2016 (7) TMI 1627 - HC - Indian Laws

Court confirms cheque must discharge debt under Section 138. Appeal dismissed.

The High Court upheld the trial court's decision to dismiss the petition for leave to appeal in a case involving a cheque issued under Section 138 of the ... Dishonor of Cheque - seeking leave to appeal - it was alleged that cheque was as security cheque - discharge of the existing legal liability, on the account that the cheque being of higher amount - HELD THAT:- On the basis of evidence adduced by the parties, it was concluded that cheque amount was much more than the actual amount due, therefore, cheque was not in discharge of a legal liability. Trial court has meticulously scrutinized evidence adduced by the parties and on the basis thereof has held that, as per the loan agreement Ex. CW1/B, petitioner had advanced ₹ 42,600/-. As agreed the interest of ₹ 14,400/- was also payable. Thus, total amount payable in instalments was ₹ 57,000/-. CW1 admitted in his cross-examination that respondent no. 2 had already paid about ₹ 40,000/- to petitioner. Statement of account Ex. CW1/1 indicated that as on 16th February, 2009 ₹ 17,100/- was outstanding balance. Over and above this, overdue charges of ₹ 12,451.48 were added. Even the aggregate of this amount comes to ₹ 29,551.48; whereas cheque amount was much more than this. Thus, the cheque being of higher amount could not be taken towards discharge of the existing legal liability. Reliance has been placed on the judgments, that is, ALLIANCE INFRASTRUCTURE PROJECT PVT. LTD. AND ORS. VERSUS VINAY MITTAL [2010 (1) TMI 1288 - DELHI HIGH COURT] to conclude that if cheque amount is much more than liability, section 138 of the Act is not attracted. The petitioner has failed to make out a case for grant of leave to appeal against the judgment of the trial court - petition dismissed. Issues:Petition for leave to appeal against the dismissal of a complaint under Section 138 of the Negotiable Instruments Act, 1881.Analysis:The petitioner had financed a sum to the respondent for the purchase of a motorcycle under a loan-cum-hypothecation agreement. The respondent issued a cheque to discharge part of his liability, which was returned unpaid due to insufficient funds. The trial court concluded that the cheque amount exceeded the actual amount due, making it not in discharge of a legal liability. The petitioner claimed the cheque was for security, but later accepted it was not. Evidence showed the respondent had already paid a significant amount, leaving a balance due. The judgment relied on previous cases to establish that if the cheque amount surpasses the liability, Section 138 of the Act is not applicable.The judgment referred to the case of Alliance Infrastructure Project Pvt. Ltd. and Angu Parameswari Textiles (P) Ltd. to support the conclusion. In the Alliance Infrastructure case, it was highlighted that the drawer of the cheque should not be punished if the cheque amount exceeds the actual liability, as it would lead to undue burden on the drawer. Similarly, the Angu Parameswari Textiles case emphasized that for Section 138 to apply, the cheque must be drawn towards the discharge of either the whole debt or part of it. If the cheque amount is more than the debt due, the section cannot be attracted.The High Court upheld the trial court's decision, stating that the view taken was reasonable. It was concluded that the petitioner failed to establish grounds for granting leave to appeal against the trial court's judgment. As a result, the petition was dismissed.