M/s Jaydee Infrastructure v. Mohit Batola

learned counsel on Union of India v. Ramesh Gandhi, (2012) 1 SCC 476, wherein the Hon’ble Supreme Court, particularly in paragraphs 25, 26, 27, and 29, held that documents not part of the primary record, or procured subsequently without due verification, cannot form the basis for judicial findings and lack evidentiary sanctity. Furthermore, in S.P. Chengalvaraya Naidu (Dead) by LRs v. Jagannath (Dead) by LRs & Ors., (1994) 1 SCC 1, the Hon’ble Supreme Court in para 5 emphasized that any litigant who approaches the court with unclean hands or suppresses material facts or documents is not entitled to any relief and such proceedings are liable to be dismissed at the threshold.

5. It is further contended by the learned counsel for the applicant that no legally enforceable debt existed as required under the Act, 1881. He submits that the cheques were issued pursuant to a Compromise Deed dated 11.12.2019, and were conditional upon completion of construction as per the deed. However, only partial work up to the 4th floor was completed, with the last bill raised on 15.01.2020. No Completion Certificate was submitted by the complainant to show that the work was completed. The learned counsel, therefore, submits that since the work was not completed, there was no legally enforceable debt and as such applicant was not liable to pay and thus, the condition precedent for cheque encashment was never fulfilled. The Hon’ble Supreme Court in Indus Airways Pvt. Ltd. & others v. Magnum 3 Aviation Pvt. Ltd. & another, (2014) 12 SCC 539, held that where cheque payment is subject to fulfillment of contractual terms, failure thereof renders proceedings under Section 138 non-maintainable.

6. The learned counsel for the applicant also asserts that part payments were made between

12.12.2019 and 25.03.2020 against the cheques, however, no endorsement of such payments appears on the instruments themselves, in violation of Section 56 of the Act, 1881, which mandates endorsement for partial payments. He submits that in the absence of such endorsement—or disclosure the complaint—the cheque cannot represent a legally enforceable debt, rendering prosecution under Section 138 impermissible. This position is supported by the Hon’ble Supreme Court in Dashrathbhai Lal v. Trikambhai Patel & Anr., (2023) 1 SCC 578 (Paras 11, 29, 30), which held that partial payments, if not endorsed, cannot sustain a complaint under the Act, 1881. A similar view was affirmed by the Uttarakhand High Court in Sunil Singh v. State of Uttarakhand & another in Criminal Misc. Application No. 248 of 2024 which held that neglecting part - payment disclosure or endorsement vitiates the Section 138 of the Act, 1881 proceedings.

7. The learned counsel for the applicant also states that the complaint filed by the respondent is time barred. He contends that the applicant replied to the statutory notice on 30.05.2020 which was sent to him by the respondent on 15.05.2020, yet the complaint was filed only on 27.08.2020. He submits that though the respondent sought condonation of delay under Section 142(b) of the Act, 1881, the same was allowed without notice to the applicant, in violation of Chapter VI Cr.P.C, hence there was a procedural lapse on part of the 4 learned 5th Additional CJM, Dehradun who wrongly initiated proceedings against the applicant. The learned counsel further submits that in order to justify that the cheque was presented on 06.05.2020, the complainant procured the letter from the bank on 02.07.2021, after a gap of more than one year only to prove his false claim that the cheque was presented on 06.05.2020. Therefore, all these events clearly show that the present complaint is nothing but a means to initiate false proceedings against the applicant in order to wrongly extract money from him.

8. The learned counsel the applicant vehemently argues that the respondent has approached the court with unclean hands. He submits that respondent, along with his brother, is charge-sheeted under Sections 420, 406, and 506 IPC, and the alleged cheque-misuse forms part of that charge sheet. He contends that the compromise deed itself stipulates that disputes arising there from would be governed by civil remedies. Hence, the appropriate recourse lies under the Specific Relief Act or Indian Contract Act, not criminal prosecution under the Act, 1881. He submits that the present complaint, motivated by malice, is devoid of legal merit and deserves to be quashed in the interest of justice and to prevent misuse of judicial process.

9. Per Contra, the learned counsel for the respondent submits that the learned Judicial Magistrate, after a careful perusal of the complaint, documents, and material placed on record, found sufficient grounds to proceed and rightly took cognizance under Section 138 of the N.I. Act. It is emphasized that the order summoning the applicant is not a mechanical one but is based on the Magistrate's satisfaction that a prima facie case was made out. Once such satisfaction is recorded upon 5 application of judicial mind, the proceedings cannot be lightly interfered with under Section 482 CrPC unless a glaring abuse of process is demonstrated, which is not the case here.

10. The learned counsel for the respondent further submits that the cheques in question were issued in discharge of a legally enforceable liability arising from a construction agreement, the work under which had already been completed by the respondent. Learned counsel places reliance on specific clauses of the compromise deed dated 11.12.2019 to demonstrate that the applicant had acknowledged completion of the agreed construction. Furthermore, even if there were delays, the agreement only prescribed imposition of a penalty or fine—not the withholding of payment altogether. It is argued by the learned counsel that the dispute raised by the applicant is misconceived. While the applicant claims the cheques were presented after termination of the agreement on 08.05.2020, the respondent has furnished bank-stamped deposit slips dated 11.05.2020 and letter dated 2.07.2021 showing the cheques were deposited on 06.05.2020. It is contended that the applicant is confusing with the concepts of "deposit" and "presentation", which are distinct in both fact and law. The learned counsel further submits that the respondent had deposited the cheques on 06.05.2020, however due to listed bank holiday on 7.05.2020 the cheque was sent to service branch on 08.05.2020 and further the cheque was sent to inward claring of Axis Bank on 11.05.2020 due to 9.10.2020 and 10.05. 202 being a holiday and on

11.05.2020 the cheque was dishonored. The ld counsel also submits that notice of termination dated 07.05.2020 is also not valid on account of being as unilateral, ex parte, and contrary to the terms of the agreement, which 6 allegedly contains no termination clause.

11. The learned counsel for the respondent further contends that the issuance of the cheques and their dishonour is undisputed. He submits that the return memos dated 11.05.2020 indicate the reason dishonour as "Payment stopped by drawer", reflecting a deliberate act on the part of the applicant. It is argued that such conduct falls squarely within the purview of Section 138 of the NI Act. Learned counsel for the respondent invokes the statutory presumptions under Sections 118 and 139 of the NI Act, which operate in favor of the holder of the cheque. It is submitted that the burden of rebutting this presumption lies on the accused, and such rebuttal cannot be undertaken at the preliminary stage or through proceedings under Section 482 CrPC.

12. It is further submitted that the complaint was filed within the period of limitation, considering the extension of limitation by the Hon’ble Supreme Court during the COVID-19 pandemic. The trial court condoned the delay after due consideration by order dated

26.02.2021, and Complaint Case No. 2822 of 2020 was accordingly registered. The learned counsel submits in response to the averments made by the applicant that that disputes arising in the present case would be governed by civil remedies only as provided in the sale deed and that the existence of an arbitration clause in the compromise deed bars institution of proceedings under the Act, 1881 is not correct. In support, reliance is placed on: Priti Saraf & another v. State (NCT of Delhi) & Anr, 2021 SCC Online SC 206 in which the Hon’ble Supreme Court has categorically held that “32…simply because there is a remedy provided for breach of contract or arbitral proceedings initiated at the 7 instance of the appellants, that does not by itself clothe the court to come to a conclusion that civil remedy is the only remedy, and the initiation of criminal proceedings, in any manner, will be an abuse of power of the process of court”. Similarly in Nagarjun Vallupalli v. state of Andhra Pradesh, 2018 SCC online Hyd 97, the Hon’ble High Court has held that the existence of an arbitration clause does not bar the maintainability of a complaint under the Act, 1881. The learned counsel for the respondent submits that the complaint was filed within the period of limitation, considering the extension of limitation by the Hon’ble Supreme Court during the COVID-19 pandemic. The trial court condoned the delay after due consideration by order dated 26.02.2021, and Complaint Case No. 2822 of 2020 was accordingly registered.

13. The learned counsel for the applicant, by means of his rejoinder, submits that the respondent’s counter affidavit is wholly misconceived and fails to rebut the core issue that no legally enforceable liability existed at the time of cheque presentation. The cheques were issued under the compromise deed dated 11.12.2019, strictly conditional upon completion of the balance construction work by 28.02.2020. Admittedly, the respondent neither completed the work nor furnished the final bill with GST deductions or any completion certificate. In this backdrop, the cheques could not have been lawfully presented. The respondent’s reliance on contradictory dates—claiming deposit on 06.05.2020 while the official return memo reflects 08.05.2020— further exposes the attempt to mislead this Hon’ble Court. Crucially, the presentation was after termination of the contract on 07.05.2020, nullifying any subsisting liability. 8

14. It is further argued by the learned counsel for the applicant that Clause 9 of the compromise deed expressly mandates that any disputes regarding its implementation must be adjudicated through civil proceedings, rendering the criminal complaint under Section 138 NI Act a clear abuse of process. The learned counsel also points to the fact that an FIR and charge- sheet have already been filed against the respondent for criminal misuse of the same cheques, underscoring the mala fide intent behind the complaint. Moreover, the respondent’s contradictory reliance on termination notices dated 07.05.2020 and 15.05.2020 only weakens his case. The learned Magistrate failed to consider these material facts while taking cognizance, and continuation of proceedings amounts to nothing more than harassment, warranting quashing in the interest of justice.

15. The respondent in his supplementary affidavit submits that he has already completed the work against which the cheques in question were handed over to him by the applicant. He states that it is settled proposition of law that as held by the Hon’ble Apex Court in catena of judgments that when disputed question of facts are involved which need to be adjudicated after the parties adduce evidence, the complaint under the Act, 1881 ought not have been quashed by the High court taking recourse to Section 482 CrPC.

16. Having heard the learned counsels for both parties and after going through the material on record, this Court does not find any ground to exercise its inherent powers under Section 482 CrPC to quash the proceedings. The case involves multiple sets of disputed facts which can only be settled before the trial court after a proper trial. This Court is also of the view that the 9 dispute regarding whether the cheque was deposited on

06.05.2020 or 08.05.2020—whether presentation was prior to or subsequent to the alleged termination of the agreement—is a factual controversy that cannot be resolved in proceedings under Section 482 CrPC. Both parties have placed conflicting documents and interpretations of the same and such matters are best left to the trial court for resolution upon proper appreciation of evidence.

17. Furthermore, this Court notes that the defence under Section 56 of the NI Act, relating to the alleged part payments made by the applicant without endorsement on the cheques, though relevant, does not render the complaint non-maintainable at the threshold. The existence or effect of such part payments is again a matter of factual proof and legal interpretation. Moreover, it is also well settled that even where a cheque is dishonoured due to 'stop payment' instructions issued by the drawer, the statutory presumption under the Act, 1881 continues to apply. In M.M.T.C. Ltd. & another v. MEDCHL Chemicals and Pharma (P) Ltd. another, (2002) 1 SCC 234, the Hon’ble Supreme Court, while dealing with an analogous situation, held in Para 19 “19. Just such a contention has been negatived by this Court in the case of Modi Cements Ltd. v. Kuchil Kumar Nandi [(1998) 3 SCC 249] . It has been held that even though the cheque is dishonoured by reason of “stop-payment” instruction an offence under Section 138 could still be made out. It is held that the presumption under Section 139 is attracted in such a case also. The authority shows that even when the cheque is dishonoured by reason of stop- payment instructions by virtue of Section 139 the court has to presume that the cheque was received by the holder for the discharge, in whole or in part, of any debt or liability. Of course this is a rebuttable presumption. The accused can thus show that the “stop-payment” issued because of insufficiency or paucity of funds. If the accused shows that in his account there were sufficient funds to clear the amount of the cheque at the time of presentation of the cheque for encashment at the drawer bank and that the stop-payment notice had been issued because of other valid causes including that there was no existing liability at the time of presentation of cheque for debt or encashment, then offence under Section 138 would not be made out. The important thing is that the burden of so proving would be on the accused. Thus a court cannot quash a complaint on this ground.” instructions were not 10

18. The Court further clarified that dishonour on the ground of stop payment does not absolve the drawer of criminal liability under the Act, 1881 unless the accused successfully rebuts the statutory presumption through cogent evidence. Therefore, the applicant’s reliance on the reason of ‘payment stopped by drawer’ as the sole ground to seek quashing is misconceived and legally not maintainable.

19. This Court also finds that the learned Judicial Magistrate, after due application of mind, perusal of the complaint, statutory notice, cheque return memo, and other supporting materials, has rightly taken cognizance under the Act, 1881. The impugned order does not suffer from any jurisdictional error, perversity, or non- application of mind, which would invite interference under Section 482 CrPC. No abuse of the judicial process or miscarriage of justice has been demonstrated by the applicant.

20. It is equally well settled, as reiterated in Rathish Babu Unnikrishnan v. State of NCT of Delhi, 2022 SCC OnLine SC 513, that the presumptions under Sections 118 and 139 of the Act, 1881 are statutory and mandatory, and cannot be rebutted at the preliminary stage merely through pleading or suggestion; the same must be tested through evidence at trial. This Court also notes that the judgments cited by the applicant—such as Indus Airways Pvt. Ltd. v. Magnum Aviation Pvt. Ltd., (2014) 12 SCC 539; Union of India v. Ramesh Gandhi, (2012) 1 SCC 476; and S.P. Chengalvaraya Naidu v. Jagannath, (1994) 1 SCC 1—are factually distinguishable. They either relate to security cheques, fraudulent suppression of material facts, or civil breaches of contract, none of which, even if assumed true, conclusively negate the maintainability of a prosecution 11 under Section of the Act, 1881. In the present case, the cheque was admittedly issued under a compromise deed, was dishonoured for “payment stopped,” and no material has been placed on record to rebut the statutory presumptions at this stage.

21. Further, the judgment of the Hon’ble Delhi High Court in Vihan Exim Co. Pvt. Ltd. v. State of NCT of Delhi, 2023 SCC OnLine Del 3782, is squarely applicable to the present facts. In that case too, the Hon’ble Court refused to quash proceedings under Section of the Act, 1881 on the basis of conditional liability or parallel civil dispute, holding that such defences require trial. Lastly, the reliance on the existence of an arbitration clause or the possibility of civil remedies under the Specific Relief Act or Contract Act does not bar prosecution under Section of the Act, 1881. This position has been consistently upheld by the Hon’ble Supreme Court, including in Priti Saraf v. State of NCT of Delhi, and reaffirmed in Rathish Babu Unnikrishnan (Supra). In view of the foregoing discussion, this Court finds no illegality, infirmity, or abuse of process continuance of the complaint case under Section 138 of the Act, 1881. The applicant has failed to meet the high threshold required for invoking the inherent jurisdiction under Section 482 CrPC.

22. Accordingly, the present C482 application is hereby dismissed. AK (Pankaj Purohit, J.)

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