PRADEEP NANDRAJOG, J.

( 1 ) PETITIONERS pray that the order dated 21. 1. 2004 summoning the petitioners to face trial for the alleged offence under Section 138 of the negotiable Instruments Act 1881 be quashed.

( 2 ) IT is urged that no actionable cause exists in favour of the complainant to make out the offence under Section 138 of the Negotiable Instruments act 1881. It is urged that the sine qua non for the applicability of Section 138 of the Negotiable Instruments Act 1881 is the issuance of cheque for a debt which is due towards discharge of a liability. It is urged that a cheque given as a collateral security or as a security for payment of an amount which may become payable at a future date upon the happening or the non-happening of an event i. e. towards a contingency cannot be the foundation of an action under Section 138 of the Negotiable Instruments Act 1881.

( 3 ) ADMITTEDLY, the complaint which was filed under Section 138 of the negotiable Instruments Act 1881 pertained to cheques issued by the petitioners on 1. 6. 2003.

( 4 ) THE cheques in question were in replacement of earlier cheques issued on 1. 6. 2002 and had to be replaced on account of the fact that the 6 months' validity period of the cheques had expired.

( 5 ) A little elaboration is required as to under what circumstances the cheques were issued.

( 6 ) FIRST petitioner is in the business of export of garments. The export of garments was regulated by Apparel Export Promotion Council. It used to allot quotas to intending exporters for exporting garments. The quota was valid for an year.

( 7 ) AS per the policy, if a firm could not exhaust the quota within the stipulated time, a penalty used to be imposed.

( 8 ) FOR the year 2003-04, the policy stipulated that the earnest money would have to be deposited in the form of an security when quota was allotted. The security was liable to be forfeited if goods were not exported. In case of partial export, proportionate penalty was levied with reference to the unexhausted quota.

( 9 ) CLAUSE 8 of the policy stipulated as under:-

"8. EARNEST MONEY DEPOSITS (EMD) Amount of Earnest Money deposits, can be given in the form of Bank Guarantee, FDR (unilaterally encashable by AEPC), or Demand Draft. Legal Undertaking (LUT)subject to the provision of para "e" below and Post Dated Cheques (PDC)subject to the provisions of para "f" below would also be accepted for extension of entitlements in systems other than FCFS. The release/for-feiture of EMD based on performance will be as per the following procedures in different systems of allotment. "

( 10 ) AS per the policy, it was permissible to seek revalidation of the unutilized quota for the ensuing year and for which, pertaining to the unutilized quota, the earnest money deposit had to be revalidated. .

( 11 ) REALIZING that first petitioner would not be in a position to utilize its quota for the year 2001, on 15. 10. 2001 it sought extension of time to utilize the quota for the year 2001 i. e. sought extension of time to comply with the policy. Along therewith post dated cheques dated 1. 6. 2002 were issued in favour of the complainant as earnest money deposits.

( 12 ) IT may be noted that as per the clause 8 of the policy, earnest money could be deposited by post dated cheques.

( 13 ) FIRST petitioner could not fulfill its obligations to utilize the unexpired quota by the extended period and on 23. 4. 2002 the complainant issued a show-cause notice as to why the earnest money be not forfeited and cheques encashed. Letter dated 23. 4. 2002 reads as under:-

TO

COLLAGE culture

56-58 community CENTRE ,

EAST OF kailash,

NEW DELHI-110 065.

Sub : Show Cause Notice

DEAR SIRS,

AS PER your REQUEST, AEPC HAS GRANTED REVALIDATION OF VARIOUS ENTITLEMENT CERTIFICATES during THE YEAR 2001. THE DETAILS OF EMD PROVIDED HEREWITH

S. NO. CHEQUE NO. DATE PDC AMOUNT 1. 210469 01-JUNE-2002 29200. 00 2. 210472 01-JUNE-2002 277980. 00 3. 210473 01-JUNE-2002 54000

Click Here to Read the rest of this document