Back
2005(1) Bankmann 33
DELHI HIGH COURT
J.D. Kapoor, J.
Nijjer Agra Foods Limited
and Others — Petitioners
versus
Nasib Chand
and Another — Respondents
Cr. R. No. 416 of 1999
Decided on 14.10.2003
IMPORTANT POINT
Proceedings under Section 138 of Negotiable Instruments Act cannot be converted into a civil suit for recovery.
Headnote:Negotiable Instruments Act, 1881—Section 138—Criminal Procedure Code, 1973—Section 482—Dishonour of cheque—Dropping of proceedings—Agreement between parties to issue two cheques as security which were to be returned on handing over two demand drafts for Rs. 20 lac. each—Respondent No. 1 presented the cheques, though two demand drafts handed over to him—Dishonour of two cheques—Filing of complaint—Maintainability—Once payment against the cheques made by way of demand drafts, liability qua the cheques ceased to exist—Trial Court wrongly rejected the application for dropping of proceedings—Petition allowed—Proceedings against petitioner, dropped.
Facts of the case:
A)Petitioner-herein entered into agreement with R1 for production of Tomato Crop. As per the agreement, the petitioner gave two post-dated cheques for Rs.20 lacs each, which were to be replaced by him by way of two demand drafts for Rs. 20 lacs each. Admittedly, demand drafts amounting to Rs. 40 lacs were given to R1. Instead of replacing the cheques with DDs, R1 presented the cheques which were dishonoured.
B)The petitioner-herein filed a petition before trial Court for dropping of proceedings, however, the same was dismissed. Against the said order, petitioner came before the High Court for dropping of proceedings. Merely because some amount or balance was due from petitioner does not mean that R1 was entitled to recover these payments by virtue of aforesaid two cheques given by petitioner as security which were replaceable by way Demand Drafts. Trial court wrongly rejected the petitioner’s application. Petition allowed. Proceedings against petitioner were dropped.
Result: Petition allowed.
J. D. Kapoor, J.—The petitioner entered into an agreement with respondent No.1 for production of tomoto crop in 1000 acres, 500 acres at Central State Farms Suratgarh and 500 acres at Central State Farm, Ladhowal on the terms and conditions mentioned in the agreement. The relevant terms and conditions of payment are as under :
Terms of Payment:
9. One week before lifting the tomato produce from the field, Second party shall provide Bank guarantee/advance post-dated cheques of 1st June to the extent of Rs. 20 lakhs, 30th June to the extent of Rs. 20 lakhs and balance on 15th July. The collection charges of the cheques shall be borne by the second party. In case the demand draft for the equivalent value are handed over before these dates, the advance cheques shall be returned by the first party. In case the payment are not made by the stipulated date, i.e. 1st June, 30th June and 15th July, the Corporation will be free to invoke the Bank guarantee in case the guarantee is given or the advance cheque shall be encashed on the due date.
2. Admittedly in terms of para 9 of the terms and conditions, the petitioner gave two post-dated cheques dated 1.6.1996 in favour of respondent No. 1 for Rs. 20 lac each. In terms of the agreement, these cheques were to be replaced by the petitioner company by way of demand draft of the total value of Rs. 20 lac each. Admittedly demand drafts amounting to Rs.40 lac were given to respondent No. 1. Instead of replacing the cheques with these demand drafts respondent No. 1 presented those cheques which obviously were dishonoured.
3. The question before the learned trial Court was whether there was any liability of the petitioner towards these cheques in question or not. Merely because some amount or remaining balance payment was due from the petitioner does not mean that respondent No.1 was entitled to recover those payments by virtue of the aforesaid two cheques given by the petitioner as security which were replaceable by way of demand drafts.
4. Once the payment against those cheques was made by way of demand dtafts the liability qua these cheques ceased to exist and therefore the respondent No.1 was not entitled to present those cheques even if some amount or balance amount was due from the petitioner. Section 138 of the Negotiable Instruments Act pertains to those cheques which are towards liability. Once the said liability stands discharged the offence under Section 138 of the Negotiable Instruments Act ceases to exist. Proceedings under Section 138 of the Negotiable Instruments Act cannot be converted into civil suit for recovery. These are specific proceedings and confine only to 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 or other liability.
5. In the instant case, the liability of Rs. 40 lac created by way of post-dated cheques was duly discharged by way of aforesaid demand drafts and therefore there was no occasion for the learned trial Court to reject the application for dropping the proceedings. The impugned Order suffers from inherent infirmity. In the result, petition is allowed. Impugned Order is set aside. Proceedings are dropped.
Petition allowed.
******
