Section 138 cheque dishonour complaints: authorisation, liability and correspondence issues generally require trial, not quashing.

A cheque dishonour complaint under Section 138 NI Act was challenged on grounds of lack of authorisation, absence of legally enforceable liability, and the alleged non-negotiable character of the cheque. The complaint was treated as maintainable because the pleading and record showed authorisation to institute proceedings. The subsistence of a standby letter of credit did not, by itself, disprove liability at the threshold, especially in light of the Section 139 presumption. A separate letter could not alter the cheque's negotiable character where no restriction appeared on the instrument itself. Issues about the effect of correspondence, implied acceptance, and absence of reply were held to require evidence at trial, not quashing jurisdiction.

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Issues: (i) Whether the complaint under Section 138 of the Negotiable Instruments Act, 1881 was liable to be quashed on the ground that it was instituted without due authority; (ii) whether no legally enforceable debt or liability existed when the cheque was issued because the standby letter of credit was still subsisting; (iii) whether the cheque became a non-negotiable instrument because of the letter dated 21 March 2016; and (iv) whether the effect of the letter and the alleged absence of reply could be conclusively decided in proceedings under Section 482 of the Code of Criminal Procedure, 1973.

Issue (i): Whether the complaint under Section 138 of the Negotiable Instruments Act, 1881 was liable to be quashed on the ground that it was instituted without due authority.

Analysis: The complaint specifically stated that the signatory was authorised by board resolution and power of attorney to sign, verify and institute proceedings. A complaint cannot be rejected merely because an objection is raised to the authority of the person filing it, where the pleading itself asserts authorisation and the record discloses due empowerment. The challenge based on absence of authority was therefore not sufficient to defeat the complaint at the threshold.

Conclusion: The objection to the maintainability of the complaint on the ground of lack of authorisation was rejected.

Issue (ii): Whether no legally enforceable debt or liability existed when the cheque was issued because the standby letter of credit was still subsisting.

Analysis: The standby letter of credit functioned as a guarantee and not as payment in discharge of the underlying obligation. Once a cheque is issued, the statutory presumption under Section 139 of the Negotiable Instruments Act, 1881 operates in favour of the holder, and the question whether the cheque was issued towards an existing liability is ordinarily a matter for trial. The subsistence of the guarantee did not establish that there was no debt or liability. The contention that the cheque represented a non-existent liability was therefore not acceptable at the quashing stage.

Conclusion: The plea that the complaint was not maintainable for want of an existing liability was rejected.

Issue (iii): Whether the cheque became a non-negotiable instrument because of the letter dated 21 March 2016.

Analysis: The cheque itself contained no endorsement, and the letter was a separate document. A separate letter, not annexed to the cheque, could not alter the character of the cheque as against third parties or deprive it of its negotiable character. The reliance on provisions governing negotiation and endorsement did not assist the petitioners because the instrument itself was not marked non-negotiable and the alleged restriction was not incorporated on the cheque. The argument that the cheque was non-negotiable therefore failed.

Conclusion: The cheque was not rendered a non-negotiable instrument by the letter dated 21 March 2016.

Issue (iv): Whether the effect of the letter and the alleged absence of reply could be conclusively decided in proceedings under Section 482 of the Code of Criminal Procedure, 1973.

Analysis: The Court declined to determine, at the quashing stage, whether the signatures on the letter amounted merely to acknowledgment or to acceptance of its contents. The applicability of Sections 91 and 92 of the Indian Evidence Act, 1872 and the alleged implied acceptance could not be conclusively ruled upon without evidence. Likewise, the absence of a reply to the letter did not justify drawing a final inference at this stage because the presumption under Section 139 of the Negotiable Instruments Act, 1881 remains rebuttable in trial. These were matters for evidence and adjudication during trial.

Conclusion: The effect of the letter and the absence of reply could not be conclusively decided in proceedings under Section 482 of the Code of Criminal Procedure, 1973.

Final Conclusion: The petition disclosed no ground for interference with the summoning order, and the cheque dishonour prosecution was permitted to proceed to trial.

Ratio Decidendi: Once a cheque is issued, the statutory presumption of liability under Section 139 of the Negotiable Instruments Act, 1881 arises, and defences going to the existence of debt, the effect of surrounding correspondence, and the true nature of the transaction are ordinarily matters for rebuttal in trial rather than for quashing jurisdiction.

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