Delhi High Court: Discussing the question that whether or not a
dishonored post-dated cheque attracts criminal liability under Section
138 of the Negotiable Instruments Act, 1881 (NIA), the division bench
comprising of R.M. Lodha and Shiva Kirti Singh, JJ held that a cheque,
if issued in discharge of an existing liability at the time of the
drawal of it, attracts criminal liabilities on dishonor. The Court
opined that in order to attract criminal liabilities against Section 138
of NIA, a legally enforceable debt or other liability subsisting on the
date of drawal of the cheque is indispensable for a contract of advance
payments. Distinguishing the criminal liability from civil liability,
the Court said that if at the time of entering into a contract, it is
one of the conditions of the contract that the purchaser has to pay the
amount in advance and there is breach of such condition then purchaser
may have to make good the loss that might have occasioned to the seller
but that does not create a criminal liability under Section 138 of NIA.
Since the cheques were issued as advance payments for purchased goods,
the Court held that there will be an existing liability unless the
purchase failed to reach its logical conclusion and therefore, their
dishonor shall attract criminal liabilities.[M/s. Indus Airways Pvt.
Ltd. & Ors. vs. M/s. Magnum Aviation Pvt. Ltd. & Anr., Criminal
Appeal No. 830 of 2014, decided on 7th April, 2014]
REPORTABLE
IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPEAL NO. 830 OF 2014
(Arising out of SLP (Crl.) No.9752 of 2010)
R.M. LODHA, J.
Leave granted.
2.
The only question that arises for consideration in this
appeal by special leave is, whether the post-dated cheques issued by
the appellants (hereinafter referred to as ‘purchasers’) as an advance
payment in respect of purchase orders could be considered in
discharge of legally enforceable debt or other liability, and, if so,
whether the dishonour of such cheques amounts to an offence under
Section 138 of the Negotiable Instruments Act, 1881 (for short, ‘the N.I.
Act’). The Delhi High Court in the impugned order has held that to be
so.
3.
The brief facts are these: On 19.02.2007 and 26.02.2007,
the purchasers placed two purchase orders for supply of certain aircraft
parts with respondent No.1, M/s. Magnum Aviation Pvt. Ltd. (hereinafter
referred to as ‘supplier’).
In respect of these purchase orders, the
purchasers also issued two post-dated cheques dated 15.03.2007 for a
sum of Rs.34,57,164/- and 20.03.2007 for a sum of Rs.15,91,820/-.
The said cheques were issued by way of advance payment for the
purchase orders. One of the terms and conditions of the contract was
that the entire payment would be given to the supplier in advance. The
supplier says that the advance payment was made by the purchasers
as it had to procure the parts from abroad.
4.
These cheques got dishonoured when they were presented
on the ground that the purchasers had stopped payment.
5.
It is not in dispute that the supplier received letter dated
22.03.2007 from the purchasers cancelling the purchase orders and
requesting the supplier to return both the cheques.
6.
The supplier sent response to the letter dated 22.03.2007
on 23.03.2007 asking the purchasers as to when the supplier could
collect the payment.
Thereafter, on 12.04.2007, the supplier sent a
notice to the purchasers and then filed a complaint against the
purchasers under Section 138 of the N.I. Act before the Court of
Additional Chief Metropolitan Magistrate, New Delhi.
7.
On
22.05.2007,
the
concerned
Additional
Chief
Metropolitan Magistrate took cognizance of the alleged offence and
issued summons to the purchasers.
8.
The purchasers challenged the order issuing summons in a
revision petition under Section 397 of the Code of Criminal Procedure,
1973 (for short, ‘Code’). The Additional Sessions Judge, after hearing
the parties, allowed the revision petition vide order dated 02.09.2008
and quashed the process issued by the Additional Chief Metropolitan
Magistrate.
9.
The supplier challenged the order of the Additional
Sessions Judge in a petition under Section 482 of the Code before the
High Court. The High Court allowed the petition, set aside the order of
the Additional Sessions Judge and restored the order of the Additional
Chief Metropolitan Magistrate issuing process to the purchasers.
10.
The Delhi High Court following its earlier decision in Mojj
Engineering1 held that the issuance of a cheque at the time of signing
such contract has to be considered against a liability, as the amount
written in the cheque is payable by the person on the date mentioned in
the cheque.
11.
Section 138 of the N.I. Act is as follows:
M/s. Mojj Engineering Systems Limited and others v. M/s. A.B. Sugars Ltd. [154 (2008) Delhi Law
Times 579]
“138. Dishonour of cheque for insufficiency,
etc., of funds in the account. - Where any
cheque drawn by a person on an account
maintained by him with a banker for payment of
any amount of money to another person from out
of that account for the discharge, in whole or in
part, of any debt or other liability, is returned by the
bank unpaid, either because of the amount of
money standing to the credit of that account is
insufficient to honour the cheque or that it exceeds
the amount arranged to be paid from that 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
provisions of this Act, be punished with
imprisonment for a term which may be extended to
two years, 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 within the period of its validity,
whichever is earlier;
(b) the payee or the holder in due course of the
cheque, as the case may be, makes a demand for
the payment of the said amount of money by
giving a notice in writing, to the drawer of the
cheque, within thirty days of the receipt of
information by him from the bank regarding the
return of the cheque as unpaid; and
(c) the drawer of such cheque fails to make the
payment of the said amount of money to the payee
or, as the case may be, to the holder in due course
of the cheque, within fifteen days of the receipt of
the said notice.
Explanation. - For the purposes of this section,
"debt or other liability" means a legally enforceable
debt or other liability.”
12.
The interpretation of the expression ‘for discharge of any
debt or other liability’ occurring in Section 138 of the N.I. Act is
significant and decisive of the matter.
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
subsisting on the date of drawal of the cheque. In other words, drawal of
the cheque in discharge of existing or past adjudicated liability is sine
qua non for bringing an offence under Section 138. If a cheque is issued
as an advance payment for purchase of the goods and for any reason
purchase order is not carried to its logical conclusion either because of
its cancellation or otherwise, and material or goods for which purchase
order was placed is not supplied, in our considered view, the cheque
cannot be held to have been drawn for an exiting 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.
14.
In Swastik Coaters2 , the single Judge of the Andhra
Pradesh High Court while considering the explanation to Section 138
held:
“........Explanation to Section 138 of the
Negotiable Instruments Act clearly makes it clear
that the cheque shall be relateable to an
enforceable liability or debt and as on the date of
2
M/s. Swastik Coaters Pvt. Ltd v. M/s. Deepak Brothers and others; [1997 Cri. L.J. 1942 (AP)]
the issuing of the cheque there was no existing
liability in the sense that the title in the property
had not passed on to the accused since the goods
were not delivered. ........”
15.
The Gujarat High Court in Shanku Concretes3 dealing with
Section 138 of the N.I. Act held that to attract Section 138 of the N.I.
Act, there must be subsisting liability or debt on the date when the
cheque was delivered. The very fact that the payment was agreed to
some future date and there was no debt or liability on the date of
delivery of the cheques would take the case out of the purview of
Section 138 of the N.I. Act.
While holding so, Gujarat High Court
followed a decision of the Madras High Court in Balaji Seafoods4.
16.
In Balaji Seafoods4, the Madras High Court held:
“Section 138 of the Negotiable Instruments Act
makes it clear that where the cheque drawn by a
person on an account maintained by him with a
banker for payment of any amount of money to
another person from out of that account for the
discharge, in whole or in part, of any debt or other
liability, is returned by the bank unpaid, either
because of the amount of money standing to the
credit of that account is insufficient to honour the
cheque or that it exceeds the amount arranged to
be paid from that account by an agreement made
with that bank, such person shall be deemed to
have committed an offence under Section 138 of
the Act. The explanation reads that for the
purposes of this section, ‘debt or other liability’
means a legally enforceable debt or liability.”
Shanku Concretes Pvt. Ltd. and others v. State of Gujarat and another; [2000 Cri. L.J.1988 (Guj.)]
M/s. Balaji Seafoods Exports (India) Ltd. and another v. Mac Industries Ltd.; [1999 (1) CTC 6]
17.
The Kerala High Court in Ullas5 had an occasion to
consider Section 138 of the N.I. Act. In that case, the post-dated cheque
was issued by the accused along with the order for supply of goods.
The supply of goods was not made by the complainant. The accused
first instructed the bank to stop payment against the cheque and then
requested the complainant not to present the cheque as he had not
supplied the goods. The cheque was dishonoured. The single Judge of
the Kerala High Court held, “.........Ext.P1 cheque cannot be stated to
be one issued in discharge of the liability to the tune of the amount
covered by it, which was really issued, as is revealed by Ext. D1, as the
price amount for 28 numbers of mixies, which the complainant had not
supplied. .....”
18.
The reasoning of the Delhi High Court in the impugned
order is as follows:
“8.
If at the time of entering into a contract it is
one of the conditions of the contract that the
purchaser has to pay the amount in advance then
advance payment is a liability of the purchaser.
The seller of the items would not have entered into
contract unless the advance payment was made to
him. A condition of advance payment is normally
put by the seller for the reason that the purchaser
may not later on retract and refuse to take the
goods either manufactured for him or procured for
him. Payment of cost of the goods in advance
being one of the conditions of the contract
becomes liability of the purchaser. The purchaser
who had issued the cheque could have been
asked to make payment either by draft or in cash.
Since giving cheque is a mode of payment like any
other mode of payment, it is normally accepted as
5
Supply House, Represented by Managing Partner v. Ullas, Proprietor Bright Agencies and another;
[2006 Cri. L.J. 4330 (Kerala)]
a payment. The issuance of a cheque at the time
of signing such contract has to be considered
against a liability as the amount written in the
cheque is payable by the person on the date
mentioned in the cheque. Where the seller or
manufacturer, on the basis of cheques issued,
manufactures the goods or procures the goods
from outside, and has acted upon the contract, the
liability of the purchaser gets fastened, the
moment the seller or manufacturer acts upon the
contract and procures the goods. If for any reason,
the seller fails to manufacture the goods or procure
the goods it is only under those circumstances that
no liability is created. However, where the goods
or raw material has been procured for the
purchaser by seller or goods have been
manufactured by the seller, it cannot be said that
the cheques were not issued against the liability. I
consider that if the liability is not construed in this
manner, the sole purpose of making dishonour of
the cheque as an offence stands defeated. The
purpose of making or enacting Section 138 of the
N.I. Act was to enhance the acceptability of
cheque in settlement of commercial transactions,
to infuse trust into commercial transactions and to
make a cheque as a reliable negotiable instrument
and to see that the cheques of business
transactions are not dishonoured. The purpose of
Negotiable Instrument Act is to make an orderly
statement of rules of law relating to negotiable
instruments and to ensure that mercantile
instruments should be equated with goods passing
from one hand to other. The sole purpose of the
Act would stand defeated if after placing orders
and giving advance payments, the stop payments
are issued and orders are cancelled on the ground
of pricing of the goods as was done in this case.”
19.
The above reasoning of the Delhi High Court is clearly
flawed inasmuch as it failed to keep in mind the fine distinction between
civil liability and criminal liability under Section 138 of the N.I. Act. If at
the time of entering into a contract, it is one of the conditions of the
contract that the purchaser has to pay the amount in advance and there
is breach of such condition then purchaser may have to make good the
loss that might have occasioned to the seller but that does not create a
criminal liability under Section 138. For a criminal liability to be made
out under Section 138, there should be legally enforceable debt or other
liability subsisting on the date of drawal of the cheque. We are unable to
accept the view of the Delhi High Court that the issuance of cheque
towards advance payment at the time of signing such contract has to be
considered as subsisting liability and dishonour of such cheque
amounts to an offence under Section 138 of the N.I. Act. The Delhi
High Court has traveled beyond the scope of Section 138 of the N.I. Act
by holding that the purpose of enacting Section 138 of the N.I. Act
would stand defeated if after placing orders and giving advance
payments, the instructions for stop payments are issued and orders are
cancelled. In what we have discussed above, if a cheque is issued as
an advance payment for purchase of the goods and for any reason
purchase order is not carried to its logical conclusion either because of
its cancellation or otherwise and material or goods for which purchase
order was placed is not supplied by the supplier, in our considered view,
the cheque cannot be said to have been drawn for an existing debt or
liability.
20.
In our opinion, the view taken by Andhra Pradesh High
Court in Swastik Coaters2, Madras High Court in Balaji Seafoods4,
Gujarat High Court in Shanku Concretes3 and Kerala High Court in
9
Page 9
Ullas5 is the correct view and accords with the scheme of Section 138 of
the N.I. Act.
21.
The view taken by Delhi High Court is plainly wrong and
does not deserve acceptance.
22.
Criminal Appeal is, accordingly, allowed; the impugned
judgment of Delhi High Court is set aside; and the order of the Sessions
Judge is restored.
....................................J.
(R.M. Lodha)
....................................J.
(Shiva Kirti Singh)
New Delhi,
April 7, 2014.
Print Page
REPORTABLE
IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPEAL NO. 830 OF 2014
(Arising out of SLP (Crl.) No.9752 of 2010)
R.M. LODHA, J.
Leave granted.
2.
The only question that arises for consideration in this
appeal by special leave is, whether the post-dated cheques issued by
the appellants (hereinafter referred to as ‘purchasers’) as an advance
payment in respect of purchase orders could be considered in
discharge of legally enforceable debt or other liability, and, if so,
whether the dishonour of such cheques amounts to an offence under
Section 138 of the Negotiable Instruments Act, 1881 (for short, ‘the N.I.
Act’). The Delhi High Court in the impugned order has held that to be
so.
3.
The brief facts are these: On 19.02.2007 and 26.02.2007,
the purchasers placed two purchase orders for supply of certain aircraft
parts with respondent No.1, M/s. Magnum Aviation Pvt. Ltd. (hereinafter
referred to as ‘supplier’).
In respect of these purchase orders, the
purchasers also issued two post-dated cheques dated 15.03.2007 for a
sum of Rs.34,57,164/- and 20.03.2007 for a sum of Rs.15,91,820/-.
The said cheques were issued by way of advance payment for the
purchase orders. One of the terms and conditions of the contract was
that the entire payment would be given to the supplier in advance. The
supplier says that the advance payment was made by the purchasers
as it had to procure the parts from abroad.
4.
These cheques got dishonoured when they were presented
on the ground that the purchasers had stopped payment.
5.
It is not in dispute that the supplier received letter dated
22.03.2007 from the purchasers cancelling the purchase orders and
requesting the supplier to return both the cheques.
6.
The supplier sent response to the letter dated 22.03.2007
on 23.03.2007 asking the purchasers as to when the supplier could
collect the payment.
Thereafter, on 12.04.2007, the supplier sent a
notice to the purchasers and then filed a complaint against the
purchasers under Section 138 of the N.I. Act before the Court of
Additional Chief Metropolitan Magistrate, New Delhi.
7.
On
22.05.2007,
the
concerned
Additional
Chief
Metropolitan Magistrate took cognizance of the alleged offence and
issued summons to the purchasers.
8.
The purchasers challenged the order issuing summons in a
revision petition under Section 397 of the Code of Criminal Procedure,
1973 (for short, ‘Code’). The Additional Sessions Judge, after hearing
the parties, allowed the revision petition vide order dated 02.09.2008
and quashed the process issued by the Additional Chief Metropolitan
Magistrate.
9.
The supplier challenged the order of the Additional
Sessions Judge in a petition under Section 482 of the Code before the
High Court. The High Court allowed the petition, set aside the order of
the Additional Sessions Judge and restored the order of the Additional
Chief Metropolitan Magistrate issuing process to the purchasers.
10.
The Delhi High Court following its earlier decision in Mojj
Engineering1 held that the issuance of a cheque at the time of signing
such contract has to be considered against a liability, as the amount
written in the cheque is payable by the person on the date mentioned in
the cheque.
11.
Section 138 of the N.I. Act is as follows:
M/s. Mojj Engineering Systems Limited and others v. M/s. A.B. Sugars Ltd. [154 (2008) Delhi Law
Times 579]
“138. Dishonour of cheque for insufficiency,
etc., of funds in the account. - Where any
cheque drawn by a person on an account
maintained by him with a banker for payment of
any amount of money to another person from out
of that account for the discharge, in whole or in
part, of any debt or other liability, is returned by the
bank unpaid, either because of the amount of
money standing to the credit of that account is
insufficient to honour the cheque or that it exceeds
the amount arranged to be paid from that 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
provisions of this Act, be punished with
imprisonment for a term which may be extended to
two years, 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 within the period of its validity,
whichever is earlier;
(b) the payee or the holder in due course of the
cheque, as the case may be, makes a demand for
the payment of the said amount of money by
giving a notice in writing, to the drawer of the
cheque, within thirty days of the receipt of
information by him from the bank regarding the
return of the cheque as unpaid; and
(c) the drawer of such cheque fails to make the
payment of the said amount of money to the payee
or, as the case may be, to the holder in due course
of the cheque, within fifteen days of the receipt of
the said notice.
Explanation. - For the purposes of this section,
"debt or other liability" means a legally enforceable
debt or other liability.”
12.
The interpretation of the expression ‘for discharge of any
debt or other liability’ occurring in Section 138 of the N.I. Act is
significant and decisive of the matter.
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
subsisting on the date of drawal of the cheque. In other words, drawal of
the cheque in discharge of existing or past adjudicated liability is sine
qua non for bringing an offence under Section 138. If a cheque is issued
as an advance payment for purchase of the goods and for any reason
purchase order is not carried to its logical conclusion either because of
its cancellation or otherwise, and material or goods for which purchase
order was placed is not supplied, in our considered view, the cheque
cannot be held to have been drawn for an exiting 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.
14.
In Swastik Coaters2 , the single Judge of the Andhra
Pradesh High Court while considering the explanation to Section 138
held:
“........Explanation to Section 138 of the
Negotiable Instruments Act clearly makes it clear
that the cheque shall be relateable to an
enforceable liability or debt and as on the date of
2
M/s. Swastik Coaters Pvt. Ltd v. M/s. Deepak Brothers and others; [1997 Cri. L.J. 1942 (AP)]
the issuing of the cheque there was no existing
liability in the sense that the title in the property
had not passed on to the accused since the goods
were not delivered. ........”
15.
The Gujarat High Court in Shanku Concretes3 dealing with
Section 138 of the N.I. Act held that to attract Section 138 of the N.I.
Act, there must be subsisting liability or debt on the date when the
cheque was delivered. The very fact that the payment was agreed to
some future date and there was no debt or liability on the date of
delivery of the cheques would take the case out of the purview of
Section 138 of the N.I. Act.
While holding so, Gujarat High Court
followed a decision of the Madras High Court in Balaji Seafoods4.
16.
In Balaji Seafoods4, the Madras High Court held:
“Section 138 of the Negotiable Instruments Act
makes it clear that where the cheque drawn by a
person on an account maintained by him with a
banker for payment of any amount of money to
another person from out of that account for the
discharge, in whole or in part, of any debt or other
liability, is returned by the bank unpaid, either
because of the amount of money standing to the
credit of that account is insufficient to honour the
cheque or that it exceeds the amount arranged to
be paid from that account by an agreement made
with that bank, such person shall be deemed to
have committed an offence under Section 138 of
the Act. The explanation reads that for the
purposes of this section, ‘debt or other liability’
means a legally enforceable debt or liability.”
Shanku Concretes Pvt. Ltd. and others v. State of Gujarat and another; [2000 Cri. L.J.1988 (Guj.)]
M/s. Balaji Seafoods Exports (India) Ltd. and another v. Mac Industries Ltd.; [1999 (1) CTC 6]
17.
The Kerala High Court in Ullas5 had an occasion to
consider Section 138 of the N.I. Act. In that case, the post-dated cheque
was issued by the accused along with the order for supply of goods.
The supply of goods was not made by the complainant. The accused
first instructed the bank to stop payment against the cheque and then
requested the complainant not to present the cheque as he had not
supplied the goods. The cheque was dishonoured. The single Judge of
the Kerala High Court held, “.........Ext.P1 cheque cannot be stated to
be one issued in discharge of the liability to the tune of the amount
covered by it, which was really issued, as is revealed by Ext. D1, as the
price amount for 28 numbers of mixies, which the complainant had not
supplied. .....”
18.
The reasoning of the Delhi High Court in the impugned
order is as follows:
“8.
If at the time of entering into a contract it is
one of the conditions of the contract that the
purchaser has to pay the amount in advance then
advance payment is a liability of the purchaser.
The seller of the items would not have entered into
contract unless the advance payment was made to
him. A condition of advance payment is normally
put by the seller for the reason that the purchaser
may not later on retract and refuse to take the
goods either manufactured for him or procured for
him. Payment of cost of the goods in advance
being one of the conditions of the contract
becomes liability of the purchaser. The purchaser
who had issued the cheque could have been
asked to make payment either by draft or in cash.
Since giving cheque is a mode of payment like any
other mode of payment, it is normally accepted as
5
Supply House, Represented by Managing Partner v. Ullas, Proprietor Bright Agencies and another;
[2006 Cri. L.J. 4330 (Kerala)]
a payment. The issuance of a cheque at the time
of signing such contract has to be considered
against a liability as the amount written in the
cheque is payable by the person on the date
mentioned in the cheque. Where the seller or
manufacturer, on the basis of cheques issued,
manufactures the goods or procures the goods
from outside, and has acted upon the contract, the
liability of the purchaser gets fastened, the
moment the seller or manufacturer acts upon the
contract and procures the goods. If for any reason,
the seller fails to manufacture the goods or procure
the goods it is only under those circumstances that
no liability is created. However, where the goods
or raw material has been procured for the
purchaser by seller or goods have been
manufactured by the seller, it cannot be said that
the cheques were not issued against the liability. I
consider that if the liability is not construed in this
manner, the sole purpose of making dishonour of
the cheque as an offence stands defeated. The
purpose of making or enacting Section 138 of the
N.I. Act was to enhance the acceptability of
cheque in settlement of commercial transactions,
to infuse trust into commercial transactions and to
make a cheque as a reliable negotiable instrument
and to see that the cheques of business
transactions are not dishonoured. The purpose of
Negotiable Instrument Act is to make an orderly
statement of rules of law relating to negotiable
instruments and to ensure that mercantile
instruments should be equated with goods passing
from one hand to other. The sole purpose of the
Act would stand defeated if after placing orders
and giving advance payments, the stop payments
are issued and orders are cancelled on the ground
of pricing of the goods as was done in this case.”
19.
The above reasoning of the Delhi High Court is clearly
flawed inasmuch as it failed to keep in mind the fine distinction between
civil liability and criminal liability under Section 138 of the N.I. Act. If at
the time of entering into a contract, it is one of the conditions of the
contract that the purchaser has to pay the amount in advance and there
is breach of such condition then purchaser may have to make good the
loss that might have occasioned to the seller but that does not create a
criminal liability under Section 138. For a criminal liability to be made
out under Section 138, there should be legally enforceable debt or other
liability subsisting on the date of drawal of the cheque. We are unable to
accept the view of the Delhi High Court that the issuance of cheque
towards advance payment at the time of signing such contract has to be
considered as subsisting liability and dishonour of such cheque
amounts to an offence under Section 138 of the N.I. Act. The Delhi
High Court has traveled beyond the scope of Section 138 of the N.I. Act
by holding that the purpose of enacting Section 138 of the N.I. Act
would stand defeated if after placing orders and giving advance
payments, the instructions for stop payments are issued and orders are
cancelled. In what we have discussed above, if a cheque is issued as
an advance payment for purchase of the goods and for any reason
purchase order is not carried to its logical conclusion either because of
its cancellation or otherwise and material or goods for which purchase
order was placed is not supplied by the supplier, in our considered view,
the cheque cannot be said to have been drawn for an existing debt or
liability.
20.
In our opinion, the view taken by Andhra Pradesh High
Court in Swastik Coaters2, Madras High Court in Balaji Seafoods4,
Gujarat High Court in Shanku Concretes3 and Kerala High Court in
9
Page 9
Ullas5 is the correct view and accords with the scheme of Section 138 of
the N.I. Act.
21.
The view taken by Delhi High Court is plainly wrong and
does not deserve acceptance.
22.
Criminal Appeal is, accordingly, allowed; the impugned
judgment of Delhi High Court is set aside; and the order of the Sessions
Judge is restored.
....................................J.
(R.M. Lodha)
....................................J.
(Shiva Kirti Singh)
New Delhi,
April 7, 2014.
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