2014 ALL MR (Cri) JOURNAL 366
(KERALA HIGH COURT)
K. RAMAKRISHNAN, J.
Rejimol Thomas Vs. Robert Martin & Anr.
Crl.MC. No.2855 of 2014
18th July, 2014
Petitioner Counsel: Sri. M.J. THOMAS
Respondent Counsel: Sri. JOHN JOSEPH VETTIKAD, Sri. C. JOSEPH JOHNY, Smt. P. MAYA
(A) Negotiable Instruments Act (1881), S.138 - Complaint u/s.138 - Maintainability in view of arbitration clause - Held, arbitration clause in an agreement in respect of business transaction is not a bar for filing a complaint u/s.138 of NI Act.
2002 (1) SC Cases 241, 2002 (2) Arb. Law Rep. 341 Rel. on. (Para 14)
(B) Negotiable Instruments Act (1881), S.138 - Criminal P.C. (1973), S.258 - Proceedings u/s.138 - Application for dropping the proceedings u/s.258 Cr.P.C. - Held, S.258 Cr.P.C. is applicable only in summons cases instituted otherwise than upon a complaint - Therefore, proceedings cannot be dropped, as the case is instituted upon a complaint and not on basis of a police report. (Para 12)
(C) Negotiable Instruments Act (1881), S.138 - Criminal P.C. (1973), S.258 - Proceedings u/s.138 - Dropping of - Evidence has already been recorded - Held, in summons trial case, once the plea was recorded, the court can only on basis of evidence either acquit or convict accused - No question of discharge arises at that stage. (Para 12)
(D) Criminal P.C. (1973), Ss.258, 399 - Application for discharge - Dismissal on ground of maintainability - Revision against - Dismissed on ground that impugned order is an interlocutory order - Held, order impugned before revisional court was in nature of an intermediary order - It decides right of parties finally to get a discharge or not - Hence, dismissal of revision on that ground held, not correct - However, matter not remitted for fresh consideration on merits, so as to avoid delay in proceedings. (Para 13)
JUDGMENT :- This is an application filed by the petitioner who is the accused in S.T.No.50/2012 on the file of the Judicial First Class Magistrate Court, No-II, Ettumanoor challenging the order passed in Crl.M.P.No168/2013 of that court and Crl.R.P.No.21/2013 of Additional Sessions Judge No-IV, Kottayam and also to quash the proceedings under Section 482 of Code of Criminal Procedure.
2. It is alleged in the petition that petitioner is the accused in S.T.No.50/2012 on the file of the Judicial First Class Magistrate Court, No-II, Ettumanoor which was taken on file on the basis of a private complaint filed by the first respondent against the petitioner alleging offence under Section 138 of the Negotiable Instruments Act. The case of the complainant in the complaint was that, the accused had issued the disputed cheque for Rs.12,00,000/- in partial discharge of his liability on the basis of an agreement entered into between the complainant and the accused in respect of some construction work and the cheque when presented was dishonoured for the resason 'funds insufficient' and inspite of notice issued, he had not paid the amount. So, he had committed the offence punishable under Section 138 of the Negotiable Instruments Act. It is also alleged in the petition that the complainant filed O.S.No.457/2012 before the Sub Court, Kottayam for recovery of Rs.23,00,000/- being the amount due as per the contract for the work done and the petitioner filed an application under Section 8 of the Arbitration & Conciliation Act stating that in the agreement, there is an arbitration clause and in such cases, no suit will lie and the remedy of the parties is to pursue their remedy by appointing an arbitrator and refer the matter for arbitration and accepting that contention, the suit was dismissed by the court. So, according to the petitioner, there is no legally enforceable debt and the cheque cannot be said to be issued for a legally enforceable debt as a liability has to be considered in the arbitration proceedings. The evidence of the complainant started and on the basis of the evidence, the petitioner filed Crl.M.C.No.920/2013 before this court for quashing the proceedings. But, this court by Annexure 4 Judgment held that since it has reached the stage of examination of the accused under Section 313 of Code of Criminal Procedure, the court cannot quash the proceedings, but, in case the petitioner files an application for dishcarge, that can be considered by the court below and dispose of the same in accordance with law. On that basis, petitioner filed Crl.M.P.No.168/2013 before the Judicial First Class Magistrate Court, No-II, Ettumanoor and the learned magistrate by Annexure 7 order, dismissed the application stating that the application for discharge is not maintainable at that stage. The petitioner preferred Crl.R.P.No.21/13 before the Sessions Court, Kottayam and the Additional Sessions Judge, No-IV Kottayam by Annexure 8 order dismissed the revision stating that it is an interlocutory order and as such no revision is maintainable. According to the petitioner, both the courts below were not justified in dismissing the applications and since the liability itself has to be considered by the arbitrator, the cheque if any given cannot be said to be in dishcarge of a llegally enforceable debt and as such the complaint under Section 138 of the Negotiable Instruments Act is not maintainable and this court has ample power to exercise the power under Section 482 of the Code of Criminal Procedure to quash the proceedings as continuance of the proceedings will amount to only abuse of process of court. So, the petitioner filed this petition seeking the following relief:
"To call for the records relating to Annexure 7 and Annexure 8 and to quash the same and to allow Annexure 5 or to allow such other relief which is this Hon'ble Court deems fit and necessary in the interest of justice."
4. The Counsel for the petitioner submitted that by virtue of the arbitration clause in the agreement, the liability of the parties has to be decided by the arbitrator till, then, it cannot be said that there was any liability exists for between the petitioner and the de facto complainant. Further, the suit filed by the first respondent for recovery of the amount was dismissed by the court accepting the contention taken by the petitioner that the suit is not maintainable, in view of the arbitration clause in the agreement under Section 8 of the Arbitration and Conciliation Act, 1996. Since the main ingredient is lacking, the complaint itself is not maintainable and it is not necessary for the accused to wait till the decision is taken by the court below on the basis of evidence. So, according to him, this court has got ample power to quash the proceedings at this stage itself and terminate the proceedings leaving open the parties to get their right agitated in the arbitration proceedings.
5. On the other hand, the learned Counsel for the first respondent who is the de facto complainant argued that the cheque was issued by the petitioner in partial discharge of his admitted liability for the work already done and the bills submitted by the first respondent and no objection was raised by the petitioner for the same. Merely because there is an arbitration clause will not debar the complainant from filing a complaint under Section 138 of the Negotiable Instruments Act as they are standing in a different footing. Since the evidence has already been taken, court below was perfectly justified in holding that it cannot invoke the power under Section 258 of Code of Criminal Procedure at that stage and it is not applicable as such also. So, according to him, the petitioner lacks bona fides and his attempt is only to prolong the proceedings.
7. It is an admitted fact that there was an agreement between the petitioner and the complainant namely the second respondent evidenced by Ext.P1 agreement marked in the lower court. It is also an admitted fact that a portion of the work was completed by the complainant and he had submitted bills for the same and it is seen from the documents produced in the lower court that Ext.P3 & P4 bills were issued for a total amount of Rs.19,26,496/- and petitioner had issued Ext.P5 cheque in the lower court in partial discharge of that liability for an amount of Rs.12,00,000/-. It is also an admitted fact that the cheque when represented was dishonoured for the reason 'funds insufficient' and the petitioner had issued Ext.P7 notice in the lower court intimating dishonour and demanding payment of the amount. But, the petitioner has not paid the amount. It is also an admitted fact that the first respondent filed O.S.No.457/2012 for recovery of the amount with interest and cost and the petitioner filed an application under Section 8 of the Arbitration & Conciliation Act stating that in view of the artibration clause in the agreement, the suit is not maintainable and accepting that contention, the suit was dismissed by the Sub Court which is evident from Annexure 10 and 11 produced by the petitioner before this court. These aspects were not in challenge. It is also true that in the cross examination, PW1 had stated that the ultimate liability has to be considered in the arbitration proceedings, but he denied the suggestion that the cheque was not issued in discharge of any legally enforceable debt as claimed by the petitioner.
"In view of the order I propose to pass in this petition I do not think necessary to issue notice to the first respondent. The limited prayer of the learned counsel appearing for the petitioner is that the petitioner may be permitted to take a plea to discharge in ST.No.50/2012.
As stated earlier, ST.No.50/2012 is now posted for the examination of the petitioner under Sec.313 of the Code of Criminal Procedure. Still, if it is legally permissible to take up a plea to discharge, it will be open to the petitioner to take up such a plea, in accordance with law. In the said circumstance, without making any observation as to the merit of the contentions raised by the petitioner in this petition, it is disposed of granting liberty to the petitioner to take up the plea of discharge, in case that stage is not already crossed by now, and certainly, in accordance with law. In case the petitioner files an application for the discharge, the same shall be considered in accordance with law expeditiously, subject to the aforesaid observation.
The Crl.M.C.is disposed of subject to the observations made above."
9. So, it is clear from the above that this court has not gone into the question on merit and it was dismissed at the admission stage itself leaving open the right of the petitioner to approach the court below for discharge if it is permissible and plea for discharge in accordance with law. It is also mentioned in the order that if such an application is filed, the lower court was directed to consider the same in accordance with law expeditiously subject to the above said observation. It is also specifically mentioned in the order that the right to plea for discharge was granted in case the stage is not already crossed by now and certainly in accordance with law. So, it cannot be said that the court has given a right to the petitioner to file an application to discharge as though he is entitled to file an application as such as per the order.
10. It is an admitted fact that in this case, the evidence of PW1 completed and it was posted for examination of the accused under Section 313 of Code of Criminal Procedure and it was at that time that the petitioner had filed the earlier petition before this court and after disposal of that petition by this court, he filed the application for dropping the proceedings under Section 258 of Code of Criminal Procedure and that was dismissed by the court below and he filed revision before the Sessions Court and that was also dismissed by the Sessions Court as per Annexure 8 order.
"Power to stop proceedings in certain cases.- In any summons-case instituted otherwise than upon complaint, a Magistrate of the first class or, with the previous sanction of the Chief Judicial Magistrate, any other Judicial Magistrate, may, for reasons to be recorded by him, stop the proceedings at any stage without pronouncing any judgment and where such stoppage of proceedings is made after the evidence of the principal witnesses has been recorded, pronounce a judgment of acquittal, and in any other case, release the accused, and such release shall have the effect of discharge."
12. So, it is clear from the above that Section 258 of Code of Criminal Procedure will be applicable only in a case where in a summons case instituted otherwise than upon complaint. So, it is clear from this that, that section is not applicable in this case as it is a case instituted upon a complaint and not on the basis of a police report. Since it is a summons trial case, once the plea was recorded, then, the court can only on the basis of evidence either acquit or convict the accused and there is no question of discharge arises at that stage. So, under the circumstances, the court below was perfectly justified in coming to the conclusion that the petitioner is not entitled to get the relief of dropping the proceedings invoking the power under Section 258 of Code of Criminal Procedure in this case.
13. It is true that the revision court has dismissed the revision on the ground that it is an interlocutory order, that appears to be not correct as it is an order in the nature of a intermediary order and it decides the right of the parties finally to get a discharge or not and that it is a revisable order. But, considering the other circumstances, I don't think that it is necessary to remit the case to the Sessions Court for fresh consideration on merits as it will only delay the proceedings and the petitioner wanted this court to go to the question whether he is entitled to quash the proceedings invoking the power under Section 482 of Code of Criminal Procedure as well on the ground that in view of the arbitration clause, the complaint is not maintainable according to him.
14. The question as to whether merely because there is an arbitration clause will take away the right of the complainant to move for criminal prosecution has been dealt with by the Honourable Supreme Court in the decision reported in S.W.Palanitkar and Others Vs. State of Bihar and Another [2002 (1) SC Cases 241] and held that merely because there is an arbitration clause in a commercial transaction agreement is not a bar for instituting criminal prosecution if such breach even prima facie constituted a criminal offence. Further, in the decision reported in 2002(2) Arbitration Law Reporter 341 Atlaz Degi-Tel Pvt. Ltd and others Vs. Atlaz Technology Pvt. Ltd. and another, the Bombay bench of the High Court held that an arbitration clause in an agreement in respect of a business transaction is not a bar for filing a criminal complaint under Section 138 of the Negotiable Instruments Act for dishonour of cheque. It is also settled law that merely because there is a civil remedy available is not a ground to quash criminal proceedings, if the allegations prima facie made out a criminal offence as well. In a case under Section 138 of the Negotiable Instruments Act, the ingredients to be proved are that a cheque was issued in discharge of any partial or whole liability which when presented was dishonoured and in spite of notice issued if the amount is not paid, then, it will attract the penal provision under Section 138 of the Negotiable Instruments Act. The ultimate liability as to how much amount is payable is a matter to be considered in arbitration proceedings and that will not de-bar the complainant from filing a complaint for prosecution under Section 138 of the Negotiable Instruments Act if the complainant had a case that the cheque was issued in partial discharge of an admitted liability by the accused. The question as to whether it is an admitted liability and whether there is any legally enforceable debt for which the cheque was issued etc are matters to be considered by the court on appreciation of evidence adduced on both sides. So, under the circumstances, the submissions made by the Counsel for the petitioner that the complaint itself is not maintainable in view of the arbitration clause and the dismissal of the suit by the civil court directing the parties to adjudicate their liability by invoking the arbitration clause in the agreement is not sustainable in law and the evidence adduced on the side of the complainant at this stage is not sufficient to come to the conclusion that there is no legally enforceable liability for which the cheque was issued as contended by the Counsel for the petitioner and this court feels that it is not a fit case where the power under Section 482 of Code of Criminal Procedure has to be invoked to quash the proceedings as all these questions are to be considered by the trial court on the basis of evidence and the defence to be taken by the accused. So, the petitioner is not entitled to get the relief of quashing the proceedings invoking the power under Section 482 of Code of Criminal Procedure and the Criminal Miscellaneous Case is liable to be dismissed.
In the result, the Criminal Miscellaneous Case is dismissed.
Communicate this order to the court below at the earliest.