2010 (2) TMI 1312 - HC - Indian Laws

Summary

Issues Involved:
1. Whether the cheque issued by the respondent was for the discharge of an existing debt or liability.
2. Whether the cheque was issued as security for the loan.
3. Whether the provisions of Section 138 of the Negotiable Instruments Act are applicable.
4. Whether the Trial Court was correct in acquitting the respondent based on the evidence presented.

Summary:

1. Existing Debt or Liability:
The Trial Court acquitted the respondent on the grounds that the cheque was not issued for an existing debt or liability. The respondent had repaid the entire loan by 2005 and provided receipts as evidence. The court found that the amounts paid by the respondent were not reflected in the account extract produced by the complainant, thus failing to prove that Rs. 87,209/- was due on the date of the cheque.

2. Cheque Issued as Security:
The court held that the cheque in question was one of ten blank cheques obtained by the applicant bank as security while sanctioning the loan. The respondent did not issue the cheque towards any existing debt or liability. The evidence showed that the cheque book containing the cheque in question was issued on 04.10.2000, and the respondent was not using cheques from this book in 2008, supporting the claim that the cheque was given as security.

3. Applicability of Section 138 of the Negotiable Instruments Act:
The court discussed the object and purpose of Section 138, which is to punish those who issue cheques without sufficient funds to discharge their liabilities. However, the court noted that Section 138 is not intended to cover cheques issued as security for loans. The court cited several cases where cheques given as security were held not to attract the provisions of Section 138, including *Anand Urban Co-operative Credit Society v. Vipin Lalchand Mehta* and *Karekar Finance Pvt. Ltd. v. Shri M.N. Bashyam*.

4. Trial Court's Acquittal:
The Trial Court's decision was based on three main grounds: the cheque was one of ten blank cheques obtained as security, there was a bar of limitation, and the amounts paid by the respondent were not reflected in the account extract. The court found the evidence of the respondent reliable and noted that the complainant failed to produce account extracts up to the date of the cheque, leading to an adverse inference. The court concluded that it was not proved that Rs. 87,209/- was outstanding on the date of the cheque, thus provisions of Section 138 were not attracted.

Conclusion:
The High Court dismissed the application for leave to file an appeal against the order of acquittal, agreeing with the Trial Court's findings and reasoning. The court emphasized that Section 138 of the Negotiable Instruments Act is not applicable to cheques issued as security for loans.