Dismissed

Il Sung Construction Pvt. Ltd. v. Sivakumar

Madras HC3 Mar 2011CRL OP/9610/2010

Case brief

AI extract

What is this about?

The High Court dismissed a petition seeking quashing of criminal proceedings under Section 138 of the Negotiable Instruments Act. The court held that the presumption of legally enforceable debt is rebuttable and matters of dispute regarding contract breaches or nature of liability are for trial, not quashing jurisdiction.

What did the court decide?

Criminal Original Petition No.9610 of 2010 was dismissed and connected M.P. No.1 of 2010 was closed.

Il Sung Construction Pvt. Ltd. Vs Sivakumar — Cheque Dishonour | Madras HC (2011)

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IN THE HIGH COURT OF JUDICATURE AT MADRAS

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DATED: 3-3-2011

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CORAM

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THE HONOURABLE MR. JUSTICE G.M. AKBAR ALI

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CRL.O.P.No.9610 of 2010

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and M.P.No.1 of 2010

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IL SUNG Construction Pvt Ltd rep by its Director CHO NAM GIL

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CHO NAM GIL
3. Cho Young Youn .. Petitioners/Accused
vs
Sivakumar .. Respondent/Defacto Complainant

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Criminal Original Petition filed under Section 482 Cr.P.C. for the reliefs as stated therein.

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For petitioners : Mr.R. Prabakaran

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For respondent : Mr.R. Balachandran

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ORDER

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By consent of both sides, the matter has been taken up for final hearing. The petition is filed seeking a direction to call for the records in C.C.No.57 of 2010 on the file of the learned Judicial Magistrate No.II, Poonamallee and quash the same.

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The respondent has initiated prosecution for an offence under Sec.138 r/w 141 of the Act (hereinafter referred to as Act ) before the learned Judicial Magistrate No.II, Poonamallee. It is alleged that the first petitioner is a Private Limited Company represented by the 2^nd and 3^rd petitioners, who are the Directors. It is stated that the defacto-complainant is a proprietor concern doing the business of civil construction works including the interior work and landscaping. The petitioners engaged the defacto-complainant for sub contract works for civil construction in various factory sites. Under these transactions the petitioners are liable to pay a huge sum of Rs.1,10,99,481/- and they have issued two cheques drawn on Axis Bank Limited for a total sum of Rs.28,88,260/-. The respondent presented the cheque on 28.1.2009 and the same was returned with an endorsement "payment stopped by the drawer". The respondent issued a statutory notice dated https://hcservices.ecourts.gov.in/hcservices/

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8.9.2009 demanding payment , but there was no reply. Therefore, the respondent initiated by way of private complaint which was taken on file in C.C.No.57 of 2010.

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Aggrieved by taking cognizance., the petitioners have approached this Court for quashing of the entire proceedings on various grounds. The main ground urged before this court is that there is no legally enforceable debt and the transaction between the parties are purely civil in nature and there is a breach of contract by the defacto-complainant when an work order was entrusted to the defacto-complainant. It is also submitted that when the defacto-complainant has already initiated criminal proceedings for alleged offence under Sec.420 IPC, simultaneous proceedings is double jeopardy .

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Mr.R. Prabakaran, learned counsel for the petitioner would submit that the defacto-complainant was engaged by the petitioners for a civil construction and the cheques were issued only as a collateral security to the defacto-complainant. The learned counsel submitted that there is a breach of contract by the defacto-complainant for which a notice was issued by the petitioners withholding payment for the cheque. The learned counsel submitted that there is no legally enforceable debt and the entire proceedings is nothing but abuse of process of law.

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The learned counsel also pointed out that the defactocomplainant has already given a police complaint for the same transaction alleging an offence under Sec.420 IPC.

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The learned counsel relied on a decision reported in 1999 (2) ALD 669 (Vempati Balaji and others vs D. Vijaya Gopala Reddi and another), wherein the High Court of Andhra Pradhesh has held that

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"Thus it is clear that the cheque should be issued by the drawer in discharge of the full or part of the debt or liability and if the said cheque was dishonoured due to insufficient funds, etc., then only Section 138 of the Act allracted, if other conditions are complied with..."

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The learned counsel also relied on a decision reported in 2002 (II) CTC 443(Gummadi Industries Ltd vs khushroo F. Engineer), wherein this Court has held as follows:

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Section 138 of the Act would indicate that the debt or liability towards which the cheque is issued, should be a legally enforceable debt or liability. This would have reference to the nature of the debt

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https://hcservices.ecourts.gov.in/hcservices/

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or liability and not to the person against whom the debt or liability would be enforced. This is clear by the use of the words "any debt or liability" which would include a cheque drawn by one person towards a legally enforceable debt or liability of another person. The significant omission of the words "of that person" after the words "any debt or liability" would indicate the intention of the Parliament".

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The learned counsel also relied on a decision reported in 1999 1 CTC 6 M/s Balaji Sea Foods Exports India Limited rep by its Director vs Mac Industries, where in, this Court has held as follows:

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" 10. Therefore, I am of the considered view that as an undated cheque having been given only as security, the provision of Section 138 of the Negotiable Instruments Act are not at all attracted and hence, the complaint against the accused under Section 138 of the Negotiable Instruments Act cannot be maintained at all".

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In the written argument submitted by the respondent, it is stated that because of breach of contract, the petitioners have stopped the payment and therefore, the cheque was written with an endorsement "payment stopped by the drawer" and therefore, there is no question of dishonouring of the cheque,

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On the contrary, Mr.R. Balachandran, learned counsel for the respondent would submit that the cheque has been issued by the petitioners and on presentation, returned dishonoured and on issuance of statutory notice, the petitioners failed to make payment which culminated into initiation of proceedings under Sec.138 of the Act. He also submits that the petitioners have also not replied to the statutory notice. He further submits that this court cannot conduct a roving enquiry on the factual matrix of the matter. At this stage, the trial has to be allowed to be continued, where the parties are at liberty to rebut the presumption.

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Heard and perused the materials available on record.

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Sec.138 of the Act reads as follows: Dishonour of cheque for insufficiency., etc., fof funds in the account

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https://hcservices.ecourts.gov.in/hcservices/

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Where any cheque drawn by a person on account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provision of this Act, be punished with imprisonment for a term which may be extended to two years, or with fine which may extend to twice the amount of the cheque, or with both;

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Provided that nothing contained in this section shall apply unless

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(a) the cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, which ever is earlier;

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(b) the payee or the holder in due course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving a notice in writing, to the drawer of the cheque within thirty days of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and

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(c) the drawer of such cheque fails to make the payment of the said amount of money to the payee or as the case may be, to the holder in due course of the

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https://hcservices.ecourts.gov.in/hcservices/

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cheque within fifteen days of the receipt of the said notice. Sec.139 of NI Act reads as follows:

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"139. Presumption in favour of holder: It shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque, of the nature referred to in section 138, for the discharge, in whole or in part, of any debt or other liability"139 reads as follows

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13.To constitute an offence under Sec.138, the following ingredients are necessary:

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(a) a cheque must be drawn

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(b) it must be presented and returned unpaid

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(d) there must be a failure to make payment

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within 15 days from the date of receipt of notice

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There is always a presumption that the cheque has been issued for legally enforceable debt. The accused is at liberty to rebut the presumption. Therefore, it is a matter for trial and this court cannot conduct a roving enquiry.

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Another ground raised by the petitioner is that the matter is civil in nature. This ground is unsustainable for the simple reason when the cheque has been issued by the petitioner and the holder-in-due course is entitled to the benefit under the provisions of 138 and 141 of NI Act.

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Yet another ground was taken that the defactocomplainant has initiated criminal proceedings for alleged offence under Sec.420 IPC. Therefore, it is a double jeopardy.

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This ground is also misconceived as the offence under Sec.138 is very distinct from any other alleged offences. The sum and substance of the argument of the petitioners to quash the proceedings is that there is no legally enforceable debt as the cheque was issued only a collateral purpose. It is also argued that the petitioners themselves have stopped the payment as they have the right to stop the cheque and therefore, it will not amount to dishonour of cheque. I am not persuaded with this line of argument for the following reasons:

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a) to constitute an offence under Sec.138 of the Act, a cheque must have been issued by the drawer, presented for payment, returned as dishonoured, statutory notice issued demanding payment

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https://hcservices.ecourts.gov.in/hcservices/

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and failure of payment constitute an offence.

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b) the presumption is rebuttable and it is a matter for trial and the court need not conduct a roving enquiry to appreciate the evidence at this stage.

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For the above said reasons, the petition is liable to be dismissed. However, it is submitted that the petitioners 2 and 3 are foreign Nationals and will be frequently visiting their countries and will not be available on all the hearings. Therefore, the appearance of the petitioners 2 and 3 are dispensed with, unless it is so required by the learned Magistrate for specific reason. As the first petitioner is the Company, the first petitioner is permitted to be represented by an authorised person of the Company.

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In the result, the criminal original petition is dismissed. Consequently, connected MP is closed. Sd/Asst. Registrar //true copy// Sub Asst.Registrar sr To 1. The Judicial Magistrate No.II, Poonamallee

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-Do- Thro The Chief Judicial Magistrate, Thiruvallur.

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1 cc to Mr.R.Prabhakaran, Advocate, Sr.No.15729

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Order in Crl.O.P.No. 9610 of 2010 JRG {CO} TP/11.3.2011

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https://hcservices.ecourts.gov.in/hcservices/

Il Sung Construction Pvt. Ltd. v. Sivakumar

Case brief

What is this about?

What did the court decide?

Il Sung Construction Pvt. Ltd. v. Sivakumar

Case brief

What is this about?

What did the court decide?

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