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Issues: (i) Whether cheques issued as collateral security, in the absence of a subsisting debt or liability on the date of delivery, attract criminal liability under Section 138 of the Negotiable Instruments Act, 1881. (ii) Whether the High Court can exercise inherent powers under Section 482 of the Code of Criminal Procedure, 1973 to quash the complaint at the instance of persons not yet arraigned as accused.
Issue (i): Whether cheques issued as collateral security, in the absence of a subsisting debt or liability on the date of delivery, attract criminal liability under Section 138 of the Negotiable Instruments Act, 1881.
Analysis: Section 138 applies only where the cheque is drawn for the discharge, in whole or in part, of an existing debt or other liability. On the facts, the amount was advanced under an agreement that contemplated repayment at a future date, and the cheques were issued to secure performance of that arrangement. The liability was to arise later, not on the date when the cheques were handed over. A cheque issued only as security for future performance, without an existing enforceable liability at the time of issue, does not satisfy the statutory requirement.
Conclusion: No criminal liability under Section 138 arose on these facts, and the complaint could not be sustained on that basis.
Issue (ii): Whether the High Court can exercise inherent powers under Section 482 of the Code of Criminal Procedure, 1973 to quash the complaint at the instance of persons not yet arraigned as accused.
Analysis: The inherent jurisdiction of the High Court is wide enough to prevent abuse of process and to secure the ends of justice. The mere fact that the petitioners had not yet been formally impleaded as accused did not bar them from seeking quashing where the complaint itself disclosed no offence. The Court held that a party is not required in every case to await proceedings before the Magistrate if the complaint on its face does not make out the offence alleged.
Conclusion: The petition under Section 482 was maintainable, and the Court was entitled to quash the proceedings.
Final Conclusion: The criminal complaint and all proceedings arising from it were set aside because the cheque transaction did not disclose the ingredients of the offence alleged, and the High Court's inherent jurisdiction could be invoked to prevent continuation of an unsustainable prosecution.
Ratio Decidendi: For Section 138 of the Negotiable Instruments Act, 1881 to apply, there must be a subsisting debt or liability at the time the cheque is issued; a cheque given only as collateral security for a future obligation does not, by itself, create criminal liability.
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