The Punjab and Haryana High Court has dismissed a petition seeking the quashing of a criminal complaint filed under Section 138 of the Negotiable Instruments Act, 1881 (NI Act), observing that a security cheque is an integral part of the commercial process and can be legally utilized to discharge a liability.
Justice Manisha Batra held that disputed questions of fact, such as claims regarding defective goods or prior payments, cannot be adjudicated by the High Court in exercise of its powers under Section 482 of the Code of Criminal Procedure (Cr.P.C.) and must be determined by the trial court after assessing evidence.
Background of the Case
The case arose from a complaint filed by M/s Super Oils (respondent), a partnership firm supplying industrial oils and lubricants. The firm alleged that Aarti Trehan (petitioner No. 1), the proprietor of the petitioner firm, purchased goods on credit. According to the complaint, as of November 1, 2022, a sum of Rs. 2,11,073 was payable by the petitioners.
To discharge this liability, the petitioners allegedly issued two cheques amounting to Rs. 1,13,245 and Rs. 96,146 respectively. When presented for realization, the cheques were dishonored with the remark “Payment stopped by drawer.” Following the dishonor, the respondent served a legal notice, and upon failure to make payment, filed a complaint.
The Judicial Magistrate First Class, Ludhiana, finding a prima facie case, issued a summoning order on March 18, 2023. The petitioners approached the High Court seeking to quash both the complaint and the summoning order.
Arguments of the Parties
The counsel for the petitioners argued that the cheques were issued merely as “security cheques.” They contended that the last consignment of goods supplied by the respondent was defective. It was submitted that despite requests to settle the matter regarding the defective material and reconcile the books of account, the respondent presented the security cheques.
The petitioners claimed that no legally enforceable liability existed because the goods were substandard. Furthermore, they argued that the complaint was a counterblast to a civil suit already filed by them. A discrepancy in the amount was also highlighted, noting that while the complaint alleged a liability of Rs. 2,11,073, the total amount of the cheques was Rs. 2,09,991. They also claimed to have already paid Rs. 7 lakhs to the respondent.
In response, the counsel for the respondent argued that the cheques were issued to discharge a legally enforceable liability and that the payment was stopped intentionally. It was submitted that the trial court had passed a reasoned order and that unless there was incontrovertible evidence showing the petitioners had no concern with the cheques, the High Court should not interfere.
Court’s Observations and Analysis
Justice Manisha Batra rejected the petitioners’ contentions, emphasizing that the inherent jurisdiction under Section 482 Cr.P.C. must be exercised “sparingly and with caution.”
On Disputed Questions of Fact
The Court observed that the defenses raised by the petitioners regarding the quality of goods and prior payments were factual issues that could only be ascertained during the trial. Citing the Supreme Court’s decisions in M/s M.M.T.C. Ltd. and another v. M/s Medchl Chemicals and Pharma P. Ltd. and HMT Watches Limited vs. M.A. Abida, the Court held that the High Court cannot assume the role of a trial court to appreciate the probable defence of the accused at the stage of quashing.
The Court noted:
“The burden of proving that there was no existing debt or liability, was on the respondents. This they have to discharge in the trial. At this stage, merely on the basis of averments in the petition filed by the accused, the High Court should not have concluded it that there was no existing debt or liability.”
On Security Cheques
Addressing the specific argument that the cheques were issued for security, the Court relied on the judgment in Shalini Enterprise and another vs. Indiabulls Financial Services Ltd. The Court clarified that the label of “security cheque” does not absolve the drawer of liability under the NI Act.
The Court observed:
“Security is not a deterrent for the drawer against dishonouring his financial commitment but it can also be legally and validly utilized towards the discharging of liability of the drawer… A security cheque is an acknowledgement of liability on the part of the drawer that the cheque holder may use the security cheque as an alternative mode of discharging his/its liability.”
On Presumption under Section 139 NI Act
The Court highlighted that the petitioner had not denied her signatures on the cheques nor the fact of their issuance. Consequently, the presumption under Section 139 of the NI Act—that the cheques were issued for the discharge of a debt or liability—arises. The Court stated that while the petitioners have the liberty to rebut this presumption during the trial, the balance of convenience at this stage lies in favor of the complainant.
Decision
The High Court concluded that the Magistrate’s order summoning the petitioners was based on a “possible view” that the cheques were drawn in discharge of a legally enforceable debt. The Court found no ground to quash the complaint or the summoning order.
The petition was dismissed with the clarification that the observations made in the order would not affect the merits of the case during the trial.
Case Details:
Case Title: Aarti Trehan and another vs. M/s Super Oils
Case No.: CRM-M No.32093 of 2023
Coram: ustice Manisha Batra
