2010 (7) TMI 1204 - HC - Indian Laws

Summary

Issues Involved:
1. Whether the cheque was issued in discharge of any debt or liability.
2. Applicability of Section 138 of the Negotiable Instruments Act to cheques issued as security deposits.
3. Validity of the process issued by the trial court under Section 138 of the Negotiable Instruments Act.

Summary:

1. Whether the cheque was issued in discharge of any debt or liability:
The Petitioner argued that the cheque was not issued in discharge of any debt or liability but as a security deposit, making Section 138 of the Negotiable Instruments Act inapplicable. The Respondent contended that the cheque was deposited in lieu of a refundable security deposit for the due performance of the contract, thus constituting "other liability."

2. Applicability of Section 138 of the Negotiable Instruments Act to cheques issued as security deposits:
Section 138 of the Negotiable Instruments Act stipulates that a cheque must be issued for the discharge of any debt or other liability. The court highlighted that if a cheque is issued only as security for the performance of a contract and not towards the discharge of any debt or liability, the offence under Section 138 is not made out. The court cited precedents such as *Travel Force v. Mohan N. Bhave* and *M.S. Narayana Menon alias Mani v. State of Kerala* to support this interpretation. The court concluded that the cheque in question was issued as a security deposit at the time of entering into the contract and not for the discharge of any existing debt or liability.

3. Validity of the process issued by the trial court under Section 138 of the Negotiable Instruments Act:
The court found that the cheque was issued as a security deposit and not towards the discharge of any debt or liability. The court noted that the cheque was undated when issued and a date was inserted long after disputes had arisen between the parties. The court emphasized that the cheque was not presented to the drawee bank within six months from the date it was actually drawn, as required by the proviso (a) to Section 138. The court concluded that the complaint did not make out a criminal case to issue the process under Section 138, and forcing the accused to undergo trial would be a misuse of the court's process.

Conclusion:
The petition was allowed, and the order passed by the learned Metropolitan Magistrate to issue process under Section 138 was quashed. The court ruled that no case to issue process under Section 138 was made out, and the rule was made absolute accordingly.