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IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR
Anil Kumar Upman, J.
Paul Mitra S/o Shri Anil Kumar Mitra – Petitioner
Versus
State of Rajasthan through P.P. and ors. – Respondents
S.B. Criminal Miscellaneous (Petition) No. 2214/2018, S.B. Criminal Miscellaneous (Petition) No. 2212/2018, S.B. Criminal Miscellaneous (Petition) No. 2213/2018, S.B. Criminal Miscellaneous (Petition) No. 2217/2018, S.B. Criminal Miscellaneous (Petition) No. 2218/2018, S.B. Criminal Miscellaneous (Petition) No. 2222/2018
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 cheques 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. Thus, the proceedings under Section 138 were not maintainable.
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 cheque issuance. The absence of such a debt at the time of issuance invalidates the criminal proceedings.
Result: The misc. petitions are dismissed, and the criminal proceedings under Section 138 of the N.I. Act are upheld.
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. | Case No. | Party Name | Other details |
| 1. | 16286/2017 | Vibrant Academy (I) Pvt. Ltd. vs Paul Mitra | pending trial before learned Special Judicial Magistrate N.I. Act Cases No.3, Kota, Rajasthan |
| 2 | 17034/2017 | Vibrant Academy (I) Pvt. Ltd. vs Akash | pending trial before learned Special Judicial Magistrate N.I. Act Cases No.3, Kota, Rajasthan |
| 3. | 20679/2027 | Vibrant Academy (I) Pvt. Ltd. vs Lokesh Kumar | pending trial before learned Special Judicial Magistrate N.I. Act Cases No.3, Kota, Rajasthan |
| 4. | 17033/2017 | Vibrant Academy (I) Pvt. Ltd. vs Sanjay Kumar Singhal | pending trial before learned Special Judicial Magistrate N.I. Act Cases No.3, Kota, Rajasthan |
| 5. | 16288/2017 | Vibrant Academy (I) Pvt. Ltd. vs Brijesh Jindal | pending trial before learned Special Judicial Magistrate N.I. Act Cases No.3, Kota, Rajasthan |
| 6. | 20594/2017 | Vibrant Academy (I) Pvt. Ltd. vs Piyush Maheshwari | 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 six 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 (details whereof are 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. | Paul Mitra | Cheque No.697616 dated 22.06.2017 for a sum of Rs.23,50,000/-of State Bank of Bikaner and Jaipur, Instrumentation Township Branch Kota |
| 2. | Akash | Cheque No.717711 dated 22.06.2017 for a sum of Rs.49,00,000/-of State Bank of Bikaner and Jaipur, Instrumentation Township Branch Kota |
| 3. | Lokesh Kumar | Cheque No.008032 dated 22.06.2017 for a sum of Rs.12,90,000/-of State Bank of Bikaner and Jaipur, Instrumentation Township Branch Kota |
| 4. | Sanjay Kumar Singhal | Cheque No.579540 dated 22.06.2017 for a sum of Rs.53,50,000/-of State Bank of Bikaner and Jaipur, Instrumentation Township Branch Kota |
| 5. | Brijesh Jindal | Cheque No.555093 dated 22.06.2017 for a sum of Rs.28,50,000/-of State Bank of Bikaner and Jaipur, Instrumentation Township Branch Kota |
| 6. | Piyush Maheshwari | Cheque No.328899 dated 22.06.2017 for a sum of Rs.33,50,000/-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 honou
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.
A legally enforceable debt must exist at the time of cheque presentation for liability under Section 138 of the N.I. Act to arise.
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.
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 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 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....
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.
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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