1. This appeal is preferred by the complainant, since he has lost his private complaint before the Lower Appellate Court, though succeeded before the Trial Court.

2. The fact involved in this case is that the disputed cheques marked as Exs.P7 and P8 claimed to be issued by the accused/respondent herein for discharging of legally enforceable debt. The Lower Appellate Court has arrived at a conclusion that though the cheques were issued for discharging the liability, due to subsequent agreement between the parties, the principle of novation has come to play and therefore, the drawer of the cheques is not liable to pay the cheques amount.

3. The short point for determination is whether the principle of novation is applicable to the facts of the case. The admitted facts are that the complainant company and the accused company were involved in the textile business and they had an arrangement between themselves for providing bill discount facility. So, whenever the accused company purchased the raw materials, those bills were discounted by the complainant company and funds were raised for the accused company. The bills discounted has to be repaid within a period of 90 days. While so, under Exs.P.25 and P.26 bills were discounted, since those two invoices were not repaid within a period of 90 days, again it was re-discounted. The cheques Exs.P7 and P8 which were issued to discharge the said liability bounced. Hence, the complaint under Section 138 of Negotiable Instruments Act was initiated after causing statutory notice.

4. The accused, though, failed to reply to the statutory notice, he has taken a defence that after the invoices discounted under Exs.P.25 and P.26, there was an agreement between the parties. So, a short term loan of Rs.50,00,000/- was raised and that loan was also duly paid. Whereas, the debt payable to the complainant company under invoices Exs.P.25 and P.26 were already discharged, there is no enforceable liability. The Trial Court, after considering the deposition of 3 witnesses Pws.1 to PW.3 and the deposition of R.Prabakaran [DW.1] on behalf of the accused analyzing 34 documents on the side of the complainant and 9 documents on the side of the defence, has held that the cheque amounts Exs.P.7 and P.8 co-relate the amount found in Exs.P.25 and P.26. Therefore, it is a clear case of dishonouring the cheques issued to discharge the liability.

5. Contrarily, the Lower Appellate Court, on appeal, after detailed discussions satisfied that the debt was not discharged by the accused, taking note of certain submissions and correspondence between the parties, has concluded and negatived the defence of the accused and held the amounts under Exs.P.25 and P.26 were not discharged on 18.03.1996 as contended by the accused. Further, the Lower Appellate Court has observed that the amounts covered under those two Hundies were rolled over and subsequently covered under the short term loan. So, once a new contract has come into existence, the old one has to go out. Meaning that the Hundies amount mentioned in Exs.P.25 and P.26 later rolled over in Ex.P.33 and Ex.P.34 were discharged due to new contract.

6. It is not the case of the accused that a new contract has come into existence in the place of old contract covered under Exs.P.25 and P.26. It is the invention of the Lower Appellate Court, though not pleaded by the accused. In fact the testimony of DW.1 clearly indicates the defence of the accused that the liability under Exs.P.25 and P.26 was discharged by them. The cheques given as a security of those liabilities was not returned by the complainant and the same has been misused.

7. The Lower Appellate Court between paragraphs 10 to 16 and 19 had properly appreciated the facts and law regarding the liability and sequence of events under which the liability has occurred. The Lower Appellate Court has concurred with the view of the Trial Court that the liability under Exs.P.25 and P.26 Hundies were not discharged by the ac