2019 (3) TMI 1895 - SC - Indian Laws

Dishonor of Cheque - cheques were issued under agreement to sell - legally enforceable debt or not - HELD THAT - Admittedly the cheques were issued under and in pursuance of the agreement to sell. Though it is well settled that an agreement to sell does not create any interest in immoveable property it nonetheless constitutes a legally enforceable contract between the parties to it. A payment which is made in pursuance of such an agreement is hence a payment made in pursuance of a duly enforceable debt or liability for the purposes of Section 138 - Moreover acting on the General Power of Attorney the Respondent entered into a subsequent transaction on 3 August 2013. Evidently that transaction was after the legal notice dated 21 June 2013 and hence could not have been adverted to in the legal notice. Recourse to the jurisdiction of the High Court Under Section 482 was a clear abuse of process. The question as to whether there was a dispute as contemplated in Clause 4 of the Agreement to Sell which obviated the obligation of the purchaser to honor the cheque which was furnished in pursuance of the agreement to sell to the vendor cannot be the subject matter of a proceeding Under Section 482 and is a matter to be determined on the basis of the evidence which may be adduced at the trial. The order passed by the High Court in the petition Under Section 482 Code of Criminal Procedure was unsustainable - Appeal allowed.

Summary

Issues:
Appeal arising from quashing of complaints under Section 138 of the Negotiable Instruments Act, 1881 based on a petition under Section 482 of the Code of Criminal Procedure, 1973. Interpretation of Clause 4 of the agreement between parties regarding pending civil suit and its impact on the presentation of post-dated cheques for payment.

Analysis:
The judgment involves appeals stemming from the quashing of complaints under Section 138 of the Negotiable Instruments Act, 1881 by a learned Single Judge, based on a petition under Section 482 of the Code of Criminal Procedure, 1973. The Appellants, who are spouses, entered into an agreement to sell certain agricultural land with the Respondent, involving post-dated cheques for the balance consideration. The Respondent's cheques were dishonored due to insufficient funds, leading to the institution of complaints under Section 138. The High Court quashed the complaints based on Clause 4 of the agreement, which stipulated that if any dispute arose, the responsibility would remain with the selling party, and cheques would be paid after dispute resolution.

The High Court's decision was primarily based on the interpretation of Clause 4 of the agreement, which referred to a pending civil suit involving the subject property. The High Court held that the cheques were not issued to create a liability but for balance payment, and as per the agreement terms, cheques could not be presented due to the pending civil suit. The Appellants contended that subsequent transactions by the Respondent invalidated the High Court's decision, emphasizing the enforceability of the debt under the agreement to sell.

The Supreme Court disagreed with the High Court's interpretation, stating that the cheques were issued in pursuance of the agreement to sell, constituting a legally enforceable debt under Section 138. The Court highlighted that the subsequent transaction by the Respondent, post-legal notices, was not relevant to the dispute. The Court deemed the High Court's decision unsustainable, emphasizing that the determination of a dispute as per Clause 4 should occur during trial based on evidence. The appeals were allowed, setting aside the High Court's judgment while refraining from expressing opinions on trial merits.

In conclusion, the Supreme Court's judgment overturned the High Court's decision to quash the complaints under Section 138, emphasizing the enforceability of the debt under the agreement to sell and the need to address disputes during trial proceedings. The ruling clarified the legal standing of post-dated cheques in such contractual arrangements, highlighting the importance of evidence-based determinations during trial proceedings.