2020 (1) TMI 386 - HC - Indian Laws

Court quashes proceedings under section 138 for lack of sale agreement. Cheque without funds not offense.

The court quashed the proceeding under section 138 of the Negotiable Instrument Act, finding that as there was no sale agreement, the essential elements ... Dishonor of Cheque - insufficiency of funds - cheque not issued towards any debt - allegation that accused persons made mischief by issuing cheque for which they committed an offence under the provision of Negotiable Instrument Act, 1881 - HELD THAT:- As per complaint the cheque was not issued towards any consideration or to clear of any debt or liability. As there was no deed / agreement for sale executed as required under law, the payment for consideration does not arise and in that view of the matter the requirement of Section 138 N.I. Act, i.e., money paid to discharge in whole or in part of any debt or other liability, is found absent. As the ingredients of the offence U/s.138 N.I. Act are lacking, taking of cognizance for that offence by the learned S.D.J.M., Bhubaneswar is not sustainable in the eye of law, hence, the same is liable to be quashed. The proceeding u/s138 of the Negotiable Instruments Act, 1881 is quashed. Issues:Proceeding to quash cognizance order under section 482 Cr.P.C. based on complaint filed under section 138 of the Negotiable Instrument Act, 1881.Analysis:1. Facts of the Complaint:The complaint was filed against the accused for issuing cheques without sufficient funds for a land deal. The complainant accepted a cheque for Rs. 5,00,000, which was dishonored due to insufficient funds. The accused were alleged to have committed an offense under the Negotiable Instrument Act, 1881.2. Contentions of the Petitioner:The petitioner argued that as the cheque was not issued for any debt or liability, it did not amount to an offense under section 138 of the Negotiable Instrument Act. The absence of a completed sale transaction meant the cheque was not towards payment of consideration.3. Opposite Party's Argument:The opposite party contended that since there was a discussion for the sale of land and a cheque was issued, the burden was on the petitioner to rebut the presumption under section 139 of the Negotiable Instrument Act. Reference was made to a Delhi District Court case, which the court deemed not to be a precedent.4. Legal Provisions and Precedents:Section 138 of the Negotiable Instrument Act deals with the dishonor of cheques due to insufficient funds. The court referred to a Delhi High Court case where it was observed that the mere absence of consideration at the time of issuing the cheque did not warrant quashing the proceedings.5. Decision of the Court:The court found that as there was no deed or agreement for the sale of land, the payment for consideration did not arise. Consequently, the essential elements of the offense under section 138 of the Negotiable Instrument Act were absent. Therefore, the court allowed the petition and quashed the proceeding against the petitioner.6. Conclusion:The court held that as the requirements of section 138 of the Negotiable Instrument Act were not met due to the absence of a sale agreement, the cognizance taken by the lower court was not sustainable in law. As a result, the proceeding under section 138 against the petitioner was quashed.