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TMI Blog2014 (4) TMI 464X X X X Extracts X X X X X X X X Extracts X X X X ..... rt has traveled beyond the scope of Section 138 of the N.I. Act by holding that the purpose of enacting Section 138 of the N.I. Act would stand defeated if after placing orders and giving advance payments, the instructions for stop payments are issued and orders are cancelled. If a cheque is issued as an advance payment for purchase of the goods and for any reason purchase order is not carried to its logical conclusion either because of its cancellation or otherwise and material or goods for which purchase order was placed is not supplied by the supplier, in our considered view, the cheque cannot be said to have been drawn for an existing debt or liability - Decided in favour of Appellant. - Criminal Appeal No. 830 of 2014 (Arising out of SLP (Crl.) No. 9752 of 2010) - - - Dated:- 7-4-2014 - R. M. Lodha And Shiva Kirti Singh,JJ. JUDGMENT R. M. Lodha, J. Leave granted. 2. The only question that arises for consideration in this appeal by special leave is, whether the post-dated cheques issued by the appellants (hereinafter referred to as purchasers ) as an advance payment in respect of purchase orders could be considered in discharge of legally enforceable deb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tored the order of the Additional Chief Metropolitan Magistrate issuing process to the purchasers. 10. The Delhi High Court following its earlier decision in Mojj Engineering M/s. Mojj Engineering Systems Limited and others v. M/s. A.B. Sugars Ltd. [154 (2008) Delhi Law Times 579] held that the issuance of a cheque at the time of signing such contract has to be considered against a liability, as the amount written in the cheque is payable by the person on the date mentioned in the cheque. 11. Section 138 of the N.I. Act is as follows: 138. Dishonour of cheque for insufficiency, etc., of funds in the account. - Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndicates that at the time of drawal of cheque, there was no existing liability. 14. In Swastik Coaters M/s. Swastik Coaters Pvt. Ltd v. M/s. Deepak Brothers and others; [1997 Cri. L.J. 1942 (AP)] , the single Judge of the Andhra Pradesh High Court while considering the explanation to Section 138 held: ..Explanation to Section 138 of the Negotiable Instruments Act clearly makes it clear that the cheque shall be relateable to an enforceable liability or debt and as on the date of the issuing of the cheque there was no existing liability in the sense that the title in the property had not passed on to the accused since the goods were not delivered. .. 15. The Gujarat High Court in Shanku Concretes Shanku Concretes Pvt. Ltd. and others v. State of Gujarat and another; [2000 Cri. L.J.1988 (Guj.)] dealing with Section 138 of the N.I. Act held that to attract Section 138 of the N.I. Act, there must be subsisting liability or debt on the date when the cheque was delivered. The very fact that the payment was agreed to some future date and there was no debt or liability on the date of delivery of the cheques would take the case out of the purview of Section 138 of the N.I. Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... condition of advance payment is normally put by the seller for the reason that the purchaser may not later on retract and refuse to take the goods either manufactured for him or procured for him. Payment of cost of the goods in advance being one of the conditions of the contract becomes liability of the purchaser. The purchaser who had issued the cheque could have been asked to make payment either by draft or in cash. Since giving cheque is a mode of payment like any other mode of payment, it is normally accepted as a payment. The issuance of a cheque at the time of signing such contract has to be considered against a liability as the amount written in the cheque is payable by the person on the date mentioned in the cheque. Where the seller or manufacturer, on the basis of cheques issued, manufactures the goods or procures the goods from outside, and has acted upon the contract, the liability of the purchaser gets fastened, the moment the seller or manufacturer acts upon the contract and procures the goods. If for any reason, the seller fails to manufacture the goods or procure the goods it is only under those circumstances that no liability is created. However, where the goods or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ussed above, if a cheque is issued as an advance payment for purchase of the goods and for any reason purchase order is not carried to its logical conclusion either because of its cancellation or otherwise and material or goods for which purchase order was placed is not supplied by the supplier, in our considered view, the cheque cannot be said to have been drawn for an existing debt or liability. 20. In our opinion, the view taken by Andhra Pradesh High Court in Swastik Coaters M/s. Swastik Coaters Pvt. Ltd v. M/s. Deepak Brothers and others; [1997 Cri. L.J. 1942 (AP)], Madras High Court in Balaji Seafoods M/s. Balaji Seafoods Exports (India) Ltd. and another v. Mac Industries Ltd.; [1999 (1) CTC 6], Gujarat High Court in Shanku Concretes Shanku Concretes Pvt. Ltd. and others v. State of Gujarat and another; [2000 Cri. L.J.1988 (Guj.)] and Kerala High Court in Ullas Supply House, Represented by Managing Partner v. Ullas, Proprietor Bright Agencies and another;[2006 Cri. L.J. 4330 (Kerala)] is the correct view and accords with the scheme of Section 138 of the N.I. Act. 21. The view taken by Delhi High Court is plainly wrong and does not deserve acceptance. 22. Criminal App ..... X X X X Extracts X X X X X X X X Extracts X X X X
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