Cheque issued as security is enforceable
the cheque though issued as security at the point when the loan was advanced, it was issued as an assurance to repay the amount after the debt becomes due for repayment. The loan was in subsistence when the cheque was issued and had become repayable during June/July 2015 and the cheque issued towards repayment was agreed to be presented thereafter. If the amount was not paid in any other mode before June/July 2015, it was incumbent on the respondent No.2 to arrange sufficient balance in the account to honour the cheque which was to be presented subsequent to June/July 2015. These aspects would primafacie indicate that there was a transaction between the parties towards which a legally recoverable debt was claimed by the appellant and the cheque issued by the respondent No.2 was presented. On such cheque being dishonoured, cause of action had arisen for issuing a notice and presenting the criminal complaint under Section 138 of N.I. Act on the payment not being made
REPORTABLE
IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPEAL NOS. 12691270 OF 2021
(Arising out of SLP(Criminal) No.252253/2020)
Sripati Singh (since deceased) Through ….Appellant(s)
His Son Gaurav Singh
Versus
The State of Jharkhand & Anr. …. Respondent(s)
J U D G M E N T
A.S. Bopanna,J.
1. The appellant is before this Court assailing the order
dated 17.12.2019 passed by the High Court of Jharkhand
at Ranchi in Criminal M.P. No.2635 of 2017 and Criminal
M.P. No.2655 of 2017. Through the said order, the High
Court has allowed the said Crl.Miscellaneous Petitions and
has set aside the orders dated 04.07.2016 and 13.06.2019
passed by the Judicial Magistrate First Class, Palamau in
Complaint Case No.1833 of 2015. The learned Judicial
Magistrate by the order dated 04.07.2016 had taken
1
cognizance of the offence alleged against the respondent
No.2 herein. By the order dated 13.06.2019 the learned
Judicial Magistrate had rejected the petition filed by the
respondent No.2 seeking discharge in the said criminal
complaint.
2. The brief facts leading to the present case as pleaded
is that the appellant and the respondent No.2 are known to
each other inasmuch as the respondent No.2 and the
daughter of the appellant were pursuing their education
together in London. On their return to India, the
respondent No.2 had settled in Bangalore and due to the
earlier acquaintance, the cordial relationship amongst the
families had continued. The respondent No.2 on learning
that the appellant was involved in business, had
approached him at Daltonganj and sought financial
assistance to the tune of Rs.1 crore so as to enable the
respondent No.2 to invest the same in his business. Since
the respondent No.2 had assured that the same would be
returned, the appellant placed trust in him and the
appellant claims to have advanced further sum and in all a
2
total sum of Rs.2 crores during the periods between
January 2014 to July 2014. The said amount was paid to
respondent No.2 by transferring from the account of
appellant’s daughter and also from the account of the
appellant. Towards the said transaction, four agreements
are stated to have been entered acknowledging the receipt
of the loan. The said agreements were reduced into writing
on nonjudicial stamp papers bearing No. B489155,
B489156, B489157 and B489159.
3. The respondent No.2 assured that the amount would
be returned during June/July 2015. Towards the same,
three cheques amounting to Rs.1 crore was handed over to
the appellant. Thereafter, three more cheques for Rs.1
crore was also given. The appellant is stated to have met
respondent No.2 during July 2015 when the respondent
No.2 assured that the amount will be repaid during October
2015. Based on such assurance, the appellant presented
the cheques for realisation on 20.10.2015. On
presentation, the said cheques were returned due to
‘insufficient funds’ in the bank account of respondent No.2.
3
The appellant therefore got issued a legal notice as
contemplated under Section 138 of the Negotiable
Instruments Act (“N.I. Act” for short). Since the respondent
No.2 had taken the money on the assurance that the same
would be returned but had deceived the appellant, the
appellant contended that the respondent No.2 had cheated
him and accordingly the complaint was filed both under
Section 420 of IPC as also Section 138 of N.I. Act. The
appellant had submitted the sworn statement of himself
and witnesses. The learned Judicial Magistrate through the
order dated 04.07.2016 took cognizance and issued
summons to the respondent No.2.
4. The respondent No.2 on appearance filed a
miscellaneous petition seeking discharge from the criminal
proceeding, which was rejected by the order dated
13.06.2019. It is in that background, the respondent No.2
claiming to be aggrieved by the order dated 04.07.2016 and
13.06.2019 approached the High Court in the said criminal
miscellaneous petitions. The High Court, through the
impugned order has allowed the petitions filed by the
4
respondent No.2. The appellant therefore claiming to be
aggrieved is before this Court in these appeals.
5. We have heard Mr. M.C. Dhingra, learned counsel for
the appellant, Mr. Raj Kishor Choudhary, learned counsel
for the respondent No.1, Mr. Keshav Murthy, learned
counsel for respondent No.2 and perused the appeal
papers.
6. The learned counsel for the appellant would contend
that the respondent No.2 taking advantage of the
acquaintance with the family of the appellant, had
borrowed the amount which was to be repaid and the
cheque issued was towards discharge of the said amount.
In the said circumstance, when the cheques issued was for
discharge of the legally recoverable debt and it had been
dishonoured, the provisions of Section 138 of N.I. Act would
get attracted. Therefore, the complaint filed by the
appellant is in accordance with law. It is his further
contention that in the present case since respondent No.2
had gained the confidence of the appellant due to the
acquaintance with his daughter and in that circumstance
5
when the amounts which had been taken by him earlier
had been repaid so as to gain the confidence and having
received substantial amount had at that stage not made
arrangement for sufficient funds in the bank despite having
issued the cheques to assure payment, the same would
amount to the respondent No.2 cheating the appellant by
design and therefore would attract Section 420 IPC. It is
contended that towards the amount received, the same had
been acknowledged by subscribing the signature to the
loan agreement. Further, when there was an undertaking to
repay the same, the cheque was issued towards such
discharge of legally recoverable debt and the cheque on
presentation after the agreed due date for repayment of the
loan was dishonoured, the same would constitute an
offence. In that regard, it is contended that the learned
Judicial Magistrate having taken note of the complaint and
the sworn statements recorded by the appellant and his
witnesses had taken cognizance and issued summons. In
such event, the order passed by the learned Judicial
Magistrate for taking cognizance and also to reject the
discharge petition filed by the respondent No.2 was in
6
accordance with law. It is contended that the learned
Judge of the High Court had in fact committed an error in
arriving at the conclusion that the cheque issued by the
respondent No.2 was towards ‘security’ and that the same
could not have been treated as a cheque issued towards the
discharge of legally recoverable debt. It is contended that
the learned Judge has proceeded at a tangent and
committed an error and as such the order passed by the
High Court calls for interference.
7. To contend that the cheque issued towards discharge
of the loan and presented for recovery of the same cannot
be construed as issued for ‘security’ has relied on the
decision of this Court in the case of Sampelly
Satyanarayana Rao vs. Indian Renewable Energy
Development Agency Ltd., (Criminal Appeal No.867 of
2016) and in M/s Womb Laboratory Pvt. Ltd. vs. Vijay
Ahuja and Anr. (Criminal Appeal No.13821383 of 2019).
Hence, it is contended that the observation contained in the
order of the High Court that a cheque issued towards
security cannot attract the provision of Section 138 of N.I.
7
Act is erroneous and the reference made by the High Court
to the decision in Sudhir Kr. Bhalla vs. Jagdish Chand
and Others 2008 7 SCC 137 is without basis. The learned
counsel therefore contends that the order passed by the
High Court is liable to be set aside and the criminal
complaint be restored to file to be proceeded in accordance
with law.
8. Mr. Keshav Murthy, learned counsel for respondent
No.2 would contend that the learned Judicial Magistrate
without application of mind to the fact situation had taken
cognizance and issued summons and had not appropriately
considered the case put forth by the respondent No.2
seeking discharge. He would contend that the High Court
on the other hand, has taken note of the entire gamut of
the case and has arrived at the conclusion that the offence
alleged both under Section 420 IPC and Section 138 of the
N.I. Act has not been made out. It is contended that the
claim for the sum of Rs. 2 crores as made in the complaint
is without basis. It is his case that the respondent No.2 has
issued a comprehensive reply disputing the claim put forth
8
by the appellant. It is contended that from the very
complaint and the statement of witnesses recorded by the
learned Judicial Magistrate it is evident that no criminal
offence is made out in the instant case. Even if the case as
put forth in the complaint is taken note, at best the
transaction can be considered as an advancement of loan
for business purpose and even if it is assumed that the said
amount was not repaid it would only give rise to civil
liability and the appellants could have only filed a civil suit
for recovery of the loan. The statement of the witnesses,
more particularly the daughter of the complainant would
indicate the longstanding relationship between the parties
and also the monetary transaction which in any event does
not constitute a criminal offence. It is contended that under
any circumstance, the offence as alleged under Section 420
of IPC cannot be sustained. Insofar as the offence alleged
against the respondent No.2 under section 138 of N.I. Act,
the same would also not be sustainable when the
complainant himself has relied on the loan agreement
wherein reference is made to the cheque being issued as
security for the loan. The learned counsel contends that the
9
High Court in fact has taken note of these aspects,
proceeded in its correct perspective and has arrived at a
just conclusion, which does not call for interference. He
therefore, contends that the above appeals be dismissed.
9. In the light of the rival contentions, a perusal of the
appeal papers would disclose that it is the very case of the
appellant that he has advanced substantial amount of Rs.
2 crores to the respondent No.2 by way of financial
assistance for business purpose. While taking note of the
nature of the transaction and also the proceedings
initiated, it is necessary for us to remain conscious of the
fact that the proceedings between the parties is at the
preliminary stage and any conclusive findings rendered in
relation to the dispute between the parties would affect
their case if ultimately the appellants were to succeed
herein and the criminal proceedings are to be restored for
further progress. Therefore, what is necessary to be
examined herein is, as to whether the appellant has prima
facie established a transaction under which there is a
legally recoverable debt payable to the appellant by the
10
respondent No.2 and as to whether the cheques in question
relating to which the complaint has been filed by the
appellant is issued towards discharge of such legally
recoverable debt. In that regard, what is necessary to be
considered is also as to whether the cheques in question
are still to be considered only as ‘security’ for the said
amount and whether it was not liable to be presented for
recovery of the legally recoverable debt. The question
which would also arise for consideration is as to whether
the complaint filed by the appellant should be limited to a
proceeding under Section 138 of N.I. Act or on the facts
involved, whether the invoking of Section 420 IPC was also
justified.
10. While considering the above aspects, it is evident
that the learned Magistrate having referred to the complaint
and sworn statement of the complainant and the witnesses
has taken cognizance, issued summons and has
consequently arrived at the conclusion that the discharge
as sought by the respondent No.2 cannot be accepted. The
High Court on the other hand having referred to the rival
11
contentions has concluded as follows:
“20. From the aforesaid facts and from the documents
of the complainant, this Court finds that long
standing 'business transaction and inability of
refunding a loan has been given a colour of criminal
offence of cheating punishable under Section 420 of
the Indian Penal Code. A breach of trust with mens
rea gives rise to a criminal prosecution. In this case
when I go through the evidence before charge of the
complainant and the documents of the complainant, I
find that there were long standing business
transactions between the parties. Since 2011 money
was advanced by the complainant and his family
members to the accused and the complainant witness
admits that money was also transferred from the
account of the accused to the account of daughter of
the complainant. From the evidence, I find that there
is no material to suggest existence of any mens rea.
Thus, this case becomes a case of simplicitor case of
nonrefunding of loan, which cannot be a basis for
initiating criminal proceeding. The Hon'ble Supreme
Court in the case of Samir Sahay alias Sameer Sahay
versus State of UP & Anr. reported in (2018) 14 SCC
233 held that when the dispute between the parties
was ordinarily a civil dispute resulting from a breach
of contract on the part of the appellant by nonrefunding of amount advanced, the same would not
constitute an offence of cheating. In this case also, I
find that it is true case that the amount of loan has
not been refunded, thus, this cannot come within the
purview of cheating, though the complainant by
suppressing the material facts, has tried to give a
different colour. Thus, I find that no case punishable
under Section 420 of the Indian Penal Code can be
made out in this case.
21. Further, I find that it is the documents of the
complainant, which show that the cheques were given
by way of security. Even if I do not believe the
statement of the accused, the documents of the
complainant cannot be brushed aside. As held earlier,
supported by the decision of the Hon'ble Supreme
Court in the case of "Sudhir Kumar Bhalla" (supra) a
cheque given by way of security cannot attract
Section 138 of the Negotiable Instruments Act. Since
12
the cheques were given by way of security, which is
evident from the complainant's documents (though
this fact has also been suppressed in the complaint
petition), I find that Section 138 of the Negotiable
Instruments Act is also not attracted in this case.”
11. In the background of what has been taken note by us
and the conclusion reached by the High Court, insofar as
the High Court arriving at the conclusion that no case
punishable under Section 420 IPC can be made out in
these facts, we are in agreement with such conclusion. This
is due to the fact that even as per the case of the appellant
the amount advanced by the appellant is towards the
business transaction and a loan agreement had been
entered into between the parties. Under the loan
agreement, the period for repayment was agreed and the
cheque had been issued to ensure repayment. It is no
doubt true that the cheques when presented for realisation
were dishonoured. The mere dishonourment of the cheque
cannot be construed as an act on the part of the
respondent No.2 with a deliberate intention to cheat and
the mens rea in that regard cannot be gathered from the
point the amount had been received. In the present facts
and circumstances, there is no sufficient evidence to
13
indicate the offence under Section 420 IPC is made out and
therefore on that aspect, we see no reason to interfere with
the conclusion reached by the High Court.
12. Having arrived at the above conclusion and also
having taken note of the conclusion reached by the High
Court as extracted above, it is noted that the High Court
has itself arrived at the conclusion that the instant case
becomes a simpliciter case of nonrefunding of loan which
cannot be a basis for initiating criminal proceedings. The
conclusion to the extent of holding that it would not
constitute an offence of cheating, as already indicated
above would be justified. However, when the High Court
itself has accepted the fact that it is a case of nonrefunding of the loan amount, the first aspect that there is
a legally recoverable debt from the respondent No.2 to the
appellant is primafacie established. The only question that
therefore needs consideration at our hands is as to whether
the contention putforth on behalf of respondent No.2 that
an offence under Section 138 of the N.I. Act is not made out
as the dishonourment alleged is of the cheques which were
issued by way of ‘security’ and not towards discharge of any
14
debt.
13. In order to consider this aspect of the matter we have
at the outset taken note of the four loan agreements dated
13.08.2014 which is the subject matter herein. Under each
of the agreements, the promise made by respondent No.2 is
to pay the appellant a sum of Rs.50 lakhs. Thus, the total
of which would amount to Rs.2 crores as contended by the
appellant. Towards the promise to pay, the repayment
agreed by the respondent No.2 is to clear the total amount
within June/July 2015. Para 5 of the loan agreement
indicates that six cheques have been issued as security.
The claim of the appellant has been negated by the High
Court only due to the fact that the agreement indicates that
the cheques have been given by way of security and the
complainant has also stated this fact in the complaint.
Though the High Court has taken note of the decision in
the case of Sudhir Kumar Bhalla (supra) to hold that the
cheque issued as security cannot constitute an offence, the
same in our opinion does not come to the aid of the
respondent No.2. There is no categorical declaration by this
15
Court in the said case that the cheque issued as security
cannot be presented for realisation under all
circumstances. The facts in the said case relate to the
cheques being issued and there being alterations made in
the cheques towards which there was also a counter
complaint filed by the drawer of the cheque. Hence, the
said decision cannot be a precedent to answer the position
in this case and the High Court was not justified in placing
reliance on the same.
14. In fact, it would be apposite to take note of the
decision of this Court in the case of Sampelly
Satyanarayana Rao (supra) wherein this Court while
answering the issue as to what constitutes a legally
enforceable debt or other liability as contained in the
Explanation 2 to Section 138 of N.I. Act has held as
hereunder:
“10. We have given due consideration to the
submission advanced on behalf of the appellant as well
as the observations of this Court in Indus Airways
(supra) with reference to the explanation to Section 138
of the Act and the expression "for discharge of any debt
or other liability" occurring in Section 138 of the Act.
We are of the view that the question whether a
postdated cheque is for "discharge of debt or
16
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, the
Section is attracted and not otherwise.
11. Reference to the facts of the present case clearly
shows that though the word "security" is used in
Clause 3.l (iii) of the agreement, the said expression
refers to the cheques being towards repayment of
instalments. The repayment becomes due under the
agreement, the moment the loan is advanced and the
instalment falls due. It is undisputed that the loan
was duly disbursed on 28th February, 2002 which
was prior to the date of the cheques. Once the loan
was disbursed and instalments have fallen due on
the date of the cheque as per the agreement,
dishonour of such cheques would fall under
Section 138 of the Act. The cheques undoubtedly
represent the outstanding liability.
12. Judgment in Indus Airways (supra) is clearly
distinguishable. As already noted, it was held therein
that liability arising out of claim for breach of contract
under Section 138, which arises on account of
dishonour of cheque issued was not by itself at par
with criminal liability towards discharge of
acknowledged and admitted debt under a loan
transaction. Dishonour of cheque issued for discharge
of later liability is clearly covered by the statute in
question. Admittedly, on the date of the cheque there
was a debt/liability in presenti in terms of the loan
agreement, as against the case of Indus Airways
(supra), where the purchase order had been cancelled
and cheque issued towards advance payment for the
purchase order was dishonoured. In that case, it was
found that the cheque had not been issued for
discharge of liability but as advance for the purchase
order which was cancelled. Keeping in mind this fine
but real distinction, the said judgment cannot be
applied to a case of present nature where the
cheque was for repayment of loan instalment
which had fallen due though such deposit of
cheques towards repayment' of instalments was
17
also described as "security" in the loan agreement.
In applying the judgment in Indus Airways (supra),
one cannot lose sight of the difference between a
transaction of purchase order which is cancelled
and that of a loan transaction where loan has
actually been advanced and its repayment is due
on the date of the cheque.
13. Crucial question to determine applicability of
Section 138 of the Act is whether the cheque
represents discharge of existing enforceable debt
or liability or whether it represents advance
payment without there being subsisting debt or
liability. While approving the views of different
High Courts noted earlier, this is the underlying
principle as can be discerned from discussion of
the said cases in the judgment of this Court.”
(emphasis supplied)
The said conclusion was reached by this Court while
distinguishing the decision of this Court in the case of Indus
Airways Pvt. Ltd. Vs. Magnum Aviation Pvt. Ltd. (2014) 12
SCC 539 which was a case wherein the issue was of dishonour
of postdated cheque issued by way of advance payment against
a purchase order that had arisen for consideration. In that
circumstance, it was held that the same cannot be considered
as a cheque issued towards discharge of legally enforceable
debt.
18
15. Further, this Court in the case of M/s Womb
Laboratories Pvt. Ltd. (supra) has held as follows:
“5. In our opinion, the High Court has muddled
the entire issue. The averment in the complaint
does indicate that the signed cheques were handed
over by the accused to the complainant. The
cheques were given by way of security, is a matter
of defence. Further, it was not for the discharge of
any debt or any liability is also a matter of defence.
The relevant facts to countenance the defence will
have to be proved that such security could not be
treated as debt or other liability of the accused.
That would be a triable issue. We say so because,
handing over of the cheques by way of security per
se would not extricate the accused from the
discharge of liability arising from such cheques.
6. Suffice it to observe, the impugned judgment of
the High Court cannot stand the test of judicial
scrutiny. The same is, therefore, set aside.”
16. 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 given as a
pledge of payment. It is given, deposited or pledged to
make certain the fulfilment of an obligation to which the
parties to the transaction are bound. If in a transaction,
a loan is advanced and the borrower agrees to repay the
19
amount in a specified timeframe and issues a cheque as
security to secure such repayment; if the loan amount is
not repaid in any other form before the due date or if
there is no other understanding or agreement between
the parties to defer the payment of amount, the cheque
which is issued as security would mature for
presentation and the drawee of the cheque would be
entitled to present the same. On such presentation, if
the same is dishonoured, the consequences
contemplated under Section 138 and the other
provisions of N.I. Act would flow.
17. When a cheque is issued and is treated as
‘security’ towards repayment of an amount with a time
period being stipulated for repayment, all that it ensures
is that such cheque which is issued as ‘security’ cannot
be presented prior to the loan or the instalment maturing
for repayment towards which such cheque is issued as
security. Further, the borrower would have the option of
repaying the loan amount or such financial liability in
any other form and in that manner if the amount of loan
20
due and payable has been discharged within the agreed
period, the cheque issued as security cannot thereafter
be presented. Therefore, the prior discharge of the loan or
there being an altered situation due to which there would
be understanding between the parties is a sine qua non
to not present the cheque which was issued as security.
These are only the defences that would be available to the
drawer of the cheque in a proceedings initiated under
Section 138 of the N.I. Act. Therefore, there cannot be a
hard and fast rule that a cheque which is issued as
security can never be presented by the drawee of the
cheque. If such is the understanding a cheque would also
be reduced to an ‘on demand promissory note’ and in all
circumstances, it would only be a civil litigation to
recover the amount, which is not the intention of the
statute. When a cheque is issued even though as
‘security’ the consequence flowing therefrom is also
known to the drawer of the cheque and in the
circumstance stated above if the cheque is presented and
dishonoured, the holder of the cheque/drawee would
have the option of initiating the civil proceedings for
21
recovery or the criminal proceedings for punishment in
the fact situation, but in any event, it is not for the
drawer of the cheque to dictate terms with regard to the
nature of litigation.
18. If the above principle is kept in view, as already
noted, under the loan agreement in question the
respondent No.2 though had issued the cheques as
security, he had also agreed to repay the amount during
June/July 2015, the cheque which was held as security
was presented for realization on 20.10.2015 which is after
the period agreed for repayment of the loan amount and the
loan advanced had already fallen due for payment.
Therefore, prima facie the cheque which was taken as
security had matured for payment and the appellant was
entitled to present the same. On dishonour of such cheque
the consequences contemplated under the Negotiable
Instruments Act had befallen on respondent No.2. As
indicated above, the respondent No.2 may have the defence
in the proceedings which will be a matter for trial. In any
event, the respondent No.2 in the fact situation cannot
22
make a grievance with regard to the cognizance being taken
by the learned Magistrate or the rejection of the petition
seeking discharge at this stage.
19. In the background of the factual and legal position
taken note supra, in the instant facts, the appellant cannot
be nonsuited for proceeding with the complaint filed under
Section 138 of N.I. Act merely due to the fact that the
cheques presented and dishonoured are shown to have
been issued as security, as indicated in the loan agreement.
In our opinion, such contention would arise only in a
circumstance where the debt has not become recoverable
and the cheque issued as security has not matured to be
presented for recovery of the amount, if the due date agreed
for payment of debt has not arrived. In the instant facts, as
noted, the repayment as agreed by the respondent No.2 is
during June/July 2015. The cheque has been presented by
the appellant for realisation on 20.10.2015. As on the date
of presentation of the cheque for realisation the repayment
of the amount as agreed under the loan agreement had
matured and the amount had become due and payable.
23
Therefore, to contend that the cheque should be held as
security even after the amount had become due and
payable is not sustainable. Further, on the cheques being
dishonoured the appellant had got issued a legal notice
dated 21.11.2015 wherein interalia it has been stated as
follows:
“You request to my client for loan and after accepting
your word my client give you loan and advanced loan
and against that you issue different cheque all
together valued Rs. One crore and my client was also
assured by you will clear the loan within June/July
2015 and after that on 26.10.2015 my client produce
the cheque for encashment in H.D.F.C. Bank all
cheque bearing No.402771 valued Rs. 25 Lakh,
402770 valued Rs.25 lakh, 402769 valued Rs. 50
lakh, (total rupees one crore) and above numbered
cheques was returned with endorsement "In sufficient
fund". Then my client feel that you have not fulfil the
assurance.”
20. The notice as issued indicates that the appellant has
at the very outset after the cheque was dishonoured,
intimated the respondent no.2 that he had agreed to clear
the loan by June/July 2015 after which the appellant had
presented the cheque for encashment on 26.10.2015 and
the assurance to repay has not been kept up.
21. In the above circumstance, the cheque though issued
as security at the point when the loan was advanced, it was
24
issued as an assurance to repay the amount after the debt
becomes due for repayment. The loan was in subsistence
when the cheque was issued and had become repayable
during June/July 2015 and the cheque issued towards
repayment was agreed to be presented thereafter. If the
amount was not paid in any other mode before June/July
2015, it was incumbent on the respondent No.2 to arrange
sufficient balance in the account to honour the cheque
which was to be presented subsequent to June/July 2015.
22. These aspects would primafacie indicate that there
was a transaction between the parties towards which a
legally recoverable debt was claimed by the appellant and
the cheque issued by the respondent No.2 was presented.
On such cheque being dishonoured, cause of action had
arisen for issuing a notice and presenting the criminal
complaint under Section 138 of N.I. Act on the payment not
being made. The further defence as to whether the loan had
been discharged as agreed by respondent No.2 and in that
circumstance the cheque which had been issued as
security had not remained live for payment subsequent
25
thereto etc. at best can be a defence for the respondent
No.2 to be put forth and to be established in the trial. In
any event, it was not a case for the Court to either refuse to
take cognizance or to discharge the respondent No.2 in the
manner it has been done by the High Court. Therefore,
though a criminal complaint under Section 420 IPC was
not sustainable in the facts and circumstances of the
instant case, the complaint under section 138 of the N.I Act
was maintainable and all contentions and the defence were
to be considered during the course of the trial.
23. In that view, the order dated 17.12.2019 passed by
the High Court of Jharkhand in Cr.M.P No.2635 of 2017
with Cr.M.P No.2655 of 2017 are set aside. Consequently,
the order dated 04.07.2016 and 13.06.2019 passed by the
Judicial Magistrate are restored. The complaint bearing
C.C. No.1839 of 2015 and 1833 of 2015 are restored to the
file of the Judicial Magistrate, limited to the complaint
under Section 138 of N.I. Act to be proceeded in accordance
with law.
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24. All contentions of the parties on merit are left open.
We make it clear that none of the observations contained
herein shall have a bearing on the main trial. The trial
court shall independently arrive at its conclusion based on
the evidence tendered before it.
25. The appeals are allowed in part with no order as to
costs.
26. Pending application, if any, shall also stand disposed
of.
…………………….J.
(M.R. SHAH)
…………………….J.
(A.S. BOPANNA)
New Delhi,
October 28, 2021
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