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Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
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AI Drafter - (New and Powerful) ✕ Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
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Issues: Whether the cheque was issued towards discharge of a legally enforceable debt so as to attract Section 138 of the Negotiable Instruments Act, or whether it was only a security cheque issued at the time of availing the loan.
Analysis: The admitted facts showed that the hire purchase vehicle had been seized and sold much earlier, while the cheque relied on by the complainant was dated later. The complainant did not produce material to prove the sale price of the vehicle or the manner in which the alleged balance of liability was computed after adjustment of the sale proceeds and amounts already repaid. The cheque was typed and not shown to have been filled and issued in the ordinary course against an existing liability. On these facts, the version that the cheque was handed over as a blank security cheque at the time of the loan transaction found support, and the existence of a legally enforceable debt on the date of the cheque was not established.
Conclusion: The cheque was not issued in discharge of a legally enforceable debt and Section 138 of the Negotiable Instruments Act was not attracted.
Ratio Decidendi: A dishonoured cheque will not sustain a prosecution under Section 138 where the complainant fails to prove that it represented an existing legally enforceable debt or liability, particularly when the cheque was issued only as security and the underlying consideration has failed.
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