The main legal point established in the judgment is that a chitty transaction conducted without permission and registration under the Kerala Chitties Act, 1975, is not necessarily void or illegal, and cheques issued in such a transaction can be considered for a legally enforceable debt under Section 138 of the Negotiable Instruments Act.

The complainant in C.C. 546/92 on the file of the Chief Judicial Magistrate's Court, Kottayam is the appellant.

2. The appellant filed complaint before the lower Court against the 1st respondent alleging offence punishable under section 138 of the Negotiable Instruments Act. According to the appellant, the 1st respondent conducted a private chitty in gold in which the appellant subscribed one ticket and deposited 148 grams of gold in the chitty. Since the 1st respondent did not possess sufficient quantity of gold to pay back to the appellant he agreed to pay Rs. 49,000/- being the value of 148 grams of gold. In order to discharge that liability the 1st respondent issued two cheques for Rs. 22,400/- dated 25-3-92 and Rs. 26,600/- dated 2-4-92 drawn on Kumaranelloor Service Co-operative Bank in favour of the appellant. When the cheques were presented for encashment, they were dishonoured for want of sufficient funds to the credit of the 1st respondent. Though the 1st respondent received the notice caused to be sent on behalf of the appellant intimating about the dishonour of the cheques and calling upon him to pay the amount, he has not paid the amount. Therefore, he is guilty of the offence punishable under section 138 of the N.I. Act.

3. The lower Court after trial found that the appellant has failed to prove all the ingredients of Section 138 of the N.I. Act and no offence is made out against the 1st respondent under that section, as such the 1st respondent not guilty and acquitted him by judgment dated 21-9-1995. Hence this appeal is preferred before this Court.

4. The contention of the appellant that he joined one ticket in the private chitty in gold conducted by the 1st respondent, he has altogether subscribed 148 grams of gold at 4 grams. per month and the 1st respondent agreed to pay Rs. 49,000/- being the value of the gold and for that amount he issued Exts. P1 and P2 cheques in favour of the appellant, is not in dispute.

5. The contention of the 1st respondent is that the private chitty conducted by him without obtaining the permission from the Government or from the competent authority and without registration under the Chitties Act in contravention of the provisions of the Chitties Act is illegal and void and therefore, the consideration for Exts. P1 and P2 cheques is illegal under section 23 of the Contract Act. The 1st respondent further contended that the cheques are not issued in discharge of a legally enforceable debt or other liability so as to attract the provisions of Section 138 of the N.I. Act. The lower Court has accepted the contention of the 1st respondent and found him not guilty in this case.

6. In this case the lower Court has formulated six points for consideration. In point No. 1 it is found that Ext. P5 notice dated 14-5-92 issued by the appellant to the 1st respondent is proper and valid. In point No. 2 it is found that the 1st respondent has issued Exts. P1 and P2 cheques in favour of the appellant to discharge the liability due from him to the appellant. In point No. 3 the lower Court found that Exts. P1 and P2 cheques were dishonoured due to insufficiency of funds to the credit of the 1st respondent in the Bank. But in point No. 4 the lower Court found that Exts. P1 and P2 cheques are not issued in discharge of the legally enforceable debt or other liability in favour of the appellant and accordingly found in point Nos. 5 and 6 that the 1st respondent is not guilty of the offence alleged against him. The findings arrived at by the lower Court in favour of the appellant are not challenged. Therefore, the only point for consideration is whether the 1st respondent has executed Exts. P1 and P2 cheques in favour of the appellant to discharge a legally enforceable debt or other liability.

7. It is contended by the 1st respondent that admittedly the private chitty in gold is conducted by the 1st respondent without obtaining sanction from the Government or from the competent authority and w