The crucial consideration is whether at the time of presentation of the cheque for encashment, there was a legally enforceable debt or liability due to the complainant from the accused. The nomenclature of the cheque, such as security, is insignificant once the debt had become due to the complainant, and even if the cheque was issued as security, the provisions of Section 138 of the N.I. Act would get attracted.

JUDGMENT :

1. The petitioner has challenged the judgment dated 21.06.2017 passed by learned Judicial Magistrate 1st Class (Forest Magistrate), Srinagar, as also the judgment dated 20.03.2019 passed by the Appellate Court i.e., Court of 2nd Additional Sessions Judge, Srinagar, whereby judgment of the learned Magistrate has been upheld.

2. Vide the impugned judgment passed by the learned Magistrate in a complaint filed by respondent against the petitioner under section 138 of Negotiable Instruments Act, the petitioner has been convicted of the aforesaid offence and sentenced to undergo a simple imprisonment of one year and to pay fine of Rs. 13.00 lacs, in default whereof the petitioner has been directed to undergo further simple imprisonment of five months. The Appellate Court, while upholding the finding of conviction passed by the learned Magistrate, has reduced the sentence of imprisonment awarded against the petitioner from one year to six months. The sentence of fine has been kept in-tact.

3. Before coming to the grounds of challenge, it would be apt to briefly state the allegations contained in the complaint filed by the respondent.

4. In the complaint it was alleged by the respondent that he had entered into a business transaction with the petitioner and an amount of Rs. 9.50 lacs was outstanding against him. It was further alleged that in discharge of aforesaid liability, the petitioner issued a cheque dated 05.03.2013 drawn on J&K Bank, Rawalpora, Srinagar, which, when presented by respondent/complainant before his banker J&K Bank Aircargo, Srinagar, on 03.04.2013, was dishonoured. It was further alleged that respondent demanded cash from the petitioner when the cheque was dishonoured but the petitioner assured him that the cheque would be honoured if he presents it again before the bank. Accordingly, respondent presented the cheque again before his bank on 25.04.2013 but it was returned unpaid on account of insufficiency of funds vide memo dated 25.04.2013. The respondent is stated to have served a legal notice of demand upon the petitioner but he failed to pay the amount. It was also alleged by respondent in the complaint that prior to issuance of the cheque in question, an agreement was executed between the parties on 5th March, 2013, whereby the petitioner had acknowledged the issuance of the aforesaid cheque under his signatures and he also acknowledged that he had to pay an amount of Rs. 9.50 lacs to the respondent.

5. On the basis of aforesaid allegations, the complaint was lodged before the learned trial Magistrate. Pursuant to issuance of the process, the petitioner appeared before the learned trial Magistrate. His statement under section 242 of Cr.P.C was recorded in which he admitted issuance of the cheque under his signatures but denied the receipt of legal notice of demand and claimed that he had no liability to discharge against the respondent. Thus, the petitioner claimed to be tried. The respondent/complainant besides examining himself as a witness also examined Senior Executive Manager, J&K Bank Aircargo Branch and two more witnesses, namely, Saleem Mohi-ud-din and Ab. Rashid. After completion of complainant's evidence, the statement of the petitioner/accused under section 342 of Cr.P.C was recorded. In his statement under section 342 of Cr.P.C, the petitioner/accused claimed that as per the agreement dated 5th March, 2013, it was clearly provided that the cheque in question will not be presented for encashment. He further claimed that he did not owe any amount to the respondent and that he did not receive the legal notice of demand. The petitioner further claimed that the cheque in question was issued by him in favour of respondent as a measure of security and the same was not meant to be encashed. The petitioner also examined one witness in defence who in his statement claimed that respondent was to supply iron to the petitioner and for this purpose only the cheque in question was issued but when responde