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IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR
Anil Kumar Upman, J.
Shaliwahan Singh Rathore S/o Shri Raj Singh Rathore - Petitioner
Versus
State Of Rajasthan Through P.p. and ors. - Respondents
S.B. Criminal Miscellaneous (Petition) No. 2216/2018, S.B. Criminal Miscellaneous (Petition) No. 2220/2018, S.B. Criminal Miscellaneous (Petition) No.2221/2018, S.B. Criminal Miscellaneous (Petition) No. 2224/2018
Decided On : 03-05-2024
Negotiable Instruments - Section 138 - Summary of Legal Framework: The court interpreted Section 138 of the N.I. Act, emphasizing that a legally enforceable debt must exist at the time of cheque issuance for criminal liability to arise. The court distinguished between civil and criminal liabilities, reinforcing the necessity of a valid debt at the time of cheque presentation.
Fact of the Case:
The petitioners issued undated cheques to the complainant as security for potential future losses under an employment contract. Upon breach of contract, the complainant presented the cheques, which were dishonored, leading to criminal proceedings under Section 138 of the N.I. Act.
Finding of the Court:
The court found that there was no legally enforceable debt at the time the cheques were issued, as they were given as security and not for an existing liability. However, it ruled that the relevant date for determining liability is the date of presentation of the cheque.
Issues: Whether the criminal proceedings under Section 138 of the N.I. Act can be maintained when the cheques were issued as security without an existing debt at the time of issuance.
Ratio Decidendi: The court held that for an offence under Section 138 to be made out, there must be a legally enforceable debt at the time of the cheque's presentation, not merely at the time of issuance.
Result: The misc. petitions are dismissed.
JUDGMENT :
Anil Kumar Upman, J.
1. These misc. petitions have been filed by respective petitioners for quashing of the entire criminal proceedings of the complaint cases (details whereof are mentioned hereinbelow) for offence under Section 138 of the N.I. Act., filed by respondent No.2 i.e., M/s Vibrant Academy against them:-
| S.No. | Complaint Case No. | Party Name | Other details |
| 1. | 891/2017 | Vibrant Academy (I) Pvt. Ltd. vs Shaliwahan Singh Rathore | pending trial before learned Special Judicial Magistrate N.I. Act Cases NO.3, Kota, Rajasthan |
| 2 | 20682/2017 | Vibrant Academy (I) Pvt. Ltd. vs Ravi Pratap Singh | pending trial before learned Special Judicial Magistrate N.I. Act Cases No.3, Kota, Rajasthan |
| 3. | 16289/2017 | Vibrant Academy (I) Pvt. Ltd. vs Nishant Gupta | pending trial before learned Special Judicial Magistrate N.I. Act Cases No.3, Kota, Rajasthan |
| 4. | 20609/2017 | Vibrant Academy (I) Pvt. Ltd. vs Nirbhay Pandey | pending trial before learned Special Judicial Magistrate N.I. Act Cases No.3, Kota, Rajasthan |
2. Since common question of law has been involved in all these misc. petitions and all the aforementioned criminal complaint cases have been filed by one and common complainant alleging similar and identical allegations in the same court i.e. learned Special Judicial Magistrate, N.I. Act Cases No.3, Kota, Rajasthan, all these four misc. petitions are heard and decided together by this common judgment.
3. The background of these misc. petition in a nutshell is that the complainant-respondent M/s Vibrant Academy (I) Pvt. Ltd. is running a IIT JEE Coaching Institute. The respondent-company invited petitioners herein to enter into contract for their employment as faculty upon certain terms and conditions. The complainant respondent obtained cheques in question (mentioned below) from the respective petitioners in order to indemnify itself for any future losses which could have incurred to it by violation of any condition of the contract by the petitioners:-
| Sr. No. | Drawer (petitioner) of the Cheque | Cheque Number and other details |
| 1. | Shaliwahan | Cheque No.976147 dated 22.06.2017 for a sum of Rs.6,00,000/- of State Bank of Bikaner and Jaipur, Instrumentation Township Branch Kota |
| 2. | Ravi Pratap Singh | Cheque No.839169 dated 22.06.2017 for a sum of Rs.28,50,000/- of State Bank of Bikaner and Jaipur, Instrumentation Township Branch Kota |
| 3. | Nishant Gupta | Cheque No.891853 dated 22.06.2017 for a sum of Rs.41,50,000/- of State Bank of Bikaner and Jaipur, Instrumentation Township Branch Kota |
| 4. | Nirbhay Pandey | Cheque No.525401 dated 22.06.2017 for a sum of Rs.34,50,000/- of State Bank of Bikaner and Jaipur, Instrumentation Township Branch Kota |
4. The cheques in questions were issued by the respective petitioners to the complainant as security and dates were not mentioned therein at that time. It was agreed between the parties that the complainant-respondent would be free to present the cheques for encashment in case of breach of any of the terms of the agreement and the petitioners would be bound to honour the cheques on presentation. Thereafter, the petitioners resigned their jobs and for breach of condition of the contract, the complainant issued multiple legal notices (both civil and criminal) to the petitioners for breach of the conditions of the contract. The petitioners filed separate reply to the notices mentioning therein their grievances/defence, and when the cheques in question could not be honoured, the respondent company filed separate cases under Section 138 of the N.I Act against the petitioners before learned Special Judicial Magistrate, N.I. Act Cases, No.3, Kota. Cognizance has been taken by the learned trial court against the petitioners for offence under Section 138 of the N.I. Act a
A legally enforceable debt must exist at the time of cheque presentation for liability under Section 138 of the N.I. Act to arise.
A cheque issued as security does not create criminal liability under Section 138 unless there is a legally enforceable debt at the time of its issuance.
Cheques issued as security can still be subject to Section 138 if a legally enforceable debt exists at the time of issuance.
The court emphasized that the determination of whether cheques were issued for a legally enforceable debt or as security is a matter for trial, not for quashing proceedings.
The issuance of a cheque signifies a legally enforceable debt under Section 138 of the N.I. Act, and the burden to prove otherwise lies with the accused, not the complainant.
The court emphasized that the determination of whether a cheque was issued for a legally enforceable debt or as security is a factual issue for trial.
The court emphasized that the determination of whether cheques were issued for a legally enforceable debt or as security is a matter for trial, not for quashing proceedings.
The death of the signatory to a cheque does not absolve the other accused of their liability for the dishonoured cheque. A cheque issued as security can be presented for encashment if the loan has be....
Point of law: Question whether a post-dated cheque is for “discharge of debt or liability” depends on the nature of the transaction.
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