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Reportable

IN THE SUPREME COURT OF INDIA

CRIMINAL  APPELLATE JURISDICTION

CRIMINAL APPEAL NO. 471  OF 2015 (Arising out of SLP (Crl) No. 5295 OF  2014)

HMT Watches Ltd. ... Appellant

Versus

M.A. Abida & Anr.         …  Respondents

WITH  

CRIMINAL APPEAL NO. 472   OF 2015 (Arising out of SLP(Crl) No. 5800 OF  2014)

J U D G M E N T

PRAFULLA C.  PANT, J.

These appeals are directed against judgment and order  

dated  25.2.2014  passed  by  the  High  Court  of  Kerala  in  

Criminal M.C. No 2366 of 2008 and Criminal M.C. No. 2367 of  

2008, whereby the said Court has allowed the petitions and

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quashed  the  proceedings  of  criminal  complaint  case  Nos.  

1790,  1791,  1792,  1793,  1794,  1795,  1796,  1824,  1825,  

1826, 1827, 1828, 1829, 1830 and 1831 of 2007 pending in  

the  Court  of  Judicial  First  Class  Magistrate  (Court  No.  IV),  

Kochi;  and C.C.  Nos.  1208,  1209,  1210,1211 and 1212 of  

2007, pending in the Court of Judicial First Class Magistrate  

(Court  No.  III),  Kochi.   All  these  criminal  complaint  cases  

were pertaining to offence punishable under Section 138 of  

the Negotiable Instruments Act, 1881 (hereinafter referred to  

as “the N.I. Act”).

2. We  have  heard  learned  counsel  for  the  parties  and  

perused the papers on record.

3. Succinctly stated, the appellant filed criminal complaint  

cases against respondent – M.A. Abida stating that as many  

as  57  cheques  dated  28.09.2006  were  issued  by  her  in  

discharge  of  outstanding  liability  towards  the  

complainant/appellant  (HMT  Watches  Ltd.).   When  the  

cheques  were  presented  for  collection  the  same  were  

received  back,  dishonoured  by  bankers  with  the

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endorsement – “payment stopped by the drawer”.  Notice of  

demand dated 9.10.2006 was issued by the complainant to  

the respondent no.1 but she failed to make the payment of  

the  amount  mentioned  in  the  cheques,  i.e.,  total  

Rs.1,79,86,357/-.   Instead,  she  sent  reply  to  the  notice  

disputing liability to pay.  On this, complainant filed twenty  

criminal  complaints  mentioned  above,  against  the  

respondent no.1 with regard to the offence punishable under  

Section 138 of the N.I. Act.

4. The accused – M.A. Abida filed Criminal M.C. No. 2366  

of 2008 and Criminal M.C. No. 2367 of 2008 challenging the  

proceedings initiated by the complainant on the ground that  

she  was  Re-Distribution  Stockist  (RDS)  of  watches  

manufactured  by  the  appellant.   The  business  with  the  

appellant was done till September, 2003 on “cash and carry”  

basis.   The  accused  further  pleaded  in  the  petitions  filed  

before  the  High  Court  under  Section  482  of  the  Code  of  

Criminal Procedure, that after 2003 the appellant company  

used  to  collect  cheques  towards  the  amount  covered  by

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distinct  invoices  with  respect  to  various  consignments  for  

securing payment of amount covered by the invoices.   

5. The  High  Court  accepted  the  plea  of  the  accused  

(respondent no.1) and quashed the criminal complaint cases.  

Hence, these appeals through special leave.

6. On behalf of the appellant, it is argued before us that  

the High Court committed a grave error of law in quashing  

the  proceedings  of  the  criminal  complaint  cases  on  the  

factual pleas taken by the respondent no.1.  On the other  

hand,  learned counsel  for  the  respondent  no.1  contended  

that since the cheques were given as security, as such there  

was no liability to make the payment, and the ingredients of  

the offence punishable under Section 138 of the N.I Act were  

not made out.

7. Section  138 of  the  Negotiable  Instruments  Act,  1881  

reads as under:

“138. Dishonour of cheque for insufficiency,  etc.,  of  funds in  the accounts.  -  Where  any  cheque  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

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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  provisions  of  this  Act,  be  punished  with  imprisonment  for “a  term  which  may  extend  to  two year”, or with fine which may extend to twice  the amount of the cheque, or with both:

Provided  that  nothing  contained  in  this  section  shall apply unless- (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,  whichever is earlier. (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 cheques as unpaid, and

(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 cheque,  within fifteen days of  the  receipt of the said notice. Explanation: For the purpose of this section, “debt  or other liability” means a legally enforceable debt  or other liability.”

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8. Section  139  of  the  Negotiable  Instruments  Act,  1881  

provides that there shall be a presumption in favor of holder  

of a cheque as to the debt or liability.  It reads as under:

“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, or any debt or other liability.”

9. Section  140  of  the  Negotiable  Instruments  Act,  1881  

prohibits  what  cannot  be  a  defence  in  a  prosecution  in  

respect of offence punishable under Section  138  of the N.I.  

Act.  It reads as under:

“140. Defence which may not be allowed in  any prosecution under section 138. - Defence  which  may  not  be  allowed  in  any  prosecution  under section 138 It shall  not be a defence in a  prosecution of an offence under section 138 that  the  drawer  had  no  reason  to  believe  when  he  issued  the  cheque  that  the  cheque  may  be  dishonoured  on  presentment  for  the  reasons  stated in that section.”

10. Having heard learned counsel for the parties, we are of  

the view that the accused (respondent no.1) challenged the  

proceedings  of  criminal  complaint  cases  before  the  High  

Court, taking factual defences.  Whether the cheques were  

given as security or not, or whether there was outstanding

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liability or not is a question of fact which could have been  

determined only by the trial court after recording evidence  

of the parties. In our opinion, the High Court should not have  

expressed its  view on the disputed questions  of  fact  in  a  

petition  under  Section  482  of  the  Code  of  Criminal  

Procedure, to come to a conclusion that the offence is not  

made out.  The High Court has erred in law in going into the  

factual  aspects  of  the  matter  which  were  not  admitted  

between  the  parties.   The  High  Court  further  erred  in  

observing that Section 138(b) of N.I. Act stood uncomplied,  

even though the respondent  no.1 (accused)  had admitted  

that he replied the notice issued by the complainant.  Also,  

the fact, as to whether the signatory of demand notice was  

authorized by the complainant company or  not,  could not  

have  been  examined  by  the  High  Court  in  its  jurisdiction  

under Section 482 of the Code of Criminal Procedure when  

such plea was controverted by the complainant before it.

11. In  Suryalakshmi  Cotton  Mills  Limited  v.  Rajvir  

Industries  Limited  and  others1,  this  Court  has  made  

1 (2008) 13 SCC 678

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following  observations  explaining  the  parameters  of  

jurisdiction  of  the  High  Court  in  exercising  its  jurisdiction  

under Section 482 of the Code of Criminal Procedure: -

“17. The  parameters  of  jurisdiction  of  the  High  Court  in  exercising  its  jurisdiction  under  Section  482 of the Code of Criminal Procedure is now well  settled. Although it is of wide amplitude, a great  deal  of  caution  is  also  required  in  its  exercise.  What is required is application of the well-known  legal principles involved in the matter.

xxx xxx xxx

22. Ordinarily, a defence of an accused although  appears to be plausible should not be taken into  consideration for exercise of the said jurisdiction.  Yet again, the High Court at that stage would not  ordinarily enter into a disputed question of fact. It,  however,  does  not  mean  that  documents  of  unimpeachable character should not be taken into  consideration  at  any  cost  for  the  purpose  of  finding  out  as  to  whether  continuance  of  the  criminal proceedings would amount to an abuse of  process of court or that the complaint petition is  filed for causing mere harassment to the accused.  While  we  are  not  oblivious  of  the  fact  that  although  a  large  number  of  disputes  should  ordinarily be determined only by the civil courts,  but criminal cases are filed only for achieving the  ultimate goal, namely, to force the accused to pay  the amount due to the complainant immediately.  The courts on the one hand should not encourage  such  a  practice;  but,  on  the  other,  cannot  also  travel beyond its jurisdiction to interfere with the  proceeding which is otherwise genuine. The courts  cannot also lose sight of the fact that in certain

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matters,  both  civil  proceedings  and  criminal  proceedings would be maintainable.’

12. In  Rallis India Limited  v.  Poduru Vidya Bhushan  

and others2, this Court expressed its views on this point as  

under:-

“12. At the threshold, the High Court should not  have  interfered  with  the  cognizance  of  the  complaints having been taken by the trial  court.  The  High  Court  could  not  have  discharged  the  respondents of the said liability at the threshold.  Unless the parties are given opportunity to  lead  evidence, it is not possible to come to a definite  conclusion  as  to  what  was  the  date  when  the  earlier partnership was dissolved and since what  date the respondents ceased to be the partners of  the firm.”

In view of the law laid down by this Court as above, in the  

present case High Court exceeded its jurisdiction by giving  

its  opinion on disputed questions  of  fact,  before  the trial  

court.

13. Lastly, it is contended on behalf of the respondent no.1  

that  it  was  not  a  case  of  insufficiency  of  fund,  as  such,  

ingredients of offence punishable under Section 138 of the  

N.I.Act are not made out.  We are not inclined to accept the  

2 (2011) 13 SCC 88

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contention of learned counsel for respondent no.1.  In this  

connection,  it  is  sufficient  to  mention  that  in  the  case  of  

Pulsive Technologies P. Ltd. vs.  State of Gujarat3,  this  

Court has already held that instruction of “stop payment”  

issued to the banker could be sufficient to make the accused  

liable for an offence punishable under Section 138 of the N.I.  

Act.  Earlier also in Modi Cements Ltd. vs. Kuchil Kumar  

Nandi4,  this  Court  has  clarified  that  if  a  cheque  is  

dishonoured because of stop payment instruction even then  

offence  punishable  under  Section  138  of  N.I.  Act  gets  

attracted.

14. For the reasons as discussed above, we find that the  

High Court has committed grave error of law in quashing the  

criminal  complaints  filed  by  the  appellant  in  respect  of  

offence  punishable  under  Section  138  of  the  N.I.  Act,  in  

exercise of powers under Section 482 of the Code of Criminal  

Procedure  by  accepting  factual  defences  of  the  accused  

which were disputed ones.  Such defences, if taken before  

3 (2014) 9 SCALE 437 4 (1998) 3 SCC 249

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trial  court,  after  recording  of  the  evidence,  can  be better  

appreciated.

15. Therefore, for the reasons, as discussed above, these  

appeals deserve to be allowed.  Accordingly, the appeals are  

allowed.  The impugned order dated 25.2.2004 passed by  

High Court of Kerala in Criminal M.C. Nos. 2366 of 2008 and  

2367  of  2008   is  hereby  quashed.   The  trial  court  shall  

proceed with the trial in the criminal complaint cases.  It is  

clarified  that  we  have  not  expressed  our  opinion  as  to  

correctness of the defence pleas taken by the respondent  

no.1.  No order as to costs.

………………….....…………J.                          [Dipak Misra]

     .………………….……………J.              [Prafulla C. Pant]

New Delhi; March 19, 2015