Sripati Singh (Since Deceased) … vs The State Of Jharkhand on 28 October, 2021


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Supreme Court of India

Sripati Singh (Since Deceased) … vs The State Of Jharkhand on 28 October, 2021

Author: A.S. Bopanna

Bench: M.R. Shah, A.S. Bopanna

                                                                  REPORTABLE

                                    IN THE SUPREME COURT OF INDIA

                                   CRIMINAL APPELLATE JURISDICTION

                                CRIMINAL APPEAL NOS. 1269­1270 OF 2021
                              (Arising out of SLP(Criminal) No.252­253/2020)


                         Sripati Singh (since deceased) Through      ….Appellant(s)
                         His Son Gaurav Singh
                                                    Versus

                         The State of Jharkhand & Anr.            …. Respondent(s)



                                              JUDGMENT

A.S. Bopanna,J.

1. The appellant is before this Court assailing the order

dated 17.12.2019 passed by the High Court of Jharkhand

at Ranchi in Criminal M.P. No.2635 of 2017 and Criminal

M.P. No.2655 of 2017. Through the said order, the High

Court has allowed the said Crl.Miscellaneous Petitions and

has set aside the orders dated 04.07.2016 and 13.06.2019

Signature Not Verified
passed by the Judicial Magistrate First Class, Palamau in
Digitally signed by R
Natarajan

Complaint Case No.1833 of 2015. The learned Judicial
Date: 2021.10.28
16:46:23 IST
Reason:

Magistrate by the order dated 04.07.2016 had taken

1
cognizance of the offence alleged against the respondent

No.2 herein. By the order dated 13.06.2019 the learned

Judicial Magistrate had rejected the petition filed by the

respondent No.2 seeking discharge in the said criminal

complaint.

2. The brief facts leading to the present case as pleaded

is that the appellant and the respondent No.2 are known to

each other inasmuch as the respondent No.2 and the

daughter of the appellant were pursuing their education

together in London. On their return to India, the

respondent No.2 had settled in Bangalore and due to the

earlier acquaintance, the cordial relationship amongst the

families had continued. The respondent No.2 on learning

that the appellant was involved in business, had

approached him at Daltonganj and sought financial

assistance to the tune of Rs.1 crore so as to enable the

respondent No.2 to invest the same in his business. Since

the respondent No.2 had assured that the same would be

returned, the appellant placed trust in him and the

appellant claims to have advanced further sum and in all a

2
total sum of Rs.2 crores during the periods between

January 2014 to July 2014. The said amount was paid to

respondent No.2 by transferring from the account of

appellant’s daughter and also from the account of the

appellant. Towards the said transaction, four agreements

are stated to have been entered acknowledging the receipt

of the loan. The said agreements were reduced into writing

on non­judicial stamp papers bearing No. B489155,

B489156, B489157 and B489159.

3. The respondent No.2 assured that the amount would

be returned during June/July 2015. Towards the same,

three cheques amounting to Rs.1 crore was handed over to

the appellant. Thereafter, three more cheques for Rs.1

crore was also given. The appellant is stated to have met

respondent No.2 during July 2015 when the respondent

No.2 assured that the amount will be repaid during October

2015. Based on such assurance, the appellant presented

the cheques for realisation on 20.10.2015. On

presentation, the said cheques were returned due to

‘insufficient funds’ in the bank account of respondent No.2.

3
The appellant therefore got issued a legal notice as

contemplated under Section 138 of the Negotiable

Instruments Act (“N.I. Act” for short). Since the respondent

No.2 had taken the money on the assurance that the same

would be returned but had deceived the appellant, the

appellant contended that the respondent No.2 had cheated

him and accordingly the complaint was filed both under

Section 420 of IPC as also Section 138 of N.I. Act. The

appellant had submitted the sworn statement of himself

and witnesses. The learned Judicial Magistrate through the

order dated 04.07.2016 took cognizance and issued

summons to the respondent No.2.

4. The respondent No.2 on appearance filed a

miscellaneous petition seeking discharge from the criminal

proceeding, which was rejected by the order dated

13.06.2019. It is in that background, the respondent No.2

claiming to be aggrieved by the order dated 04.07.2016 and

13.06.2019 approached the High Court in the said criminal

miscellaneous petitions. The High Court, through the

impugned order has allowed the petitions filed by the

4
respondent No.2. The appellant therefore claiming to be

aggrieved is before this Court in these appeals.

5. We have heard Mr. M.C. Dhingra, learned counsel for

the appellant, Mr. Raj Kishor Choudhary, learned counsel

for the respondent No.1, Mr. Keshav Murthy, learned

counsel for respondent No.2 and perused the appeal

papers.

6. The learned counsel for the appellant would contend

that the respondent No.2 taking advantage of the

acquaintance with the family of the appellant, had

borrowed the amount which was to be repaid and the

cheque issued was towards discharge of the said amount.

In the said circumstance, when the cheques issued was for

discharge of the legally recoverable debt and it had been

dishonoured, the provisions of Section 138 of N.I. Act would

get attracted. Therefore, the complaint filed by the

appellant is in accordance with law. It is his further

contention that in the present case since respondent No.2

had gained the confidence of the appellant due to the

acquaintance with his daughter and in that circumstance

5
when the amounts which had been taken by him earlier

had been repaid so as to gain the confidence and having

received substantial amount had at that stage not made

arrangement for sufficient funds in the bank despite having

issued the cheques to assure payment, the same would

amount to the respondent No.2 cheating the appellant by

design and therefore would attract Section 420 IPC. It is

contended that towards the amount received, the same had

been acknowledged by subscribing the signature to the

loan agreement. Further, when there was an undertaking to

repay the same, the cheque was issued towards such

discharge of legally recoverable debt and the cheque on

presentation after the agreed due date for repayment of the

loan was dishonoured, the same would constitute an

offence. In that regard, it is contended that the learned

Judicial Magistrate having taken note of the complaint and

the sworn statements recorded by the appellant and his

witnesses had taken cognizance and issued summons. In

such event, the order passed by the learned Judicial

Magistrate for taking cognizance and also to reject the

discharge petition filed by the respondent No.2 was in

6
accordance with law. It is contended that the learned

Judge of the High Court had in fact committed an error in

arriving at the conclusion that the cheque issued by the

respondent No.2 was towards ‘security’ and that the same

could not have been treated as a cheque issued towards the

discharge of legally recoverable debt. It is contended that

the learned Judge has proceeded at a tangent and

committed an error and as such the order passed by the

High Court calls for interference.

7. To contend that the cheque issued towards discharge

of the loan and presented for recovery of the same cannot

be construed as issued for ‘security’ has relied on the

decision of this Court in the case of Sampelly

Satyanarayana Rao vs. Indian Renewable Energy

Development Agency Ltd., (Criminal Appeal No.867 of

2016) and in M/s Womb Laboratory Pvt. Ltd. vs. Vijay

Ahuja and Anr. (Criminal Appeal No.1382­1383 of 2019).

Hence, it is contended that the observation contained in the

order of the High Court that a cheque issued towards

security cannot attract the provision of Section 138 of N.I.
7
Act is erroneous and the reference made by the High Court

to the decision in Sudhir Kr. Bhalla vs. Jagdish Chand

and Others 2008 7 SCC 137 is without basis. The learned

counsel therefore contends that the order passed by the

High Court is liable to be set aside and the criminal

complaint be restored to file to be proceeded in accordance

with law.

8. Mr. Keshav Murthy, learned counsel for respondent

No.2 would contend that the learned Judicial Magistrate

without application of mind to the fact situation had taken

cognizance and issued summons and had not appropriately

considered the case put forth by the respondent No.2

seeking discharge. He would contend that the High Court

on the other hand, has taken note of the entire gamut of

the case and has arrived at the conclusion that the offence

alleged both under Section 420 IPC and Section 138 of the

N.I. Act has not been made out. It is contended that the

claim for the sum of Rs. 2 crores as made in the complaint

is without basis. It is his case that the respondent No.2 has

issued a comprehensive reply disputing the claim put forth

8
by the appellant. It is contended that from the very

complaint and the statement of witnesses recorded by the

learned Judicial Magistrate it is evident that no criminal

offence is made out in the instant case. Even if the case as

put forth in the complaint is taken note, at best the

transaction can be considered as an advancement of loan

for business purpose and even if it is assumed that the said

amount was not repaid it would only give rise to civil

liability and the appellants could have only filed a civil suit

for recovery of the loan. The statement of the witnesses,

more particularly the daughter of the complainant would

indicate the long­standing relationship between the parties

and also the monetary transaction which in any event does

not constitute a criminal offence. It is contended that under

any circumstance, the offence as alleged under Section 420

of IPC cannot be sustained. Insofar as the offence alleged

against the respondent No.2 under section 138 of N.I. Act,

the same would also not be sustainable when the

complainant himself has relied on the loan agreement

wherein reference is made to the cheque being issued as

security for the loan. The learned counsel contends that the

9
High Court in fact has taken note of these aspects,

proceeded in its correct perspective and has arrived at a

just conclusion, which does not call for interference. He

therefore, contends that the above appeals be dismissed.

9. In the light of the rival contentions, a perusal of the

appeal papers would disclose that it is the very case of the

appellant that he has advanced substantial amount of Rs.

2 crores to the respondent No.2 by way of financial

assistance for business purpose. While taking note of the

nature of the transaction and also the proceedings

initiated, it is necessary for us to remain conscious of the

fact that the proceedings between the parties is at the

preliminary stage and any conclusive findings rendered in

relation to the dispute between the parties would affect

their case if ultimately the appellants were to succeed

herein and the criminal proceedings are to be restored for

further progress. Therefore, what is necessary to be

examined herein is, as to whether the appellant has prima

facie established a transaction under which there is a

legally recoverable debt payable to the appellant by the

10
respondent No.2 and as to whether the cheques in question

relating to which the complaint has been filed by the

appellant is issued towards discharge of such legally

recoverable debt. In that regard, what is necessary to be

considered is also as to whether the cheques in question

are still to be considered only as ‘security’ for the said

amount and whether it was not liable to be presented for

recovery of the legally recoverable debt. The question

which would also arise for consideration is as to whether

the complaint filed by the appellant should be limited to a

proceeding under Section 138 of N.I. Act or on the facts

involved, whether the invoking of Section 420 IPC was also

justified.

10. While considering the above aspects, it is evident

that the learned Magistrate having referred to the complaint

and sworn statement of the complainant and the witnesses

has taken cognizance, issued summons and has

consequently arrived at the conclusion that the discharge

as sought by the respondent No.2 cannot be accepted. The

High Court on the other hand having referred to the rival

11
contentions has concluded as follows:­

“20. From the aforesaid facts and from the documents
of the complainant, this Court finds that long
standing ‘business transaction and inability of
refunding a loan has been given a colour of criminal
offence of cheating punishable under Section 420 of
the Indian Penal Code. A breach of trust with mens
rea gives rise to a criminal prosecution. In this case
when I go through the evidence before charge of the
complainant and the documents of the complainant, I
find that there were long standing business
transactions between the parties. Since 2011 money
was advanced by the complainant and his family
members to the accused and the complainant witness
admits that money was also transferred from the
account of the accused to the account of daughter of
the complainant. From the evidence, I find that there
is no material to suggest existence of any mens rea.
Thus, this case becomes a case of simplicitor case of
non­refunding of loan, which cannot be a basis for
initiating criminal proceeding. The Hon’ble Supreme
Court in the case of Samir Sahay alias Sameer Sahay
versus State of UP & Anr. reported in (2018) 14 SCC
233 held that when the dispute between the parties
was ordinarily a civil dispute resulting from a breach
of contract on the part of the appellant by non­
refunding of amount advanced, the same would not
constitute an offence of cheating. In this case also, I
find that it is true case that the amount of loan has
not been refunded, thus, this cannot come within the
purview of cheating, though the complainant by
suppressing the material facts, has tried to give a
different colour. Thus, I find that no case punishable
under Section 420 of the Indian Penal Code can be
made out in this case.

21. Further, I find that it is the documents of the
complainant, which show that the cheques were given
by way of security. Even if I do not believe the
statement of the accused, the documents of the
complainant cannot be brushed aside. As held earlier,
supported by the decision of the Hon’ble Supreme
Court in the case of “Sudhir Kumar Bhalla” (supra) a
cheque given by way of security cannot attract
Section 138 of the Negotiable Instruments Act. Since

12
the cheques were given by way of security, which is
evident from the complainant’s documents (though
this fact has also been suppressed in the complaint
petition), I find that Section 138 of the Negotiable
Instruments Act is also not attracted in this case.”

11. In the background of what has been taken note by us

and the conclusion reached by the High Court, insofar as

the High Court arriving at the conclusion that no case

punishable under Section 420 IPC can be made out in

these facts, we are in agreement with such conclusion. This

is due to the fact that even as per the case of the appellant

the amount advanced by the appellant is towards the

business transaction and a loan agreement had been

entered into between the parties. Under the loan

agreement, the period for repayment was agreed and the

cheque had been issued to ensure repayment. It is no

doubt true that the cheques when presented for realisation

were dishonoured. The mere dishonourment of the cheque

cannot be construed as an act on the part of the

respondent No.2 with a deliberate intention to cheat and

the mens rea in that regard cannot be gathered from the

point the amount had been received. In the present facts

and circumstances, there is no sufficient evidence to

13
indicate the offence under Section 420 IPC is made out and

therefore on that aspect, we see no reason to interfere with

the conclusion reached by the High Court.

12. Having arrived at the above conclusion and also

having taken note of the conclusion reached by the High

Court as extracted above, it is noted that the High Court

has itself arrived at the conclusion that the instant case

becomes a simpliciter case of non­refunding of loan which

cannot be a basis for initiating criminal proceedings. The

conclusion to the extent of holding that it would not

constitute an offence of cheating, as already indicated

above would be justified. However, when the High Court

itself has accepted the fact that it is a case of non­

refunding of the loan amount, the first aspect that there is

a legally recoverable debt from the respondent No.2 to the

appellant is prima­facie established. The only question that

therefore needs consideration at our hands is as to whether

the contention put­forth on behalf of respondent No.2 that

an offence under Section 138 of the N.I. Act is not made out

as the dishonourment alleged is of the cheques which were

issued by way of ‘security’ and not towards discharge of any

14
debt.

13. In order to consider this aspect of the matter we have

at the outset taken note of the four loan agreements dated

13.08.2014 which is the subject matter herein. Under each

of the agreements, the promise made by respondent No.2 is

to pay the appellant a sum of Rs.50 lakhs. Thus, the total

of which would amount to Rs.2 crores as contended by the

appellant. Towards the promise to pay, the repayment

agreed by the respondent No.2 is to clear the total amount

within June/July 2015. Para 5 of the loan agreement

indicates that six cheques have been issued as security.

The claim of the appellant has been negated by the High

Court only due to the fact that the agreement indicates that

the cheques have been given by way of security and the

complainant has also stated this fact in the complaint.

Though the High Court has taken note of the decision in

the case of Sudhir Kumar Bhalla (supra) to hold that the

cheque issued as security cannot constitute an offence, the

same in our opinion does not come to the aid of the

respondent No.2. There is no categorical declaration by this

15
Court in the said case that the cheque issued as security

cannot be presented for realisation under all

circumstances. The facts in the said case relate to the

cheques being issued and there being alterations made in

the cheques towards which there was also a counter

complaint filed by the drawer of the cheque. Hence, the

said decision cannot be a precedent to answer the position

in this case and the High Court was not justified in placing

reliance on the same.

14. In fact, it would be apposite to take note of the

decision of this Court in the case of Sampelly

Satyanarayana Rao (supra) wherein this Court while

answering the issue as to what constitutes a legally

enforceable debt or other liability as contained in the

Explanation 2 to Section 138 of N.I. Act has held as

hereunder:­

“10. We have given due consideration to the
submission advanced on behalf of the appellant as well
as the observations of this Court in Indus Airways
(supra) with reference to the explanation to Section 138
of the Act and the expression “for discharge of any debt
or other liability” occurring in Section 138 of the Act.
We are of the view that the question whether a
post­dated cheque is for “discharge of debt or

16
liability” depends on the nature of the transaction.
If on the date of the cheque liability or debt exists
or the amount has become legally recoverable, the
Section is attracted and not otherwise.

11. Reference to the facts of the present case clearly
shows that though the word “security” is used in
Clause 3.l (iii) of the agreement, the said expression
refers to the cheques being towards repayment of
instalments. The repayment becomes due under the
agreement, the moment the loan is advanced and the
instalment falls due. It is undisputed that the loan
was duly disbursed on 28th February, 2002 which
was prior to the date of the cheques. Once the loan
was disbursed and instalments have fallen due on
the date of the cheque as per the agreement,
dishonour of such cheques would fall under
Section 138 of the Act. The cheques undoubtedly
represent the outstanding liability.

12. Judgment in Indus Airways (supra) is clearly
distinguishable. As already noted, it was held therein
that liability arising out of claim for breach of contract
under Section 138, which arises on account of
dishonour of cheque issued was not by itself at par
with criminal liability towards discharge of
acknowledged and admitted debt under a loan
transaction. Dishonour of cheque issued for discharge
of later liability is clearly covered by the statute in
question. Admittedly, on the date of the cheque there
was a debt/liability in presenti in terms of the loan
agreement, as against the case of Indus Airways
(supra), where the purchase order had been cancelled
and cheque issued towards advance payment for the
purchase order was dishonoured. In that case, it was
found that the cheque had not been issued for
discharge of liability but as advance for the purchase
order which was cancelled. Keeping in mind this fine
but real distinction, the said judgment cannot be
applied to a case of present nature where the
cheque was for repayment of loan instalment
which had fallen due though such deposit of
cheques towards repayment’ of instalments was

17
also described as “security” in the loan agreement.

In applying the judgment in Indus Airways (supra),
one cannot lose sight of the difference between a
transaction of purchase order which is cancelled
and that of a loan transaction where loan has
actually been advanced and its repayment is due
on the date of the cheque.

13. Crucial question to determine applicability of
Section 138 of the Act is whether the cheque
represents discharge of existing enforceable debt
or liability or whether it represents advance
payment without there being subsisting debt or
liability. While approving the views of different
High Courts noted earlier, this is the underlying
principle as can be discerned from discussion of
the said cases in the judgment of this Court.”

( emphasis supplied)

The said conclusion was reached by this Court while

distinguishing the decision of this Court in the case of Indus

Airways Pvt. Ltd. Vs. Magnum Aviation Pvt. Ltd. (2014) 12

SCC 539 which was a case wherein the issue was of dishonour

of post­dated cheque issued by way of advance payment against

a purchase order that had arisen for consideration. In that

circumstance, it was held that the same cannot be considered

as a cheque issued towards discharge of legally enforceable

debt.

18

15. Further, this Court in the case of M/s Womb

Laboratories Pvt. Ltd. (supra) has held as follows:­

“5. In our opinion, the High Court has muddled
the entire issue. The averment in the complaint
does indicate that the signed cheques were handed
over by the accused to the complainant. The
cheques were given by way of security, is a matter
of defence. Further, it was not for the discharge of
any debt or any liability is also a matter of defence.
The relevant facts to countenance the defence will
have to be proved­ that such security could not be
treated as debt or other liability of the accused.
That would be a triable issue. We say so because,
handing over of the cheques by way of security per
se would not extricate the accused from the
discharge of liability arising from such cheques.

6. Suffice it to observe, the impugned judgment of
the High Court cannot stand the test of judicial
scrutiny. The same is, therefore, set aside.”

16. A cheque issued as security pursuant to a

financial transaction cannot be considered as a

worthless piece of paper under every circumstance.

‘Security’ in its true sense is the state of being safe and

the security given for a loan is something given as a

pledge of payment. It is given, deposited or pledged to

make certain the fulfilment of an obligation to which the

parties to the transaction are bound. If in a transaction,

a loan is advanced and the borrower agrees to repay the
19
amount in a specified timeframe and issues a cheque as

security to secure such repayment; if the loan amount is

not repaid in any other form before the due date or if

there is no other understanding or agreement between

the parties to defer the payment of amount, the cheque

which is issued as security would mature for

presentation and the drawee of the cheque would be

entitled to present the same. On such presentation, if

the same is dishonoured, the consequences

contemplated under Section 138 and the other

provisions of N.I. Act would flow.

17. When a cheque is issued and is treated as

‘security’ towards repayment of an amount with a time

period being stipulated for repayment, all that it ensures

is that such cheque which is issued as ‘security’ cannot

be presented prior to the loan or the instalment maturing

for repayment towards which such cheque is issued as

security. Further, the borrower would have the option of

repaying the loan amount or such financial liability in

any other form and in that manner if the amount of loan

20
due and payable has been discharged within the agreed

period, the cheque issued as security cannot thereafter

be presented. Therefore, the prior discharge of the loan or

there being an altered situation due to which there would

be understanding between the parties is a sine qua non

to not present the cheque which was issued as security.

These are only the defences that would be available to the

drawer of the cheque in a proceedings initiated under

Section 138 of the N.I. Act. Therefore, there cannot be a

hard and fast rule that a cheque which is issued as

security can never be presented by the drawee of the

cheque. If such is the understanding a cheque would also

be reduced to an ‘on demand promissory note’ and in all

circumstances, it would only be a civil litigation to

recover the amount, which is not the intention of the

statute. When a cheque is issued even though as

‘security’ the consequence flowing therefrom is also

known to the drawer of the cheque and in the

circumstance stated above if the cheque is presented and

dishonoured, the holder of the cheque/drawee would

have the option of initiating the civil proceedings for

21
recovery or the criminal proceedings for punishment in

the fact situation, but in any event, it is not for the

drawer of the cheque to dictate terms with regard to the

nature of litigation.

18. If the above principle is kept in view, as already

noted, under the loan agreement in question the

respondent No.2 though had issued the cheques as

security, he had also agreed to repay the amount during

June/July 2015, the cheque which was held as security

was presented for realization on 20.10.2015 which is after

the period agreed for repayment of the loan amount and the

loan advanced had already fallen due for payment.

Therefore, prima facie the cheque which was taken as

security had matured for payment and the appellant was

entitled to present the same. On dishonour of such cheque

the consequences contemplated under the Negotiable

Instruments Act had befallen on respondent No.2. As

indicated above, the respondent No.2 may have the defence

in the proceedings which will be a matter for trial. In any

event, the respondent No.2 in the fact situation cannot

22
make a grievance with regard to the cognizance being taken

by the learned Magistrate or the rejection of the petition

seeking discharge at this stage.

19. In the background of the factual and legal position

taken note supra, in the instant facts, the appellant cannot

be non­suited for proceeding with the complaint filed under

Section 138 of N.I. Act merely due to the fact that the

cheques presented and dishonoured are shown to have

been issued as security, as indicated in the loan agreement.

In our opinion, such contention would arise only in a

circumstance where the debt has not become recoverable

and the cheque issued as security has not matured to be

presented for recovery of the amount, if the due date agreed

for payment of debt has not arrived. In the instant facts, as

noted, the repayment as agreed by the respondent No.2 is

during June/July 2015. The cheque has been presented by

the appellant for realisation on 20.10.2015. As on the date

of presentation of the cheque for realisation the repayment

of the amount as agreed under the loan agreement had

matured and the amount had become due and payable.

23
Therefore, to contend that the cheque should be held as

security even after the amount had become due and

payable is not sustainable. Further, on the cheques being

dishonoured the appellant had got issued a legal notice

dated 21.11.2015 wherein inter­alia it has been stated as

follows:­

“You request to my client for loan and after accepting
your word my client give you loan and advanced loan
and against that you issue different cheque all
together valued Rs. One crore and my client was also
assured by you will clear the loan within June/July
2015 and after that on 26.10.2015 my client produce
the cheque for encashment in H.D.F.C. Bank all
cheque bearing No.402771 valued Rs. 25 Lakh,
402770 valued Rs.25 lakh, 402769 valued Rs. 50
lakh, (total rupees one crore) and above numbered
cheques was returned with endorsement “In sufficient
fund”. Then my client feel that you have not fulfil the
assurance.”

20. The notice as issued indicates that the appellant has

at the very outset after the cheque was dishonoured,

intimated the respondent no.2 that he had agreed to clear

the loan by June/July 2015 after which the appellant had

presented the cheque for encashment on 26.10.2015 and

the assurance to repay has not been kept up.

21. In the above circumstance, the cheque though issued

as security at the point when the loan was advanced, it was

24
issued as an assurance to repay the amount after the debt

becomes due for repayment. The loan was in subsistence

when the cheque was issued and had become repayable

during June/July 2015 and the cheque issued towards

repayment was agreed to be presented thereafter. If the

amount was not paid in any other mode before June/July

2015, it was incumbent on the respondent No.2 to arrange

sufficient balance in the account to honour the cheque

which was to be presented subsequent to June/July 2015.

22. These aspects would prima­facie indicate that there

was a transaction between the parties towards which a

legally recoverable debt was claimed by the appellant and

the cheque issued by the respondent No.2 was presented.

On such cheque being dishonoured, cause of action had

arisen for issuing a notice and presenting the criminal

complaint under Section 138 of N.I. Act on the payment not

being made. The further defence as to whether the loan had

been discharged as agreed by respondent No.2 and in that

circumstance the cheque which had been issued as

security had not remained live for payment subsequent

25
thereto etc. at best can be a defence for the respondent

No.2 to be put forth and to be established in the trial. In

any event, it was not a case for the Court to either refuse to

take cognizance or to discharge the respondent No.2 in the

manner it has been done by the High Court. Therefore,

though a criminal complaint under Section 420 IPC was

not sustainable in the facts and circumstances of the

instant case, the complaint under section 138 of the N.I Act

was maintainable and all contentions and the defence were

to be considered during the course of the trial.

23. In that view, the order dated 17.12.2019 passed by

the High Court of Jharkhand in Cr.M.P No.2635 of 2017

with Cr.M.P No.2655 of 2017 are set aside. Consequently,

the order dated 04.07.2016 and 13.06.2019 passed by the

Judicial Magistrate are restored. The complaint bearing

C.C. No.1839 of 2015 and 1833 of 2015 are restored to the

file of the Judicial Magistrate, limited to the complaint

under Section 138 of N.I. Act to be proceeded in accordance

with law.

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24. All contentions of the parties on merit are left open.

We make it clear that none of the observations contained

herein shall have a bearing on the main trial. The trial

court shall independently arrive at its conclusion based on

the evidence tendered before it.

25. The appeals are allowed in part with no order as to

costs.

26. Pending application, if any, shall also stand disposed

of.

…………………….J.

(M.R. SHAH)

…………………….J.

(A.S. BOPANNA)

New Delhi,
October 28, 2021

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