2018 (9) TMI 1000 - HC - Indian Laws

Dishonor of Cheque due to insufficiency of funds - Repayment of loan - Section 138 of Negotiable Instruments Act - existence of legally enforceable debt or not? - Held that - Admittedly, the petitioner and his mother borrowed a loan on execution of registered mortgage deed of their properties in favour of the respondent and his wife. When it being so, without repaying the same, again on 02.05.2007, the petitioner borrowed a sum of ₹ 7,00,000/- on issuance of post dated cheque for the said sum dated 16.05.2007. It is seen from the notice dated 22.11.2005 issued by the petitioner and his mother to the respondent and his wife, calling upon them not to present the cheques obtained at the time of borrowing the loan viz., in the year 2003 and 2004 for collection as they were not issued in discharging of any liability. The alleged cheques were not issued for any legally enforceable debt. It is also proved from the notice dated 22.11.2005 that the said alleged cheques and other pronotes were obtained by the respondent/complainant at the time of borrowal of loan in the year 2003 and 2004. Therefore, the alleged cheques were not issued by the petitioner for any legally enforceable debt. In such circumstances, the petitioner cannot be subjected to ordeal trial. The complaint cannot be sustained and it is liable to be quashed - petition allowed.

Summary

Issues:
Quash petition to challenge criminal proceedings under Section 138 of Negotiable Instrument Act.

Analysis:
The respondent alleged that the petitioner borrowed a sum of money and issued a post-dated cheque which was dishonored, leading to criminal proceedings. The petitioner argued that the further loan was not possible when the first loan was pending, calling the complaint unbelievable. The petitioner claimed that the cheques were not issued to discharge any liability but were obtained as security during previous loan transactions. The respondent contended that the complaint should proceed to trial due to factual disputes and the cheques being issued for a legally enforceable debt.

The court noted that the petitioner and his mother had borrowed loans against property and issued cheques as security. The court found the complaint to be an abuse of process of law based on the notice issued by the petitioner and his mother in 2005, detailing the circumstances of obtaining the cheques and pronotes. The court observed that lending a further loan without repaying the initial one was implausible. The court concluded that the alleged cheques were not issued for any legally enforceable debt, leading to the quashing of the complaint.

The court rejected the respondent's reliance on previous judgments, stating that the facts of this case indicated an abuse of process of law. Despite disputed facts, the court found the complaint unsustainable, as evidenced by the circumstances surrounding the issuance of the cheques. The court allowed the quash petition and quashed the criminal complaint, closing the case.