Court quashes case due to cheque as security, not debt repayment. Absence of enforceable debt crucial.

The court quashed Criminal Case No. 920 of 2015 as the cheque issued was deemed a security without representing an existing enforceable debt or liability at the time. The court emphasized the absence of an existing debt when the cheque was given, concluding that it was not for discharge of any debt but merely as security. Additionally, the court highlighted the lack of a civil suit for recovery of the amount, ultimately leading to the proceedings being quashed.

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Issues Involved:
1. Whether the proceedings of the Criminal Case No. 920 of 2015 should be quashed.
2. Whether the cheque in question represents a discharge of existing enforceable debt or liability under Section 138 of the Negotiable Instruments Act.

Issue-wise Detailed Analysis:

1. Whether the proceedings of the Criminal Case No. 920 of 2015 should be quashed:
The applicant, the original accused, sought to invoke the inherent powers of the court under Section 482 of the Code of Criminal Procedure, 1973, to quash the proceedings of Criminal Case No. 920 of 2015 pending before the Metropolitan Magistrate, Surat. The case involved an offence under Section 138 of the Negotiable Instruments Act, where the applicant allegedly issued a cheque that was dishonored due to insufficient funds. The respondent, a limited company engaged in manufacturing and supply of mattresses and furniture, claimed that the applicant was one of its customers who had purchased goods on credit and issued a cheque for Rs. 76,26,776, which was dishonored. The applicant contended that he was a dealer, not a customer, and that the cheque was given as security when the dealership was accepted in 2011, not for any existing debt.

2. Whether the cheque in question represents a discharge of existing enforceable debt or liability under Section 138 of the Negotiable Instruments Act:
The court examined whether the cheque issued by the applicant was for the discharge of an existing enforceable debt or liability. The applicant argued that the cheque was given as security in 2011 when there was no existing debt, and thus, no liability under Section 138 could be fastened upon him. The respondent countered that a prima facie case was made out, and the application should be rejected. The court referred to the Supreme Court's decision in Sampelly Satyanarayana Rao v. Indian Renewable Energy Development Agency Limited, which clarified that the crucial question is whether the cheque represents the discharge of an existing enforceable debt or liability or if it was for advance payment without any subsisting debt or liability.

The court noted that the materials on record indicated that the cheque was from a cheque-book of the year 2011, and there was no existing debt when the blank signed cheque was handed over by the accused to the company. Therefore, the cheque was considered as security without any subsisting debt or liability on the date of handing over. The liability to pay the amount of Rs. 76,26,766 was incurred over time in the course of business transactions, and the cheque did not represent an existing enforceable debt or liability at the time it was issued.

Conclusion:
Given the absence of an existing debt or liability when the cheque was handed over, the court held that the cheque was merely a security. Consequently, the proceedings of the Criminal Case No. 920 of 2015 were quashed. The court also noted the surprising fact that the complainant had not filed any civil suit for the recovery of such a substantial amount. The rule was made absolute, and direct service was permitted.

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