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AI Drafter ✕ 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 criminal complaint under Section 138 of the Negotiable Instruments Act was liable to be quashed on the plea that the cheques were issued only as security and that a sale deed had already been executed, thereby negating any legally enforceable debt or liability.
Analysis: The petitioner's defence rested on the assertion that the cheques represented only a security arrangement and that the underlying transaction had been settled through a sale deed. The record, however, showed that the cheques were issued towards the balance consideration, were post-dated, and were dishonoured for insufficiency of funds. The petitioner had admitted issuance of the cheques and the statutory presumption under Section 139 of the Negotiable Instruments Act therefore arose in favour of the complainant. At the stage of quashing, the defence based on a disputed sale deed and alleged absence of liability required proof in trial and could not, by itself, displace the prima facie case disclosed by the complaint.
Conclusion: The petition for quashing was not maintainable on the facts presented and the complaint under Section 138 of the Negotiable Instruments Act was not liable to be interfered with.
Ratio Decidendi: Where issuance and dishonour of cheques are admitted, the statutory presumption of legally enforceable debt or liability operates, and a disputed defence based on a security cheque or a contested document cannot justify quashing at the pre-trial stage unless the complaint fails to disclose a prima facie offence.
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