Security cheque defence and post-deposit payment do not ordinarily justify quashing a cheque dishonour prosecution at threshold.

Section 139 of the Negotiable Instruments Act raises a presumption in favour of the cheque holder, and a defence that the cheque was issued only as security or that no legally enforceable liability existed ordinarily involves disputed questions of fact. Such factual disputes cannot usually be finally decided in a Section 482 CrPC petition at the pre-trial stage, where the defence is not unimpeachable, and the matter must go to trial. Later precedent also precluded treating deposit of the cheque amount as a ground to terminate a Section 138 prosecution at the threshold. The complaints were therefore allowed to proceed.

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Issues: (i) Whether criminal proceedings under the Negotiable Instruments Act could be quashed on the plea that the cheques were issued only as security and no legally enforceable liability subsisted at the time of dishonour. (ii) Whether deposit of the cheque amount during pendency of the case justified closure of the proceedings at the threshold.

Issue (i): Whether criminal proceedings under the Negotiable Instruments Act could be quashed on the plea that the cheques were issued only as security and no legally enforceable liability subsisted at the time of dishonour.

Analysis: The statutory presumption under Section 139 of the Negotiable Instruments Act, 1881 operates in favour of the holder of the cheque, and the accused may rebut it by evidence. A defence that the cheques were issued as security, or that there was no subsisting liability, ordinarily raises disputed questions of fact. Such factual controversies are not to be finally adjudicated in proceedings under Section 482 of the Code of Criminal Procedure, 1973 when the matter is at the threshold and the defence is not of an unimpeachable character. The proper course is to leave the issue to trial, where evidence can be led and tested.

Conclusion: The security-cheque defence did not warrant quashing of the complaints at the pre-trial stage.

Issue (ii): Whether deposit of the cheque amount during pendency of the case justified closure of the proceedings at the threshold.

Analysis: The earlier view permitting closure of proceedings on deposit of the cheque amount was held not to survive in light of the later binding precedent referred to in the order. The court therefore declined to treat subsequent payment or deposit as a ground to terminate prosecutions under Section 138 of the Negotiable Instruments Act, 1881 at the stage of quashing.

Conclusion: Deposit of the amount did not entitle the petitioners to termination of the criminal proceedings.

Final Conclusion: The petitions failed because the defence raised was factual and triable, and the criminal complaints under the cheque dishonour law were allowed to proceed.

Ratio Decidendi: In proceedings under Section 482 of the Code of Criminal Procedure, 1973, a disputed defence to a cheque dishonour complaint, including a plea that the cheque was only security, cannot ordinarily be used to quash the case where the statutory presumption under Section 139 of the Negotiable Instruments Act, 1881 applies and the defence requires evidence at trial.

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