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The HC dismissed the appeal in a cheque dishonour case under Section 138 NI Act. The complainant company failed to produce the purported Agreement to Sell dated November 2008, claiming it was torn after execution of a subsequent agreement in July 2009. The court rejected this explanation as untenable, noting that companies maintain records even after cancellation and no copy was produced. Crucially, the admitted liability was only Rs. 75 lakhs while the disputed cheque was for Rs. 1.5 crores. The court held that Section 138 requires the cheque amount to discharge the entire existing debt or liability. Since the complainant failed to prove the underlying legally enforceable debt supporting the cheque, the essential ingredient under Section 138 was not satisfied, warranting dismissal.
The HC dismissed the appeal in a cheque dishonour case under Section 138 NI Act. The complainant company failed to produce the purported Agreement to Sell dated November 2008, claiming it was torn after execution of a subsequent agreement in July 2009. The court rejected this explanation as untenable, noting that companies maintain records even after cancellation and no copy was produced. Crucially, the admitted liability was only Rs. 75 lakhs while the disputed cheque was for Rs. 1.5 crores. The court held that Section 138 requires the cheque amount to discharge the entire existing debt or liability. Since the complainant failed to prove the underlying legally enforceable debt supporting the cheque, the essential ingredient under Section 138 was not satisfied, warranting dismissal.
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