NDLI: Sunil Todi & Ors. Vs. State of Gujarat & Anr.

Content Provider	Supreme Court of India
e-ISSN	30484839
Language	English
Access Restriction	NDLI
Subject Keyword	Negotiable Instruments Act Power Supply Agreement
Content Type	Text
Resource Type	Law Judgement
Jurisdiction	India
Act(s) Referred	Negotiable Instruments Act, 1881 (26 of 1881)
Case(s) Referred	Referred Case 0 Referred Case 1 Referred Case 2 Referred Case 3 Referred Case 4 Referred Case 5 Referred Case 6 Referred Case 7 Referred Case 8 Referred Case 9 Referred Case 10 Referred Case 11
Case Type	Appeal
Court	Supreme Court of India
Disposal Nature	Appeal Dismissed
Headnote	Negotiable Instruments Act, 1881 – ss.138, 141 – Code of Criminal Procedure, 1973 – ss. 202, 203 and 482 – Dishonour of cheque issued by way of security – A Power Supply Agreement (PSA) was entered into between the second respondent and the company – The PSA between the parties envisaged that the second respondent would supply power to the company of which the appellants are directors etc. – The agreement postulated that payment for the power supplied would be made by means of Letter of Credit (LCs) – A cheque post-dated 28.08.2017 in the amount of Rs.2,67,84,000/- was issued by the company in favour of the respondent, with the following endorsement on its reverse, “to be deposited after confirmation only for security purpose” – The power supply had commenced on 01.07.2016 – Though, the LCs’ were provided, they were allegedly not in a form acceptable to the bankers of the second respondent – Bills were raised by the second respondent – The company terminated its agreement with the second respondent – Cheque issued by the company was deposited – Cheque was dishonoured with a reason ‘payment stopped by drawer’ – Appellants alleged offence u/s. 138 of the N.I. Act – A criminal complaint was filed by the second respondent – Magistrate issued summons to the appellants – Appellants filed petitions u/s.482 of Cr.P.C. – The High Court dismissed the petitions for quashing the complaint – Before the Supreme Court, the appellant contended that cheque was issued for the purpose of security and not for encashment – Held: The explanation to s.138 of the NI Act provides that ‘debt or any other liability’ means a legally enforceable debt or other liability – The term debt also includes a sum of money promised to be paid on a future day by reason of a present obligation – A post-dated cheque issued after the debt has been incurred would be covered by the definition of ‘debt’ – However, if the sum payable depends on acontingent event, then it takes the color of a debt only after the contingency has occurred – Therefore, in the present case, a debt was incurred after the second respondent began supply of power for which payment was not made because of the non-acceptance of the LCs’ – The appellants do not dispute that prior to the termination of the agreement, power was supplied for a period of three months to the company – Once payments for electricity supply became due in terms of the PSA, and the company failed to discharge its dues, the second respondent was entitled in law to present the cheque for payment – Merely labelling the cheque as a security would not obviate its character as an instrument designed to meet a legally enforceable debt or liability, once the supply of power had been provided for which there were monies due and payable – There is no inflexible rule which precludes the drawee of a cheque issued as security from presenting it for payment in terms of the contract. Negotiable Instruments Act, 1881 – ss.138, 141 – Code of Criminal Procedure, 1973 – ss. 202, 203 and 482 – Dishonour of cheque issued by way of security – A Power Supply Agreement (PSA) was entered into between the second respondent and the company – A cheque post-dated 28.08.2017 in the amount of Rs.2,67,84,000/- was issued by the company in favour of the respondent, with the following endorsement on its reverse, “to be deposited after confirmation only for security purpose” – The power supply had commenced – Bills were raised by the second respondent – The company terminated its agreement with the second respondent – Cheque issued by the company was deposited – Cheque was dishonoured with a reason ‘payment stopped by drawer’ – Appellants alleged offence u/s. 138 of the N.I. Act – A criminal complaint was filed by the second respondent – Magistrate issued summons to the appellants – The accused persons in the present case resided at Aurangabad while the complaint u/s. 138 was filed before the Magistrate in Mundra – The argument of the appellants is that in these circumstances, the Magistrate was duty bound to postpone the issuance of process and to either enquire into the case himself or to direct an investigation either by a police officer or by some other person – It was further contended that the summoning order showed non-application of mind – Held: Under Sub-Section (1) of s.202, a Magistrate upon the receipt of a complaint of an offence of which he/she is authorized to take cognizance is empowered topostpone the issuance of process against the accused and either (i) enquire into the case; or (ii) direct an investigation to be made by a police officer or by such other person as he thinks fit – If the Magistrate holds an inquiry himself, it is not compulsory that he should examine witnesses and in suitable cases the Magistrate can examine documents to be satisfied that there are sufficient grounds for proceeding u/s. 202 – In the present case, the Magistrate has adverted to: (i) The complaint; (ii) The affidavit filed by the complainant; (iii) The evidence as per evidence list and; and (iv) The submissions of the complainant – The order passed by the Magistrate cannot be held to be invalid as betraying a non- application of mind – As it is settled that in determining the question as to whether process is to be issued, the Magistrate has to be satisfied whether there is sufficient ground for proceeding and not whether there is sufficient ground for conviction.
Judge	Hon'ble Dr. Justice D.Y. Chandrachud
Neutral Citation	2021 INSC 823
Petitioner	Sunil Todi & Ors.
Respondent	State Of Gujarat & Anr.
SCR	[2021] 9 S.C.R. 1086
Judgement Date	2021-12-03
Case Number	1446

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