Negotiable Instruments Act, 1881 – Section 138 – Post dated Cheque – Repayment of loan installment – Security Cheque – Loan Agreement – Whether the dishonour of a post-dated cheque given for repayment of loan installment which is also described as “security” in the loan agreement is covered by the Act ?
IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION
(DIPAK MISRA) AND (ADARSH KUMAR GOEL) JJ.
SEPTEMBER 19, 2016
CRIMINAL APPEAL NO. 867 OF 2016
(ARISING OUT OF S.L.P. (CRL.) NO. 5410 OF 2014)
SAMPELLY SATYANARAYANA RAO …APPELLANT
INDIAN RENEWABLE ENERGY DEVELOPMENT AGENCY LIMITED …RESPONDENT
For Appellant(s) Mr. Lakshmi Raman Singh,Adv. For Respondent(s) Mr. Annam D. N. Rao,Adv.
J U D G M E N T
ADARSH KUMAR GOEL, J.
1. This appeal has been preferred against the judgment and order dated 8 th May, 2014 passed by the High Court of Delhi at New Delhi in Writ Petition (Criminal) No.1170 of 2011.
2. Question for consideration is whether in the facts of the present case, the dishonour of a post-dated cheque given for repayment of loan installment which is also described as “security” in the loan agreement is covered by
Section 138 of the Negotiable Instruments Act, 1881
3. The appellant is Director of the company whose cheques have been dishonoured and who is also the co-accused. The company is engaged in the field of power generation. The respondent is engaged in development of renewable energy and is a Government of India enterprise. Vide the loan agreement dated 15th March, 2001, the respondent agreed to advance loan of Rs.11.50 crores for setting up of 4.00 MW Biomass based Power Project in the State of Andhra Pradesh. The agreement recorded that post-dated cheques towards payment of installment of loan (principal and interest) were given by way of security. The text of this part of the agreement is quoted in the later part of this order. The cheques carried different dates depending on the dates when the installments were due and upon dishonour thereof, complaints including the one dated 27th September, 2002 were filed by the respondent in the court of the concerned Magistrate at New Delhi.
4. The appellant approached the High Court to seek quashing of the complaints arising out of 18 cheques of the value of about Rs.10.3 crores. Contention of the appellant in support of his case was that the cheques were given by way of security as mentioned in the agreement and that on the date the cheques were issued, no debt or liability was due. Thus, dishonour of post-dated cheques given by way of security did not fall under Section 138 of the Act. Reliance was placed on clause 3.1 (iii) of the agreement to the effect that deposit of post-dated cheques toward repayment of installments was by way of “security”. Even the first installment as per the agreement became due subsequent to the handing over of the post-dated cheque. Thus, contended the appellant, it was not towards discharge of debt or liability in presenti but for the amount payable in future.
5. The High Court did not accept the above contention and held :-
“10. In the present case when the post-dated cheques were issued, the loan had been sanctioned and hence the same fall in the first category that is they were cheque issued for a debt in present but payable in future. Hence, I find no reason to quash the complaints. However, these observations are only prima facie in nature and it will be open for the party to prove to the contrary during trial.”
6. We have heard learned counsel for the parties.
7. It will be appropriate to reproduce the statutory provision in question which is as follows :
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.”
8. Clause 3.1(iii) of the agreement may also be noted :-
3.1 SECURITY FOR THE LOAN
The loan together with the interest, interest tax, liquidated damages, commitment fee, up front fee prima on repayment or on redemption, costs, expenses and other monies shall be secured by ;
(iii) Deposit of Post dated cheques towards repayment of installments of principal of loan amount in accordance with agreed repayment schedule and installments of interest payable thereon.”
9. Reference may now be made to the decision of this Court in