TaxTMI 
TaxTMI 
2025 (11) TMI 673
X X X X Extracts X X X X
X X X X Extracts X X X X
....C Grills" for a total consideration of Rs. 56,86,633/-. As per the terms of the contract, the Respondent paid a 15% mobilization advance of Rs. 6,82,416/- to the Petitioner's Company. Against this payment, the Petitioner's Company issued an advance cheque (the "impugned cheque") bearing No. 723223 for the equivalent amount of Rs. 6,82,416/- as security for the advance. 3. It is stated by the Petitioner that while the work was in progress, the Respondent "illegally, arbitrarily, abruptly and unjustly terminated the contract". A dispute arose regarding the final accounts. 4. On 26.03.2014, the Petitioner's Company sent an e-mail with its final Bill, claiming work done to the value of Rs. 5,85,472/-. After adjusting this amount and TDS in the sum of Rs. 13,648/- from the advance received in the sum of Rs. 6,82,400/-, the Petitioner's Company asserted that only a balance of Rs. 69,647/- was payable by them to the Respondent. 5. The Respondent, by its Letter dated 18.04.2014, refuted the Petitioner's Bill. The Respondent claimed that only Rs. 3,20,881/- worth of work was completed and, therefore, demanded the refund of the unadjusted mobilization advance, which they calculated ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....and 31.05.2014, was only for Rs. 3,61,847/-. Therefore, the Respondent had no legal right to present a cheque for a much larger, un-adjudicated amount of Rs. 6,82,416/-. 16. The Respondent knowingly presented the cheque after receiving a specific Legal Notice from the Petitioner dated 06.06.2014 and its subsequent Reply dated 26.02.2015 to the statutory Notice, warning them not to present the said security cheque, a fact which was deliberately concealed from the Ld. Trial Court, at the time of summoning. 17. Thus, it is prayed that the Petition be allowed and the Complaint under S.138 NI Act, be dismissed. 18. The Respondent/M/s Negolice India Ltd., in its Reply has stated that the Petitioner's Company was awarded a Work Order for Rs. 56,86,633/- for GRC Grill work. An advance payment of Rs. 6,82,416/- was made towards mobilization. 19. The Petitioner's Company, as a part of the contract and in tune with the Indemnity Bond dated 08.03.2013, issued the cheque (No. 723223 for Rs. 6,82,416/-) with an express and willful promise that it could be encashed without prior notice if the Petitioner was unable to perform the contract terms, or in the discharge of the existing and ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Court considered the question whether post-dated cheque issued by way of advance payment for a Purchase Order, could be considered for discharge of legally enforceable debt. It was held that while the purchaser may be liable for breach of the contract, when a contract provides that the purchaser has to pay in advance. 30. This proposition was reiterated by the Apex Court in Sampelly Satyanarayana Rao vs. Indian Renewable Energy Development Agency Limited, (2016) 10 SCC 458, wherein it was observed by the Court that the question whether a post-dated cheque is for "discharge of debt or liability" depends on the nature of the transaction. If on the date of the cheque, liability or debt exists or the amount has become legally recoverable, Section 138 is attracted. 31. The concept of Security Cheques was explained by the Apex Court in the case of Sripati Singh vs. State of Jharkhand, (2022) 18 SCC 614, wherein it was observed: "21. A cheque issued as security pursuant to a financial transaction cannot be considered as a worthless piece of paper under every circumstance. "Security" in its true sense is the state of being safe and the security given for a loan is something....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Thus, this contention of the Petitioner that the impugned Cheque was merely a security cheque and could not have been presented, is untenable. 35. The Complainant has specifically alleged about their being existing debt/liability on 09.12.2015, when the cheque was presented to the Bank. Thus, the next logical question that needs to be answered pertains to existence of a "legally enforceable debt". II. Whether the cheque was in excess of the Legally Recoverable Debt: 36. The second issue is that whether a legally enforceable debt of Rs. 6,82,416/- existed on 08.12.2015, the date the cheque was presented. In this regard we may make reference to the law in this regard. 37. Section 138 of the NI Act essentially criminalizes the dishonor of a cheque when it is issued by a person to another person for the discharge, in whole or in part, of any debt or other liability. 38. The Explanation to Section 138 clarifies that "debt or other liability" means a legally enforceable debt or other liability. 39. It is an admitted case of the parties that Respondent M/s Negolice India Ltd. awarded a Work Order dated 28.02.2013 for Rs. 56,86,633/-to the Petitioner Company for supply a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....est in the Owner, said cheque may be encashed by the Owner immediately thereupon, without giving any prior notice therefore to the Contractor, in discharge of the Contractor's then existing and outstanding liability for payment of liquidated damages." 43. It is not in dispute that a Mobilization advance of Rs.6,82,416/- had been given by the Complainant to the Respondent and that he had issued this impugned cheque for the same amount. In term of Clause 5 of the Indemnity Agreement, this Cheque could be presented by the Complainant for any loss, damages or harm suffered by him in execution of the Work Order. 44. What emerges from the rival pleadings is that only part of the Work got done while the Complainant was claiming vide emails dated 18.04.2014 that outstanding amount of Rs.3,61,847/- is due from the mobilization advance that was given by the Complainant. On the other hand, the Accused Company was asserting that there was in fact only a sum of Rs. Rs. 69,647/- which was liable to be returned to the Complainant. 45. The case involves an undated PDC bearing No. 723223 for Rs. 6,82,416/- given by the Petitioner's Company to the Respondent Company. The undisputed fact is ....