- Bookmark
- Share
- CaseIQ
Pulsive Technologies Private Limited v. State Of Gujarat And Others
Factual and Procedural Background
The appellant, a private limited company and the original complainant, supplied desktop computers, printers, UPS systems and other products to the accused company pursuant to bulk orders the latter had received from Gujarat Informatics Ltd. (GIL), a Government of Gujarat undertaking. Part payments were made, leaving an outstanding sum of Rs 11,80,670. To discharge this liability, the accused issued post-dated Cheque No. 387176 dated 15-07-2006 drawn on HSBC Bank, Bangalore in favour of the appellant.
The cheque was presented twice through the appellant’s bank, Bank of Baroda (Jetalpur Branch), and was returned unpaid on 03-10-2006 with the endorsement “payment stopped by drawer.” A statutory demand notice dated 13-10-2006 was served on the accused, but the amount remained unpaid. Consequently, on 15-11-2006, Criminal Complaint No. 6076 of 2006 was filed before the Chief Judicial Magistrate, Vadodara under Sections 138 and 142 of the Negotiable Instruments Act, 1881 (NI Act). Summons were issued to the accused, who then approached the Gujarat High Court under Section 482 of the Code of Criminal Procedure seeking quashing of the complaint. By judgment dated 08-09-2011, the High Court allowed the petition and quashed the proceedings. The appellant challenged that order before the Supreme Court.
Legal Issues Presented
- Whether dishonour of a cheque due to “stop payment” instructions constitutes an offence under Section 138 of the Negotiable Instruments Act.
- Whether, at the stage of considering a petition under Section 482 CrPC, the High Court could quash the complaint by examining disputed factual issues such as alleged non-performance of contractual obligations by the complainant.
Arguments of the Parties
Complainant/Appellant’s Arguments
- The High Court erroneously concluded that “stop payment” cases fall outside the scope of Section 138 NI Act.
- Authoritative Supreme Court precedents make it clear that dishonour owing to “stop payment” instructions still attracts Section 138 liability.
- The High Court exceeded its jurisdiction under Section 482 CrPC by delving into factual disputes better left to trial.
Accused/Respondents’ Arguments
- Supported the High Court’s view that because payment was stopped, the statutory ingredients of Section 138 were not met.
- Contended that the cheque was stopped due to the complainant’s failure to repair or replace defective UPS systems, negating any subsisting liability.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Modi Cements Ltd. v. Kuchil Kumar Nandi (1998) 3 SCC 249 |
Issuance of “stop payment” instructions does not absolve the drawer; Section 138 applies and a presumption under Section 139 arises once a cheque is issued. | Relied upon to hold that the complaint discloses an offence even when dishonour is due to stop-payment instructions. |
| M.M.T.C. Ltd. v. Medchl Chemicals and Pharma (P) Ltd. (2002) 1 SCC 234 |
Even in stop-payment cases, the complaint cannot be quashed; the burden to rebut the statutory presumption lies on the accused. | Cited to emphasise that quashing at the threshold was impermissible; factual defences must be proved at trial. |
| Laxmi Dyechem v. State of Gujarat (2012) 13 SCC 375 |
Reiterated the principle that dishonour due to stop-payment instructions attracts Section 138 NI Act. | Served as additional authority reinforcing the appellant’s position and the Court’s reasoning. |
Court's Reasoning and Analysis
The Supreme Court held that the Gujarat High Court committed a “grave error” by quashing the complaint. Established precedent unequivocally recognises that a cheque dishonoured because of stop-payment instructions still attracts Section 138 liability. The Court reaffirmed that once a cheque is issued, Section 139 raises a presumption of debt or liability, which can only be rebutted by the accused at trial, not at the quashing stage.
The High Court’s reliance on contractual allegations—namely, that the complainant failed to repair or replace defective UPS systems—was deemed improper for summary adjudication under Section 482 CrPC. Such factual disputes require evidentiary evaluation during trial. Similarly, the High Court’s view that non-disclosure of the accused’s reply in the complaint was fatal was rejected as premature; issues regarding payments or set-offs are matters of defence.
Applying Modi Cements, M.M.T.C., and Laxmi Dyechem, the Court concluded that the ingredients of Section 138 were sufficiently pleaded. Accordingly, the complaint should proceed to trial where the accused may adduce evidence to rebut the statutory presumptions.
Holding and Implications
HELD: The impugned judgment dated 08-09-2011 of the Gujarat High Court is set aside; Criminal Complaint No. 6076 of 2006 is restored and directed to be disposed of by the Chief Judicial Magistrate, Vadodara, within one year.
Implications: The decision reinstates the criminal prosecution against the accused and fortifies the jurisprudence that “stop payment” instructions do not shield a drawer from Section 138 liability. It also underscores the limited scope of the High Court’s inherent jurisdiction in cheque-dishonour matters, clarifying that disputed questions of fact cannot be resolved at the quashing stage.
Ranjana P. Desai, J.— Leave granted. These appeals are directed against the judgment and order dated 8-9-2011 passed by the High Court of Gujarat in Acer India (P) Ltd. v. State of Gujarat whereby the High Court of Gujarat quashed the criminal complaint filed by the appellant being Criminal Case No. 6076 of 2006 pending on the file of the Chief Judicial Magistrate of Vadodara for the offences punishable under Sections 138 and 142 of the Negotiable Instruments Act (the NI Act).
Brief facts of the appellant Company's case
2. The appellant in both the appeals is the original complainant. It is a private limited company. Contesting Respondent 2 in appeal arising out of SLP No. 9915 of 2011 is the accused company and contesting Respondents 2 to 4 in an appeal arising out of SLP No. 9901 of 2011 are its Directors.
3. In the course of its business, the accused received bulk orders from Gujarat Informatics Ltd. (GIL), a Government of Gujarat company for supply of desktop computers, printers, UPS and other products. The complainant being one of the approved vendors on the list of GIL, the accused, placed various purchase orders with the complainant and the complainant sold and supplied the same as per the demand and specifications. During the course of business, the accused made part payments regularly. For the remaining outstanding legitimate dues of the complainant, the accused handed over a post-dated cheque bearing No. 387176 dated 15-7-2006 for Rs 11,80,670 drawn on HSBC Bank, Bangalore in favour of the complainant. The complainant presented the cheque twice for collection through its bankers viz. Bank of Baroda, Jetalpur Branch. It was returned unpaid on 3-10-2006 for the reason “payment stopped by drawer”. The complainant on 13-10-2006 sent a demand notice to the accused asking them to pay the cheque amount within a period of 15 days from the date of the receipt of the notice. The accused failed to pay the amount to the complainant.
4. On 15-11-2006 the complainant filed a complaint being Criminal Complaint No. 6076 of 2006 in the Court of the Chief Judicial Magistrate, Vadodara, Gujarat against the accused under Sections 138/142 of the NI Act. The Chief Judicial Magistrate, Vadodara, by order dated 15-11-2006 issued summons to all the accused. The accused filed applications before the High Court under Section 482 of the Code of Criminal Procedure for quashing of the said complaint case. The High Court by the impugned order dated 8-9-2011 allowed the petition and quashed the said complaint. Being aggrieved by the said order the complainant has approached this Court.
5. We have heard Mr D.N Ray, learned counsel for the complainant and Mr Giriraj Subramanium, learned counsel for the accused. The counsel for the complainant submitted that the High Court erred in coming to the conclusion that the complaint does not disclose the offence punishable under Section 138 of the NI Act. The counsel submitted that the High Court was wrong in holding that “stop payment” instructions are not covered by Section 138 of the NI Act. The High Court failed to notice authoritative pronouncements of this Court which state that if a cheque bounces because of “stop payment” instructions it would constitute an offence under Section 138 of the NI Act. The counsel urged that the impugned order must, therefore, be set aside. The counsel for the accused, on the other hand, supported the impugned order.
6. The High Court held that provisions of Section 138 of the NI Act are attracted where a cheque is returned by the bank on the ground that there is insufficient amount or that the amount of cheque exceeds the amount arranged to be paid from that account by an agreement made with the bank. The High Court further held that the cheque in question was returned on account of “stop payment” instructions given by the accused vide letter dated 13-7-2006 in view of the fact that the complainant had failed to discharge its obligations as per the agreement by not repairing/replacing the damaged UPS system. The High Court further observed that the complainant had not disclosed complete facts as required under provisos (b) and (c) of Section 138 of the NI Act. The High Court concluded that the complaint did not disclose the offence contemplated under Section 138 of the NI Act. The High Court, in the circumstances, quashed the complaint.
7. The High Court, in our opinion, fell into a grave error when it proceeded to quash the complaint. Even “stop payment” instructions issued to the bank are held to make a person liable for the offence punishable under Section 138 of the NI Act in case cheque is dishonoured on that count.
8. In Modi Cements Ltd. v. Kuchil Kumar Nandi (1998) 3 SCC 249 this Court made it clear that even if a cheque is dishonoured because of “stop payment” instructions given to the bank, Section 138 of the NI Act would get attracted. This Court further observed that:
“16. … once the cheque is issued by the drawer a presumption under Section 139 must follow and merely because the drawer issues a notice to the drawee or to the bank for stoppage of the payment it will not preclude an action under Section 138 of the NI Act by the drawee or the holder of the cheques in due course.”
9. Again in M.M.T.C Ltd. v. Medchl Chemicals and Pharma (P) Ltd. (2002) 1 SCC 234 this Court reiterated the same view. What is more important is the fact that this Court declared that the complaint cannot be quashed on this ground. Relevant observations of this Court read as under:
“19. … 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’ instructions were not 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 debt or liability at the time of presentation of cheque for 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.”
In Laxmi Dyechem v. State of Gujarat (2012) 13 SCC 375 this Court reiterated the above view.
10. We find that the High Court has relied on M.M.T.C Ltd. (2002) 1 SCC 234 and Modi Cements (1998) 3 SCC 249 and yet drawn a wrong conclusion that inasmuch as cheque was dishonoured because of “stop payment” instructions, the offence punishable under Section 138 of the NI Act is not made out. The High Court observed that “stop payment” instructions were given because the complainant had failed to discharge its obligations as per agreement by not repairing/replacing the damaged UPS system. Whether the complainant had failed to discharge its obligations or not could not have been decided by the High Court conclusively at this stage. The High Court was dealing with a petition filed under Section 482 of the Code for quashing the complaint. On factual issue, as to whether the complainant had discharged its obligations or not, the High Court could not have given its final verdict at this stage. It is a matter of evidence. This is exactly what this Court said in M.M.T.C Ltd. (2002) 1 SCC 234 Though the High Court referred to M.M.T.C Ltd. (2002) 1 SCC 234, it failed to note the most vital caution sounded therein.
11. The High Court also erred in quashing the complaint on the ground that the contents of the reply sent by the accused were not disclosed in the complaint. Whether any money is paid by the accused to the complainant is a matter of evidence. The accused has ample opportunity to probabilise his defence. On that count, in the facts of this case, the complaint cannot be quashed.
12. In view of the above, we set aside the impugned order dated 8-9-2011 passed by the Gujarat High Court in Acer India (P) Ltd. v. State of Gujarat. We direct the Chief Judicial Metropolitan Magistrate, Vadodara to dispose of Criminal Complaint No. 6076 of 2006 as expeditiously as possible and, in any event, within a period of one year from the date of receipt of this order.
13. The appeals are disposed of in the aforestated terms.
Alert