Magistrate's Clear Application of Mind Necessary For Issuance of Summons Under Section 138 Of NI Act: Delhi High Court
The Delhi High Court bench of Justice Anup Jairam Bhambhani has held that the issuance of summons under Section 138 of the Negotiable Instruments Act, 1881 requires a clear application of mind. The bench held that this application of mind must be evident upon reading the summoning order; the appellate or revisional court should not have to speculate about the considerations of the Magistrate who issued the summons.
Justice Bhambhani has directed the counsel for both parties to submit brief synopses of their respective submissions, along with a list of judicial precedents they intend to rely on, not exceeding three pages, with copies provided to the opposing counsel.
The bench held that:
“By reason of the above, it is necessary to lay down certain pre- requisites that a Magistrate must address and that must be reflected in summoning orders in cases under section 138 NI Act, so as to ensure that summoning orders are not issued mechanically; and that they contain at least a brief discussion on the most basic but essential ingredients of the offence under section 138 of the NI Act.”
Section 138 deals with the offence of dishonour of a cheque for insufficiency of funds or if it exceeds the amount arranged to be paid from that account.
Brief Facts:
Aeiforia Constructions Pvt. Ltd and anr (Petitioners) approached the High Court under Section 482 Cr.P.C. and sought to quash a summoning order issued by the Metropolitan Magistrate and a subsequent notice under section 251 Cr.P.C. arising from a complaint under Section 138 of the Negotiable Instruments Act, 1881. The Petitioners argued that both the summoning order and notice were issued mechanically which lacked any reasoned basis or consideration of the defence. It contended that the cheque in question was issued pursuant to a Security Bond which stipulated conditions, including prior intimation before cheque presentation, none of which were considered by the Magistrate.
Despite the delay in filing the petition challenging the summoning order, the court notes the procedural deficiencies. The summoning order fails to mention essential details of the cheque, such as its number, date, bank, or particulars of the cheque return, nor does it reference any notice issued under section 138 NI Act or proof of its service on the Petitioners. The court observes that the summoning order appears template-driven, lacking specific details of the transaction alleged by the complainant.
Continental Carbon India Pvt. Ltd. (Respondent) contended that under sections 118 and 139 of the NI Act statutory assumptions arise upon issuance of negotiable instruments. It argued that this absolves the Magistrate from the need to discuss evidence or defences when issuing summons. Tejas Karia for the Respondent argued that the petition was an abuse of the court process and should not be entertained.
Observations by the High Court:
The High Court referred to the decision of the Supreme Court in Pepsi Foods Ltd. and Another vs Special Judicial Magistrate & Others where the Supreme Court held that summoning an accused in a criminal case is a serious matter which requires the court to apply its mind and provide a reasoned order before issuing summons. It held that the court must scrutinize the allegations and evidence both oral and documentary to determine if there is sufficient ground to proceed with the charge.
The High Court noted that while proceedings under Section 138 of the NI Act are typically summary in nature, the principles laid out in Pepsi Foods regarding the necessity of judicial application of mind equally apply. It held that issuing a summons in a Section 138 proceeding converts a person into an accused who must face a criminal trial. Thus, the summoning order must reflect a considered examination of the material on record.
The High Court held that the summoning order was deficient as it lacked any specific details about the dishonoured cheque, such as its date, number, the bank on which it was drawn, the date of the cheque return memo, and the particulars of the statutory notice required under Section 138 of the NI Act.
The High Court noted that the Supreme Court in Pepsi Foods used the term "reflect" deliberately to stress that the application of mind must be evident from the summoning order itself.
The High Court expressed its concern that the summoning order appeared to be a 'template order,' likely used to issue summons in any complaint under Section 138 of the NI Act without considering the specific facts of the case.
“This court is inclined to think that the summoning order of the kind impugned in the present case is based on a 'template order' that could be adopted to issue summons to any person in any complaint filed under section 138 NI Act, without any application of mind to the facts of a given case.”
Consequently, the High Court stayed further proceedings in the criminal appeal pending before the Metropolitan Magistrate until the next hearing date. Additionally, it mandated that the counsel for both parties submit brief synopses of their submissions and a list of judicial precedents they intend to rely upon to ensure that future summoning orders include at least a brief discussion of the essential ingredients of the offence under Section 138 of the NI Act.
Case Title: Aeiforia Constructions Pvt. Ltd. & Anr Vs Continental Carbon India Pvt. Ltd. & Anr.
Case Number: CRL.M.C. 5260/2024 & CRL.M.A. 20106/2024, CRL.M.A. 20108/2024
Advocate for the Petitioners: Mr. Mrinal Kumar Sharma and Mr. Gyanesh Bhardwaj
Advocate for the Respondent: Mr. Tejas Karia, Mr. Prakhar Deep, Mr. Nishant Doshi and Mr. Nitin Sharma, Advocates with Ms. Shally Goyal, authorised representative of CCIPL.
Date of Judgment: 12.07.2024