Factual aspects
Pending case in s.138 N.I Act appellant is the customer of the respondent co-operative society
1. The Appellant is the accused in Criminal Case No. 648 of 2016 pending before the Judicial Magistrate First Class, Kalwan (for short, ‘the JMFC’). The complaint was filed by the respondent before the JMFC alleging the commission of an offence punishable under Section 138 of the Negotiable Instruments Act, 1881 (for short, ‘the NI Act’) on the basis of the dishonour of a cheque, which was allegedly issued by the appellant in favour of the respondent, a Credit Co-Operative Society.
Loan from the respondent in an overdraft facility and issued two security cheques in which one/first got dishonoured, later on since respondent withdrew the prosecution appellant was acquitted
2. It is alleged by the respondent that the appellant had obtained a loan of Rs. 3,50,000/- from the respondent on 3rd July 2006 through an overdraft facility. At the time of obtaining the loan, she issued two security cheques bearing Nos. 010721 and 010722. Due to a default in repayment, the respondent deposited the first cheque (No.010721) drawn on 10th February 2007 for the amount of Rs.3,75,976/-, which was dishonoured. Following a legal demand notice from the respondent’s advocate, the respondent filed Criminal Case No. 135 of 2007 under Section 138 of the NI Act on 4th April 2007. The appellant paid the cheque amount before the JMFC, Kalwan Court, on 23rd September 2016, following which the respondent withdrew the prosecution, and the appellant was acquitted on the same date.
Appellant was granted another loan the in default the respondent has used another/second cheque issued as security in previous loan and got dishonoured
3. In the interregnum, the appellant was allegedly granted another loan of Rs. 11,97,000/- on 25th July 2008 by the respondent. Due to an alleged default in repayment of the loan amount and interest accrued thereon, the respondent deposited the second cheque (No. 010722) drawn on 3rd October 2016 for the amount of Rs. 27,27,460/- which was dishonoured on 14th October 2016. The respondent issued a legal notice dated 11th November 2016, claiming that the cheque was issued towards repayment of an overdraft facility of Rs.11,97,000/- allegedly taken by the appellant on 25th July 2008.
4. While disputing the case made out in the demand notice, through her advocate’s reply on 28th November 2016, the appellant sought the supply of the loan documents from the respondent to enable her to give a reply to the statutory notice. By writing another letter through her advocate on 13th December 2016, she informed the advocate for the respondent that the documents had not been supplied to her.
Respondent filed complaint and JMFC issued process in which appellant preferred writ which got dismissed by the Hon’ble High Court
5. The respondent filed the complaint bearing Criminal Case No. 648 of 2016 before JMFC, Kalwan, alleging the commission of an offence punishable under Section 138 of the NI Act on 15th December 2016 in relation to dishonoured Cheque No.010722. The JMFC issued the process on 2nd March 2017. Challenging the issuance of process, the appellant filed a Criminal Writ Petition No. 2316 of 2017 before the Hon’ble High Court of Bombay, which was dismissed by the impugned order dated 18th December 2023. The High Court found no infirmities in the order of the JMFC issuing process and held that the contentions raised by the appellant could only be decided at trial.
Analysis
Consideration of submissions
8. Section 138 of the NI Act reads thus:
“ ………….. “
Magistrate is duty-bound to examine the complainant on oath and witnesses if any if the complaint filed under section 138 N.I
9. A court of the Judicial Magistrate can take cognizance of an offence punishable under Section 138 of the NI Act based on a complaint filed under Section 200 of the Code of Criminal Procedure, 1973 (for short, ‘the CrPC’). The corresponding provision under the Bhartiya Nagarik Suraksha Sanhita, 2023 (for short, ‘the BNSS’) is Section 223. After a complaint is filed under Section 200 of the CrPC, the learned Magistrate is duty-bound to examine the complainant on oath and witnesses, if any, present and reduce the substance of such examination into writing. What is reduced into writing is required to be signed by the complainant and witnesses, if any.
Recording complainant’s statement on oath under section 200 crpc is not an empty formality
10. Recording the complainant’s statement on oath under Section 200 of the CrPC is not an empty formality. The object of recording the complainant’s statement and witnesses, if any, is to ascertain the truth. The learned Magistrate is duty-bound to put questions to the complainant to elicit the truth. The examination is necessary to enable the Court to satisfy itself whether there are sufficient grounds to proceed against the accused. After considering the complaint, the documents produced along with the complaint, and the statements of the complainant and witnesses, if any, the learned Magistrate has to apply his mind to ascertain whether there is sufficient ground for proceeding against the accused. If he is satisfied that there is sufficient ground to proceed against the accused, then the learned Magistrate has to issue a process in terms of sub-Section (1) of Section 204 of the CrPC. The corresponding provision under the BNSS is Section 227. Setting criminal law in motion is a serious matter. The accused faces serious consequences in the sense that he has to defend himself in the trial.
11. It is settled law that a litigant who, while filing proceedings in the court, suppresses material facts or makes a false statement, cannot seek justice from the court. The facts suppressed must be material and relevant to the controversy, which may have a bearing on the decision making. Cases of those litigants who have no regard for the truth and those who indulge in suppressing material facts need to be thrown out of the court. In paragraph 5 of the decision of this Court in the case of S.P. Chengalvaraya Naidu v. Jagannath & Ors, it is held thus:
“5. The High Court, in our view, fell into patent error. The short question before the High Court was whether in the facts and circumstances of this case, Jagannath obtained the preliminary decree by playing fraud on the court. The High Court, however, went haywire and made observations which are wholly perverse. We do not agree with the High Court that “there is no legal duty cast upon the plaintiff to come to court with a true case and prove it by true evidence”. The principle of “finality of litigation” cannot be pressed to the extent of such an absurdity that it becomes an engine of fraud in the hands of dishonest litigants. The courts of law are meant for imparting justice between the parties. One who comes to the court, must come with clean hands. We are constrained to say that more often than not, process of the court is being abused. Property-grabbers, taxevaders, bank-loan-dodgers and other unscrupulous persons from all walks of life find the court-process a convenient lever to retain the illegal gains indefinitely. We have no hesitation to say that a person, who’s case is based on falsehood, has no right to approach the court. He can be summarily thrown out at any stage of the litigation.” (emphasis added)
Ingredients to take cognizance of offence under section 138 N.I Act
12. Section 138 of the NI Act has three conditions incorporated in clauses (a) to (c) of the proviso. Firstly, 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. Secondly, if a cheque is returned by the bank unpaid, the payee or the holder in due course must make a demand for payment of the amount of money covered by the cheque by issuing a notice in writing within 30 days of receipt of information from the bank regarding the return of the cheque as unpaid. The third condition is that the drawer of the cheque must fail to make payment of the amount covered by the cheque within 15 days of the receipt of the notice.
Notice as per fact proceeds to describe the cheque return unpaid
13. In the present case, a statutory notice under Section 138 of the NI Act was issued by the advocate for the respondent on 11th November 2016 to the appellant. The notice proceeds on the footing that the respondent, a Co-operative Credit Society, is providing financial assistance to its members and is also carrying on banking business. The allegation in the notice served to the appellant is that the appellant was a member of the credit society and had taken an overdraft facility from the respondent in the sum of Rs.11,97,000/-. Paragraph 1 of the notice specifically relies upon the fact that the appellant has executed necessary documents and that the appellant has agreed and acknowledged to make repayment of the amount advanced with interest. Thereafter, the notice proceeds to describe how the cheque issued by the appellant in the sum of Rs.27,27,460/- was returned unpaid.
Certain documents were suppressed in the statement on oath and made out a false case
18. The fact remains that in the complaint, the respondent has suppressed the reply dated 28th November 2016 and the letter dated 13th December 2016 sent by the appellant’s advocate. These two documents have also been suppressed in the statement on oath. The respondent made out a false case that the appellant did not reply to the demand notice. Moreover, the case that the documents as demanded were supplied is not pleaded in the complaint and statement under Section 200 of CrPC.
If these documents were disclosed in the complaint the Learned Magistrate could have dismissed the complaint
19. If these two letters were disclosed in the complaint, the learned Magistrate while recording the statement under Section 200 of CrPC, could have always questioned the respondent on the supply of documents to the appellant. What is important is that in the reply dated 28th November 2016, the appellant had reserved her right to give a reply to the demand notice after receiving the documents. It was the respondent’s duty to supply documents to the appellant or her advocate to enable the appellant to properly reply to the demand notice. At least, the inspection of documents could have been provided to the appellant. After noticing the fact that notwithstanding service of two letters written by the appellant, relied upon documents were not provided to the appellant, the learned Magistrate could have dismissed the complaint by exercising power under Section 203 of CrPC, as the appellant could not have replied to the statutory notice without looking at the documents relied upon.
20. Thus, this was a case where very material documents in the form of two letters addressed by the appellant were suppressed in the complaint and the statement on oath under Section 200. In the statement on oath, the respondent-complainant vaguely referred to a ‘false notice reply’, but a copy of the reply was not produced by the respondent along with the complaint.
21. While filing a complaint under Section 200 of CrPC and recording his statement on oath in support of the complaint, as the complainant suppresses material facts and documents, he cannot be allowed to set criminal law in motion based on the complaint. Setting criminal law in motion by suppressing material facts and documents is nothing but an abuse of the process of law.
Conclusion
Cognizance set aside
22. Hence, the High Court ought to have interfered and quashed the complaint. Accordingly, the impugned order of the High Court is set aside. The complaint bearing S.C. No. 648 of 2016 pending in the court of the learned Judicial Magistrate First Class at Kalwan and the order of cognizance dated 2nd March 2017 are hereby quashed and set aside.
23. We make it clear that the other remedies of the respondent to file proceedings for recovery of the amount allegedly due and payable by the appellant in accordance with law will remain open.
Acts and sections are cited in the case
Negotiable Instruments Act, 1881
– Section 138: Dishonour of cheque for insufficiency of funds.
– Section 139: Presumption in favour of holder.
Code of Criminal Procedure, 1973
– Section 200: Examination of complainant.
– Section 204: Issue of process.
– Section 203: Dismissal of complaint.
Bhartiya Nagarik Suraksha Sanhita, 2023
– Section 223: Corresponding provision to Section 200 of CrPC.
– Section 227: Corresponding provision to Section 204 of CrPC.
The judgment cited in the case is
S.P. Chengalvaraya Naidu v. Jagannath & Ors – (1994) 1 SCC 1
Party
Rekha Sharad Ushir vs. Saptashrungi Mahila Nagari Sahkari Patsanstha Ltd – Criminal Appeal No. 724 of 2025 – 2025 INSC 399 – March 26, 2025 – Justices Abhay S. Oka and Ujjal Bhuyan.
Author’s note
Kindly see Part II: Issuance of process in the following judgment
