IN THE HIGH COURT OF JUDICATURE AT PATNA Cr.Misc. No.48092 of 2007 SHAKTI COLD STORAGE THROUGH PAWAN KUMAR & ANR Versus THE STATE OF BIHAR & ANR For the Petitioner:- Mr. Ashwani Kumar Singh & Mr. Gajendra Prasad Singh & Mr. Pankaj Kumar Singh, Advocates For the O.P. No.2:- Mr. Girijesh Kumar, Advocate For the State:- Mr. Rajendra Nath Jha, A.P.P. ----------- 03 19.02.2009 Heard learned counsel for the petitioners, learned counsel for the State of Bihar, learned counsel for Opposite Party No.2 and learned counsel for the Bihar State Co-operative Marketing Union Limited (hereinafter referred to as BISCOMAUN). A Complaint Case No. 2442 (M) of 2007 was filed on 28.7.2007 by Opposite Party No.2 against the petitioners under Sections 406,409,420, 120B and 138 of the N.I. Act. Cognizance has been taken upon the same on 28.7.2007. The petitioners question the proceedings and the cognizance as being in abuse of the process of criminal law. Learned counsel for the petitioner submits that reading the complaint as it is, the relationship between the petitioners and the Opposite Party No.2 arose out of a contractual agreement dated 9.10.2003. The Opposite Party No.2, under this contract, agreed to lease out the Cold Storage to the petitioners for 11 years. The contract agreement contains the obligations of the respective parties thereunder. Once the relationship was contractual, the allegations were civil for breach of any terms of the contract. The invocation of - 2 - the criminal law was, therefore, an abuse of the process of the criminal court when the matter was appropriately to be agitated before the Civil Forum for a civil dispute for breach of contract. The allegations do not constitute any criminal offence, whatsoever, assuming for the sake of argument that the petitioner breached any term of the contract. It was next submitted that paragraph-7 of the complaint itself acknowledges that what was given was a blank undated cheque as a security. He submits that such a blank undated cheque, where the amount is not specified does not fulfill the requirement of Section 138 of the Negotiable Instruments Act (hereinafter referred to as N.I. Act), read with Sections 5 and 6 of the same. He relies upon a judgment of the Supreme Court in 2006 (6) SCC 39 (M.S. Narayana Menon @ Mani Versus State of Kerala and Another) and a Bench decision of the Andhra Pradesh reported in 1995 Criminal Law Journal 560 Shri Taher N. Khambati Versus M/s. Vinayak Enterprises, Secunderabad and Others). Learned counsel for Opposite Party No.2 urged that even if the relationship was contractual between the parties and the remedy for this breach was available under the contractual agreement, nevertheless, the invocation of the criminal law in respect thereof was not barred, as such breach can also constitute a criminal offence inasmuch as the petitioner committed an act of cheating in a breach of trust by breaching the agreement. He next urged that the cheque, though undated and blank was given as security for discharge of a future liability. The cheque was to be filled in and presented for - 3 - encashment in the event of default in payment by the petitioners of their liability under the agreement. The moment breach occurred, the amount became specific and was filled up by the opposite party no.2, the requirement of Section 138 of the N.I. Act is satisfied. It was lastly submitted that this application under 482 Cr.P.C. was not maintainable as the petitioners, if aggrieved, had an adequate remedy under the contract Clause-22 for arbitration. The power of the Court to interfere with a criminal prosecution at the very inception in exercise of power under Section 482 Cr.P.C. stands well explained and hardly needs detailed discussion. The salient guidelines were laid down in the case of MADHAVRAO JIWAJIRAO SINDHIYA VERSUS SAMBHAJIRAO CHANDRORI RAO ANGRE, reported in 1988 (1) S.C.C. 692. The Courts are required to be circumspect in any interference with the trial at the initial stage, if the allegations are otherwise fit to go to trial. One of the ingredients laid down is that if the offence constitutes a civil dispute, on the face of it, resort to criminal prosecution was an abuse of process of law. In the present case, the relationship between the parties is governed by a written contract which provides for their respective obligations. The consequences of either of them breaching the terms of the contract is provided for in the agreement itself. The lease was of a Cold Storage. There were terms and conditions under this lease. The allegation is not with regard to acting in a manner contrary to the agreement itself with regard to the Cold Storage, the subject matter of the agreement, but of - 4 - violation of the terms of dealing with the subject matter. There are no allegations that the Cold Storage has been disposed of or the Cold Storage has been dealt with in a manner which may amount to be a criminal breach of trust or cheating. The petitioner was entrusted with the Cold Storage. He has not dishonestly misappropriated/converted the Cold Storage to his use or used it in violation of the conditions for which it was given to him. This Court is, therefore, satisfied that Section 405 and 406 of the Indian Penal Code have no application on the face of it. For like reason when the petitioner has not dealt with the Cold Storage in a manner of committing a breach of trust of the same, Section 409 has also no application merely because he happens to be a merchant. According to complaint, the petitioner under the contract required to obtain the electric connection for running of the Cold Storage in his own name which connection earlier stood in the name of BISCOMAUN. Quite obviously, BISCOMAUN did not wish to be saddled with any liability for electric dues consumed by the lessee. The petitioner allegedly breached this condition of the agreement. BISCOMAUN became apprehensive of being saddled with financial liabilities by reason of acts of the petitioners, contrary to the agreement arrived at between the parties. The petitioners allegedly assured BISCOMAUN that henceforth they shall act in terms of the contract and shall proceed to procure electric connection in their names. At this stage, BISCOMAUN thought it prudent to take a blank cheque, undated, as security from the petitioners. Obviously, - 5 - BISCOMAUN wanted to keep itself indemnified in the event of breach of the assurance given by the petitioners under the contract to pay for their electric consumption. The petitioners did not procure an electric connection in their name but in breach of the agreement continued to use the connection in the name of BISCOMAUN which has laid to certain dues notified to the BISCOMAUN by the State Electricity Board. From paragraphs 11 and 16 of the complaint it is apparent that in controversy now are only certain annual minimum guarantee dues payables by the petitioners under the contract between the parties to the State Electricity Board. It is not necessary at this stage to go into the issue of the quantum of the Annual Minimum Guarantee amount being disputed by the petitioners before the State Electricity Board. Once the origin of the relationship between the parties is contractual, the property which is the subject matter of the contract is intact, there are procedural violations in dealing with that property under the terms of the contract, the dispute becomes purely civil in nature and the remedy lies in an appropriate action by the opposite party no.2 against the petitioner for alleged breach of contract only. This Court, therefore, has no hesitation in holding that the institution of the complaint by invocation of the provisions of criminal law was completely a misuse of process of law. In 2005 (2) SCC 571 (Kailash Verma Versus Punjab State Civil Supplies Corporation and Another), a prosecution was registered under Sections 406 and 428 of the Indian Penal Code. The two accused were running a partnership in the name of Jagdamba Rice - 6 - Mills. The Civil Supplies Corporation entrusted paddy to the rice mill for dehusking. The partnership, under an agreement with the corporation was required to supply advance rice. The allegation was that the partnership failed to supply advance paddy to the corporation. The accused were discharged as the Magistrate was of the view that the allegations in the complaint were of a civil nature and no criminal case was made out. The Sessions Judge in revision upheld the order of the Magistrate inter alia noticing that the corporation had initiated arbitration proceedings against the partnership as also made allegation under 138 of the N.I. Act. The High Court set aside the orders of the Magistrate and the Revisonal Court. Setting aside the order of the High Court. The Supreme Court held that no offence was made out under Section 406 of the Indian Penal Code as the dispute was of a civil nature, arising out of a contractual relationship and that resort had been taken to arbitration already. Section 138 of the N.I. Act reads as follows:- “138. Dishonour of cheque for insufficiency, etc., of funds in the account.- Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that is exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provision of this Act, be punished with imprisonment for a term which may extend to one year, or with fine which may extend to twice the amount of the cheque, or with both:………” The salient aspect of the provision is, the drawing of a - 7 - cheque by a person for payment of any amount of money. The words “any amount of money” can only mean a specified amount of money. It is for that reason that the provision thereafter states that such a cheque for „an amount of money‟ must be issued in discharge of a debt or liability whether in whole or in part. Therefore, the debt or liability must be quantified and ascertained on the date that the cheque is issued and thus predetermined and the cheque must be filled in with specified amount in partial or whole discharge of such debt or liability. Learned counsel for the petitioner rightly submits that a “cheque” is defined as a bill of exchange in Section 6 of the N.I. Act. A bill of exchange is defined in Section 5 of the N.I. Act as an instrument by the maker to pay a „certain sum of money‟ to the bearer of the instrument. The words “certain sum of money” again sanctifies a quantified and ascertained sum of money predetermined. He, therefore, rightly urges that the basic condition for invocation of Section 138 of the N.I. Act is missing when a blank cheque is given and the debt or liability is neither ascertained nor quantified on date of issuance. Such a cheque given as a security to be utilized at a later stage and to be filled subsequently after ascertainment of a debt or liability takes its origin from a contractual relationship and itself has the nature of a contract as there may be a dispute about the quantum of the liability itself. If the debt or liability is uncertain, the very ascertainment of the debt or liability and the quantification of the payment itself - 8 - became contractual matters. This Court, therefore, holds that such an instrument does not fulfill the requirements of Section 138 of the N.I. Act. In the case of (M.S. Narayana Menon @ Mani Versus State of Kerala and Another) 2006 (6) SCC 39 relied upon by the petitioner, the Supreme Court at paragraph 52 in the relevant extract held as follows:- “…….. If the defence is acceptable as probable the cheque therefore cannot be held to have been issued in discharge of the debt as, for example, if a cheque is issued for security or for any other purpose the same would not come within the purview of Section 138 of the Act……..” Referring to the case of the Shri Taher N. Khambati Versus M/s. Vinayak Enterprises, Secunderabad and Others, reported in the Criminal Law Journal, 1995 page 560 relied upon by the counsel for the petitioners, this Court can do no better than. “Section 138 of the Act is introduced with a view to avoid the malignant trade practice of indiscriminately issuing cheques without sufficient funds. The amendment is introduced with a view to curb instances of issuing such cheques indiscriminately. So, having regard to the purpose with which this provision is introduced, it is doubtful whether a case of this nature can be construed as attracting the provisions of section 138 of the Act. In the instant case, the appellant advanced some money to the respondents and obtained a pronote. It was stipulated that the respondents should pay interest every month. At the same time appellant-creditor took a blank signed cheques from the respondents with the understanding that the complainant could fill the other columns in the cheque and present it if the respondents committed default in payment of interest. The respondents paid interest for about 8 months and thereafter stopped payment of interest. Then the appellant put the date as 15.1.91, wrote his own name in the space intended for the payee and also mentioned amount as Rs. 1,18,337/- and presented the cheque. Even at the time - 9 - when he presented the cheque, he would not have expected that the cheque would be honoured. He was presenting the cheque only with a view to get an endorsement which would enable him to proceed under section 138 of the Act. If this sort of practice is allowed, every Creditor should abuse the provisions of section 138 of the Act by obtaining blank cheques and putting the debtors in the fear of presentation insist on discharge of the debts at any time. I do not think that would have been the intention of the Legislature while incorporating section 138 in the Negotiation Instruments Act. Though, the appellant did not state the circumstances under which he obtained the pronote and the cheque in his complaint yet it is clear from the evidence the circumstances under which the complainant obtained a signed blank cheque from the respondent. So, the appellant has obtained this blank signed cheque with a view to make use of it, as a threat to the respondents for realization of the amount. So, it cannot be construed that the respondent had issued the cheque voluntarily for discharge of any debt or legal liability as envisaged under section 138. I, therefore, find that the facts and circumstances of the case are not attracted by the provisions of section 138 of the Act and that the learned Magistrate was justified in acquitting the accused. Hence, the Criminal Appeal is dismissed.” Having considered the submissions made on behalf of the parties, this Court is satisfied that to permit the present complaint to continue either under the provisions of the Indian Penal Code or the Negotiable Instruments Act shall clearly be an abuse of the prosecution of Court. This Court holds that the liability of the petitioner was essentially civil in nature for which the opposite party no.2 had an adequate remedy under Clause-22 of the contract agreement. The consequences of short cut adopted by them by resort to the process of criminal law are a burden to be borne by them upon its failure. The entire proceeding in Complaint Case No. 2442 (M) of - 10 - 2007, pending before the Chief Judicial Magistrate, Patna, is hereby quashed. The application stands allowed. P.K. (Navin Sinha, J.)