MUMBAI: The Supreme Court recently restored a criminal case filed by Renuka Sheth against Virendra Gala, a friend of her estranged husband Ashwin Sheth of Sheth Developers, over a bounced cheque for the sum of ₹50 crore.
There were disputes between Renuka and Ashwin Sheth over alleged illegal and fraudulent transfer of shares pertaining to Sheth Developers and Realtors (India) ltd and Sheth Developers Pvt Ltd. After Renuka filed complaints on the above grounds, Ashwin initiated negotiations for an amicable settlement and eventually the parties arrived at an agreement on January 12, 2022.
According to Renuka, under the agreement, the high-profile developer had agreed to give her three storeys – the fifth, sixth and seventh floors – of Natwar Bungalow, the Sheth family property, a plot in Mumbai’s western suburbs, and a sum of ₹50 crore.
She said Gala, a close friend of her husband, had agreed to act as a mediator and hold the sum of ₹50 crore in an escrow account, and had issued Renuka a cheque for the same. Three months later, she said, the share transfer was completed contrary to the terms of the settlement. She also deposited the cheque for encashment.
However, the cheque was dishonoured and Renuka approached the Andheri metropolitan magistrate’s court with a complaint against Gala. The cheque was dishonoured on April 6, 2022, with a remark “payment stopped by drawer”. Acting on her complaint, the magistrate’s court on June 17, 2022, “issued process” (marking the beginning of criminal proceedings) to prosecute Gala under section 138 of the Negotiable Instruments Act (NI Act).
Gala challenged the order before the Sessions Court and, on December 30, 2022, the first appellate court struck down the cheque bounce case primarily on grounds that there was no legally enforceable debt on the date of presentation of the complaint.
The Bombay High Court, on March 29, 2023, upheld the Sessions Court order, observing that there was no concluded contract between the parties, as the agreement referred to in the complaint was an unsigned document, which cannot create right or liability on a person, prompting Renuka to approach the Supreme Court.
However, a Supreme Court bench of Justice JK Maheshwari and Justice Atul S Chandurkar accepted her counsel’s arguments that the complaint should not have been nipped in the bud at the preliminary stage of issuance of process, as it satisfied all ingredients of an offence under Section 138 of the Act.
The apex court said the Sessions Court had misdirected itself in giving more weightage to the agreement and ignored the fact that the basic ingredients for attracting Section 138 of the NI Act had been duly satisfied, at least for issuance of process. The judges said it was not disputed that Gala had signed and issued the cheque, neither was its subsequent dishonouring on his instructions. It noted that the statutory notice was issued during the stipulated period.
The court said, in such a situation, when the basic ingredients of Section 138 of the NI Act were duly satisfied, drawing a conclusion that the cheque was not issued for a legally enforceable debt at the pre-trial stage, it amounted to ignoring the statutory presumption under Section 139 that the cheque had been issued for a legally enforceable debt or liability. The apex court therefore struck down the Sessions Court and high court orders and restored the complaint.