Court dismisses complaint under Section 138 N.I. Act due to lack of enforceable debt

The court allowed the petition, set aside the order issuing process under Section 138 of the N.I. Act, and dismissed the complaint. It was held that there was no legally enforceable debt or liability at the time the undated cheques were issued, rendering the process against the petitioner unsustainable. The court emphasized the necessity of a subsisting debt or liability at the time of cheque issuance for an offence under Section 138. The order of issuance of process was deemed unsustainable in the absence of such a debt or liability.

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Issues Involved:
1. Legality of the issuance of process under Section 138 of the N.I. Act.
2. Existence of a legally enforceable debt or liability at the time of cheque issuance.
3. Validity of the oral agreement and the undated cheques.
4. Applicability of precedents from the Supreme Court and High Court.

Issue-wise Detailed Analysis:

1. Legality of the issuance of process under Section 138 of the N.I. Act:
The petitioner challenged the order dated 23-2-2016 by the Judicial Magistrate, First Class, Mapusa, which issued process against the petitioner for an offence under Section 138 of the N.I. Act. This order was confirmed by the Sessions Judge on 27-3-2018 in Criminal Revision Application No. 43/2016. The Magistrate's order stated, "Based on the material on record, I am prima facie satisfied that accused has committed an offence u/s. 138 NI Act. Issue s/s. to the accused."

2. Existence of a legally enforceable debt or liability at the time of cheque issuance:
The petitioner argued that the cheques were issued without any legally enforceable debt or liability at the time of issuance. According to the petitioner, the cheques were undated and issued in 2006, with an agreement that they would be presented after 7 1/2 years. The petitioner cited the Supreme Court's decision in Indus Airways Pvt. Ltd. vs. Magnum Aviation Pvt. Ltd., which held that for an offence under Section 138, there must be a legally enforceable debt or liability subsisting on the date of the cheque's drawal. The court noted, "the explanation leaves no manner of doubt that to attract an offence under section 138, there should be legally enforceable debt or other liability subsisting on the date of drawal of the cheque."

3. Validity of the oral agreement and the undated cheques:
The respondent's case was based on an oral agreement where the petitioner agreed to pay Rs. 3 Lakhs per month for hiring trucks for 7 1/2 years. The petitioner issued two undated cheques as security, which were to be presented after the contract period. The cheque in question was presented on 25-5-2015 and dishonoured because the account was closed in 2010. The court observed that there was no legally enforceable debt or liability at the time the cheques were issued, as the cheques were undated and issued as security.

4. Applicability of precedents from the Supreme Court and High Court:
The respondent relied on Sampelly Satyanarayana Rao vs. Indian Renewable Energy Development Agency Limited, where the Supreme Court held that a post-dated cheque given as security could still give rise to an offence under Section 138 if dishonoured. However, the court distinguished this case from Indus Airways Pvt. Ltd., noting that in Indus Airways, the cheques were issued as advance payment for purchase orders that were later cancelled. The court concluded that the present case was governed by Indus Airways Pvt. Ltd. and Joseph Vilangadan vs. Phenomenal Health Care Services Ltd., where it was held that no offence under Section 138 could be made out if there was no existing debt or liability at the time of cheque issuance.

Conclusion:
The court concluded that the issuance of process against the petitioner could not be sustained as there was no legally enforceable debt or liability at the time the cheques were issued. The order issuing process was set aside, and the complaint was dismissed. The court stated, "In the given facts and circumstances, I do not find that the order of issuance of process can be sustained."

Order:
1. The petition is allowed.
2. The impugned order issuing process is set aside.
3. The complaint filed by the respondent is dismissed.
4. Rule is made absolute in the aforesaid terms.

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