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ICDS. Ltd. Versus Beena Shabeer

2002 (8) TMI 577 - SUPREME COURT OF INDIA

Maintainability of a proceeding under section 138 of the Negotiable Instruments Act, 1881, vis-a-vis, a guarantor - Held that:- Appeal allowed. The High Court, it seems, got carried away by the issue of guarantee and guarantor’s liability and, thus, has overlooked the true intent and purport of section 138. The judgments recorded in the order of the High Court do not have any relevance in the contextual facts and the same, thus, do not lend any assistance to the contentions raised by the respond .....

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appeal to the effect as to the maintainability of a proceeding under section 138 of the Negotiable Instruments Act, 1881, vis-a-vis, a guarantor. The High Court negated it and, hence, the matter before this Court under article 136 of the Constitution. In order, however, to appreciate the contentions raised in the matter, it would be worthwhile at this juncture to notice section 138 for its true terms, scope and effect as also to assess the situation ourselves. Section 138 reads as below : Dishon .....

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account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provision of this Act, be punished with imprisonment for a term which may extend to one year, or with fine which may extend to twice the amount of the cheque, or with both : Provided that nothing contained in this section shall apply unless- (a )the cheque has been presented to the bank within a period of six months from the date on which it is drawn or .....

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he holder in due course of the cheque, within fifteen days of the receipt of the said notice. Explanation.-For the purpose of this section, debt or other liability means a legally enforceable debt or other liability. It is on the basis of the provision as above, the High Court came to a conclusion when a cheque was issued as security, no complaint will lie under section 138 since the cheque issued cannot be said to be for the purpose of discharging any debt or liability : In justification of the .....

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s also placed reliance on a decision of the Kerala High Court in the case of Sreenivasan v. State of Kerala 1999 (3) KLT 849. Incidentally, a learned Single Judge of the High Court in the decision last noted (supra) also placed reliance on a decision of the Andhra Pradesh High Court in Taher N. Khambati v. Vinayak Enterprises [1995] (1) KLT SN 5, wherein it has been held as follows : In the instant case, the appellant advanced some money to the respondents and obtained a pronote. It was stipulat .....

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d issued the cheque voluntarily for discharge of any debt or legal liability as envisaged under section 138. 4. Having, however, the support of the Andhra Pradesh High Court judgment, the Kerala High Court in Sreenivasan s case (supra) observed: A comparative reading of the principle laid down by the Andhra Pradesh High Court and the mandatory provisions laid down in section 138 of the Negotiable Instruments Act is crystal clear that when a cheque has been issued as a security, no complaint will .....

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Manipal-576119 and branches among other places at Palayam, Trivandrum. The husband of respondent No. 1 entered into a hire purchase agreement with the appellant for the purposes of the purchase of a Maruti car on hire purchase basis. The respondent No. 1, his wife stood as a guarantor in respect of the hire purchase facilities being made available to her husband. The facts further reveal that the respondent No. 1, on account of the aforesaid transaction and towards part payment issued a cheque .....

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No. 1 did not think it fit and proper to reply to the said notice in spite of receipt thereof, the appellant thereafter filed a complaint under section 138 before the Chief Judicial Magistrate s Court, Thiruvananthapuram. The complaint has been registered as S.T. No. 141/1999 in the Court of the Addl. Chief Judicial Magistrate, Thiruvananthapuram and, subsequently, the case was taken on file for the purposes of the complaint and immediately thereafter, the respondents herein moved a petition un .....

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ereinbefore, the principal reason for quashing of the proceeding as also the complaint by the High Court was by reason of the fact that section 138 provides for issuance of a cheque to another person towards the discharge in whole or in part of any debt or liability and on the factual context, the High Court came to a conclusion that issuance of the cheque cannot be co-related for the purpose of discharging any debt or liability and as such complaint under section 138 cannot be maintainable. 8. .....

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words, if read with the first three words at the commencement of section 138, leave no manner of doubt that for whatever reason it may be, the liability under this provision cannot be avoided in the event the same stands returned by the banker unpaid. The Legislature has been careful enough to record not only discharge in whole or in part of any debt but the same includes other liability as well. This aspect of the matter has not been appreciated by the High Court, neither been dealt with or eve .....

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