The court dismissed a petition under Section 482 Cr.P.C. seeking quashing of a cheque bounce case. It held that determining if a cheque was for debt or security is a question of fact unsuitable for inherent powers.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
THE HON'BLE SRI JUSTICE K.C. BHANU CRIMINAL PETITION No.2021 OF 2011
ORDER:
This Criminal Petition, under Section 482 of the Code of Criminal Procedure, 1973, is filed to quash the proceedings in C.C.No.414 of 2010 on the file of the XX Additional Chief Metropolitan Magistrate, Hyderabad, which was registered for the offence punishable under Section 138 of the Negotiable Instruments Act, 1881 ( for brevity, ‘the Act’).
2. The allegations in the complaint, in brief, are as follows: The complainant provided financial assistance to the accused to a tune of Rs.8,00,000/as per the terms and conditions, and after duly executing the loan-cum-hypothecation agreement, along with the promissory note, both dated 13.05.2008 agreeing to repay the said amount with interest payable in 36 equated monthly instalments of Rs.34,889/- each. The accused failed to repay the monthly instalments as agreed. On demand made by the complainant, the accused issued a cheque for Rs.9,69,843/- on 08.12.2009 and when it was presented in the bank it was returned with an endorsement ‘insufficient funds’. The complainant after issuing the statutory notice to the accused as contemplated under Section 138 (b) of the Act, as
the accused failed to make the payment within the time stipulated filed the present complaint.
3. Learned counsel for the petitioners contended that cheque was given as security at the time of obtaining loan and that it was not given for a legally enforceable debt or liability and therefore continuation of proceedings is nothing but abuse of process of Court.
4. On the other hand, learned counsel for the 2nd respondent contends that there are specific allegations in the complaint and a prima facie case is made out for the offence under Section 138 of the Act and there are no merits to quash the same.
5. Inherent powers under Section 482 Cr.P.C. can be exercised to carry out the orders passed under this Code or to prevent abuse of process of Court or to secure the ends of justice. There cannot be any dispute that if uncontroverted allegations in the complaint do not make out prima facie case of the offence alleged, then only question of quashing the complaint arises.
6. Section 138 of the Act deals with ‘dishonour of cheque for insufficiency, etc. of funds in the account. Necessary ingredients to be established by the complainant are:
(a) a cheque is drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account in the discharge in whole or in part of any debt or other liability;
(b) the cheque 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;
(c) 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, whichever is earlier;
(d) 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
(e) 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 cheque, within fifteen days of the receipt of the said notice.
7. From the above ingredients, it is clear that one of the conditions to be established by the complainant is that the cheque issued was dishonoured in the account maintained by the
accused. Allegation in the complaint discloses that the cheque was given towards discharge of loan. But, according to the accused it was given as a security at the time of entering into hypothecation agreement with the 2nd respondent. Whether the cheque was given for a legally enforceable debt or whether it was given as security for the purpose of discharge of the loan are all questions of fact which cannot be decided or determined in exercise of the inherent powers of this Court under Section 482 Cr.P.C. Therefore the question of quashing the complaint does not arise.
8. Accordingly, the Criminal Petition is dismissed. Miscellaneous petitions, if any, filed in this Criminal Petition shall stand closed.
_______________ K.C. BHANU, J
19th April, 2012 Tsy
2 issues framed by the court
Whether a cheque given as security rather than for a legally enforceable debt can sustain proceedings under Section 138 of the Negotiable Instruments Act.
Whether an inherent power petition under Section 482 Cr.P.C. can quash proceedings when the nature of the cheque issuance is a question of fact.
2 provisions across 2 enactments
Petitioner
2nd Respondent
K.C. Bhanu
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
