2020 (12) TMI 998 - HC - Indian Laws

Dishonor of Cheque - Insufficient Funds - case of appellant is that the alleged cheques were never issued by the petitioner for any legally enforcible debt - Sections 138 and 142 of NI Act - HELD THAT - The petitioner is an accused on the complaint lodged by the respondent herein for the offences punishable under Sections 138 and 142 of NI Act. According to the respondent, the petitioner borrowed a sum of ₹ 3 lakhs and towards repayment of the same, the petitioner issued two cheques for a sum of ₹ 1.5 lakhs each. Both the cheques were presented for collection and initially both the cheques were returned for the reason Insufficient Funds . Again on the instruction given by the petitioner, the cheques were presented for collection and again and it was dishonored for the reason that Code-5 Kindly contact Drawer/Drawee Bank . After issuing statutory notice, the respondent initiated proceedings for the offence under Sections 138 and 142 of NI Act. On receipt of the statutory notice dated 21.03.2019, the petitioner issued reply notices on 03.04.2019 and 05.04.2019. In the reply notice, she stated that the respondent's father, who was practicing advocate at Pondicherry, is well acquainted with the husband of the petitioner herein. Therefore, in the year 2008, the petitioner borrowed a sum of ₹ 5 lakhs by mortgaging her property to the respondent's father for monthly interest. Thereafter on 12.03.2009 the entire loan amount was discharged by the petitioner with interest. The respondent's father also issued receipt for discharging the entire loan amount - After discharging the loan amount, the respondent's father also issued acknowledgment that entire loan amount settled by the petitioner. Thereafter the respondent's father failed to return the two cheques, which were received from the petitioner as security. It is also evident from the endorsement made by the respondent's bank while returning the cheques, it is mentioned as Code- 5 Kindly contact Drawer/Drawee Bank . Since the alleged cheques are non-CTS cheques and as such, it cannot be cleared by the banker as per the Reserve Bank of India guidelines from 01.01.2019 onwards. It is also evident from the letter issued by the petitioner's banker dated 21.02.2020, stating that the cheques were issued to the petitioner herein on 06.06.2008. Now, after a period of 11 years the cheques were presented for collection and both the cheques were returned dishonored and directed the respondent to contact Drawer/Drawee Bank. The offence under Section 138 of the Negotiable Instruments Act is attracted for whatever reason the cheques are returned. In the case on hand, other circumstances are proved that the impugned cheques were issued by the petitioner for security purpose while borrowing the loan, in the year 2008. Therefore, the impugned complaint is nothing but clear abuse of process of Court and it cannot be sustained as against the petitioner - Petition allowed.

Summary

Issues:
Petitioner's denial of issuing cheques for legally enforceable debt, Allegations of borrowing and issuing cheques, Legal implications of cheque dishonor, Consideration of RBI guidelines on non-CTS cheques, Respondent's legal notice and petitioner's reply, Examination of bank endorsements on dishonored cheques, Abuse of court process in the complaint.

Analysis:
The case involves a petition to quash proceedings under Sections 138 and 142 of the Negotiable Instruments Act. The petitioner denies issuing the alleged cheques for any legally enforceable debt, citing that the cheques were issued as security while borrowing a loan in 2008. The respondent claims the petitioner borrowed money for her son's marriage and issued two cheques, which were dishonored for insufficient funds and "Code-5:Kindly contact Drawer/Drawee Bank." The respondent sent a legal notice, and the petitioner replied, alleging false accusations.

The petitioner argues that the cheques were non-CTS and could not be cleared as per RBI guidelines from 01.01.2019. The petitioner's banker confirmed the issuance of the cheques in 2008. The court examined a similar case precedent where a cheque return did not constitute dishonor, emphasizing the purpose of Section 138 of the NI Act. The court found the complaint an abuse of process, quashing the proceedings in S.T.C.No.1535 of 2019.

The judgment highlights the importance of legal requirements in cheque dishonor cases and the need to consider all circumstances before initiating legal action. The court's decision emphasizes the abuse of court processes and the necessity to adhere to legal provisions while dealing with cheque-related matters.