Supreme Court Upholds Cheque Dishonor Case, Quashes Forgery FIR: Rajeshbhai Muljibhai Patel vs. State of Gujarat (2020)

Date of the Judgment: February 10, 2020
Citation: 2020 INSC 123
Judges: R. Banumathi, J., A.S. Bopanna, J.
Can a criminal case for forgery be allowed to proceed when the genuineness of the documents is already under scrutiny in a civil suit? The Supreme Court of India recently addressed this question, along with the validity of a cheque dishonor case, in a dispute between family members. This case highlights the interplay between civil and criminal proceedings and the importance of statutory presumptions in cheque bounce cases. The judgment was delivered by a two-judge bench comprising Justice R. Banumathi and Justice A.S. Bopanna, with Justice Banumathi authoring the opinion.

Case Background

The case involves a dispute between Rajeshbhai Muljibhai Patel (Appellant No. 1) and his brother Yogeshbhai Muljibhai Patel (Respondent), along with their maternal uncle, Hasmukhbhai Ravjibhai Patel (Appellant No. 3). The dispute originated from a land deal where Hasmukhbhai paid ₹1,20,00,000 to Yogeshbhai through Mahendrakumar Javaharbhai Patel (Respondent No. 2) as part payment for agricultural land. However, Yogeshbhai later sold the land to a third party. When Hasmukhbhai demanded his money back, Yogeshbhai issued four cheques which were later dishonored. Subsequently, a criminal case was filed by Hasmukhbhai against Yogeshbhai under Section 138 of the Negotiable Instruments Act, 1881 (“N.I. Act”). Meanwhile, Mahendrakumar filed a separate FIR alleging that the receipts provided by Hasmukhbhai for the payments were forged.

Timeline

Course of Proceedings

Initially, Hasmukhbhai filed a civil suit (Special Summary Suit No. 105/2015) for recovery of the ₹1,20,00,000 based on the receipts issued by Mahendrakumar. Subsequently, Hasmukhbhai also initiated a criminal case (C.C.No. 367/2016) against Yogeshbhai under Section 138 of the N.I. Act for the dishonored cheques. After receiving summons in the civil suit, Mahendrakumar filed an application seeking leave to defend, which was allowed. The receipts were then sent to the Forensic Science Laboratory (FSL), which reported that the signatures on the receipts did not match Mahendrakumar’s. Based on this, Mahendrakumar filed a criminal complaint, leading to FIR No. I-194/2016 against Hasmukhbhai and others for forgery. The High Court of Gujarat dismissed the application to quash the FIR but quashed the cheque dishonor case. This led to the appeals before the Supreme Court.

Legal Framework

The judgment primarily deals with the following legal provisions:

• Section 138 of the Negotiable Instruments Act, 1881: This section deals with the offense of dishonor of a cheque for insufficiency of funds in the account. It states that if a cheque is dishonored due to insufficient funds, the drawer can be prosecuted.
• Section 139 of the Negotiable Instruments Act, 1881: This section establishes a presumption in favor of the holder of the cheque that it was issued for the discharge of a legally enforceable debt or liability. The burden is on the accused to rebut this presumption.
• Section 118(a) of the Indian Evidence Act, 1872: This section also raises a presumption that every negotiable instrument was made or drawn for consideration.
• Section 45 of the Indian Evidence Act, 1872: This section states that the opinion of handwriting experts is a relevant piece of evidence.
• Section 73 of the Indian Evidence Act, 1872: This section empowers the court to compare admitted and disputed writings to form its own opinion.
• Sections 406, 420, 465, 467, 468, 471, and 114 of the Indian Penal Code, 1860: These sections deal with offenses of criminal breach of trust, cheating, forgery, and abetment.

Arguments

Appellants’ Arguments:

• The FIR lodged by Mahendrakumar is false because the same subject matter (the genuineness of the receipts) is pending consideration in the civil suit (Special Summary Suit No. 105/2015).
• The opinion of the handwriting expert is relevant but not conclusive, and the court can compare the writings under Section 73 of the Indian Evidence Act, 1872.
• The High Court erred in quashing the cheque case under Section 138 of the N.I. Act, as Yogeshbhai admitted to issuing the cheques.

Respondents’ Arguments:

• Yogeshbhai issued cheques from his NRO account, but when he realized there were no funds, he asked Hasmukhbhai to return them and issued new cheques from his NRE account.
• Hasmukhbhai did not return the old cheques and instructed the bank to stop payment on all four cheques.
• The receipts relied upon by Hasmukhbhai were forged, as confirmed by the handwriting expert.
• There is a prima facie case of forgery and cheating against the appellants, justifying the FIR.

The innovativeness of the argument by the appellants was that the FIR should not be allowed to continue when the genuineness of the receipts was already under consideration in a civil suit. The respondents innovatively argued that the appellants had committed forgery and fraud, and thus, the FIR was valid.

Submissions Table

Issues Framed by the Supreme Court

The Supreme Court addressed the following issues:

1. Whether the FIR No.I-194/2016 should be quashed given that the genuineness of the receipts is under consideration in the civil suit?
2. Whether the High Court was right in quashing the criminal case in C.C.No.367/2016 filed under Section 138 of the N.I. Act?

Treatment of the Issue by the Court

Authorities

The Supreme Court considered the following authorities:

Legal Provisions:

• Section 138 of the Negotiable Instruments Act, 1881: Regarding the dishonor of cheques.
• Section 139 of the Negotiable Instruments Act, 1881: Regarding the presumption in favor of the holder of a cheque.
• Section 118(a) of the Indian Evidence Act, 1872: Regarding the presumption of consideration for negotiable instruments.
• Section 45 of the Indian Evidence Act, 1872: Regarding the opinion of handwriting experts.
• Section 73 of the Indian Evidence Act, 1872: Regarding the court’s power to compare writings.

Authorities Table

Judgment

The Supreme Court allowed the appeals, setting aside the High Court’s order. The court quashed the FIR No.I-194/2016 and restored the criminal case in C.C.No.367/2016 filed under Section 138 of the N.I. Act.

Treatment of Submissions

Treatment of Authorities

The Court relied on the statutory presumptions under Section 139 of the N.I. Act* and Section 118(a) of the Indian Evidence Act* in favor of the complainant in the cheque dishonor case. The Court also clarified that while the opinion of the handwriting expert is relevant under Section 45 of the Indian Evidence Act*, it is not conclusive and the Court can compare the writings under Section 73 of the Indian Evidence Act*.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the following factors:

• The ongoing civil suit regarding the genuineness of the receipts.
• The statutory presumption under Section 139 of the N.I. Act in favor of the complainant in the cheque dishonor case.
• The principle that a criminal case should not be allowed to proceed when the core issue is already being adjudicated in a civil suit.
• The non-conclusive nature of the handwriting expert’s opinion.

Sentiment Analysis of Reasons

Ratio of Fact to Law

Logical Reasoning

The Court reasoned that since the genuineness of the receipts was already under scrutiny in the civil suit, allowing the criminal case to proceed would prejudice the parties. The Court also emphasized that the opinion of the handwriting expert was not conclusive. Regarding the cheque dishonor case, the Court noted that the issuance of the cheques was admitted, which raises a presumption under Section 139 of the N.I. Act. The burden to rebut this presumption was on the accused, which required the case to proceed.

The Court considered the alternative interpretation that the FIR was based on a separate cause of action, but rejected it, stating that the core issue was the same as in the civil suit. The final decision was to quash the FIR and restore the cheque dishonor case.

The court quoted: “When the issue as to the genuineness of the receipts is pending consideration in the civil suit, in our view, the FIR ought not to have been allowed to continue as it would prejudice the interest of the parties and the stand taken by them in the civil suit.” The court also said, “Based on the sole opinion of the handwriting expert, the FIR ought not to have been registered.” Further, the court added, “When once the issuance of cheque is admitted/established, the presumption would arise under Section 139 of the N.I. Act in favour of the holder of cheque that is the complainant-appellant No.3.”

There was no minority opinion in this case, as both judges on the bench agreed on the judgment.

Key Takeaways

• A criminal case for forgery should not proceed if the same issue is already being adjudicated in a civil suit.
• The opinion of a handwriting expert is relevant but not conclusive evidence.
• The statutory presumption under Section 139 of the N.I. Act in favor of the holder of a cheque is significant, and the burden is on the accused to rebut it.
• Courts should be cautious in quashing criminal complaints under Section 138 of the N.I. Act when disputed questions of fact are involved.

Directions

The Supreme Court directed the 5th Additional Civil Judge & JMFC, Bharuch to proceed with the case in C.C.No.367/2016 filed under Section 138 of the N.I. Act and afford sufficient opportunity to both parties to dispose of the same in accordance with law. The Court also directed that the Summary Suit No.105/2015 shall be proceeded in accordance with law without being influenced by any of the views expressed by the High Court in the impugned order.

Development of Law

The ratio decidendi of this case is that a criminal case for forgery should not proceed if the same issue is already being adjudicated in a civil suit, and that the statutory presumption under Section 139 of the N.I. Act is significant in cheque dishonor cases. This judgment clarifies the interplay between civil and criminal proceedings and emphasizes the importance of statutory presumptions in cheque bounce cases. There is no change in the previous position of law, but the judgment emphasizes the correct application of existing laws.

Conclusion

In conclusion, the Supreme Court allowed the appeals, quashing the FIR for forgery and restoring the cheque dishonor case. The Court emphasized that a criminal case should not proceed when the core issue is already being adjudicated in a civil suit and that the statutory presumption under Section 139 of the N.I. Act is significant in cheque dishonor cases. This judgment highlights the importance of statutory presumptions and the interplay between civil and criminal proceedings.