2006 (5) TMI 471 - HC - Indian Laws

Appeal Dismissed: Post-Dated Cheque Not Linked to Specific Liability; Acquittal Under N.I Act Sec. 138 Upheld.

The appeal contesting the acquittal under Sec. 138 of the N.I Act was dismissed by the HC. The court determined that the post-dated cheque was not issued ... Section 138 of the Negotiable Instruments Act - offence for dishonour of cheque not issued in discharge of liability - post-dated cheque issued as price for goods - stop memo / stop payment instruction to bank - burden of proof to establish subsisting liability equivalent to cheque amountSection 138 of the Negotiable Instruments Act - offence for dishonour of cheque not issued in discharge of liability - post-dated cheque issued as price for goods - stop memo / stop payment instruction to bank - burden of proof to establish subsisting liability equivalent to cheque amount - Whether the cheque (Ext.P1) was issued in discharge of a liability such that its dishonour would attract Section 138 N.I. Act. - HELD THAT: - The trial court found, and this Court agrees, that Ext.P1 was a post-dated cheque issued as the price for an order (Ext.D1) for 28 mixies which the complainant failed to supply. The accused issued a stop memo (Ext.D4) to his bank on 10.3.1998, before the cheque date, and informed the complainant by letter (Ext.D3 dated 16.3.1998) that the cheque should not be presented because the ordered goods were not supplied; these communications pre-dated presentation. Although correspondence (Ext.P8 and Ext.D3) indicate that some account between the parties remained to be settled, the complainant did not prove that any subsisting liability on the date of presentation corresponded in amount to the sum drawn on Ext.P1. For an offence under Section 138 to be made out, the cheque must have been drawn in discharge of a liability, in whole or in part; it cannot be used to recover an amount exceeding any proven liability. Since Ext.P1 was specifically issued for the unpaid order and the complainant failed to establish that a subsisting liability equal to the cheque amount existed at presentation, the requisite element for conviction under Section 138 was not established.Acquittal of the accused upheld; Ext.P1 was not proved to have been issued in discharge of a subsisting liability equal to its amount, and conviction under Section 138 could not be sustained.Final Conclusion: The appeal against the acquittal is dismissed; the trial court's finding that the cheque was issued as payment for goods not supplied and that the complainant failed to prove a subsisting liability equivalent to the cheque amount is affirmed. Issues:Acquittal under Section 138 of the N.I Act challenged; Dispute over liability for a post-dated cheque; Admissibility of evidence regarding liability admission; Interpretation of stop memo and order for mixies; Proof of liability amount in relation to the cheque.Analysis:1. The appeal challenges the acquittal of the respondent under Section 138 of the N.I Act. The complainant alleged that the respondent owed an amount due to credit purchases and issued a post-dated cheque, which bounced. The respondent claimed the cheque was for mixies not supplied by the complainant, as per an order and stop memo.2. The lower court found that the cheque was not issued to discharge the accused's liability towards the complainant. The evidence was crucial in determining the nature of the transaction and the purpose of the cheque.3. The appellant argued that evidence, including communications (Ext.D3 and Ext.P8), indicated the respondent's admission of liability towards the complainant. Despite the stop memo, the appellant contended that the cheque was intended to settle the existing liability, even if it was initially meant for the mixies order.4. The order for mixies (Ext.D1) and the stop memo (Ext.D4) were pivotal in understanding the sequence of events. The stop memo was issued before the cheque date, indicating the respondent's intention not to honor the cheque due to non-supply of the ordered items. The appellant failed to prove the exact amount of liability in relation to the cheque.5. The court concluded that the post-dated cheque was not issued to discharge the specific liability amount covered by it, which was for the mixies order. As the complainant did not prove the exact liability matching the cheque amount, the acquittal of the accused was deemed justified, and the appeal was dismissed.