Compliance with statutory requirements and specific details of cheques are crucial in determining the validity of a complaint under Section 138 of the Negotiable Instruments Act.

Headnote:
Negotiable Instruments Act - Cheques as Security - Statutory Requirements Compliance
Fact of the Case:

The petitioners sought to quash a case filed against them for the offence under Section 138 of the Negotiable Instruments Act. They argued that the cheques in question were issued as security and presented beyond the statutory period.
Finding of the Court:

The court found that the complainant had complied with all statutory requirements and that the cheques mentioned in the agreement were not the same as those in the present case. The court also held that invoking the arbitration clause did not affect the complainant's right to proceed under Section 138 of the Negotiable Instruments Act.
Issues: Validity of cheques as security, compliance with statutory requirements, effect of arbitration clause on Section 138 proceedings
Ratio Decidendi: The court emphasized that compliance with statutory requirements and the specific details of the cheques mentioned in the agreement were crucial in determining the validity of the complaint. Additionally, the court clarified that invoking the arbitration clause did not preclude the complainant from pursuing proceedings under Section 138.
Final Decision: The Criminal Original Petition filed by the petitioners was dismissed, and the connected Miscellaneous Petitions were closed.

ORDER :

1. This Criminal Original Petition is filed to call for the records in C.C.No.221 of 2009 dated 05.01.2009 on the file of the XXIII Metropolitan Magistrate Court, Saidapet, Chennai and quash the same.

2. The petitioners/accused in a case instituted by the respondent/complainant for the offence under Section 138 of the Negotiable Instruments Act in C.C.No.221 of 2009 pending on the file of the XXIII Metropolitan Magistrate Court, Saidapet, Chennai. The above quash petition has been filed by the petitioners/accused.

3. The case of the petitioners is that the petitioners had approached the respondent/complainant, who are engaged in the business of Cine finance and Film producing, processing motion picture related activities. During the course of business, the petitioners/accused had approached the complainant for finance for a film produced by them. The petitioners are the film producers, for their business needs the petitioners had approached the complainant for financial assistance entering upon into an agreement. The respondent/complainant had extended financial assistance. The cheques were issued for the loans obtained.

4. The learned counsel for the petitioners submitted that the respondent/complainant has not made out any case against the cheques in issue since the cheques were not issued in discharge of their liability as provided under Section 138 of the Negotiable Instruments Act. The respondents had already filed a Original Application No.674 of 2009 on the file of this Court for appointment of Arbitrator and also obtained interim injunction restraining the accused from alienating the property.

5. Further, the respondent/complainant had not mentioned anything about the financial assistance agreement dated 11.07.2007. As per the petitioners, the cheques in issue were given as security as per the above agreement and further, it is well settled that if a cheque is issued as security, the liability under Section 138 of the Negotiable Instruments Act will not arise.

6. Further, the learned counsel for the petitioners contended that the cheques were issued on the date of agreement i.e. 11.07.2007 and the cheques were presented in the above case dated 17.11.2008, 18.11.2008 and 19.11.2008. Therefore, the cheques were presented beyond the period of six months violating the conditions contemplated under Section 138 of the Negotiable Instruments Act. Hence, prayed for quashing the complaint.

7. On going through the complaint it is seen that the respondent/complainant has complied with all the statutory requirements and had filed the above complaint.

8. The learned counsel for the petitioners has strenuously contended that based on the financial assistance agreement dated 11.07.2007 the said three cheques in the above case were issued as security and the cheques were issued on the date of agreement i.e. during 2007, but in the present case filed based on the cheques issued in November, 2008. Hence, the cheques are not the valid cheques. Further, as per the agreement, the arbitration clause is there and the respondent/complainant had after invoking arbitration cannot now resort to 138 proceedings against the petitioners/accused.

9. On a perusal of the typed set of papers filed by the petitioners, it is seen that the financial assistance agreement, the schedule of payment annexed to it and the annexure 4 mentions about two post dated cheques. The cheques mentioned in the agreement are not the cheques in issue in the present 138 case and the amount are also not the same.

10. Further, invoking of the arbitration clause will no way affect the complainant's right to proceed case against the petitioners under Section 138 of the Negotiable Instruments Act. Further, the complaint filed by the complainant does not have any legal infirmities.

11. In view of the above, the Criminal Original Petition filed by the petitioners is dismissed. Consequently, the connected Miscellaneous Petitions are closed.

Click Here to Read the rest of this document