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TMI Blog2022 (5) TMI 304X X X X Extracts X X X X X X X X Extracts X X X X ..... gistrate, has reduced the sentence of imprisonment awarded against the petitioner from one year to six months. The sentence of fine has been kept in-tact. 3. Before coming to the grounds of challenge, it would be apt to briefly state the allegations contained in the complaint filed by the respondent. 4. In the complaint it was alleged by the respondent that he had entered into a business transaction with the petitioner and an amount of Rs. 9.50 lacs was outstanding against him. It was further alleged that in discharge of aforesaid liability, the petitioner issued a cheque dated 05.03.2013 drawn on J & K Bank, Rawalpora, Srinagar, which, when presented by respondent/complainant before his banker J & K Bank Aircargo, Srinagar, on 03.04.2013, was dishonoured. It was further alleged that respondent demanded cash from the petitioner when the cheque was dishonoured but the petitioner assured him that the cheque would be honoured if he presents it again before the bank. Accordingly, respondent presented the cheque again before his bank on 25.04.2013 but it was returned unpaid on account of insufficiency of funds vide memo dated 25.04.2013. The respondent is stated to have served a legal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 lacs and, as such, it can safely be stated that the cheque in question was issued in discharge of legally enforceable debt and it was not a security cheque. 7. The learned Appellate Court upheld the judgment of the learned trial court and negatived the contention of the petitioner that cheque in question was only a security cheque which was not meant to be presented for encashment in terms of agreement dated 5th of March, 2013. 8. The petitioner has challenged both the aforesaid judgments on the grounds that the learned courts below have failed to appreciate the fact that there was an agreement between the petitioner and the respondent whereby it was agreed by the parties that the cheque which petitioner had issued in favour of the respondent, was not to be presented for encashment and that it was only a cheque for security. It is contended that when it was specifically agreed by the petitioner that the cheque in question would not be presented for encashment, the respondent could not have initiated criminal proceedings against the petitioner on its basis. It is further contended that the agreement dated 5th March, 2013 contains contradictory covenants and, as such, the same is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity" occurring in Section 138 of the Act. We are of the view that the question whether a postdated cheque is for "discharge of debt or liability" depends on the nature of the transaction. If on the date of the cheque, liability or debt exists or the amount has become legally recoverable, the section is attracted and not otherwise. 11. Reference to the facts of the present case clearly shows that though the word "security" is used in Clause 3.1(iii) of the agreement, the said expression refers to the cheques being towards repayment of instalments. The repayment becomes due under the agreement, the moment the loan is advanced and the instalment falls due. It is undisputed that the loan was duly disbursed on 28-2-2002 which was prior to the date of the cheques. Once the loan was disbursed and instalments have fallen due on the date of the cheque as per the agreement, dishonour of such cheques would fall under Section 138 of the Act. The cheques undoubtedly represent the outstanding liability. 12. The judgment in Indus Airways (supra) is clearly distinguishable. As already noted, it was held therein that liability arising out of claim for breach of contract under Section 138, which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loan is advanced and the borrower agrees to repay the amount in a specified timeframe and issues a cheque as security to secure such repayment; if the loan amount is not repaid in any other form before the due date or if there is no other understanding or agreement between the parties to defer the payment of amount, the cheque which is issued as security would mature for presentation and the drawee of the cheque would be entitled to present the same. On such presentation, if the same is dishonoured, the consequences contemplated under Section 138 and the other provisions of N.I. Act would flow. 17. When a cheque is issued and is treated as 'security' towards repayment of an amount with a time period being stipulated for repayment, all that it ensures is that such cheque which is issued as 'security' cannot be presented prior to the loan or the instalment maturing for repayment towards which such cheque is issued as security. Further, the borrower would have the option of repaying the loan amount or such financial liability in any other form and in that manner if the amount of loan due and payable has been discharged within the agreed period, the cheque issued as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... used two distinct phrases. The expression 'or other liability' has a content which is broader than 'a debt' and cannot be equated with the latter. In the present case, the cheque was issued in close proximity with the commencement of power supply. The issuance of the cheque in the context of a commercial transaction must be understood in the context of the business dealings. The issuance of the cheque was followed close on its heels by the supply of power. To hold that the cheque was not issued in the context of a liability which was being assumed by the company to pay for the dues towards power supplied would be to produce an outcome at odds with the business dealings. If the company were to fail to provide a satisfactory LC and yet consume power, the cheques were capable of being presented for the purpose of meeting the outstanding dues. 27. According to the complainant, the LCs' were not in a format agreed to by their bankers. The cheques which were initially towards security could not have been presented before the payments under the PSA fell due. Moreover, if the company were to discharge its liability to pay the outstanding dues under the power supply ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omplainant and even if the cheque was issued as a security, the provisions of Section 138 of the N.I. Act would get attracted. 17. Now coming to the facts of the instant case. As per the agreement dated 5th March, 2013, it was clearly indicated therein that the petitioner owed a sum of Rs. 9.50 lacs to respondent. It was further agreed by the parties that the petitioner would liquidate the aforesaid amount and that he had issued the cheque in question as security to the respondent. The agreement also provides that the petitioner would be bound to deposit the sum in the savings bank account of the respondent maintained with J & K Bank Aircargo Branch to liquidate the aforesaid liability. The agreement also provides that the petitioner would pay the amount of Rs. 9.50 lacs to respondent positively. 18. From the foregoing covenants of the agreement, there is no manner of doubt about the fact that the petitioner owed a sum of Rs. 9.50 lacs to respondent at the time when he issued the cheque in question in favour of the respondent. Learned counsel for the petitioner has harped on the expression 'security' used in the agreement and he has laid much emphasis on the covenant whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Laxmi Narain and another, (2007) Cri.L.J. 2262. The ratio laid down in the said judgment is not applicable to the facts of the instant case, inasmuch as in the said case, the consideration for which the cheque was issued was unlawful. It is in those circumstances that it was held that the agreement between complainant and the accused therein was void as the consideration was in the nature of an illegal gratification, which is unlawful. In the instant case, the consideration for which the cheque in question was issued is not unlawful nor the agreement between the petitioner and respondent is unlawful as the transaction between the petitioner and respondent, admittedly, was a commercial transaction of lawful nature. 22. A feeble attempt has been made by learned counsel for the petitioner to canvass that the cheque in question was issued by the petitioner in favour of the respondent in consideration of iron supplies to be made by the respondent to him, which he failed to do. According to the petitioner, the respondent could not have presented the cheque for encashment. 23. If we have a look at the evidence led before the trial Magistrate, it becomes clear that the petitioner during ..... X X X X Extracts X X X X X X X X Extracts X X X X
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