2018 (9) TMI 587 - HC - Indian Laws

Dishonor of Cheque - recovery of loan granted - Section 138 of Negotiable Instruments Act - Held that - The appellant / complainant has failed to prove the case of 138 of the Negotiable Instruments Act against the accused - appeal dismissed - decided against appellant.

Summary

Issues Involved:
1. Legally enforceable debt under Section 138 of the Negotiable Instruments Act.
2. Validity of the cheque issued as security.
3. Termination of the Hire Purchase Agreement.
4. Seizure and sale of the vehicle.
5. Applicability of precedents and judgments.

Issue-wise Detailed Analysis:

1. Legally enforceable debt under Section 138 of the Negotiable Instruments Act:
The primary issue was whether the cheque issued by the accused was for a legally enforceable debt. The accused had defaulted on the loan repayments, and the cheque for ?2,60,000/- was issued towards the repayment of the loan. The complainant argued that the cheque was issued for a legally enforceable debt under the Hire Purchase Agreement. However, the court found that the cheque was not issued for a legally enforceable debt because the Hire Purchase Agreement had been terminated, and the vehicle was seized by the complainant.

2. Validity of the cheque issued as security:
The accused contended that the cheque was handed over as security at the time of the loan agreement and not for any specific repayment. The court agreed, noting that the cheque was issued as security and not for a legally enforceable debt. The court cited precedents, including the judgment in "Suresh Chandra Goyal Vs. Amit Singhal," which dealt with the value of post-dated cheques given as security.

3. Termination of the Hire Purchase Agreement:
The court observed that the Hire Purchase Agreement was terminated when the complainant seized the vehicle due to non-payment of installments. According to the agreement, the complainant had the right to seize the vehicle and recover the balance loan amount. The court held that once the agreement was terminated, the relationship between the financier and the borrower ended, and the cheque could not be considered as issued for a legally enforceable debt.

4. Seizure and sale of the vehicle:
The complainant had seized the vehicle but had not sold it due to the missing registration certificate. The court noted that the complainant could proceed to recover the balance amount after selling the vehicle. The court emphasized that the cheque could not be used for encashment after the vehicle's seizure, as the post-dated cheque became an instrument for which consideration had failed.

5. Applicability of precedents and judgments:
The court relied on several judgments to support its decision. It referred to "Sudha Beevi Vs. State of Kerala," which held that post-dated cheques could not be presented for encashment after the termination of the agreement and seizure of the vehicle. Another relevant judgment was "N.Rajangan Vs. M/s.Centurian Bank Ltd.," which reiterated that financiers must take legal recourse for recovery after vehicle seizure and cannot present post-dated cheques for encashment. The court found these judgments applicable to the present case and concluded that the cheque was not issued for a legally enforceable debt.

Conclusion:
The court dismissed the appeal, upholding the appellate court's decision to acquit the accused. It concluded that the cheque was issued as security and not for a legally enforceable debt, especially after the termination of the Hire Purchase Agreement and seizure of the vehicle. The judgments relied upon by the appellant were deemed not applicable to the case.