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2015 (9) TMI 240 - DELHI HIGH COURT

2015 (9) TMI 240 - DELHI HIGH COURT - TMI - Dishonour of cheque - Cheques given in persuance of rent due - Held that:- Appellant and the other co-owners are the owners and the landlords of the premises in question; premises in question was leased out by five different lease deeds to the respondent/lessees by the five co-owners in respect of their undivided 1/5th share each on a monthly rent of ₹ 1,10,000/- for each of the co-sharers, i. E. ₹ 5,50,000/- in the aggregate; lease had not .....

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their liability in their reply dated 23.05.2009 and conveyed their intention to clear the cheques and stated that they were dishonoured due to their tight financial position.

Advance cheques had been issued towards payment of rent by the respondent/lessees. The respondents continued to remain tenants and incurred the liability to pay rent month to month. The advance cheques issued towards payment of rent when deposited for realization of the rent for the said period were dishonoured u .....

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HI, J. For The Appellant : Mr. K. N. Popli & Mr. Mohit Popli, Advocates. For The Respondent : Mr. Mr. Juggal Wadhwa, Mr. Rishabh Wadhwa and Mr. Parth Kaushik, Advocates for R-1 & 2. Mr. Rajeev Kumar and Mr. Saurabh Kumar, Advocates. JUDGMENT : 1. The present appeal is directed against the common judgment dated 10.07.2014 passed by the learned Metropolitan Magistrate (NI Act)-041 Tis Hazari Courts, New Delhi in CC No. 76/10, whereby the complaint preferred by the appellant under Section 1 .....

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nd floor, first floor and second floor with roof rights. All the sisters/ complainants had appointed one Mr. Vipin Batra as their Attorney by way of a GPA dated 23.06.2008, and through him entered into five lease agreements on 18.07.2008-all marked as Ex. CW-1/DA, with the accused in respect of the undivided share of each of the sisters in the aforesaid premises for a period of nine years, at a total monthly rent of ₹ 5,50,000/- (before TDS deduction). The share of rent of each sister was .....

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oses of computation of monthly rent, into four slabs, as follows: i) Monthly rent for the period 1st July, 2008 to 30th September, 2008 shall be Nil. (This period of 3 months will be treated as free for fit out to commence the restaurant) ii) Monthly rent for the period 1st October, 2008 to 30th June, 2011 shall be ₹ 1,10,000/- iii) Monthly rent for the period 1st July 2011 to 30th June, 2014 shall be ₹ 1,26,500/- iv) Monthly rent for the period 1st July 2014 to 30th June, 2017 shall .....

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time of execution of each of the lease agreements i. E. on 18.07.2008 in pursuance of Clause (4) of the lease agreements-which are all having identical terms and conditions. Clause 4 of each of the lease agreements, insofar as it is relevant reads: the lessee has also submit 12 post dated cheques at the time of execution of this lease deed as advance for monthly rent…. Each of the cheques were drawn for the amount of ₹ 91,300/- (After TDS deduction on rent of ₹ 1,10,000/-). Of .....

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ion of the aforesaid property. Subsequently, the aforesaid property was booked and sealed by the MCD for unauthorized construction/ excess coverage in violation of bye-laws. On 13.04.2009, a portion of the basement and third floor were sealed, and the rest of the property was sealed on 12.09.2009. 5. The learned MM set out the fivefold defence of the accused as follows: i) Complaint being still born, having not been filed by competent attorney; ii) Lease Agreement is as agreement void ab-initio, .....

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/complainants. It was held that the complaint had been filed by the competent authority and that lease agreements were not void ab initio as they were not agreements forbidden by law or against public policy. It was also held that there was no misrepresentation or concealment of material information by the lessor. After holding that the lease agreement entered into were valid and were neither void nor voidable, the learned MM proceeded to consider whether the contract subsequently became void on .....

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the terms of the contract. The contract contained in the lease agreement could not be said to have been frustrated on account of supervening third party conduct, and that the parties were under an obligation to perform their part of the contract. Finally, the learned MM considered the issue whether the cheques in question had been issued, not in discharge of a subsisting liability, but as advance/security cheques. 8. On this aspect, the learned MM held that the rent becomes due or accrues on th .....

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ent: 13. The explanation appended to Section 138 explains the meaning of the expression debt or other liability‟ for the purpose of Section 138. This expression means a legally enforceable debt or other liability. Section 138 treats dishonoured cheque as an offence, if the cheque has been issued in discharge of any debt or other liability. The explanation leaves no manner of doubt that to attract an offence under Section 138, there should be legally enforceable debt or other liability subs .....

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annot be held to have been drawn for an existing debt or liability. The payment by cheque in the nature of advance payment indicates that at the time of drawal of cheque, there was no existing liability… . 9. The learned MM held that, since the cheques in question had been received by the complainants in advance at the time of execution of the lease deeds and the property could not be used for the intended purpose, the dishonour of the cheques in question would not entail an action under .....

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nt arise month to month, the learned MM has concluded that the dishonour of the cheque in question could not be the basis of a complaint under Section 138 of the NI Act. For reaching this conclusion, the learned MM has placed reliance on the judgment of the Supreme Court in Indus Airways (supra). Learned counsel submits that this is on account of a superficial reading of the said judgment, and its misapplication to the facts of the present case. 11. Learned counsel submits that the learned MM ha .....

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elevant or material. Learned counsel submits that when the premises was let out by the appellant along with the other four sisters, there was no notice by the Municipal Corporation pending. 12. Learned counsel submits that the building was booked vide letter dated 17.10.2008, whereas the premises had been leased to the respondent on 18.07.2008. Learned counsel submits that the building was not sealed for want of completion certificate and that the said sealing had taken place on account of unaut .....

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hat under the terms of the lease agreement, the respondents/lessees were obliged to obtain all the requisite permission before undertaking any additions or alteration in the lease premises. In this regard, reference is made to the following clauses of the lease deeds dated 18.07.2008 which are identical and which were all marked as CW-1/DA: f) The Lessee shall not make or permit to be made any structural addition on the roof except the lift room and a temporary shed for generator set approx. mea .....

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n the Lessee shall be wholly and solely responsible to defend the said proceedings and consequences thereof, whether civil or criminal shall be solely borne by the Lessee. The Lessee shall also indemnify and also keep indemnified the Lessor against any loss or damages that the Lessor suffers or that are undergone by the Lessor due to non-compliance of any statutory, regulatory or mandatory provisions or rules or regulations etc. x x x x x x x x x x i) The Lessee shall not make or permit to be ma .....

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see shall not be entitled for any compensation for the same/ any other improvements at the time of vacation. x x x x x x x x x x k) At the time of installation of lift, fire security system and other civil work and before commencing the restaurant business, the Lessee shall get the permission/ license, if necessary, from the concerned authority/ department at his own costs and that the Lessee shall get the same renewed from time to time. 14. Learned counsel submits that the respondent/accused un .....

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he conversion charges vide receipts dated 19.06.2008 and 30.06.2008. 15. Learned counsel submits that, in any event, the respondents by opting to hold on to the lease premises even after its sealing, and not surrendering the lease, incurred the liability to pay the rent. 16. On the other hand, learned counsel for the respondent submits that the appellant and the other co-owners were responsible for the sealing of the premises. In this regard, clause 7(b) of the lease deed Ex. CW-1/DA is referred .....

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subject matter of any pending litigation, acquisition proceedings, by reason whereof the Lessor is prohibited from leasing the same. 17. Learned counsel submits that sealing took place on account of unauthorized construction on all the floors including basement, ground and first floor as stated by DW-1. The booking first took place on 17.10.2008 for excess coverage at basement, ground, first floor and addition to second floor. It is submitted that on account of the said illegalities committed b .....

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the respondent. 19. Learned counsel for the respondent has sought to place reliance on the judgment of the Supreme Court in M. S. Narayana Menon @ Mavi Vs. State of Kerala & Another, (2006) 6 SCC 39. 20. Learned counsel for the respondent submits that in the suit filed by the appellant, and the other co-owners, the plaintiffs-including the appellant, had preferred CCP No.111/2012 in C. S. (OS) No.735/2010. The same was dismissed by this Court on 07.02.2014. Consequently, reliance is also pla .....

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ein the Supreme Court held that if the trial court has acquitted the accused, the appellate court shall not take a different view unless the finding is such that no reasonable person will come to that conclusion. The Supreme Court also referred to the decision of the Privy Council in Sheo Swarup v. King Emperor, LR 61 IA 398, wherein the Privy Council had observed: … the High Court should and will always give proper weight and consideration to such matters as (1) the views of the trial Ju .....

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Narain & Anr., 135 (2006) DLT 273, wherein this Court invoked the maxim Pari delicto portior est conditio possidentis , i. E. the Courts will refuse to enforce an illegal agreement at the instance of a person who himself is a party to the illegality or fraud. This submission is made in furtherance of the submission that the lease agreements were void and contrary to the law inasmuch, as, they had been entered into to perpetuate an illegality, i. E. of putting the premises in question to use .....

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tence as on the date of cheque would not attract prosecution under Section 138 of the NI Act. Learned counsel also relies on Indus Airways (supra) for this proposition. 23. In his rejoinder, learned counsel for the appellant has referred to the reply dated 23.05.2009 (Ex. DW-2/C3) sent by the respondents to the appellants letter dated 05.05.2009. In this reply, the respondents, inter alia, stated that We have all the intentions to clear the cheques, which have got dishonoured due to our tight fi .....

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delivered by us to the complainant. The same were given towards advance rent. The aforesaid three demand drafts were not in addition to 60 cheques earlier given towards the advance rent. The copy of the said drafts is Ex. DW-2/C-1 (one page). The said demand drafts were towards rent. It is correct that the aforesaid demand drafts were delivered by us to the complainant after first sealing of the property i. E. 13.04.09. It is correct that five demand drafts were delivered by us to the complainan .....

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nclined to overrule or otherwise disturb the trail courts finding of acquittal. The relevant extract from this decision reads as follows: 70. In light of the above, the High Court and other appellate courts should follow the well settled principles crystallized by number of judgments if it is going to overrule or otherwise disturb the trial court's acquittal: 1. The appellate court may only overrule or otherwise disturb the trial court's acquittal if it has "very substantial and com .....

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of justice"; iv) The entire approach of the trial court in dealing with the evidence was patently illegal; v) The trial court's judgment was manifestly unjust and unreasonable; vi) The trial court has ignored the evidence or misread the material evidence or has ignored material documents like dying declarations/ report of the Ballistic expert, etc. vii) This list is intended to be illustrative, not exhaustive. Pertinently, in Ghurey Lal (supra), the Supreme Court considered the judgment .....

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her irresistible force, any material part of the property be wholly destroyed or rendered substantially and permanently unfit for the purposes for which it was let, the lease shall, at the option of the lessee, be void: Provided that, if the injury be occasioned by the wrongful act or default of the lessee, he shall not be entitled to avail himself of the benefit of this provision; (Emphasis supplied) 27. Thus, if the leased premises is rendered substantially and permanently unfit for the purpos .....

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this issue. In this case, proceedings were initiated under the Delhi Rent Control Act, 1958, inter alia, on the ground of non payment of rent by the tenant. The Rent Controller passed an order under Section 15(1) of the said Act, directing deposit of arrears of rent and directing payment of interim rent from month to month. During pendency of the eviction proceedings, a part of the tenanted premises was destroyed by fire. The tenant did not deposit the interim rent fixed by the Controller. Conse .....

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the Rent Control Tribunal allowed the appeal of the respondent/landlord. Consequently, the tenant preferred a second appeal before the High Court. 29. This Court rejected the appellants/tenants submission that it had the right to suspend the payment of rent on the destruction of the premises and upon the refusal of the respondent/landlord to either reconstruct himself, or permit the tenant to do so. The discussion in the said decision reads as follows: 8. On the second point on merits, it is co .....

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the Transfer of Property Act is to exercise the option of treating the lease to be void. In such a case the lessee cannot continue to hold on to the premises or say that the lease continues but he will not pay the rent. If the lessee does not exercise the option to treat the lease to be void, he will remain liable to pay the rent. (See Sidick Haji Hossin v. Bruel and Co., (1910) 8 IC 1049. In Gandavalla Munuswamy v. Marugn Muniramiah, AIR1965AP167 it was observed:- "Under S.108(e), T. P. Ac .....

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ot otherwise be able to take appropriate steps on the footing that the lease has come to an end and he is Therefore at liberty to deal with the property as he chooses. What is even more important is that a mere declaration of intention to treat the lease as void is not sufficient. The lessee must also yield up possession of the property to the Lesser as required by the provisions of Section 108(q) of the Transfer of Property Act. He cannot continue in possession and yet declare that he has treat .....

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s reported in AIR1966All225 and in re- Alanduraippar s case, AIR1963Mad94 , There cannot be any unilateral suspension of rent. The tenant continues to be liable for the whole of the rent until he obtains an order from the Court or agreement from the landlord for reduction of the proportionate part of the rent. (See. Kishan Chand v. Rainesh Chander and others 1969 AIRCJ 839 a decision of Deshpande J. of this Court). Therefore, where an order for deposit of rent has been made under sub-section (1) .....

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s followed by this Court again in Chander Mohan Jain & Ors. v. State Bank of Patiala & Anr., 58 (1995) DLT 799. This is a short order and the relevant extract from the same reads as follows: (2) This is application for direction to defendant No.1 that the rent of the premises occupied by defendant No.1 bank be paid. The claim in the application is for payment of ₹ 1,02,600.00 per month. (3) It is stated in the reply that a part of the roof had collapsed on 13.10.1990, and the build .....

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of Colour and Chemical Pvt. Ltd. v. Trilok Chand ) , where it was held by this Court that a tenant cannot treat a lease as subsisting and suspend payment of rent. I am in respectful agreement. (5) The defendant bank has not voided the leas we in question. It continues to regard itself as tenant. As a tenant it has to pay the agreed rent. I, Therefore, direct the defendant to deposit the rent of ₹ 1,02,600/ -per month, which has admittedly not been paid since 31.10.1990, in Court within ten .....

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ndly on 12.09.2009, (when the entire premises was sealed), is of no relevance for the simple reason that the respondent/tenants did not choose to avoid the lease as they could have done. It is wholly irrelevant for the present purpose, as to who was responsible for the sealing of the premises on both the occasions. Even if one were to proceed on the assumption that the appellant and the other co-owners had made excess coverage on the basement and upper floors of the leased premises even prior to .....

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f the building, purpose for which the Demised Premises can be used etc. and has also verified and fully satisfied himself about the soundness of the title of the Lessor. Hereafter, no claim and/ or demand of any nature whatsoever on any ground shall lie upon the Lessor. 33. The respondent/lessees took the premises on lease with open eyes. Even if it were to be accepted for the sake of argument, that the premises was taken by them on lease unmindful of the excess coverage on the basement and uppe .....

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f law has led to grave miscarriage of justice in the present case. 34. The submission of Mr. Wadhwa premised on clause 7(b) of the lease agreement which contains the warranty and representation made by the lessors, at best, may entitle the lessees to enforce the same and to claim damages and losses, if any, suffered by them on account of the defects in the leased premises. The same does not entitle the respondent/lessees to suspend the payment of rent. 35. There is no merit in the submission of .....

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e was void. The learned MM has comprehensively discussed the aforesaid aspect under issue no.2 and I agree with the said reasoning as well as conclusion of the learned MM. Moreover, Ld. Counsel for the respondents has advanced no argument to claim that the lease agreement was void ab-initio, or to show that the finding of the Ld. MM on the said aspect in erroneous. Consequently, no reliance can be placed on the decision of this Court in Virender Singh (supra). 37. The decisions of the Supreme Co .....

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puted the interest claimed and stated that the amount reflected in the cheques was not the legally enforceable liability. The amount had been filled up by the drawee on a blank signed cheque. The Court held: 5. …. …. In the case of a signed blank cheque, the drawer gives authority to the drawee to fill up the agreed liability. If the drawee were to dishonestly fill up any excess liability and the extent of liability if it becomes bona fide matter of civil dispute in such case, the .....

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ct. The dismissal of complaint is sound and proper. The appeal is dismissed. 39. However, the position in the present case is entirely different. There is no dispute with regard to the essential facts, namely, that the appellant and the other co-owners are the owners and the landlords of the premises in question; that the premises in question was leased out by five different lease deeds to the respondent/lessees by the five co-owners in respect of their undivided 1/5th share each on a monthly re .....

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nt, which is an ascertained and crystallized liability. It is equally pertinent to note that the respondents admitted their liability in their reply dated 23.05.2009 (Ex. DW-2/C3) and conveyed their intention to clear the cheques and stated that they were dishonoured due to their tight financial position. 40. Reliance placed by Mr. Wadhwa on the judgment of the Supreme Court in M. S. Narayana Menon (supra) is of no avail. This Court had the occasion to consider the judgment in M. S. Narayana Men .....

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accused disputed the statement of account relied upon by the complainant, on the basis whereof it was claimed that the cheque amount was due and outstanding. The Supreme Court examined the nature of the transactions undertaken between the parties in the light of the evidence before it. The Supreme Court held that the complainant had not been able to explain the discrepancies in his books of accounts. The complainant did not bring on record any material to show that the parties had transactions, .....

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e his contention as regards the correctness of the accounts of Ex. P10 series must be rejected. 33. The Supreme Court then proceeded to delve into Sections 118(1) and 139 of the NI Act which raise a presumption against the drawer of a cheque. In para 52 of the judgment, the Supreme Court, inter alia, observed; …….. The appellant clearly said that nothing is due and the cheque was issued by way of security. The said defence has been accepted as probable. If the defence is acceptable .....

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observations have to be read in the context in which they were made. It is well settled that a judgment cannot be read like a Statute. Construction of a judgment should be made in the light of the factual matrix involved therein. What is more important is to see the issues involved in a given case, and the context wherein the observations were made by the Court while deciding the case. Observation made in a judgment, it is trite, should not be read in isolation and out of context. [See Goan Real .....

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precedents. A decision, it is trite, should not be read as a statute. 139. A decision is an authority for the questions of law determined by it. While applying the ratio, the court may not pick out a word or a sentence from the judgment divorced from the context in which the said question arose for consideration. A judgment as is well-known, must be read in its entirety and the observations made therein should receive consideration in the light of the questions raised before it. (See Haryana Fin .....

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are galore on this point, we may refer to a recent one in State of Gujarat and Ors. v. Akhil Gujarat Pravasi V. S. Mahamandal and Ors., AIR2004SC3894 wherein this Court held: "... It is trite that any observation made during the course of reasoning in a judgment should not be read divorced from the context in which they were used." 36. The Supreme Court in Narayana Menon (supra) was not particularly dealing with the issue as to whether, or not, a cheque issued for security or for any o .....

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nt of any amount of money………of any debt or other liability………‟. 37. The Karnataka High Court in M/s Shree Ganesh Steel Rolling Mills Ltd. v. M/s STCL Limited, Criminal Petition No.4104/2009 decided on 21.05.2013, 2013 SCC OnLine Kar 9939 : (2013) 4 AIR Kant R 70, inter alia, observed in relation to Narayana Menon (supra): It is to be noticed that the observation made by the apex court in Narayana Menon‟s case that ………&hel .....

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or brought to the notice of the Court, and has not been considered by the Court. In fact, on a reading of Narayana Menon (supra), it is clear that the said decision was rendered in the specific facts of that case, and upon examination of the evidence led before the Court by holding that the accused had been able to discharge his initial burden of raising a probable defence, and that the complainant had failed to establish that the cheques in question have been issued in discharge of a legal deb .....

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ound that the Supreme Court had held that the accused had been able to raise a probable defence, as the liability of the accused/debtor was not ascertained and crystallized. The same cannot be said about the present case in view of the aforesaid discussion. The decision in M. S. Narayana Menon (supra), therefore, has no application to the facts of the present case. 42. Reliance placed on the order dated 07.04.2014 in CCP No.111/2012 in C. S. (OS) No.735/2010 is of no avail whatsoever. It has no .....

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below the relevant extract from the said decision: 20. It is the observation made by the Supreme Court in Indus Airways (supra) - that the dishonoured cheque should be in relation to a debt or other liability subsisting on the date of drawal of the cheque, to be able to maintain a complaint under Section 138 of the NI Act, which is the cornerstone of the legal submission of the respondents/ accused. 21. On a closer scrutiny of the decision in Indus Airways (supra), it appears to me that Indus A .....

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rchaser issued advance cheques with the two purchase orders. Before the supplies under the purchase orders was made, the purchaser/accused cancelled the two purchase orders (which was not in dispute), and requested the complainant to return the cheques. The cheque was presented and dishonoured. As a result, a complaint was preferred. The Supreme Court dismissed the complaint on the ground that there was no existing liability between the parties since the contract had been terminated. Thus, on th .....

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t best, only a civil liability existed in damages. 22. However, in the present case, the liability or debt is claimed to have arisen under the contract in respect of which the dishonoured cheque was issued. The cheque was issued precisely to secure the debt/ liability that may arise under the contract on account of the accused undertaking the share sale/purchase transactions on credit basis through the appellant broker. Thus, the decision in Indus Airways (supra) cannot be mechanically applied i .....

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hus, if the observations made by the Supreme Court in Indus Airways (supra) are understood as laying down a general legal proposition that on the date of issuance of the cheque the debt/other liability should be subsisting to maintain a complaint under Section 138 of the NI Act, the same would not align with the ratio laid down in the earlier decision in Beena Shabeer (supra). 24. As noticed above, in Indus Airways (supra) the Supreme Court was considering the fact situation wherein the purchase .....

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id that, because there was no pre-existing or pre-determined debt or other liability on the date of issue of the cheque by the purchaser (as the goods/ services were supplied only after the issuance of the post-dated cheque), a complaint under Section 138 NI Act would not lie? 25. In my view, it would defeat the object of Section 138 NI Act to hold that the seller/ service provider cannot enforce his right conferred by Section 138 NI Act in such a situation, as it would encourage dishonest buyer .....

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oods was not made for whatever reason. 26. The Explanation to Section 138 NI Act reads: Explanation -For the purposes of this section, debt or other liability means a legally enforceable debt or other liability. 27. Thus, the debt or other liability has to be a legally enforceable debt or other liability. Neither the main provision of Section 138, nor the explanation suggest that the debt or other liability should be in existence on the date of issuance of the cheque, i. E. on the date of its de .....

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