The Supreme Court has held that a cheque issued pursuant to a deed of settlement between parties will be presumed to have been issued towards discharge of a debt or liability under Section 138 of the Negotiable Instruments Act (NI Act), which fastens criminal liability in cheque bounce cases (M/s Gimpex Private Limited v. Manoj Goel).
Section 139 of the NI Act raises a presumption, unless the contrary is proved, that the holder of a cheque receives the cheque of the nature referred to in Section 138 for the discharge of any debt or other liability, the Court held.
The question as to whether the liability exists or not is a matter of trial, a Bench of Justices DY Chandrachud, Vikram Nath and BV Nagarathna added.
“Section 139 raises the presumption ‘unless the contrary is proved’. Once the complainant discharges the burden of proving that the instrument was executed by the accused; the presumption under Section 139 shifts the burden on the accused. The expression “unless the contrary is proved” would demonstrate that it is only for the accused at the trial to adduce evidence of such facts or circumstances on the basis of which the burden would stand discharged,” the judgment said.
The Court, therefore, set aside a judgment of the Madras High Court which had quashed a Section 138 criminal complaint on the ground that the cheques were issued pursuant to a settlement agreement and could not be deemed to be issued for discharge of a debt or liability.
“There was no basis for the learned single-judge to conclude, particularly in the course of the hearing of a petition under Section 482 of the Code of Criminal Procedure (CrPC) that the second set of cheques issued in pursuance of the deed of compromise cannot be construed as being towards the discharge of a liability. The question as to whether the liability exists or not is clearly a matter of trial,” the top court ruled.
The case in hand stemmed from High Seas Sale Agreements between the appellant Gimpex Private Limited and Aanchal Cement Limited (ACL).
The case involved two sets of cheques. The first set of cheques which were issued by ACL allegedly towards discharge of the liability, were dishonoured. Consequently, criminal complaints under Section 138 came to be filed against ACL’s directors – Sitaram Goel, Manoj Goel (the respondent) and Mukesh Goel.
Thereafter, a deed of compromise was entered into on March 12, 2013. The deed of compromise was partially implemented by the payment of an amount of ₹3 crore by demand draft to the complainant.
Upon receipt of this amount, the Gimpex was to grant its non-objection to the plea of bail of Manoj Goel, who undertook to pay the balance of ₹7 crore within three months in instalments. The second set of cheques issued pursuant to the deed of compromise were also, however, dishonoured. This led to a second criminal complaint.
The single-judge of the High Court was persuaded to quash the criminal complaint instituted against Manoj Goel on the basis of the second set of cheques. It was held that since the proceedings under the NI Act for the dishonour of the first set of cheques was pending, the second set of cheques issued only on the basis of the deed of compromise could not be construed as being towards the discharge of a liability.
It also relied upon the fact that the validity of the deed of compromise had been challenged in a suit pending before the High Court.
The Supreme Court, however, said that both the above grounds cannot be the basis to quash a Section 138 complaint in exercise of powers under Section 482 of the Code of Criminal Procedure (CrPC).
Once the ingredients of Section 138 of the NI Act are fulfilled, the statute clearly stipulates that ‘such person shall be deemed to have committed an offence’. Thus, once the ingredients of Section 138 are fulfilled, a distinct offence arises in respect of the dishonour of the cheques in question, the apex court held.
“There was a serious error on the part of the single-judge in allowing the petition under Section 482 to quash the prosecution on PART C 35 the basis that the deed of compromise would not constitute a legally enforceable liability. The mere fact that a suit is pending before the High Court challenging the validity of the compromise deed would furnish no cogent basis to quash the proceedings under Section 138,” the Supreme Court ruled.
The Court also observed that a settlement agreement effaces the original complaint and thus, it is not up to the parties to simply reverse the effects of that agreement and relitigate the original complaint relating to the same underlying transaction under Section 138 of the NI Act.
Further, the Court noted that the breach of the deed of compromise arose due to the dishonour of cheques which were issued by the accused towards discharge of the remaining balance of ₹7 crore.
“In this backdrop, it was far fetched for the High Court to have quashed the proceedings in exercise of its jurisdiction under Section 482,” the Court ruled setting aside the Madras High Court order.
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