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2022 (1) TMI 6 - HC - Indian LawsDishonor of Cheque - legally enforceable debt or not - compensation amount received by the Respondent is a security substituted in the place of the original mortgage property as contemplated under Section 73 of Transfer of Property Act - HELD THAT - The borrowal of the loan of ₹ 2,00,95,000/- is not in dispute. Similarly, prior to the Notification under Section 6 of the Land Acquisition Act, the property has been mortgaged in favour of the Respondent is also not in dispute. The fact remains that the property has been acquired, acquisition also put in challenge in a writ petition, which is also not disputed. The Respondent being a secured creditor was paid a compensation amount of ₹ 56,14,840/-. Much emphasis have been made by the learned counsel for the Petitioner that as the acquired property Compensation has already been paid and cheque issued towards the such loan is not enforceable and there is no legal enforceable debt. In SUNDARAM FINANCE LTD. VERSUS THE STATE OF KERALA AND ANOTHER 1965 (11) TMI 123 - SUPREME COURT the Apex Court has held that the intention of the appellants in obtaining the hire-purchase and the allied agreement was to secure the return of loans advanced to their customers, and no real sale of the vehicle was intended by the customer to the appellants. The transactions were merely financing transactions. The mortgagee certainly recover for remaining amount also other then the compensation amount. Therefore, merely because compensation withdrawn and challenge has not made to refer the matter to the Land Acquisition Tribunal, it cannot be said that the entire proceeding has been discharged. The substantive provision of Transfer of Property Act as the mortgage has already executed, though its validity is questioned before this Court, this Court cannot make a roving enquiry. Therefore, this Court cannot go into the merits whether there is legally enforceable debt or not, it has to be discharged only by the accused before the trial Court - petition dismissed.
Issues Involved:
1. Legally enforceable debt under Section 138 of the Negotiable Instruments Act. 2. Impact of government acquisition and compensation on mortgage and debt obligations. 3. Validity of mortgage post-notification under the Land Acquisition Act. 4. Applicability of Section 73 of the Transfer of Property Act. 5. Jurisdiction of the High Court under Section 482 Cr.P.C. to quash proceedings. Detailed Analysis: 1. Legally enforceable debt under Section 138 of the Negotiable Instruments Act: The complainant alleged that the respondents availed a housing loan and defaulted on EMI payments, leading to dishonored cheques. The petitioners argued that the loan was discharged through compensation received from government acquisition, thereby nullifying any enforceable debt under Section 138 of the N.I. Act. However, the court emphasized that the issuance of cheques and the presumption of debt under Section 139 of the N.I. Act must be rebutted by the accused during the trial, not at the quashing stage. 2. Impact of government acquisition and compensation on mortgage and debt obligations: The petitioners contended that the compensation received from the government's acquisition of the mortgaged property discharged their debt. They argued that any transaction post-notification under Section 4(1) of the Land Acquisition Act was void. The court, however, noted that the compensation amount was significantly less than the loan amount, and thus, the debt was not fully discharged. The court held that the mortgagee is entitled to claim the remaining debt beyond the compensation received. 3. Validity of mortgage post-notification under the Land Acquisition Act: The petitioners argued that the mortgage was void post-notification under Section 4(1) of the Land Acquisition Act. The court referred to precedents stating that any encumbrance created after such notification does not bind the government. However, the court clarified that the validity of the mortgage could not be adjudicated at the quashing stage and must be addressed during the trial. 4. Applicability of Section 73 of the Transfer of Property Act: The petitioners cited Section 73 of the Transfer of Property Act, arguing that the compensation received should substitute the original mortgage security, thus discharging the debt. The court acknowledged that Section 73 allows the mortgagee to claim compensation but maintained that the mortgagee could still pursue the remaining debt. The court emphasized that the compensation amount received did not cover the entire loan, and therefore, the debt was not fully discharged. 5. Jurisdiction of the High Court under Section 482 Cr.P.C. to quash proceedings: The court reiterated that the High Court's power under Section 482 Cr.P.C. should not extend to examining the merits of the complaint or determining the existence of a legally enforceable debt. The court cited several judgments, emphasizing that disputed questions of fact, such as the validity of the debt, should be resolved during the trial. Consequently, the petitions to quash the proceedings were dismissed. Conclusion: The court dismissed the petitions to quash the proceedings under Section 138 of the N.I. Act, stating that the issues raised by the petitioners, including the validity of the mortgage and the enforceability of the debt, must be adjudicated during the trial. The court also dispensed with the personal appearance of the petitioners, who are senior citizens, except for specific instances as required by the trial court.
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