2021 (12) TMI 237 - HC - Indian Laws

Court quashes criminal case under Section 138 for void liability & public policy violation.

The court allowed the application to quash the criminal case under Section 138 of the Negotiable Instruments Act. It held that the liability sought to be ... Dishonor of Cheque - discharge of legally enforceable liability or not - existence of valid agreement between parties or not - HELD THAT:- Indisputably, complainant was a member of ‘COC’ and he accepted the consideration from the accused for not preferring an appeal against the order of the NCLT. Section 23 of the Contract Act, lays down that ‘Consideration’ or ‘Object’ of the agreement is unlawful, if it is forbidden by law or would defeat the provisions of law or would involve injury to any person or property of another or the Court considers it, as immoral, or opposed to public policy. It may be stated that it is contrary to the public policy to induce public officer for money or other valuable consideration, to use their position/office and influence to procure benefit. The agreement between the Complainant and the accused was, void since, beginning. Since liability sought to be enforced by the complainant under the agreement was ‘void’, the complaint under Section 138 of the NIA was not maintainable - Application allowed. Issues:Application to quash a criminal case under Section 482 of Cr.P.C. seeking to quash a case under Section 138 of NIA based on a bounced cheque.Analysis:The complainant, a Chartered Accountant, was a financial creditor of a company under insolvency proceedings. The complainant, dissatisfied with the resolution plan, was approached by the accused, an operational creditor, to not appeal the NCLT's decision in exchange for a payment. A cheque was issued by the accused to the complainant, which bounced, leading to the filing of a complaint under Section 138 of NIA.The applicant argued that the cheque amount did not constitute a legally enforceable liability as the agreement's object was unlawful, being against public policy. The complainant contended that the complaint and issue process should be upheld.The court examined Section 138 of NIA and Section 23 of the Indian Contracts Act, which deems consideration or object unlawful if it is against public policy. It found that inducing a public officer with money to use their position is contrary to public policy. Referring to legal precedents, the court concluded that the agreement between the parties was void from the beginning.Considering the void nature of the agreement and the unlawful object, the court held that the liability sought to be enforced by the complainant was void, rendering the complaint under Section 138 of NIA not maintainable. Consequently, the application to quash the case was allowed, and the complaint was quashed.In light of the above analysis and legal principles, the court made the rule absolute, disposing of the application to quash the criminal case under Section 138 of NIA.