The main legal point established in the judgment is that the defence of a cheque being issued for security and not for discharge of debt or liability would be a triable issue and not a ground for quashing the complaint under Section 138 of the Negotiable Instruments Act.

JUDGMENT

Avneesh Jhingan, J. (Oral) - This petition under Section 482 Cr.P.C. is filed for quashing of the complaint bearing No. NACT-152-2018, titled as "Satia Industries Ltd. v. PSA Nitrogen Ltd." and summoning order dated 23.5.2018.

2. The brief facts necessary for adjudication of the present petition are that the complainant-Satia Industries Ltd. placed a purchase order dated 13.7.2016 with the petitioner-company for design, engineering, supply, supervision of erection and commissioning of oxygen generator set. As per the payment clause, the petitioner had to give a cheque for Rs.37.20 lacs with an undertaking that the respondent can encash the cheque on failure of the petitioner to deliver equipment. The cheque was to be taken back on completion of successful commissioning.

3. In compliance of the payment clause, admittedly a cheque was issued by the petitioner to the complainant.

4. The complainant alleged that supply was not completed within time, as many items were not supplied and some of the items supplied were of lower capacity. Cheque No. 001474 for an amount of Rs.37,20,000/- issued by the petitioner was presented for encashment, as the petitioner failed to deliver the required equipment and to complete the commissioning of oxygen plant. The cheque was dishonoured with the remarks "funds insufficient". After giving notice, a complaint under Section 138 of the Negotiable Instruments Act, 1881 (for short, 'the Act') was filed.

5. The trial court perusing the documents adduced in preliminary evidence, prima facie observing that case under Section 138 of the Act is made out, summoned the petitioner through authorised representative, hence the present petition.

6. Learned counsel for the petitioner submits that there was no legally enforceable debt, the security cheque was mis-used. He relies upon the decision of Bombay High Court in Joseph Vilangadan v. Phenomenal Health Care Services Ltd. and another 2010(5) AIR Bom. R 554. The contention is that as per payment clause the security cheque could have been presented only on failure of the petitioner to deliver the equipment but the case of the complainant is that the plant is not working properly.

7. Further, it it is argued that the cheque was issued several months before the presentation, hence, it was not valid at the time of presentation.

8. It would be relevant to quote the following decisions of the Supreme Court.

9. In Sripati Singh (since deceased) through his son Gaurav Singh v. The State of Jharkhand and another, SLP (Criminal) No. 252- 253/2020, decided on 28.10.2021, the Supreme Court held as under:

"16. A cheque issued as security pursuant to a financial transaction cannot be considered as a worthless piece of paper under every circumstance. 'Security' in its true sense is the state of being safe and the security given for a loan is something given as a pledge of payment. It is given, deposited or pledged to make certain the fulfilment of an obligation to which the parties to the transaction are bound. If in a transaction, a loan is advanced and the borrower agrees to repay the amount in a specified timeframe and issues a cheque as security to secure such repayment; if the loan amount is not repaid in any other form before the due date or if there is no other understanding or agreement between the parties to defer the payment of amount, the cheque which is issued as security would mature for presentation and the drawee of the cheque would be entitled to present the same. On such presentation, if the same is dishonoured, the consequences contemplated under Section 138 and the other provisions of N.I. Act would flow."

10. In Rathish Babu Unnikrishnan v. The State (Govt. of NCT of Delhi) and another, Criminal Appeal Nos. 694-695 of 2022 decided on 26.4.2022, the Supreme Court held as under:

"13. Bearing in mind the principles for exercise of jurisdiction in a proceeding for quashing, let us now turn to the materials in this case. On careful reading of the complaint and th