2011 (3) TMI 1760 - HC - Indian Laws

Summary

Issues involved:
The issues involved in this case are the quashing of complaints filed under Section 138 of the Negotiable Instruments Act (N.I. Act) for dishonour of cheques, the interpretation of Section 138 N.I. Act regarding the liability for dishonoured cheques, and the validity of multiple complaints for dishonour of cheques against a single liability.

Summary:

Issue 1: Quashing of complaints under Section 138 N.I. Act
The petitioner sought the quashing of complaints filed against him under Section 138 of the N.I. Act by respondent No.2 for dishonour of three cheques issued by him as security and assurance for encashment of a cheque worth `70 lakhs. The petitioner contended that the cheques were issued from his personal account only as security and not for the discharge of any existing liability.

Issue 2: Interpretation of Section 138 N.I. Act
The court examined Section 138 N.I. Act, which imposes criminal liability only if a dishonoured cheque was issued for the discharge of an existing debt or liability. It clarified that a post-dated cheque issued for a future liability would not attract Section 138 N.I. Act. Citing the case of M.S. Narayana Menon @ Mani Vs. State of Kerala & Anr., the court emphasized that cheques issued for security or other purposes do not fall under Section 138 of the Act.

Issue 3: Validity of multiple complaints for dishonour of cheques
The respondent argued that since the cheque of `70 lakhs was dishonoured, they had the right to present the three cheques issued as security for encashment. The court noted that the three cheques of `25 lakhs each were issued by the petitioner as security from his personal account and were to be presented only in case of the dishonour of the `70 lakhs cheque. Consequently, the court held that Section 138 N.I. Act was not attracted in this case, and the petitions for quashing the complaints were allowed.

In conclusion, the court quashed the summoning orders for the complaints filed against the petitioner under Section 138 N.I. Act, as the cheques in question were issued as security and not for the discharge of an existing liability.