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Issues involved:
The judgment involves the quashing of a case in S.T.C. No. 486 of 2004 on the file of the Judicial Magistrate No. III, Madurai, based on the legality of presenting post-dated cheques after the seizure of a vehicle under a hypothecation agreement. Summary: Issue 1: Presentation of Post-Dated Cheques After Vehicle Seizure The Petitioner availed a loan to purchase a lorry under a hypothecation agreement with the Respondent bank. The Respondent bank seized the lorry due to payment default by the Petitioner, leading to the sale of the vehicle and adjustment of the sale proceeds in the loan amount. The Petitioner argued that the post-dated cheques issued earlier cannot be used after the seizure and sale of the vehicle, as the liability had automatically varied. The Respondent contended that the remaining amount could still be realized through the post-dated cheques. Issue 2: Legal Liability and Consideration The Petitioner relied on a Kerala High Court decision stating that post-dated cheques lose their enforceability if the consideration fails after the seizure of the vehicle. The Court emphasized that for penal provisions under Section 138 of the Negotiable Instruments Act to apply, the debt or liability must be legally enforceable. The Respondent argued that the Kerala High Court decision was specific to hire purchase agreements, not hypothecation agreements. Judgment: The Court held that post-dated cheques lose their enforceability once the vehicle is seized under a hypothecation agreement. The owner must seek other legal remedies for recovery after seizure, and if the vehicle is sold, the balance amount can be adjusted with the sale proceeds. The case based on the post-dated cheques was not a valid offense under Section 138 of the Negotiable Instruments Act, leading to the quashing of the case in S.T.C. No. 486 of 2004.
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