High Court quashes Section 138 complaint, deems cheque security not debt, declares warrant illegal.

The High Court quashed the order dated 18.11.2019 and the complaint under Section 138 of the Negotiable Instruments Act as the cheque was given as security, not for an enforceable debt. The Court also found the Warrant of Attachment issued by the Civil Court at Rajkot to be illegal, rendering all related proceedings baseless. The operation of the judgment was stayed for six weeks to allow the respondent to seek relief from a higher forum.

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Issues Involved:
1. Quashing of the order dated 18.11.2019 by the 13th Additional Chief Judicial Magistrate, Rajkot.
2. Validity of the proceedings under Section 138 of the Negotiable Instruments Act, 1881 (NI Act).
3. Legality of the Warrant of Attachment issued by the Civil Court at Rajkot.
4. Enforceability of the cheque given as security.

Issue-wise Detailed Analysis:

1. Quashing of the Order Dated 18.11.2019:
The applicants sought to quash the order dated 18.11.2019, passed by the 13th Additional Chief Judicial Magistrate, Rajkot, which directed the registration of a complaint under Section 138 of the NI Act and issuance of process under Section 204 of Cr.P.C. against them. The Court found that the cheque in question was given as security and not in respect of any enforceable debt, thus, the proceedings under Section 138 of the NI Act were not sustainable. Consequently, the Court quashed the impugned order and the complaint.

2. Validity of the Proceedings under Section 138 of the NI Act:
The applicants contended that the cheque was given as security, as stated in the Deed of Undertaking dated 07.04.2016, and not for any enforceable debt. The Court agreed, referencing the case of Lalit Kumar Sharma v. State of Uttar Pradesh, which held that a cheque issued as part of a compromise does not constitute an enforceable debt. The Court concluded that since the cheque was given as security, the proceedings under Section 138 of the NI Act were invalid.

3. Legality of the Warrant of Attachment Issued by the Civil Court at Rajkot:
The applicants argued that the Civil Court at Rajkot lacked jurisdiction to issue a Warrant of Attachment for properties located outside its territorial limits, specifically in Nadiad. The Court noted that the order dated 22.03.2016, which directed the issuance of the Warrant of Attachment, was quashed by the High Court in Special Civil Application No.7417 of 2016. The subsequent order dated 20.08.2019 by the executing Court at Rajkot, which reaffirmed the earlier order, was also quashed by the High Court in Special Civil Application No.15137 of 2019. Thus, the Warrant of Attachment and all consequential proceedings, including the Deed of Undertaking, were rendered baseless.

4. Enforceability of the Cheque Given as Security:
The Court observed that the cheque was explicitly given as security, as per the Deed of Undertaking dated 07.04.2016. The Court cited the Supreme Court's decision in Sampelly Satyanarayana Rao v. Indian Renewable Energy Development Agency Limited, which held that a cheque given as security does not attract Section 138 of the NI Act unless it is towards an enforceable debt. Since the cheque in question was not issued for an enforceable debt but as security, the proceedings under Section 138 of the NI Act were deemed unsustainable.

Conclusion:
The High Court quashed the impugned order dated 18.11.2019 and the complaint under Section 138 of the NI Act, as the cheque was given as security and not for an enforceable debt. The Warrant of Attachment issued by the Civil Court at Rajkot was also found to be illegal, rendering all consequential proceedings baseless. The Court stayed the operation of its judgment for six weeks to allow the respondent to approach a higher forum.

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