2009 (2) TMI 927 - HC - Indian Laws

Summary

Issues Involved:
1. Maintainability of the complaint under Section 138 of the Negotiable Instruments Act, 1881.
2. Whether the cheques were issued as security or for discharge of a debt.

Issue-wise Detailed Analysis:

1. Maintainability of the Complaint:
The primary issue addressed was whether the complaint filed under Section 138 of the Negotiable Instruments Act, 1881, was maintainable. The petitioners contended that the cheques in question were issued as security and not for any existing debt. The court examined the complaint and supporting documents, including the Memorandum of Understanding (MOU), Deed of Corporate Guarantee, and statutory notice issued by the respondent. It was noted that the cheques were issued as collateral security for a debt that was yet to accrue. The court referred to the precedent set by the Supreme Court in DCM Financial Services Ltd. v. J.N. Sareen, emphasizing the importance of distinguishing between civil and criminal proceedings and the standard of proof required in each.

2. Cheques Issued as Security or for Discharge of Debt:
The petitioners argued that the cheques were issued as a security for a future liability and not for an existing debt. The court examined the relevant clauses of the MOU and the Deed of Corporate Guarantee, which confirmed that the cheques were issued as collateral security. The court cited the Supreme Court judgment in M.S. Narayana Menon @ Mani vs. State of Kerala, which held that a cheque issued as security does not fall within the purview of Section 138 of the Negotiable Instruments Act. Additionally, the court referred to the judgment in V.Y. Jose and Anr. vs. State of Gujarat and Anr., which emphasized that inherent powers under Section 482 of Cr.P.C. should be exercised to prevent harassment when no case is made out.

Conclusion:
The court concluded that the cheques in question were issued as security and not for the discharge of any existing debt. Consequently, the complaint under Section 138 of the Negotiable Instruments Act was not maintainable. The court quashed the Criminal Complaint Nos. 837/06 and 838/06 and set aside the summoning orders dated 09.06.2006. The petitions were disposed of accordingly.