Section 138 conviction does not by itself amount to moral turpitude or justify dealership termination under a broad clause.

A contractual termination clause referring to a criminal offence cannot automatically be invoked for every statutory offence. The Madhya Pradesh High Court distinguished mala in se offences from malum prohibitum offences and held that a conviction under Section 138 of the Negotiable Instruments Act, arising from a civil transaction, is not by itself an offence involving moral turpitude. Clause 45(d) was wide, but not wide enough to treat every punishable act as a ground for dealership termination unless the contract clearly so provides. On that basis, termination of the dealership was not justified.

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Issues: Whether conviction for an offence under Section 138 of the Negotiable Instruments Act, 1881 justified termination of dealership under Clause 45(d) of the agreement, and whether such offence could be treated as a case of moral turpitude or a criminal offence warranting invocation of the termination clause.

Analysis: The Court distinguished offences that are mala in se from those that are malum prohibitum. It held that an offence under Section 138 of the Negotiable Instruments Act is a legislatively created offence arising out of a civil transaction and, by itself, does not carry the character of moral turpitude. Clause 45(d) was held to be wide, but not so wide as to cover every statutory offence irrespective of its nature. The Court also observed that the mere fact that a penal consequence exists does not mean that every punishable act can justify termination of dealership, and the clause must be understood in the context of offences involving moral depravity or the company being the victim.

Conclusion: Conviction under Section 138 of the Negotiable Instruments Act, 1881 did not justify termination of the dealership under Clause 45(d); the challenge to the order of the learned Single Judge failed.

Ratio Decidendi: A contractual termination clause referring to criminal offence cannot be invoked for every statutory offence, and an offence under Section 138 of the Negotiable Instruments Act, 1881 is not, by itself, an offence involving moral turpitude or a ground for termination unless the contract clearly so provides.

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