr.P.C. read with Section 143 of the N.I. Act. Section 258 Cr.P.C. reads as under:

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"258. Power to stop proceedings in certain cases - In any summons-case instituted otherwise than upon complaint, a Magistrate of the first class or, with the previous sanction of the Chief Judicial Magistrate, any other Judicial Magistrate, may, for reasons to be recorded by him, stop the proceedings at any stage without pronouncing any judgment and where such stoppage of proceedings is made after the evidence of the principal witnesses has been recorded, pronounce a judgment of acquittal, and in any other case release, the accused, and such release shall have the effect of discharge."

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From plain reading of the aforesaid proviso, it is ample clear that the said provision will not be applicable on the complaint cases. Therefore, the trial court has rightly rejected the application of discharge moved by applicants under Section 258 Cr.P.C.

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Learned counsel for the applicants has placed reliance upon para-30 of the judgment of Apex Court in Dashrathbhai Tikambhai (supra), which is being reproduced herein under:

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"30. In view of the discussion above, we summarise our findings below:

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(i) For the commission of an offence under Section 138, the cheque that is dishonoured must represent a legally enforceable debt on the date of maturity or presentation;

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(ii) If the drawer of the cheque pays a part or whole of the sum between the period when the cheque is drawn and when it is encashed upon maturity, then the legally enforceable debt on the date of maturity would not be the sum represented on the cheque;

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(iii) When a part or whole of the sum represented on the cheque is paid by the drawer of the cheque, it must be endorsed on the cheque as prescribed in Section

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56 of the Act. The cheque endorsed with the payment made may be used to negotiate the balance, if any. If the cheque that is endorsed is dishonoured when it is sought to be encashed upon maturity, then the offence under Section 138, will stand attracted;

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(iv) The first respondent has made part-payments after the debt was incurred and before the cheque was encashed upon maturity. The sum of rupees twenty lakhs represented on the cheque was not the 'legally enforceable debt' on the date of maturity. Thus, the first respondent cannot be deemed to have committed an offence under Section 138 of the Act when the cheque was dishonoured for insufficient funds; and

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(v) The notice demanding the payment of the 'said amount of money' has been interpreted by judgments of this Court to mean the cheque amount."

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Learned counsel for the applicants has focused his submissions in category(ii) of the aforesaid judgment and submitted that since the part payments have been made after issuance of the cheque, those were required to be endorsed in terms of Section 56 of the N.I.Act. In the instant case, cheques are dated 03.04.2022, 05.04.2022 and 07.04.2022. However, on query made by the Court, learned counsel for the applicants has failed to show any of the payments made after the aforesaid dates of the the cheques. In view thereof, the provisions of Section 56 of the N.I.Act would not attract in the instant case.

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Section 87 of the N.I. Act permits the parties to make the alterations to carry out the common intention of the original parties. Therefore, the cheques in question were issued for the purpose of security of any unpaid amount by the applicants. Since the applicants did not pay the amount despite the execution of work done by the opposite party no.2, therefore, to carry out the common intention of the parties the applicants have utilized the cheque for making necessary alteration under Section 87 of the N.I. Act.

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Therefore, no fault can be found in utilization of the cheques by the opposite party no.2. Once the cheques have been issued, it shall be presumed under Section 139 of the N.I. Act that the cheques were issued in discharge of legal liability or debt. In view of the presumption under Section 139 of the N.I. Act, prima facie, the case has been made out against the applicants herein. The other contentions on merits of the case are open for the applicants to be raised before the trial court concerned in view of the rebuttable nature under Section 139 of the N.I. Act by leading the proper evidence before the trial court.

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In the considered opinion of this Court, the instant application lacks merit and is, accordingly, dismissed. However it is made clear that the trial court shall proceed in the matter in accordance with law, without being influenced by any of the observations made herein above.

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Order Date :- 22.7.2024 Ashish Pd.

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(Anish Kumar Gupta,J.)

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Digitally signed by :- ASHISH PRASAD High Court of Judicature at Allahabad

M/S Kamal Enterprises and Another v. State of U.P. and Another

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M/S Kamal Enterprises and Another v. State of U.P. and Another

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