Dishonour of cheques for future rental liability does not attract penalty under Section 138 of the Negotiable Instruments Act.

K. SREEDHAR RAO, J.

( 1 ) BOTH the appeals pertain to the same parties, on same set of facts, giving rise to similar liabilities but for distinct and different periods.

( 2 ) THE Uppinangady Grama Panchayath conducted public auction of the stalls. The respondent-accused is the successful bidder of stall No. 2. The terms of auction are as follows:

(1) the successful bidder will be allotted the stall for a period of three years on leave and licence basis.

(2) The entire bid amount shall constitute the total rent for the total period of three years.

(3) One third of the bid amount shall be payable by cash immediately after the acceptance of bid. The balance of the bid amount representing two years rent could be payable by way of post dated cheques. The contract for occupation of the shop commenced from 1-7-1997. It is on record that even before completion of one year period, the respondent unilaterally terminated the contract, delivered the keys of the shop to the panchayath. The cheques issued by the accused towards future rental liability is presented for encashment. The cheques are dishonoured. In respect of said cheques a private complaint is filed against the accused.

( 3 ) THE admitted facts narrated above clearly discloses that the cheques are not issued in respect of the existing current liability to pay the rent for occupation. The cheques have been issued in advance towards future rental liability. May be that accused had unilaterally terminated the contract and might have committed breach of terms of contract. The Panchayath may have right to sue the accused for damages for the breach of contract but the Panchayath has no right to seek payment of rents for the periods when the accused is not in occupation.

( 4 ) TO warrant prosecution Under Section 138 of N.. Act it is necessary that the cheque should have been issued in respect of either past or current existing debt or other legal liability. The cheques obviously not issued towards payment of damages. There is no legal obligation on the part of the accused to effect clearance of the cheques issued towards the rental liabilities for the period where he is not in occupation of the premises. The amount reflected in the cheque is not an enforceable legal liability. Therefore the dishonour of cheque does not attract any penalty under Section 138 of the N.. Act. The order of acquittal is sound and proper. The appeals are dismissed.

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