HMT WATCHES LTD. versus M.A. ABIDA &ANR.
[2015] 3 S.C.R. 719, Supreme Court of India, 2015
Outcome: Appeal(s) allowed (Granted)
Segment: Ratio
[2015] 3 S.C.R. 719 
HMT WATCHES LTD. 
v. 
M.A. ABIDA &ANR. 
(Criminal Appeal No. 471 of 2015 etc.) 
MARCH 19, 2015 
[DIPAK MISRA AND PRAFULLA C. PANT, JJ.] 
A 
B 
Code of Criminal Procedure, 1973- s. 482- Jurisdiction 
under -
Scope of -
Criminal proceeding u/s. 138 of C 
Negotiable Instruments Act- Quashed by High Court- Held: 
High court committed grave error by exceeding its jurisdiction 
by quashing the proceeding accepting disputed factual 
defences - Negotiable instruments Act, 1881 - s. 138. 
Negotiable Instruments Act, 1881 - s. 138 - Offence 
under - Dishonor of cheque because of stop-payment 
instruction - Held: Such instruction also would attract the 
offence uls. 138. 
Allowing the appeals, the court 
HELO: 1. The High Court has committed grave error 
D 
E 
of law in quashing the criminal complaints filed by the 
appellant in respect of offence punishable under Section 
F 
138 of the Negotiable Instruments Act, in exercise of 
powers under Section 482 of Cr.P.C. by accepting factual 
defences of the accused which were disputed ones. 
[Para 14] [727-G-H] 
Suryalakshmi Cotton Mills Limited v. Rajvir Industries 
Limited and Ors. (2008) 13 SCC 678: 2008 (1) SCR 432; 
Rallis India Limited v. Poduru Vidya Bhushan and Ors. (2011) 
13 sec 88: 2011 (5) SCR 289- relied on. 
719 
G 
H
720 
SUPREME COURT REPORTS 
(2015) 3 S.C.R. 
A 
2. The High Court further erred in observing that 
Section 138(b) of Negotiable Instruments Act stood 
uncomplied, even though respondent No.1 (accused) 
had admitted that he replied the notice issued by the 
complainant. Also, the fact, as to whether the signatory 
B of demand notice was authorized by the complainant 
company or not, could not have been examined by the 
High Court in its jurisdiction u/s. 482 Crl.P.C. when such 
plea was controverted by the complainant before it. [Para 
C 10) [725-D-E] 
3. 
Instruction of "stop payment" issued to the 
banker could be sufficient to make the accused liable 
for an offence punishable under Section 138 of the 
0 
Negotiable Instruments Act. [Para 13) [727-E] 
E 
F 
G 
H 
Pulsive Technologies P. Ltd. vs. State of Gujarat (2014) 
9 SCALE 437; Modi Cements Ltd. vs. Kuchil Kumar Nandi 
(1998) 3 sec 249: 1998 (1) SCR 1192- relied on. 
CASE LAW REFERENCE 
2008 (1) SCR 432 
relied on 
2011 (5) SCR 289 
relied on 
(2014) 9 SCALE 437 relied on 
1998 (1) SCR 1192 
relied on 
Para 11 
Para 12 
Para 13 
Para 13 
CRIMINALAPPELLATE JURISDICTION: Criminal Appeal 
No. 471 of2015. 
From the Judgment and Order dated 25.02.2014 of the 
High Court of Kerala at Ernakulam in CRLMC No. 2367 of 
2008. 
WITH
H MT WATCHES LTD. v. M.A.ABIDA 
721 
Criminal Appeal No. 472 of2015 
A 
Liz Mathew, M.F. Philip, Malavika Prasad, C.V. Francis, 
Arun Francis, Sindhu Mohan, Mukti Chowdhary, Swati Setia 
for the Appellant. 
B 
Basant R., Romy Chacko for the Respondents. 
The Judgment of the Court wa!ii delivered by 
PRAFULLA C. PANT, J. 1. These appeals are directed C 
against judgment and order dated 25.2.2014 passed by the 
High Court of Kerala in Criminal M.C. No 2366 of 2008 and 
Criminal M.C. No. 2367 of 2008, whereby the said Court has 
allowed the petitions and quashed the proceedings of crirltinal 0 
complaint case Nos. 1790, 1791, 1792, 1793, 1794, 1795, 
1796, 1824, 1825, 1826, 1827, 1828, 1829, 1830 and 1831 
of 2007 pending in the Court of Judicial First Class Magistrate 
(Court No. IV), Kechi; and C.C. Nos.1208, 1209, 1210,1211 
and 1212 of2007, pending in the Court of Judicial First Class E 
Magistrate (Court No. Ill), Kechi. All these criminal complaint 
cases were pertaining to offence punishable under Section 
138 of the Negotiable Instruments Act, 1881 (hereinafter 
referred to as "the N. I. Act"). 
F 
2. We have heard learned counsel for the parties and 
perused the papers on record. 
3. Succinctly stated, the appellant filed criminal complaint 
cases against respondent- M.A. Abida stating that as many G 
as 57 cheques dated 28.09.2006 were issued by her in 
discharge of outstanding liability towards the complainant/ 
appellant (HMT Watches Ltd.). When the cheques were
presented for collection the same were received back, 
dishonoured by bankers with the endorsement - "payment H
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SUPREME COURT REPORTS 
[2015] 3 S.C.R. 
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stopped by the drawer". Notice of demand dated 9.10.2006 
was issued by the complainant to the respondent no.1 but she 
failed to make the payment of the amount mentioned in the 
cheques, i.e., total Rs.1,79,86,357/-. Instead, she sent reply 
to the notice disputing liability to pay. On this, complainant 
B filed twenty criminal complaints mentioned above, against the 
respondent no.1 with regard to the offence punishable under 
Section 138 of the N. I. Act. 
4. The accused-M.A.Abida filed Criminal M.C. No. 2366 
C of 2008 and Criminal M.C. No. 2367 of 2008 challenging the 
proceedings initiated by the complainant on the ground that 
she was Re-Distribution Stockist (RDS) of watches 
manufactured by the appellant. The business with the appellant 
D was done till September, 2003 on "cash and carry" basis. The 
accused further pleaded in the petitions filed before the High 
Court under Section 482 of the Code of Criminal Procedure, 
that after 2003 the appellant company used to collect cheques 
towards the amount covered by distinct invoices with respect 
E to various consignments for securing payment of amount 
covered by the invoices. 
5. The High Court accepted the plea of the accused 
(respondent no.1) and quashed the criminal complaint cases. 
F Hence, these appeals through special leave. 
6. On behalf of the appellant, it is argued before us that 
the High Court committed a grave error of law in quashing the 
proceedings of
the criminal complaint cases on the factual 
G pleas taken by the respondent no.1. On the other hand, learned 
counsel for the respondent no.1 contended that since the 
cheques were given as security, as such there was no liability 
to make the payment, and the ingredients of the offence 
punishable under Section 138 of the N.I Act were not made 
H out.
H MT WATCHES LTD. v. M.A.ABIDA 
[PRAFULLAC. PANT, J.] 
723 
7. Section 138 of the Negotiable Instruments Act, 1881 
A 
reads as under: 
"138. Dishonour of cheque for insufficiency, etc., 
of funds in the accounts. - 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 it 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 provisions of this Act, be punished with 
imprisonment for "a term which may extend to two 
year", or with fine which may extend to twice the 
amount of the cheque, or with both: 
Provided that nothing contained in this section shall 
apply unless-
( a) 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. 
(b) The payee or the holder in due course of the 
cheque, as the case may be, makes a demand for 
the payment of the said amount of money by giving a 
notice, in writing, to the drawer, of the cheque, ''within 
thirty days" of the receipt of information by him from
the bank regarding the return of the cheques as 
B 
c 
D 
E 
F 
G 
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724 
SUPREME COURT REPORTS 
[2015) 3 S.C.R. 
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unpaid, and 
(c) The drawer of such cheque fails to make the 
payment of the said amount of money to the payee 
or, as the case may be, to the holder in due course of 
B 
the cheque, within fifteen days of the receipt of the 
said notice. 
Explanation: For the purpose of this section, "debt or 
other liability" means a legally enforceable debt or 
c 
other liability." 
D 
E 
8. Section 139 of the Negotiable Instruments Act, 1881 
provides that there shall be a presumption in favor of holder of 
a cheque as to the debt or liability. It reads as under: 
"139. Presumption in favour of holder. - It shall 
be presumed, unless the Contrary is proved, thatthe 
holder of a cheque received the cheque of the nature 
referred to in section 138 for the discharge, in whole 
or in part, or any debt or other liability." 
9. Section 140 of the Negotiable Instruments Act, 1881 
prohibits what cannot be a defence in a prosecution in respect 
of offence punishable under Section 138 of the N.l.Act. It reads 
F as Linder: 
G 
H 
"140. Defence which may not be allowed in any 
prosecution under section 138. - Defence which 
may not be allowed in any prosecution under section 
138 It shall not be a defence in a prosecution of an 
offence under section 138 that the drawer had no 
reason to believe when he issued the cheque that the 
cheque may be dishonoured on presentment for the 
reasons stated in that section."
HM TWATCHES LTD. v. M.A.ABIDA 
[PRAFULLAC. PANT, J.] 
725 
10. Having heard learned counsel for the parties, we are A 
of the view that the accused (respondent no.1) challenged the 
proceedings of criminal complaint cases before the High Court, 
taking factual defences. Whether the cheques were given as 
security or not, or whether there was outstanding liability or not 
is a question of fact which could have been determined only B 
by the trial court after recording evidence of the parties. In our 
opinion, the High Court should not have expressed its view on 
the disputed questions of fact in a petition under Section 482 
of the Code of Criminal Procedure, to come to a conclusion C 
that the offence is not made out. The High Court has erred in 
law in going into the factual aspects of the matter which were 
not admitted between the parties. The High Court further erred 
in observing that Section 138(b) of N. I. Act stood uncomplied, 
even though the respondent no.1 (accused) had admitted that o 
he replied the notice issued by the complainant. Also, the fact, 
as to whether the signatory of demand notice was authorized 
by the complainant company or not, could not have been 
examined by the High Court in its jurisdiction under Section 
482 of the Code of Criminal Procedure when such plea was E 
controverted by the complainant before it. 
11. In Surya/akshmi Cotton Mills Limited v. Rajvir 
Industries Limited and others', this Court has made 
following observations
explaining the parameters of jurisdiction 
F 
of the High Court in exercising its jurisdiction under Section 
482 of the Code of Criminal Procedure: -
"17. The parameters of jurisdiction of the High Court 
in exercising its jurisdiction under Section 482 of the 
G 
Code of Criminal Procedure is now well settled. 
Although it is of wide amplitude, a great deal of caution 
is also required in its exercise. What is required is 
application of the well-known legal principles involved 
H
726 
SUPREME COURT REPORTS 
[2015) 3 S.C.R. 
A 
in the matter. 
B 
c 
D 
E 
F 
xxx 
xxx 
xxx 
22. Ordinarily, a defence of an accused although 
appears to be plausible should not be taken into 
consideration for exercise of the said jurisdiction. Yet 
again, the High Court atthat stage would not ordinarily 
enter into a disputed question of fact. It, however, does 
not mean that documents of unimpeachable character 
should not be taken into consideration at any cost for 
the purpose of finding out as to whether continuance 
of the criminal .proceedings would amount to an 
abuse of process of court or that the complaint petition 
is filed for causing mere harassmen! to the accused. 
While we are not oblivious of the fact that although a 
large number of disputes should ordinarily be 
determined only by the civil courts, but criminal cases 
are filed only for achieving the ultimate goal, namely, 
to force the accused to pay the amount due to the 
complainant immediately. The courts on the one hand 
should not encourage such a practice; but, on the 
other, cannot also travel beyond its jurisdiction to 
interfere with the proceeding which is otherwise 
genuine. The courts cannot also lose sight of the fact 
that in certain matters, both civil proceedings and 
criminal proceedings would be maintainable.' 
12. In Rallis India Limitedv. Poduru Vidya Bhushan 
G and others2, this Court expressed its views on this point as 
under:-
H 
"12.Atthe threshold, the High Court should not
have 
interfered with the cognizance of the complaints 
having been taken by the trial court. The High Court
H MT WATCHES LTD. v. M.A.ABIDA 
[PRAFULLAC. PANT, J.] 
could not have discharged the respondents of.the said 
liability at the threshold. Unl~ss the parties are given 
opportunity to lead evidence, it is not possible to come 
to a definite conclusion as to what was the date when 
the earlier partnership was dissolved and since what 
date the respondents ceased to be the partners of 
the firm." 
In view of the law laid down by this Court as above, in the 
present case High Court exceeded its jurisdiction by giving its 
727 
A 
B 
opinion on disputed questions of fact, before the trial co_urt. 
C 
13. Lastly, it is contended on behalf of the respondent no.1 
that it was not a case of insufficiency of fund, as such, 
ingredients of offence punishable under Section 138 of the · 
N.l.Act are not made out. We are not inclined to accept the D 
contention of learned counsel for respondent no.1. In this 
connection, it is sufficient to mention that in the case of Pulsive 
Technologies P. Ltd. vs. State of Gujarat3, this Court has 
already held that instruction of "stop payment" issued to the 
E 
banker could be sufficient to make the accused liable for an 
offence punishable under Section 138 of the N. I. Act. Earlier 
also in Modi Cements Ltd. vs. Kuchil Kumar Nandi4, this 
Court has clarified that if a cheque is dishonoured because of 
stop payment instruction even then offence punishable under F 
Section.138 of N. I. Act gets attracted. 
14. For the reasons as discussed above, we
find thatthe 
High Court has committed grave error of law in quashing the 
criminal complaints filed by the appellant in respect of offence G 
punishable under Section 138 of the N.I. Act, in exercise of 
powers under Section 482 of the Code of Criminal Procedure 
by accepting factual defences of the accused which were 
disputed ones. Such defences, if taken before trial court, after 
recording of the evidence, can be better appreciated. 
H

728 
SUPREME COURT REPORTS 
[2015) 3 S.C.R. 
A 
15. Therefore, for the reasons, as discussed above, these 
appeals deserve to be allowed. Accordingly, the appeals are 
allowed. The impugned order dated 25.2.2004 passed by 
High Court of Kerala in Criminal M.C. Nos. 2366 of 2008 and 
2367 of 2008 is hereby quashed. The trial court shall proceed 
B with the trial in the criminal complaint cases. It is clarified that 
we have not expressed our opinion as to correctness of the 
defence pleas taken by the respondent no. 1. No order as to 
costs. 
C 
Kalpana K. Tripathy 
Appeals allowed.