Cheque Dishonour and S.138 of Negotiable Instruments Act, 1881 in Cases of Loan Transactions by Public Sector Banks

Cheque Dishonour and S.138 of Negotiable Instruments Act, 1881 in Cases of Loan Transactions by Public Sector Banks - Bank Loan and Cheque Dishonour - Home Loans by Banks - Non-delivery of Possession of Flat - Challenge to summons issued to accused by the Magistrate 

In case of Versha Negi v. State [2023] GCtR 1165 (Delhi) petition has been filed under Section 482 of the Code of Criminal Procedure, 1973 (“Code”) inter alia, praying for quashing of the Criminal Complaint bearing number 1169/2018, under Section 138 r/w Section 142 of the Negotiable Instruments Act, 1881 (‘NI Act’).  

In this case, a public sector bank was the complainant. Accused had availed home loan. When defaults in EMIs was done by accused, bank presented the cheque. Accused had been issued summons which was challenged by accused before High Court. Argument raised by accused was that the possession of flat was not handed over by the developer. 

Date of Existence of Debt

Section 138 of N.I. Act, 1881 specifically mentions that the cheque issued for the discharge of “debt” and “other liability”. It is therefore, not necessary that when the cheques are issued, the drawer had any debt to discharge on the date of issuance. The debt or any liability is to exist when the cheque in question is presented for encashment.  

Signed Cheque with Blank Particulars

In the instant case, the issuance of the blank cheques was not disputed by the accused. There was no dispute that the cheques belonged to the accused. When the cheque is signed, leaving blank all other particulars, and handing over to the payee authorizing him to fill up the blanks as agreed upon, attracts penal provision of Section 138 in case of dishonor. 

Cancelled Purchase Order and Cheque Dishonour

One cannot lose sight of the difference between a transaction of the cancelled purchase order and that of a loan transaction where the loan has been advanced, and its repayment becomes due. 

EMI  Payment and Effect on Prosecution - Disputed Facts and Stage for Examination

As far as the argument of accused with respect to the payment of the EMI amount is concerned, the same was required to be proved by way of documentary and oral evidence at the time of trial. It is also relevant to note, in the present case of Versha Negi (supra), that neither the accused has made nor placed on record any endorsement nor has filed any other documentary evidence to support her contentions, and the same remains to be disputed facts which will be adjudicated upon at the time of trial. 

Inherent Powers of High Court - Existence of Liability - Quashing of Proceedings and Factors to be Applied - Burden of Proving the Absence of Debt - Presumption under S.139 of NI Act, 1881

It is also equally settled that while exercising the powers under Section 482 of the Code, 1973 at the instance of an accused, the High Court ought to be circumspect. It should not interfere unless some unimpeachable and uncontroverted evidence is placed on record to indicate that the allegations made are bereft of any merit. Thus, in a case where the basic averments have been made which point to the issuance of the cheque and its dishonour; in the absence of any unimpeachable and uncontrovertible evidence, the defences such as the existence of liability etc. are a matter of trial. 

It has been held time and again that the power of quashing criminal proceedings while exercising power under Section 482 of the Code, 1973 should be exercised very sparingly and with circumspection. The Court, at this stage, is not to embark upon an inquiry as to the reliability or genuineness of the allegations made in the complaint. The Court, at the same time, is also not to go into the merits of the complaint to reach a conclusion that there was any existing debt or liability. Furthermore, the burden of proving that there was no existing debt or liability is on  the accused which is required to be discharged at the time of trial unless some evidence of unimpeachable character is produced before the Court to take a different view. The presumption envisaged under Section 139 of the NI Act is a rebuttable presumption at the time of trial. The Court can exercise power under Section 482 of the Code, 1973, if the complaint on the face of it does not make out any case against the accused or if any evidence of an unimpeachable nature is produced to support the case of the accused. The only ground taken by the accused in the case of Versha Negi (2023) was that the cheque was given to the bank for the purpose of repayment of EMIs and not for the total outstanding amount. 

After explaining these aspects, the petition filed by accused under S.482 was dismissed.