26 March 2025 Cheque Bounce >> Civil/Debt   |   Negotiable Instruments Act >> Criminal Law  

The Supreme Court has allowed an appeal in Rekha Sharad Ushir v/s Saptashrungi Mahila Nagari Sahkari Patsansta Ltd., setting aside an order of the Bombay High Court and quashing a criminal complaint filed under Section 138 of the Negotiable Instruments Act, 1881 (NI Act). The apex court strongly condemned the respondent-complainant's act of suppressing crucial correspondence in the complaint and the sworn statement, deeming it an abuse of the process of law.

The case arose from a complaint filed by a Credit Co-Operative Society against the appellant, alleging dishonour of a cheque issued towards repayment of a loan. The respondent claimed that the cheque, issued as security earlier, was deposited due to a default in repayment of a subsequent loan.

Upon receiving the statutory demand notice, the appellant, through her advocate, promptly sought copies of the loan documents relied upon by the respondent to furnish a proper reply. Despite repeated requests, these documents were allegedly not provided. Subsequently, the respondent filed a criminal complaint under Section 138 of the NI Act, notably omitting any mention of the appellant's requests for the loan documents in both the complaint and the accompanying sworn affidavit.

The Judicial Magistrate First Class (JMFC) issued a process against the appellant, a decision upheld by the Bombay High Court, which opined that the appellant's contentions could only be decided during the trial.

However, the Supreme Court took a different view. The court highlighted the crucial nature of the correspondence exchanged between the parties prior to the filing of the complaint. It emphasized that the respondent's demand notice specifically referred to executed loan documents and the appellant's acknowledgment of the debt. The appellant's immediate request for these documents to understand the basis of the demand was a pertinent fact that should have been disclosed in the complaint.

The Supreme Court cited its earlier judgment in S.P. Chengalvaraya Naidu vs. Jagannath & Ors., underscoring that litigants approaching the court must do so with clean hands and without suppressing material facts. The court observed that the respondent's failure to disclose the appellant's letters seeking documents, and the subsequent assertion of non-receipt of a reply from the appellant, amounted to a misrepresentation of facts.

The apex court stated that had these letters been presented before the JMFC, the Magistrate could have questioned the respondent about the non-supply of documents. Furthermore, given that the appellant had explicitly reserved her right to reply to the demand notice upon receiving the necessary documents, the Magistrate could have considered dismissing the complaint at the initial stage under Section 203 of the Code of Criminal Procedure (CrPC).

The Supreme Court concluded that the suppression of these vital documents constituted an abuse of the process of law, warranting the quashing of the complaint. Consequently, the High Court's order was set aside, and the criminal complaint pending before the JMFC was quashed.

The Supreme Court, however, clarified that this order would not preclude the respondent from pursuing other legal avenues for the recovery of the allegedly due amount in accordance with the law.

  Section 138, Negotiable Instruments Act - 1881  

  Negotiable Instruments Act, 1881