2023 (9) TMI 1362 - HC - Indian Laws

Dishonour of Cheque - insufficiency of funds - Legally enforceable debt or not - HELD THAT - The petitioner has not disputed the documents executed. In such circumstances, the Magistrate's Court convicted the petitioner under Section 255(2) of the Code of Criminal Procedure for the offence under Section 138 of the Negotiable Instruments Act and sentenced the petitioner to undergo simple imprisonment for three months and to pay a fine of Rs. 15 lakhs. It was also ordered that in case of default, the petitioner shall undergo a further period of simple imprisonment for one month. The strenuous argument made on behalf of the revision petitioner is that an agreement, the consideration or object of which is forbidden by law and if permitted, it would defeat the provisions of any law, cannot be a debt as contemplated under the Explanation to Section 138 of the Negotiable Instruments Act. The debt is based on Ext.P8 Letter of Acknowledgment executed between the parties and since the sale agreement and Ext.P8 Letter of Acknowledgment are executed to undervalue a property, any debt arising therefrom cannot be subject matter of proceedings under Section 138 of the Negotiable Instruments Act. After failing to honour the cheque issued in consideration of the purchase of property, now the petitioner cannot be heard to contend that the debt is not a legally enforceable debt and a proceeding under Section 138 is not maintainable. Transaction is admitted. Issuance of cheque is not disputed. The 1st respondent has not violated any procedure prescribed in Sections 138 and 139 of the Negotiable Instruments Act. In the facts of the case, the 1st respondent cannot be heard to contend that the debt is not enforceable through Section 138 proceedings - petition dismissed.

Summary

Issues Involved:
The judgment deals with the issues of dishonored cheques under Section 138 of the Negotiable Instruments Act, 1881, and the enforceability of debt based on a Letter of Acknowledgment.

Issue 1: Conviction under Section 138 of the Negotiable Instruments Act
The revision petitioner was accused in two cases for dishonoring cheques and sought to set aside the judgment convicting him. The petitioner argued that the claim was based on an unenforceable debt due to undervaluation of property in the sale deeds. The petitioner contended that legally recoverable debt is required for an offense under Section 138. The petitioner relied on legal provisions and previous judgments to support his argument.

Issue 2: Enforceability of Debt based on Letter of Acknowledgment
The petitioner, his wife, and brother-in-law executed sale deeds showing a lower consideration than the actual amount agreed upon. An additional Letter of Acknowledgment was signed, increasing the total consideration. The petitioner argued that this debt was unenforceable due to undervaluation and violation of stamp duty laws. The petitioner claimed that the debt based on the Letter of Acknowledgment was not legally recoverable, citing legal precedents.

Judgment Summary:
The High Court dismissed the criminal revision petition, upholding the conviction under Section 138 of the Negotiable Instruments Act. The Court found that the petitioner's argument regarding unenforceable debt due to undervaluation was not valid. The Court noted that the petitioner, as the beneficiary of the undervaluation, could not escape liability for dishonored cheques. The Court emphasized that the issuance of the cheques was not disputed, and the debt was enforceable under Section 138. The judgment highlighted the mutual agreement between the parties and the petitioner's liability to pay stamp duty. Ultimately, the Court ruled that the debt was legally enforceable, and the petitioner's petition was dismissed.