Supreme Court Quashes Cheque Dishonour Case Due to Suppression of Material Facts

The Supreme Court of India recently delivered a significant judgment in the case of Rekha Sharad Ushir vs. Saptashrungi Mahila Nagari Sahakari Patsanstha Ltd., setting aside a complaint filed under Section 138 of the Negotiable Instruments Act, 1881. The case revolved around the alleged dishonour of a cheque issued by the appellant, Rekha Sharad Ushir, in favour of the respondent, a credit cooperative society. The Court found that the respondent had suppressed material facts and documents, leading to an abuse of the legal process. Here’s a detailed breakdown of the case and the Court’s reasoning.

Background of the Case

The appellant, Rekha Sharad Ushir, was accused in Criminal Case No. 648 of 2016 pending before the Judicial Magistrate First Class (JMFC), Kalwan. The respondent had filed a complaint alleging that the appellant had committed an offence under Section 138 of the Negotiable Instruments Act due to the dishonour of a cheque issued by her. The cheque was allegedly issued as security for a loan taken by the appellant from the respondent.

Key Allegations and Proceedings

• First Loan and Cheque Dishonour: The respondent claimed that the appellant had taken a loan of Rs. 3,50,000/- on 3rd July 2006 and issued two security cheques. The first cheque (No. 010721) was dishonoured, leading to the filing of Criminal Case No. 135 of 2007. The appellant later paid the amount, and the case was withdrawn.
• Second Loan and Cheque Dishonour: The respondent alleged that the appellant took another loan of Rs. 11,97,000/- on 25th July 2008. The second cheque (No. 010722) was dishonoured on 14th October 2016, and a legal notice was issued on 11th November 2016.
• Appellant’s Defence: The appellant denied the allegations and sought copies of loan documents from the respondent to reply to the notice. Despite repeated requests, the documents were not provided.
• Complaint Filed: The respondent filed a complaint on 15th December 2016, suppressing the appellant’s letters dated 28th November 2016 and 13th December 2016, which highlighted the non-supply of documents.

Submissions by the Parties

Appellant’s Arguments:

• The appellant had already repaid the first loan, but the respondent maliciously misused the second security cheque to initiate false proceedings.
• The respondent suppressed material facts, including the appellant’s letters demanding documents, which were crucial for her defence.
• The complaint was an abuse of the legal process as the appellant could not reply to the statutory notice without the documents.

Respondent’s Arguments:

• There is a presumption under Section 139 of the NI Act in favour of the cheque holder, and the appellant could rebut it only during the trial.
• The complaint contained all essential ingredients, and there was no suppression of material facts.
• The respondent later claimed that the documents were supplied to the appellant, but this was not mentioned in the complaint or the affidavit.

Court’s Observations and Decision

The Supreme Court, in its judgment delivered by Justice Abhay S. Oka and Justice Ujjal Bhuyan, made the following key observations:

• Suppression of Material Facts: The Court noted that the respondent had suppressed the appellant’s letters dated 28th November 2016 and 13th December 2016, which were critical to the case. The complaint and affidavit filed by the respondent did not disclose these letters.
• Abuse of Process: The Court held that setting criminal law in motion by suppressing material facts and documents amounted to an abuse of the legal process. The respondent’s conduct was deemed dishonest and misleading.
• Duty of the Magistrate: The Court emphasized that the Magistrate must ensure that the complainant discloses all material facts and documents while filing a complaint. The Magistrate failed in this duty by not questioning the respondent about the suppressed letters.
• Quashing of Complaint: The Court quashed the complaint and the order of cognizance dated 2nd March 2017, holding that the High Court should have intervened to prevent the abuse of process.

Key Excerpts from the Judgment

The Court quoted the following principles from its earlier decision in S.P. Chengalvaraya Naidu v. Jagannath & Ors.:

“The courts of law are meant for imparting justice between the parties. One who comes to the court, must come with clean hands. We are constrained to say that more often than not, process of the court is being abused. Property-grabbers, tax evaders, bank-loan-dodgers and other unscrupulous persons from all walks of life find the court-process a convenient lever to retain the illegal gains indefinitely. We have no hesitation to say that a person, who’s case is based on falsehood, has no right to approach the court. He can be summarily thrown out at any stage of the litigation.”

Read also: https://judgmentlibrary.com/consumer-loan-dispute-and-settlement-supreme-courts-ruling-on-banking-practices-and-builder-liabilities/

Conclusion

The Supreme Court allowed the appeal, quashing the complaint and the cognizance order. The Court clarified that the respondent could still pursue other legal remedies for recovering the alleged dues. This judgment underscores the importance of honesty and transparency in legal proceedings and serves as a warning against the suppression of material facts.

Petitioner Name: Rekha Sharad Ushir.
Respondent Name: Saptashrungi Mahila Nagari Sahakari Patsanstha Ltd..
Judgment By: Justice Abhay S. Oka, Justice Ujjal Bhuyan.
Place Of Incident: Kalwan.
Judgment Date: 25-03-2025.

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