Practice Directions by High Court

Practice Directions by High Court - Nature of Inquiry under S.202 in cases under S.138 of Negotiable Instruments Act, 1881 - Role of Magistrate - Legally enforceable debt and stage of evidence - Procedure at the stage of issuing summons - Nature of Presumption under S.139 of NI Act, 1881 - Role of agreement in respect of alleged debt - Agreement for the sale and purchase of shares - Scope of S.145 of NI Act, 1881 - Validity of summons issued for offence under NI Act, 1881 

The case of Northern India Paint Colour and Varnish Co. LLP v. Sushil Chaudhary [2023] GCtR 2507 (Delhi) important issues related to NI Act, 1881 were discussed where validity of summons issued to accused was challenged.  The relevant extracts of the Practice Directions issued by Delhi High Court Court on 21st June, 2021, insofar as they pertain to conducting an inquiry under Section 202 of the Code of Criminal Procedure, 1973 were set out below: 

“2. On receipt of any such complaint under Section 138 of N.I. Act, wherever it is found that any accused is resident of the area beyond the territorial jurisdiction of the Magistrate concerned, an inquiry shall be conducted by the Magistrate to arrive at sufficient grounds to proceed against the accused as prescribed under Section 202 Cr.P.C. 3. While conducting any such inquiry under Section 202 Cr.P.C., the evidence of witnesses on behalf of the complainant shall be permitted to be taken on affidavit. In suitable cases, the Magistrate may restrict the inquiry to examination of documents for satisfaction as to the sufficiency of grounds for proceeding under the said provision.” 

Based on the above, it is clear that in cases under Section 138 of the NI Act, the mandatory inquiry as contemplated by Section 202 of the Code, 1973 can be conducted by taking evidence of the complainant on affidavit. The inquiry need not be necessarily conducted by taking evidence on oath. Further, documents may be examined by the Trial Court for satisfaction as to the sufficiency of grounds for proceeding under Section 202 of the Code of Criminal Procedure, 1973.

Whether the conditions as contemplated in the Agreement for a legally enforceable debt to accrue have arisen or not cannot be determined simply by perusal of the Agreement. It was the contention of the Complainant that the conditions in the Agreement have been satisfied and therefore, there is a legally enforceable debt, whereas the Accused contends that the same have not been satisfied and there arises no legally enforceable debt. In light of the presumption 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. The learned MM is not required to go into this evidence while conducting an inquiry under Section 202 of the Code, 1973.

At the stage of issuance of summons, for the purpose of Section 202 of the Code, 1973 read with section 145 of the NI Act, 1881 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.

The argument is unacceptable that tust because the summoning order of the MM does not make specific reference to Section 202 of the Code, 1973, that an inquiry as contemplated in the aforesaid provision has not been conducted by the learned MM.