Before issuing summons u/s 138 NI Act, only prima facie view on presence of basic ingredients of the offence necessary

In the matter of Northern India Paint Colour and Varnish Co. LLP v. Sushil Chaudhary, (CRL.M.C. 2480/2023) decided by the Hon’ble High Court of Delhi on 10.11.2023

FACTS: The present appeal was filed by the Appellant impugning the order of the Additional Sessions Judge whereby the summoning order in a Complaint filed by the Appellant against the Respondent was set aside and remanded back to the MM with the observations to conduct inquiry under Section 202 CrPC and to properly appreciate the Share Sale and Purchase Agreement dated 27.09.2019 between the parties to ascertain if the amount of the cheque in question had become lawfully due and payable by the Appellant to the Respondent towards the sale price of the shares and whether pre-requisites for the transfer of the said shares, as contained in the said agreement had been complied by the respective parties.

ISSUE: Whether a detailed inquiry under Section 202 CrPC has to be conducted at the stage of issuance of summons to the Accused under Section 138 NI Act

OBSERVATIONS: The Hon’ble High Court recapitulated the directions made by the Hon’ble Supreme Court in the judgment of In Re: Expeditious Trial of Cases under Section 138 of the NI Act, 1881 (2021 SCC OnLine SC 325) wherein it was held that “If the evidence of the complainant may be given by him on affidavit, there is no reason for insisting on the evidence of the witnesses to be taken on oath. On a holistic reading of Section 145 along with Section 202, we hold that Section 202 (2) of the Code is inapplicable to complaints under Section 138 in respect of examination of witnesses on oath. The evidence of witnesses on behalf of the complainant shall be permitted on affidavit. If the Magistrate holds an inquiry himself, it is not compulsory that he should examine witnesses. In suitable cases, the Magistrate can examine documents for satisfaction as to the sufficiency of grounds for proceeding under Section 202. From the observations extracted above, it becomes abundantly clear that in cases of 138 NI Act, the evidence of witnesses of the complainant can be on the basis of affidavit. Further the Magistrate may not insist on the evidence of the witnesses to be taken on oath”. The relevant extracts insofar as they pertain to conducting an inquiry under Section 202 of the CrPC were adopted by the High Court of Delhi vide its practice directions dated 21.06.2021.

It was further observed that under Section 139 of the NI Act, a cheque given under Section 138 of the NI Act is presumed to be in discharge of a legally enforceable debt or other liability. The aforesaid presumption is rebuttable, and the accused can rebut this presumption by leading evidence in this regard. Therefore, the contention of the Accused that a legally enforceable debt has not accrued in favour of the Complainant on account of non-fulfilment of the conditions in the Agreement would have to be proved by leading evidence at the time of trial.

Hence, it was held that at the stage of issuance of summons, for the purpose of Section 202 of the CrPC read with section 145 of the NI Act, the learned MM is only required to examine whether the basic ingredients of an offence under Section 138 of the NI Act have been prima facie made out by the complainant and supported by the pre-summoning evidence led on behalf of the complainant. Further, it was not accepted that just because the summoning order of the MM does not make specific reference to Section 202 of the CrPC, that an inquiry as contemplated in the aforesaid provision has not been conducted by the learned MM. In view of the same, the present appeal was allowed.