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Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
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AI Drafter - (New and Powerful) ✕ Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
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Issues: Whether a complaint under Section 138 of the Negotiable Instruments Act was maintainable after the financier had repossessed and sold the vehicle under the hire-purchase arrangement, thereby extinguishing the subsisting liability.
Analysis: Section 138 applies only where the cheque is issued in discharge of a legally enforceable debt or liability. Once the financier repossessed the vehicle and thereafter sold it, the hire-purchase arrangement stood determined, and the amount recoverable stood confined to the balance, if any, to be pursued by appropriate civil remedy. A cheque retained or filled up as security after such determination could not be treated as supported by consideration or as issued towards a live and enforceable liability.
Conclusion: The complaint under Section 138 was not maintainable on the facts, and the criminal proceedings were liable to be quashed in favour of the petitioner.
Final Conclusion: The dishonoured cheque did not represent an enforceable debt after repossession and sale of the vehicle, so the prosecution under Section 138 could not continue.
Ratio Decidendi: For an offence under Section 138 of the Negotiable Instruments Act, the cheque must be referable to a legally enforceable debt or liability subsisting on the date of its issuance and presentation; once the underlying transaction stands determined and consideration fails, the provision is not attracted.
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