A cheque issued under a contract is not in discharge of a legally recoverable debt if the other party fails to perform their contractual obligations.

This application under Section 482 of Cr.P.C. has been filed for quashment of Complaint Case SCNIA No. 202/2018, registered vide order dated 07.02.2018 pending in the Court of JMFC, Jabalpur for offence under Section 138 of Negotiable Instruments Act.

2. It is submitted by counsel for applicant that an agreement to sale was executed between applicant and respondent on 13.01.2016 for sale of certain piece of land for a consideration of Rs.14,50,000/-. An amount of Rs.8,50,000/- was paid and it was directed that the remaining amount of Rs.6,00,000/- shall be paid at the time of execution of sale deed. Time was not made an essence of contract. The applicant gave a cheque of Rs.6,00,000/- on 05.10.2016 towards the outstanding amount. However, the respondent did not execute the sale deed, therefore, the applicant issued an instruction to the Bank to stop payment and accordingly, the cheque was dishonored on 30.12.2016 on the ground of stop payment. It is submitted by counsel for applicant that in the meanwhile, the applicant has filed a Civil Suit for specific performance of contract. The said Civil Suit has been partially dismissed by judgment and decree dated 20.11.2023 passed by I Civil Judge, Senior Division, Burhar, District Shahdol in RCAS No. 10A/2020 and it was held that the discretionary decree of specific performance of contract cannot be granted in favour of applicant for the reason that she has failed to prove that she was ready and willing to perform her part of contract but a decree has been granted directing the respondent to refund the amount of Rs.8,50,000/- with interest @6% per annum to be calculated from the date of execution of agreement to sale. It is submitted that the cheque of Rs. 6,00,000/- was given by virtue of agreement to sale and once the trial Court has held that the applicant has failed to prove her willingness to perform her part of contract and, therefore, has directed the respondent to refund an amount of Rs.8,50,000/- with interest which was paid by the applicant by way of advance money to the respondent, then it is clear that at present there is no legally recoverable debt. Thus, it is clear that the cheque was not issued in discharge of legally recoverable debt. Thus, the complaint is liable to be quashed.

3. Per contra, it is submitted by counsel for respondent that when the cheque was issued, the applicant was under obligation to perform her part of contract, therefore, it cannot be said that the cheque was not issued in discharge of legally recoverable debt. However, it was fairly conceded that the trial Court has partially dismissed the suit of the applicant but has directed the respondent to refund an amount of Rs.8,50,000/- with interest @6% per annum to be calculated from the date of the agreement.

4. Heard learned counsel for the parties.

5. The only question for consideration is as to whether the cheque was issued in discharge of legally recoverable debt or not?

6. This Court has gone through the agreement to sale. Time was not made an essence of the contract. However, in the complaint, the respondent had claimed that it was agreed that the remaining amount of Rs.6,00,000/- shall be paid by the applicant within a period of three months.

7. Admittedly, the agreement to sale was executed on 13.01.2016 and three months had come to an end on 12.04.2016 and no cheque was given by the applicant prior thereto. The cheque of Rs.6,00,000/- was given by the applicant on 05.10.2016. It is not the case of the respondent that although she had executed the sale deed but the payment of cheque was stopped. Admittedly, the respondent also did not execute the sale deed. Had been a case that in spite of execution of sale deed, the applicant had instructed the Bank to stop the payment then it would have been a clear case of legally recoverable debt but once the respondent had also not performed her part of contract, then it cannot be said that the cheque issued by the applicant was in discharge of legally