2019 (9) TMI 1561 - SC - Indian Laws

Dishonor of Cheque - security offered for the discharge of any debt or any liability or not - Section 138 of the Negotiable Instruments Act, 1881 - HELD THAT - 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. This is 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. Counsel for the Appellant pointed out that in view of the changed legal position, the complaint must now proceed before the Court at Ahmedabad. Even this contention may be pursued before the High Court in the remanded proceedings, which may be dealt with appropriately. Appeal disposed off.

Summary

Issues involved:
Appeal against quashing of proceedings under Section 138 of the Negotiable Instruments Act, 1881 by the High Court of Delhi.

Analysis:

1. Quashing of Proceedings:
The Supreme Court granted leave to appeal against the judgment and order of the High Court of Delhi quashing the proceedings initiated under Section 138 of the Negotiable Instruments Act, 1881. The High Court based its decision on the assertion in the complaint that the accused had issued signed blank cheques as security, assuming that the cheques were given only for security purposes and not for the discharge of any debt or liability. The Supreme Court opined that the High Court had muddled the issue by not considering that whether the cheques were given as security or for discharge of liability was a matter of defense, and the relevant facts to support this defense needed to be proved in a trial. The Supreme Court held that handing over cheques as security does not absolve the accused from the liability arising from those cheques.

2. Judicial Scrutiny:
The Supreme Court observed that the High Court's judgment did not stand the test of judicial scrutiny and therefore set it aside. The Court emphasized that the issue of whether the cheques were given as security or for the discharge of liability was a triable matter that needed to be examined in detail during the trial proceedings. The Supreme Court's decision indicated that the High Court had erred in quashing the proceedings solely based on the assumption that the cheques were given as security and not for discharging any debt or liability.

3. Remand to High Court:
The Supreme Court directed that the parties be sent back to the High Court for further examination of the grounds raised by the respondent in the quashing petition. The High Court was instructed to consider these grounds on their merits in accordance with the law. Additionally, the appellant's counsel highlighted the need for the complaint to proceed before the Court at Ahmedabad due to a changed legal position, which could also be addressed before the High Court during the remanded proceedings.

4. Disposal of Appeals:
Ultimately, the Supreme Court disposed of the appeals by setting aside the High Court's judgment, emphasizing the need for a trial to determine whether the cheques were given as security or for discharging any liability. The Court's decision highlighted the importance of examining the factual and legal aspects of the case in a trial setting rather than prematurely quashing the proceedings based on assumptions made in the complaint and initial stages of litigation.