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2022 (1) TMI 800 - HC - Indian LawsDishonor of Cheque - insufficiency of funds - legally enforcement debt or not - Hire Purchase Agreement - petitioner alleges that respondent no.2 very conveniently did not produce copy of the Hire Purchase Agreement in the criminal complaint before the Judicial Magistrate - HELD THAT:- In the instant case, prior to the filing of the criminal complaint before the concerned Judicial Magistrate, the financial institution, Shriram Transport Finance Company Ltd., had admittedly got repossession of the vehicle, therefore, the agreement entered into between the parties would get determined ipso facto by such repossession - the remedy available to the owner would be in accordance to the terms and conditions decided. Thus, the Court thereby laid down that once financial institution/owner exercised option of seizure of the vehicle, the postdated Cheques obtained from the hirer cannot be presented for encashment after the seizure. Though, the owner has to take recourse to other legal remedies for recovery of the balance amount, if any, when the vehicle is sold subsequently, the owner can recover the balance amount after adjusting the sale proceeds of the vehicle. Section 138 attracts the penal provision for “debts or other liabilities”, which may not be legally enforceable debts or other liabilities if the instrument by way of cheque is not supported by consideration. Section 43 of the N.I. Act deals with a negotiable instrument made without consideration. If a negotiable instrument is made or drawn without consideration it creates no obligation of payment between the parties to the transaction. Similarly, if the consideration for which the instrument was made or drawn has failed subsequently, then also the instrument creates no obligation at all - After repossession of the vehicle, Shriram Transport Finance Company Ltd. had sold the vehicle and the sale proceeds admittedly would be no doubt adjusted towards loan repayment, the complainant/owner has already initiated steps to recover the liability from the hirer. In this case, the cheque dated 13.12.2018 was presented, which came to be dishonoured because of funds insufficiency and the dishonoured memo was received by the Company on 19.12.2018. Thereafter, on 28.12.2018, the vehicle was repossessed by Shriram Transport Finance Company Ltd. – respondent no.2, the notice demanding payment was served on 08.01.2019 and thereafter the complaint was filed on 22.02.2019. The complainant by suppressing the fact of repossession of vehicle before the Judicial Magistrate had prayed for relief. The learned Magistrate thus, relying on the facts pleaded, had issued summons - In view of the fact that vehicle was seized and was sold thereafter, the agreement between the complainant and accused stood terminated and there was no legally enforceable debt when the complaint was filed before the learned Magistrate. On repossession of vehicle, the agreement stood terminated, therefore cheques in the hands of financial institution becomes instrument for which consideration has failed, even being presented and dishonoured, no offence under Section 138 of the N.I. Act would be attracted. The proceedings before the learned Judicial Magistrate, First Class, Vadodara, Summons dated 22.02.2019 and all the consequential proceedings initiated in pursuance thereof are quashed and set aside qua the present petitioner - Application disposed off.
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