2019 (11) TMI 1064 - HC - Indian Laws

Dishonor of Cheque - discharge of legally recoverable debt - Section 138 of Negotiable Instrument Act - HELD THAT - The fact remains that the amount was paid by the society on behalf of its individual member to facilitate the transaction in getting their houses constructed by the respondent. Since the individual members of the petitioner society immediately doubted whether the respondent would be able to complete the flats, they did not deposit the amount with the society and thus, the cheques issued by the society got dishonoured - It is not disputed that the society was constituted for the welfare of its members who were interested in getting their houses constructed by the respondent. Therefore, the society played a role only to facilitate its members in getting their houses constructed and the society had no liability as per Section 138 NI Act on the date of signing of the MOU. Even if it is presumed that the said amount was paid to the respondent as advance money, even then there appears to be no criminal liability or any liability which is recoverable under provisions of Section 138 NI Act. Petition allowed.

Summary

Issues: Quashing of complaint case under Section 138 of Negotiable Instruments Act

Analysis:
1. Nature of Complaint: The petition seeks to quash a complaint filed under Section 138 of the Negotiable Instruments Act, alleging dishonored cheques amounting to ?4.1 crore issued in discharge of a debt as per an MOU/Agreement.

2. Petitioner's Argument: The petitioner contends that the complaint is vindictive and abusive, with no existing debt or liability at the time of issuing the cheques as per the terms of the MOU. The ingredients of the offense under Section 138 are not satisfied based on the complaint and accompanying documents.

3. Respondent's Position: The respondent maintains that the cheques were issued as advance payment for constructing residential apartments for the petitioner society members, leading to a legal debt/liability. However, due to doubts regarding completion, the cheques were dishonored.

4. Role of Petitioner Society: The petitioner society, formed for the welfare of its members, facilitated the construction transactions without incurring any personal liability under Section 138 of the NI Act at the time of MOU signing.

5. Liability Under Section 138: Despite the payment being made as advance money, the court finds no criminal or recoverable liability under Section 138 of the NI Act, ultimately leading to the quashing of the complaint and all related proceedings.

6. Court Decision: The petition is allowed, and the complaint case under Section 138 along with subsequent proceedings are quashed, emphasizing the lack of liability under the NI Act at the time of the alleged offense.

7. Conclusion: The judgment highlights the importance of analyzing the existence of debt or liability under Section 138 of the NI Act before initiating legal proceedings, ensuring fairness and adherence to legal principles in cases involving dishonored cheques and financial transactions.