Mr.Lakshmi Prabhak Vs. State of A.P., Through Public Prosecutor - Court Judgment

SooperKanoon Citationsooperkanoon.com/1134868
CourtAndhra Pradesh High Court
Decided OnJun-20-2013
Judge B.SESHASAYANA REDDY
AppellantMr.Lakshmi Prabhak
RespondentState of A.P., Through Public Prosecutor
Excerpt:
the hon'ble sri justice b.seshasayana reddy criminal petition no.8471 of 2012 dated:20-06-2013 mr.lakshmi prabhakar....petitioner state of a.p., through public prosecutor, high court of a.p., hyderabad.... respondent counsel for the petitioner : sri d.prakash reddy counsel for the respondent no.1: sri c.padmanabha reddy counsel for the respondent no.2 : public prosecutor : : ?.cases referred:2012. (2) ald (crl.) 302 (ap) air2008suprmee court1325air2002supreme court3014(2010) 11 supreme court cases 441 criminal petition no.8471 of 2012 order: this criminal petition has been taken out under section 482 cr.p.c. by accused-lakshmi prabhakar in c.c.no.164 of 2012 on the file of iii special magistrate, at hasthinapuram, ranga reddy district to quash the proceeding therein.2. the 1st respondent is the complainant in c.c.no.164 of 2012. it is the case of the complainant that he was one of the directors of m/s.vision heights limited (vhl) from july 2009 to 14-11-2011. he shouldered the responsibilities as secretary and correspondent of m/s. vision education society (ves) at rajahmundry till 14-11-2011. his wife smt. indira priyadarsini served as member of m/s. vision education society as well as the director of the school maintained by the said society till 14-11-2011. he and his wife resigned from their respective positions on 14-11-2011 and settled their claim in regard to their share application money, salaries, consultancy fees and severance fee etcetera pertaining to m/s. vision ventures limited, vision heights ltd and vision education society for a total sum of rs.1.75 crores as per the terms and conditions specified and arrived at by them on 14-11-2011 under an agreement dated 14-11-2011. he and his wife stood as guarantors to the loan raised by ves project from bank of baroda, hukumpet branch and mortgaged their personal properties. the petitioner assured him (complainant) and his wife that he would get the personal guarantees and securities released within a period of three months. m/s. vision heights limited further agreed that personal guarantee provided by the complainant to united bank of india, hyderabad branch for the execution of vhl project at rajahmundry be released within three months from the date of signing of the said agreement by replacing the same with such suitable personal guarantees as may be required by the concerned bank. release of the mortgaged properties and the personal guarantees of him and his wife from both the banks was one of the conditions of the settlement arrived at under the agreement dated 14-11-2011. vision ventures limited, the sister concern of vhl represented by the petitioner as managing director issued two cheques bearing nos.2028 and 2029 in his favour drawn on axis bank limited, banjara hills branch for rs.30,00,000/- each. the petitioner specifically requested him to present the said two cheques for encashment in the event of his failure to get release of the personal guarantees and the collateral securities given by him and his wife towards partial discharge of the liability. he accepted the said two cheques believing that the petitioner would do the needful in the meanwhile without necessitating his presenting the cheques for payment. even after a lapse of said three months period stipulated in the agreement dated 14-11-2011, the petitioner failed to fulfill his promise of releasing the guarantees and securities given to the said two banks by him and his wife. after waiting for further period of two months from the date of the cheques, he presented the cheques as they are likely to be time barred. on presentation of the cheques through his banker andhra bank, kothapet branch on 02-5-2012, both the cheques came to be dishonoured for the reason ".account closed".. he approached the petitioner and demanded payment of the amount covered under the cheques. there being no positive response, he issued a statutory notice calling upon the petitioner to make good the amount covered under the cheques in question. the petitioner gave a reply denying his liability. thereupon, he issued a rejoinder to the reply notice. despite notice and rejoinder notice, the petitioner did not choose to pay the amount covered under the cheques in question. hence, he filed complaint in the court of judicial first class magistrate, special mobile court, ranga reddy district. the learned magistrate took the compliant on file as c.c.824 of 2012. subsequently the case came to be transferred to the file of iii special magistrate, hasthinapuram, l.b.nagar, r.r.district and re-registered as c.c.no.164 of 2012. hence this criminal petition by the accused in c.c.no.164 of 2012 on the file of iii special magistrate, hasthinapuram, ranga reddy district to quash the proceeding therein.3. heard sri d.prakash reddy, learned senior counsel appearing for the petitioner/accused and sri c.padmanabha reddy, learned senior counsel appearing for the 1st respondent/complainant.4. it is contended by the learned senior counsel sri d.prakash reddy for the petitioner that as on the date of issuance of cheques, there was no amount due to the 1st respondent/ complainant and therefore, it could not be said that the cheques in question were issued towards discharge of the debt or liability, much less legally enforceable debt or liability. he would contend that on the date of issuance of cheques, no amount was crystallized, which the petitioner was required to pay. even otherwise, the complaint averments indicate that the cheques were given to the 1st respondent/complainant as a security for due performance of getting the personal guarantees and securities of the 1st respondent/complainant released from the two banks. mere failure to fulfill the promise of getting the personal guarantees and properties released from the banks cannot be construed as a debt or liability, as provided in section 138 of the negotiable instruments act, 1881 (n.i.act). the complaint averments are sufficient to infer that there was no debt, which the petitioner was required to pay as on the date of the issuance of the two cheques. in support of his contentions, reliance has been placed on the judgment of this court in suresh agarwal v. state of andhra pradesh1, krishna janardhan bhat v. dattatraya g.hegde2.5. sri c.padmanabha reddy, learned senior counsel for the 1st respondent submits that the 1st respondent/complainant and his wife stood as guarantors for the loans availed for the execution of ves project from bank of baroda, hukumpet branch and union bank of india. since their association with m/s. vision heights limited (vhl) and m/s. vision education society (ves) came to be seized, their account came to be settled and the petitioner undertook to get the personal guarantee and the properties released from the respective banks and as a security, as a managing director, he issued two cheques for rs.30 lakhs each for due discharge of his liability. since the cheques are issued towards discharge of liability, bouncing of the cheques attract the provisions of section 138 of the n.i.act. even if the cheques are issued as a security, drawer of the cheque cannot escape his liability in the event of the same being dishonoured. the words ".other liability". mentioned in section 138 of the n.i.act includes the liability consequent on failure of the promise to get the personal guarantees and properties released from the two banks. in support of his submissions, reliance has been placed on the judgments of the supreme court in i.c.d.s.ltd. v. beemna shabeer3 and rangappa v. sri mohan4. in rangappa's case (4 supra), it has been held that the presumption mandated by section 139 includes a presumption that there exists a legally enforceable debt or liability. for better appreciation, it is trite to refer paragraphs (26) to (28) of the cited judgment and they are thus:- ".26. in the light of these extracts, we are in agreement with the respondent claimant that the presumption mandated by section 139 of the act does indeed include the existence of a legally enforceable debt or liability. to that extent, the impugned observations in krishna janardhan bhat [(2008) 4 scc54 may not be correct. however, this does not in any way cast doubt on the correctness of the decision in that case since it was based on the specific facts and circumstances therein. as noted in the citations, this is of course in the nature of a rebuttable presumption and it is open to the accused to raise a defence wherein the existence of a legally enforceable debt or liability can be contested. however, there can be no doubt that there is an initial presumption which favours the complainant.27. section 139 of the act is an example of a reverse onus clause that has been included in furtherance of the legislative objective of improving the credibility of negotiable instruments. while section 138 of the act specifies a strong criminal remedy in relation to the dishonour of cheques, the rebuttable presumption under section 139 is a device to prevent undue delay in the course of litigation. however, it must be remembered that the offence made punishable by section 138 can be better described as a regulatory offence since the bouncing of a cheque is largely in the nature of a civil wrong whose impact is usually confined to the private parties involved in commercial transactions. in such a scenario, the test of proportionality should guide the construction and interpretation of reverse onus clauses and the defendant-accused cannot be expected to discharge an unduly high standard of proof.28. in the absence of compelling justifications, reverse onus clauses usually impose an evidentiary burden and not a persuasive burden. keeping this in view, it is a settled position that when an accused has to rebut the presumption under section 139, the standard of proof for doing so it that of ".preponderance of probabilities".. therefore, if the accused is able to raise a probable defence which creates doubts about the existence of a legally enforceable debt or liability, the prosecution can fail. as clarified in the citations, the accused can rely on the materials submitted by the complainant in order to raise such a defence and it is conceivable that in some cases the accused may not need to adduce evidence of his/her own.".6. the point for determination in this criminal petition is: whether the cheques bearing no.2028 and 2029 drawn on axis bank limited for rs.30 lakhs each, dated 15-02-2012 are issued by the petitioner towards discharge of debt or liability, as provided under section 138 of the n.i.act ?.7. section 138 of the n.i.act reads as hereunder:- ".138. dishonour of cheque for insufficiency, etc., of funds in the account. where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid. either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice. to any other provision of this act, be punished with imprisonment for a term which may extend to one year, or with fine which may extend to twice the amount of the cheque, or with both: provided that nothing contained in this section shall apply unless- (a) the cheque has been, presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier; (b) the payee or the holder in due course. of the cheque as the case may be, makes a demand for the payment of the said amount of money by giving a notice, in writing, to the drawer of the cheque, within fifteen days of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and (c) the drawer of such cheque fails to make the payment of the said amount of money to the payee or, as the case may be, to the holder in due course of the cheque, within fifteen days of the receipt of the said notice. explanation.- for the purposes of this section,". debt or other liability". means a legally enforceable debt or other liability.8. the three ingredients of section 138 of the n.i.act are:- (i) that there is a legally enforceable debt; (ii) that the cheque was drawn from the account of bank for discharge in whole or in part of any debt or other liability which presupposes a legally enforceable debt; and (iii) that the cheque so issued had been returned due to insufficiency of funds.9. the proviso appended to the said section provides for compliance with legal requirements before a complaint petition can be acted upon by a court of law. section 139 of the act merely raises a presumption in regard to the second aspect of the matter. in rangappa's case (4 supra), the supreme court held that presumption of section 139 of the act does includes the existence of a legally enforceable debt or liability.10. the circumstances under which two cheques came to be issued have been stated in the complaint filed by the 1st respondent/complainant. paragraph (9) of the complaint needs to be noted and it is thus:- ".the complainant further says that vision ventures ltd., the sister concern of vhl, have issued two cheques in his favour bearing nos.2028 and 2029 drawn on axis bank ltd., banjara hills br. for rs.30,00,000/- each and both of which were dated on 15-02-2012 which happens to be the next day after expiry of the said 3 months period from the date of signing of the agreement i.e., 14-11- 2011 in order to give him a confidence that they would seriously take up the necessary measures to release the said properties and personal guarantees within the said period of 3 months from the date of the said agreement. they have specifically requested to present the said two cheques for encashment, only if they fail to release the personal guarantees and the collateral securities given by him and his wife towards partial discharge of the total unsettled liabilities due from the companies to him and his wife. even though the amount of rs.60,00,000/- is much less than the values of the personal properties mortgaged by him to bank of baroda and the value of the personal guarantees of his and his wife given to the banks, he accepted the said two cheques believing that they would do the needful in the meanwhile without necessitating his presenting the cheques for payment. ..... ....... .... .... ...".11. it is not in dispute that the petitioner is not indebted to the 1st respondent any amount as on the date of the cheque. so, it can be said without any fear of contradiction that the cheques were not issued towards discharge of the debt.12. the next point to be considered is whether the cheques in question were issued towards discharge of the liability. the liability taken up by the petitioners-accused under the agreement dated 14-11-2011 is that he would get the personal guarantees and properties of the 1st respondent/complainant and his wife released from the two banks. paragraph (3) of the agreement needs to be noted and it is thus:- ".3. release of personal guarantees 3.1 the company agrees that personal guarantees and collateral securities provided by the second party and the third party in the rajahmundry branch of bank of baroda (bob), for the execution of ves project in rajahmundry shall be released within a period of 3 (three) months from the date of signing of this agreement, by replacing the same with such suitable guarantees and collateral securities as may be required by the concerned bank. 3.2 the company further agrees that the personal guarantee provided by second party to the hyderabad branch of united bank of india (ubi), for the execution of vhl project works in rajahmundry shall be released within a period of 3(three) months from the date of signing of this agreement, by replacing the same with such suitable personal guarantee as may be required by the concerned bank. 3.3 the company (vhl) shall, immediately upon signing of this agreement submit its request letter to ubi for release of the personal guarantee provided by the second party. similarly, ves shall, immediately upon this agreement being signed, submit its request letter to bob for release of personal guarantees and collateral securities provided by the second party and the third party in the rajahmundry branch of bank of baroda (bob). 3.4 further, in the event the company is unable to release the personal guarantees and collateral securities as mentioned in this article 3, it shall hold the second party and the third party harmless against any loss that may materialize in connection with releasing such personal guarantees and/or indemnities from the date of signing of this agreement"..13. the consequences of not getting the personal guarantees and properties released are stated in the agreement itself. as on this day, the liability of the 1st respondent/complainant consequent on failure of the petitioner to get the personal guarantees and securities released is not crystallized. to attract section 138 of the n.i.act, firstly, the liability must be crystallized. after crystallization of the liability; if the cheques issued as a security are presented, the drawer cannot avoid further consequences. since the liability is not crystallized as on the date of issuance of the cheques, it cannot be said that the cheques are issued towards discharge of legally enforceable debt or liability. therefore, continuation of proceedings against the petitioner amounts to abuse of process of law.14. accordingly, the criminal petition is allowed quashing the proceedings in c.c.no.164 of 2012 on the file of iii special magistrate, at hasthinapuram, ranga reddy district. _____________________ b.seshasayana reddy, j dt.20-06-2013
Judgment:

THE HON'BLE SRI JUSTICE B.SESHASAYANA REDDY Criminal Petition No.8471 of 2012 dated:20-06-2013 Mr.Lakshmi Prabhakar....Petitioner State of A.P., through Public Prosecutor, High Court of A.P., Hyderabad.... Respondent Counsel for the petitioner : Sri D.Prakash Reddy Counsel for the Respondent No.1: Sri C.Padmanabha Reddy Counsel for the Respondent No.2 : Public Prosecutor : : ?.Cases referred:

2012. (2) ALD (Crl.) 302 (AP) AIR2008SUPRMEE COURT1325AIR2002SUPREME COURT3014(2010) 11 Supreme Court Cases 441 Criminal Petition No.8471 of 2012 ORDER

: This Criminal Petition has been taken out under Section 482 Cr.P.C. by accused-Lakshmi Prabhakar in C.C.No.164 of 2012 on the file of III Special Magistrate, at Hasthinapuram, Ranga Reddy District to quash the proceeding therein.

2. The 1st respondent is the complainant in C.C.No.164 of 2012. It is the case of the complainant that he was one of the Directors of M/s.Vision Heights Limited (VHL) from July 2009 to 14-11-2011. He shouldered the responsibilities as Secretary and Correspondent of M/s. Vision Education Society (VES) at Rajahmundry till 14-11-2011. His wife Smt. Indira Priyadarsini served as member of M/s. Vision Education Society as well as the Director of the school maintained by the said society till 14-11-2011. He and his wife resigned from their respective positions on 14-11-2011 and settled their claim in regard to their share application money, salaries, consultancy fees and severance fee etcetera pertaining to M/s. Vision Ventures Limited, Vision Heights Ltd and Vision Education Society for a total sum of Rs.1.75 Crores as per the terms and conditions specified and arrived at by them on 14-11-2011 under an Agreement dated 14-11-2011. He and his wife stood as guarantors to the loan raised by VES Project from Bank of Baroda, Hukumpet Branch and mortgaged their personal properties. The petitioner assured him (complainant) and his wife that he would get the personal guarantees and securities released within a period of three months. M/s. Vision Heights Limited further agreed that personal guarantee provided by the complainant to United Bank of India, Hyderabad Branch for the execution of VHL Project at Rajahmundry be released within three months from the date of signing of the said Agreement by replacing the same with such suitable personal guarantees as may be required by the concerned Bank. Release of the mortgaged properties and the personal guarantees of him and his wife from both the Banks was one of the conditions of the settlement arrived at under the Agreement dated 14-11-2011. Vision Ventures Limited, the sister concern of VHL represented by the petitioner as Managing Director issued two cheques bearing Nos.2028 and 2029 in his favour drawn on Axis Bank Limited, Banjara Hills Branch for Rs.30,00,000/- each. The petitioner specifically requested him to present the said two cheques for encashment in the event of his failure to get release of the personal guarantees and the collateral securities given by him and his wife towards partial discharge of the liability. He accepted the said two cheques believing that the petitioner would do the needful in the meanwhile without necessitating his presenting the cheques for payment. Even after a lapse of said three months period stipulated in the agreement dated 14-11-2011, the petitioner failed to fulfill his promise of releasing the guarantees and securities given to the said two Banks by him and his wife. After waiting for further period of two months from the date of the cheques, he presented the cheques as they are likely to be time barred. On presentation of the cheques through his Banker Andhra Bank, Kothapet Branch on 02-5-2012, both the cheques came to be dishonoured for the reason ".Account Closed".. He approached the petitioner and demanded payment of the amount covered under the cheques. There being no positive response, he issued a statutory notice calling upon the petitioner to make good the amount covered under the cheques in question. The petitioner gave a reply denying his liability. Thereupon, he issued a rejoinder to the reply notice. Despite notice and rejoinder notice, the petitioner did not choose to pay the amount covered under the cheques in question. Hence, he filed complaint in the Court of Judicial First Class Magistrate, Special Mobile Court, Ranga Reddy District. The learned Magistrate took the compliant on file as C.C.824 of 2012. Subsequently the case came to be transferred to the file of III Special Magistrate, Hasthinapuram, L.B.Nagar, R.R.District and re-registered as C.C.No.164 of 2012. Hence this Criminal Petition by the accused in C.C.No.164 of 2012 on the file of III Special Magistrate, Hasthinapuram, Ranga Reddy District to quash the proceeding therein.

3. Heard Sri D.Prakash Reddy, learned senior counsel appearing for the petitioner/accused and Sri C.Padmanabha Reddy, learned senior counsel appearing for the 1st respondent/complainant.

4. It is contended by the learned senior counsel Sri D.Prakash Reddy for the petitioner that as on the date of issuance of cheques, there was no amount due to the 1st respondent/ complainant and therefore, it could not be said that the cheques in question were issued towards discharge of the debt or liability, much less legally enforceable debt or liability. He would contend that on the date of issuance of cheques, no amount was crystallized, which the petitioner was required to pay. Even otherwise, the complaint averments indicate that the cheques were given to the 1st respondent/complainant as a security for due performance of getting the personal guarantees and securities of the 1st respondent/complainant released from the two Banks. Mere failure to fulfill the promise of getting the personal guarantees and properties released from the Banks cannot be construed as a debt or liability, as provided in Section 138 of the Negotiable Instruments Act, 1881 (N.I.Act). The complaint averments are sufficient to infer that there was no debt, which the petitioner was required to pay as on the date of the issuance of the two cheques. In support of his contentions, reliance has been placed on the judgment of this Court in Suresh Agarwal v. State of Andhra Pradesh1, Krishna Janardhan Bhat v. Dattatraya G.Hegde2.

5. Sri C.Padmanabha Reddy, learned senior counsel for the 1st respondent submits that the 1st respondent/complainant and his wife stood as guarantors for the loans availed for the execution of VES Project from Bank of Baroda, HuKumpet Branch and Union Bank of India. Since their association with M/s. Vision Heights Limited (VHL) and M/s. Vision Education Society (VES) came to be seized, their account came to be settled and the petitioner undertook to get the personal guarantee and the properties released from the respective Banks and as a security, as a Managing Director, he issued two cheques for Rs.30 lakhs each for due discharge of his liability. Since the cheques are issued towards discharge of liability, bouncing of the cheques attract the provisions of Section 138 of the N.I.Act. Even if the cheques are issued as a security, drawer of the cheque cannot escape his liability in the event of the same being dishonoured. The words ".other liability". mentioned in Section 138 of the N.I.Act includes the liability consequent on failure of the promise to get the personal guarantees and properties released from the two Banks. In support of his submissions, reliance has been placed on the judgments of the Supreme Court in I.C.D.S.Ltd. v. Beemna Shabeer3 and Rangappa v. Sri Mohan4. In Rangappa's case (4 supra), it has been held that the presumption mandated by Section 139 includes a presumption that there exists a legally enforceable debt or liability. For better appreciation, it is trite to refer paragraphs (26) to (28) of the cited judgment and they are thus:- ".26. In the light of these extracts, we are in agreement with the respondent claimant that the presumption mandated by Section 139 of the Act does indeed include the existence of a legally enforceable debt or liability. To that extent, the impugned observations in Krishna Janardhan Bhat [(2008) 4 SCC54 may not be correct. However, this does not in any way cast doubt on the correctness of the decision in that case since it was based on the specific facts and circumstances therein. As noted in the citations, this is of course in the nature of a rebuttable presumption and it is open to the accused to raise a defence wherein the existence of a legally enforceable debt or liability can be contested. However, there can be no doubt that there is an initial presumption which favours the complainant.

27. Section 139 of the Act is an example of a reverse onus clause that has been included in furtherance of the legislative objective of improving the credibility of negotiable instruments. While Section 138 of the Act specifies a strong criminal remedy in relation to the dishonour of cheques, the rebuttable presumption under Section 139 is a device to prevent undue delay in the course of litigation. However, it must be remembered that the offence made punishable by Section 138 can be better described as a regulatory offence since the bouncing of a cheque is largely in the nature of a civil wrong whose impact is usually confined to the private parties involved in commercial transactions. In such a scenario, the test of proportionality should guide the construction and interpretation of reverse onus clauses and the defendant-accused cannot be expected to discharge an unduly high standard of proof.

28. In the absence of compelling justifications, reverse onus clauses usually impose an evidentiary burden and not a persuasive burden. Keeping this in view, it is a settled position that when an accused has to rebut the presumption under Section 139, the standard of proof for doing so it that of ".preponderance of probabilities".. Therefore, if the accused is able to raise a probable defence which creates doubts about the existence of a legally enforceable debt or liability, the prosecution can fail. As clarified in the citations, the accused can rely on the materials submitted by the complainant in order to raise such a defence and it is conceivable that in some cases the accused may not need to adduce evidence of his/her own.".

6. The point for determination in this criminal petition is: Whether the cheques bearing No.2028 and 2029 drawn on Axis Bank Limited for Rs.30 lakhs each, dated 15-02-2012 are issued by the petitioner towards discharge of debt or liability, as provided under Section 138 of the N.I.Act ?.

7. Section 138 of the N.I.Act reads as hereunder:- ".

138. Dishonour of cheque for insufficiency, etc., of funds in the account. Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid. either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice. to any other provision of this Act, be punished with imprisonment for a term which may extend to one year, or with fine which may extend to twice the amount of the cheque, or with both: Provided that nothing contained in this section shall apply unless- (a) the cheque has been, presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier; (b) the payee or the holder in due course. of the cheque as the case may be, makes a demand for the payment of the said amount of money by giving a notice, in writing, to the drawer of the cheque, within fifteen days of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and (c) the drawer of such cheque fails to make the payment of the said amount of money to the payee or, as the case may be, to the holder in due course of the cheque, within fifteen days of the receipt of the said notice. Explanation.- For the purposes of this section,". debt or other liability". means a legally enforceable debt or other liability.

8. The three ingredients of Section 138 of the N.I.Act are:- (i) that there is a legally enforceable debt; (ii) that the cheque was drawn from the account of bank for discharge in whole or in part of any debt or other liability which presupposes a legally enforceable debt; and (iii) that the cheque so issued had been returned due to insufficiency of funds.

9. The proviso appended to the said section provides for compliance with legal requirements before a complaint petition can be acted upon by a court of law. Section 139 of the Act merely raises a presumption in regard to the second aspect of the matter. In Rangappa's case (4 supra), the Supreme Court held that presumption of Section 139 of the Act does includes the existence of a legally enforceable debt or liability.

10. The circumstances under which two cheques came to be issued have been stated in the complaint filed by the 1st respondent/complainant. Paragraph (9) of the complaint needs to be noted and it is thus:- ".The complainant further says that Vision Ventures Ltd., the sister concern of VHL, have issued two cheques in his favour bearing Nos.2028 and 2029 drawn on Axis Bank Ltd., Banjara Hills Br. for Rs.30,00,000/- each and both of which were dated on 15-02-2012 which happens to be the next day after expiry of the said 3 months period from the date of signing of the Agreement i.e., 14-11- 2011 in order to give him a confidence that they would seriously take up the necessary measures to release the said properties and personal guarantees within the said period of 3 months from the date of the said Agreement. They have specifically requested to present the said two cheques for encashment, only if they fail to release the personal guarantees and the collateral securities given by him and his wife towards partial discharge of the total unsettled liabilities due from the Companies to him and his wife. Even though the amount of Rs.60,00,000/- is much less than the values of the personal properties mortgaged by him to Bank of Baroda and the value of the personal guarantees of his and his wife given to the Banks, he accepted the said two cheques believing that they would do the needful in the meanwhile without necessitating his presenting the cheques for payment. ..... ....... .... .... ...".

11. It is not in dispute that the petitioner is not indebted to the 1st respondent any amount as on the date of the cheque. So, it can be said without any fear of contradiction that the cheques were not issued towards discharge of the debt.

12. The next point to be considered is whether the cheques in question were issued towards discharge of the liability. The liability taken up by the petitioners-accused under the Agreement dated 14-11-2011 is that he would get the personal guarantees and properties of the 1st respondent/complainant and his wife released from the two Banks. Paragraph (3) of the Agreement needs to be noted and it is thus:- ".3. Release of Personal Guarantees 3.1 The Company agrees that personal guarantees and collateral securities provided by the Second Party and the Third Party in the Rajahmundry branch of Bank of Baroda (BOB), for the execution of VES Project in Rajahmundry shall be released within a period of 3 (three) months from the date of signing of this Agreement, by replacing the same with such suitable guarantees and collateral securities as may be required by the concerned bank. 3.2 The Company further agrees that the personal guarantee provided by Second Party to the Hyderabad branch of United Bank of India (UBI), for the execution of VHL Project works in Rajahmundry shall be released within a period of 3(three) months from the date of signing of this Agreement, by replacing the same with such suitable personal guarantee as may be required by the concerned bank. 3.3 The Company (VHL) shall, immediately upon signing of this Agreement submit its request letter to UBI for release of the personal guarantee provided by the Second Party. Similarly, VES shall, immediately upon this Agreement being signed, submit its request letter to BOB for release of personal guarantees and collateral securities provided by the Second Party and the Third Party in the Rajahmundry branch of Bank of Baroda (BOB). 3.4 Further, in the event the Company is unable to release the personal guarantees and collateral securities as mentioned in this Article 3, it shall hold the Second Party and the Third Party harmless against any loss that may materialize in connection with releasing such personal guarantees and/or indemnities from the date of signing of this Agreement"..

13. The consequences of not getting the personal guarantees and properties released are stated in the agreement itself. As on this day, the liability of the 1st respondent/complainant consequent on failure of the petitioner to get the personal guarantees and securities released is not crystallized. To attract Section 138 of the N.I.Act, firstly, the liability must be crystallized. After crystallization of the liability; if the cheques issued as a security are presented, the drawer cannot avoid further consequences. Since the liability is not crystallized as on the date of issuance of the cheques, it cannot be said that the cheques are issued towards discharge of legally enforceable debt or liability. Therefore, continuation of proceedings against the petitioner amounts to abuse of process of law.

14. Accordingly, the Criminal Petition is allowed quashing the proceedings in C.C.No.164 of 2012 on the file of III Special Magistrate, at Hasthinapuram, Ranga Reddy District. _____________________ B.SESHASAYANA REDDY, J Dt.20-06-2013