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2001 (9) TMI 1078 - SC - Companies Law

Issues involved: Appeal against refusal to quash criminal proceedings u/s 138 and 142 of Negotiable Instruments Act based on dishonored cheque.

Summary:
The appeal was filed against the Bombay High Court's decision to not quash criminal proceedings initiated u/s 138 and 142 of the Negotiable Instruments Act. The accused argued that the grounds for dishonor of the cheque did not constitute an offense u/s 138, as the essential elements were not met. The High Court, despite considering the contentions, relied on a previous judgment and refused to quash the proceedings. The Supreme Court, however, disagreed with the High Court's reasoning and set aside the judgment, quashing the criminal proceedings.

Analysis:
The accused contended that the dishonor of the cheque did not fulfill the requirements of u/s 138 of the Act, as there was no evidence of insufficient funds or exceeding the credit limit. The only reason for dishonor was an incomplete signature, not a lack of funds or exceeding the arrangement with the bank. The Supreme Court emphasized that u/s 138, specific conditions must be satisfied for the penal provision to apply, and in this case, those conditions were not met. Therefore, the High Court erred in relying on a previous judgment and refusing to quash the criminal proceedings. The Supreme Court ultimately quashed the proceedings and allowed the appeal.

 

 

 

 

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