Relevant Date For Determining Existence Of Legally Enforceable Debt U/S 138 NI Act Is Date Of Presentation Of Cheque & Not Date Of Issuance: Rajasthan HC
The Rajasthan High Court observed that the relevant date for determining the existence of a legally enforceable debt or liability under Section 138 of the Negotiable Instruments Act is the date of presentation/ maturity of the cheque in question.
The Court said that a person cannot shirk his/her liability to pay the cheque amount by taking plea that there was no legally enforceable debt or liability subsisting on the date of issuance/drawl.
The Court said thus in a batch of criminal miscellaneous petitions seeking quashment of entire criminal proceedings of the complaint cases for the offence under Section 138 of the Negotiable Instruments Act, 1881 (NI Act).
A Single Bench of Justice Anil Kumar Upman remarked, “… I am of the considered opinion that the petitioners cannot shirk their liability to pay the cheque amount to the complainant by taking plea that there was no legally enforceable debt or liability subsisting on the date of issuance/drawl. The relevant date for determining the existence of a legally enforceable debt or liability under the N.I. Act would be the date of presentation/maturity of the cheque in question.”
Advocate Dushyant Singh represented the petitioners while Advocate Manish K. Saini represented the respondents.
Factual Background -
The complainant/respondent i.e., M/s Vibrant Academy (I) Pvt. Ltd. was running an IIT JEE Coaching Institute. It invited petitioners to enter into contract for their employment as faculty upon certain terms and conditions. It obtained cheques from the respective petitioners in order to indemnify itself for any future losses which could have incurred to it by violation of any condition of the contract by the petitioners. The said cheques were issued as security by the petitioners and dates were not mentioned therein at that time. It was agreed between the parties that the respondent would be free to present the cheques for encashment in case of breach of any of the terms of the agreement and the petitioners would be bound to honour the cheques on presentation.
Thereafter, the petitioners resigned their jobs and for breach of condition of the contract, the respondent issued multiple legal notices (both civil and criminal) to them for breach of the conditions of the contract. The petitioners filed separate reply to the notices mentioning therein their grievances/defence, and when the cheques could not be honoured, the respondent company filed separate cases under Section 138 of the NI Act against the petitioners before the Special Judicial Magistrate. Cognizance was taken by the Trial Court against the petitioners for offence under Section 138 NI Act and proceedings were going on there. Hence, the petitioners filed miscellaneous petitions seeking quashing of the entire criminal proceedings of the complaint cases, pending against them before the Trial Court.
The High Court in the above regard observed, “The Act's overarching goal, as articulated in Section 138, is to increase the acceptance of cheques and foster confidence in the usefulness of negotiable instruments for doing business. To understand more on the issue of legislative intent, the latter case is of utmost importance. In the case of Sunil Todi, a two-judge bench expounded on the phrase “debt or other liability” in Section 138 to understand the true intention of legislation. In previous cases it was held that the word “debt” only includes the amount owed by the drawer to the payee on the date of issuance of the cheque. But it is pertinent to note that “other liabilities” is a separate phrase within the section, and it has to distinguished from the word “debt”. And hence the liability arising on the date of maturity will be covered under Section-138.”
The Court emphasised that if there subsists any legally enforceable debt or liability on the date of presentation of cheque; the cheque gets dishonoured and the drawer fails to make payment of the cheque amount within the stipulated time period, after serving legal notice, the drawer of the cheque has to face trial under the NI Act.
“However, the accused petitioners would be at liberty to cross-examine the complainant and adduce other evidence during trial to rebut the presumption of legally enforceable debt or liability subsisting on the date of presentation of cheques in question for encashment; disprove the validity of the contract and produce any other material, favouring their cases”, it added.
Accordingly, the High Court dismissed the misc. petitions and directed the Trial Court to expedite the proceedings.
Cause Title- Paul Mitra v. State of Rajasthan & Anr. (Neutral Citation: 2024:RJ-JP:20892)
Appearance:
Petitioners: Advocate Dushyant Singh
Respondents: Advocates Manish K. Saini and Mahesh Sharma.
