Case title:- Mrs. Santosh Rani Dhariwal vs. State (Govt. of NCT of Delhi) and Anr.
Case No. :- CRL.M.C. 6017 of 2023
Dated on:- March 28, 2024
Qoram:- Hon’ble Mr. Justice Manoj Kumar Ohri
FACTS OF THE CASE
Mrs. Santosh Rani Dhariwal’s involvement in a legal dispute stems from a loan her husband, Mr. Sandeep Singh Deswal, secured from M/s Sachdeva Land and Finance Pvt. Ltd., an NBFC. Mr. Deswal entered a loan agreement on 07.09.2015, seeking Rs. 1 crore for business purposes, with the petitioner also signing a Term Sheet and executing a surety bond on the same date. To secure the loan, the petitioner provided original property documents as collateral. Following her husband’s default, he issued a cheque for Rs. 60 lacs on 02.06.2018, which bounced due to insufficient funds. Despite a legal demand notice, repayment was not made, leading to a case under Section 138 NI Act. Subsequently, the petitioner issued a Rs. 25 lacs cheque from her account, which also bounced, resulting in a criminal complaint against her under the same Act. This sequence of events led to a summoning order from the Metropolitan Magistrate, Rohini Courts, Delhi, dated 18.09.2018.
ISSUES
- Whether Mrs. Santosh Rani Dhariwal can be held liable under Section 138 of the NI Act for a cheque issued as a guarantor for her husband’s loan.
- Whether proceedings can continue against the petitioner without implicating her husband, the principal borrower, since she was only a guarantor.
- Whether the presumption that a cheque was issued for discharging a debt or liability applies to the petitioner and if it can only be rebutted with evidence during a trial.
LEGAL PROVISIONS
Section 138 of the Negotiable Instruments Act, 1881 (NI Act):
- This section deals with the dishonour of cheques for insufficiency of funds or if it exceeds the amount arranged to be paid from that account. It specifies that such dishonour constitutes an offence, provided certain conditions are met:
- The cheque is presented to the bank within six months from the date on which it is drawn or within its validity period, whichever is earlier.
- The payee or holder in due course of the cheque gives a written notice to the drawer within 30 days of receiving information from the bank about the dishonour.
- The drawer fails to make the payment of the cheque amount to the payee or holder in due course within 15 days of receiving the notice.
Section 139 of the Negotiable Instruments Act, 1881:
- This section provides a presumption in favour of the holder that the cheque was issued for the discharge of any debt or other liability. It states:
- “It shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque of the nature referred to in section 138 for the discharge, in whole or in part, of any debt or other liability.”
Section 482 of the Criminal Procedure Code (Cr.P.C.):
- This section grants inherent powers to the High Court to make such orders as may be necessary to give effect to any order under Cr.P.C., to prevent abuse of the process of any court, or to secure the ends of justice. This provision is often invoked to quash criminal proceedings where the allegations do not disclose a prima facie case or are otherwise frivolous.
CONTENTIONS OF THE APPELLANT
The appellant contended that the cheque she issued was not towards the discharge of any legal liability but was issued merely as a surety/security in her capacity as a guarantor for the loan taken by her husband, Mr. Sandeep Singh Deswal. She argued that issuing a cheque as security does not attract liability under Section 138 of the Negotiable Instruments Act, 1881 (NI Act). The appellant argued that the loan was taken by her husband in the name of his sole proprietorship firm, and she only stood as a guarantor. Therefore, legal proceedings under Section 138 NI Act should not proceed against her without also implicating her husband, the principal borrower. She asserted that her liability as a guarantor is secondary and contingent upon the default of the principal borrower. The appellant submitted that the presumption under Section 139 of the NI Act, which assumes that a cheque is issued for the discharge of any debt or other liability, should not apply in her case. She contended that this presumption can be rebutted by demonstrating that the cheque was issued as security and not for the payment of any debt. She argued that this rebuttal should be considered without necessitating a trial, as the cheque was not issued for any immediate legal obligation. In support of her contentions, the appellant relied on various judicial precedents, including: Pooja Ravinder Devidasani v. State of Maharashtra & Anr., which discusses the limitations of a guarantor’s liability under Section 138 NI Act. Dilip Hariramani v. Bank of Baroda, reinforcing the view that a guarantor cannot be held liable under Section 138 NI Act without clear evidence of involvement in the company’s day-to-day affairs. She emphasised that as a guarantor, her liability should not automatically translate to criminal liability under Section 138 NI Act unless there are specific allegations and evidence proving her active involvement in the transactions leading to the issuance of the cheque. The appellant also raised procedural objections, arguing that the proceedings were flawed as they did not properly account for her role as a guarantor. She contended that the complaint and the resulting summoning order did not adequately differentiate between the liabilities of the principal borrower and the guarantor, leading to an improper application of the law.
CONTENTIONS OF THE RESPONDENT
The respondent argued that Mrs. Santosh Rani Dhariwal is liable under Section 138 of the NI Act for the dishonour of the cheque she issued as a guarantor for her husband’s loan. They maintained that even though the cheque was issued as security, it still constitutes a valid instrument for discharging a liability under the NI Act. The respondent contended that the term ‘other liability’ under Section 138 NI Act includes the liabilities of a guarantor. They referenced the Supreme Court’s decision in ICDS Ltd. v. Beena Shabeer and Anr., which clarifies that a guarantor can be held liable for a dishonoured cheque issued in relation to the guaranteed debt. The respondent emphasised that there is a legal presumption under Section 139 NI Act that the cheque was issued for the discharge of a debt or liability. This presumption applies to the petitioner and can only be rebutted with evidence during a trial, not at the preliminary stage. The respondent asserted that the complaint and legal notice clearly stated that the petitioner issued the cheque to discharge her husband’s loan liability. They argued that the petitioner admitted the cheque’s issuance and dishonour, as well as the receipt of the legal notice, fulfilling the necessary conditions for action under Section 138 NI Act. The respondent argued that legal proceedings under Section 138 NI Act can proceed against the petitioner independently of her husband, the principal borrower. They noted that the petitioner issued a separate cheque from her personal account, creating an independent cause of action. The respondent cited precedents such as Four Seasons Energy Ventures Pvt. Ltd. & Ors. v. State of NCT of Delhi & Anr., supporting the view that a guarantor can be prosecuted under Section 138 NI Act for issuing a cheque in discharge of a guaranteed debt. The respondent highlighted that the petitioner did not dispute key facts such as the loan, her role as a guarantor, the issuance and dishonour of the cheque, and the receipt of the legal demand notice. These admissions, they argued, satisfy the conditions for an offence under Section 138 NI Act.
COURT’S ANALYSIS AND JUDGEMENT
The court meticulously examined the relevant legal provisions, specifically Sections 138 and 139 of the Negotiable Instruments Act, 1881 (NI Act). It highlighted that Section 138 imposes liability for dishonoring a cheque due to insufficient funds, while Section 139 establishes a legal presumption regarding the purpose of issuing the cheque. Additionally, the court considered precedents such as ICDS Ltd. v. Beena Shabeer and Anr. to interpret the term ‘other liability’ and its applicability to guarantors. Delving into the nature of a guarantor’s liability under the NI Act, the court acknowledged the petitioner’s argument that she acted solely as a guarantor, issuing the cheque as security for her husband’s loan. However, the court emphasized that the NI Act explicitly encompasses the liability of guarantors within the scope of ‘other liability’ under Section 138, thereby rejecting the petitioner’s contention.
Furthermore, the court affirmed the applicability of the legal presumption under Section 139 NI Act to the petitioner, reasoning that this presumption stands unless rebutted with evidence. Notably, the court underscored that the examination of the petitioner’s contentions regarding the cheque’s purpose must occur during trial, where evidence can be adequately assessed. Taking into account the petitioner’s admissions regarding the issuance and dishonor of the cheque, as well as the receipt of the legal demand notice, the court concluded that these admissions, coupled with the legal notice specifying the petitioner’s liability, fulfilled the basic requirements for proceeding under Section 138 NI Act.
Addressing the petitioner’s argument concerning the necessity of involving her husband, the principal borrower, the court clarified that legal proceedings against a guarantor can proceed independently of the principal borrower. Highlighting that the petitioner issued the cheque from her individual account, the court emphasized the creation of a distinct cause of action under the NI Act. Ultimately, after carefully balancing the legal provisions, precedents, and factual circumstances, the court upheld the lower court’s decision, dismissing the petitioner’s plea to set aside the summoning order. It emphasized that detailed appreciation of evidence and rebuttal of presumptions should occur during trial, reinforcing the continuation of legal proceedings against the petitioner under Section 138 NI Act.
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Judgement Reviewed by – Shruti Gattani
