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Jitendra Sing Flora v. Ravikant Talwar
Factual and Procedural Background
The revision challenges an order dated 25-10-1999 passed by the Judicial Magistrate First Class, Jabalpur in Criminal Case No. 814/99 by which a charge under Section 138 of the Negotiable Instruments Act, 1881 was framed against the applicant, Jitendra Singh Flora.
The non-applicant, Ravikant Talwar, filed a complaint alleging he held a power of attorney for Shri Shashikant Talwar and that the applicant agreed to construct a house at No. 183, A.P.R. Colony, Katanga, Jabalpur under agreements dated 8-5-1990 and 10-5-1992 (and a later agreement dated 10-2-1993). It is alleged that Rs. 2,70,000/- was advanced to the applicant and that completion was to be by 30-8-1992, later extended (by agreement) to 30-4-1993.
Pursuant to the arrangements, three post-dated cheques dated 30-4-1993 (Nos. 0646945 for Rs. 30,000/-, 0646946 for Rs. 30,000/-, and 0646947 for Rs. 40,000/-) were issued by the applicant in favour of the non-applicant. The cheques were presented to the Bank of India (presentation dates are recorded in the opinion as 5-5-1993 in one paragraph and 3-5-1993 in another) and were returned dishonoured with the remark "Refer to Drawer Insufficient Funds"; the returned cheques and the bank's advice were received by the non-applicant on 7-5-1993.
A notice under Section 138 was served on the applicant on 18-5-1993 (received 19-5-1993), demanding Rs. 1,00,000/-. When there was no response, a complaint under Section 138 was filed on 18-6-1993 within the statutory limitation. The trial court examined the complainant before framing the charge and framed the charge against the applicant on 25-10-1999. This revision proceeds from the applicant against that framing order.
Legal Issues Presented
- Whether the facts and the agreements between the parties establish a legally enforceable "debt or other liability" within the meaning of Section 138 of the Negotiable Instruments Act, 1881, such that issuance and dishonour of the cheques would constitute an offence under that section.
- Whether cheques issued by the applicant as described in the agreements were given as security (to be returned on specified stages of construction) rather than to discharge a debt or liability, and therefore fall outside the scope of Section 138.
Arguments of the Parties
Applicant's Arguments
- Section 138 is attracted only where a cheque is drawn for the discharge, in whole or in part, of a debt or other legally enforceable liability.
- There was no legally enforceable debt or other liability owed by the applicant to the non-applicant; the cheques were of a normal nature issued by way of security to demonstrate the applicant's desire to perform contractual obligations (i.e., construction of the building).
- The cheques were to be returned upon completion of specified construction stages (ground floor, first-floor slab, handing over the completed building) and thus did not create a debt enforceable under law.
The opinion records that no one appeared to support the non-applicant's case before the revisional court; the non-applicant's substantive counter-arguments are not detailed in the opinion.
Table of Precedents Cited
No precedents were cited in the provided opinion.
Court's Reasoning and Analysis
The court's analysis proceeded from the text of the written agreements between the parties and the statutory language of Section 138 of the Negotiable Instruments Act, 1881 (including the explanation defining "debt or other liability" as a legally enforceable debt or other liability).
- Examination of the agreements: The court examined three agreements (8-5-1990, 10-5-1992 and 10-2-1993, collectively marked Annexure P-3) and focused on Clauses 5 and 6 of the agreement dated 10-5-1992. Those clauses expressly stated that three post-dated cheques were delivered "by way of Security" and set out conditions for their return: the first cheque to be returned on completion of the ground floor, the second after casting the first floor slab, and the third on handing over the building, subject to deductions.
- Legal requirement under Section 138: The court recited Section 138, noting that the offence arises only where a cheque is drawn for the discharge (in whole or in part) of a debt or other liability, and the explanation specifies that "debt or other liability" means a legally enforceable debt or other liability.
- Application of law to facts: Reading the contractual clauses together, the court found that the cheques (totaling Rs. 1,00,000/- by three cheques) were issued as security and were not amounts then due to the non-applicant. Because the cheques were to be returned on completion of specified stages, they did not evidence an intention to create an immediately enforceable debt or other legal liability in favour of the non-applicant.
- Timing and entitlement: The court noted that the completion date had been extended to 30-4-1993. The opinion records presentation/encashment activity in May 1993 (the opinion contains both 5-5-1993 and 3-5-1993 as factual references to the attempted encashment). The court observed that, even if liability were to be considered, liability would accrue only after the completion date (30-4-1993) if the building remained incomplete. The court also observed that the non-applicant could have withheld the cheques until completion rather than seeking to encash them.
- Evidentiary note and broader conclusion: Although the court remarked that the applicant had not disclosed how far construction had progressed (noting that the first two cheques were to be returned before building completion), it expressly took a broader view and concluded that, given the contractual terms, there was no legally enforceable debt or liability within the meaning of Section 138. Therefore the essential ingredient of the offence under Section 138 was absent.
Holding and Implications
Holding: The revision is allowed; the order dated 25-10-1999 framing a charge under Section 138 against the applicant is set aside and the applicant is discharged.
Implications:
- The direct effect is that the applicant, Jitendra Singh Flora, is discharged and no charge under Section 138 remains based on the impugned framing order.
- The opinion does not discuss or record the creation of any new legal precedent beyond the application of the statutory definition of "debt or other liability" in the specific factual context; the decision resolves the dispute between these parties on the basis that the cheques were given as security and not as an instrument to discharge a legally enforceable debt within the meaning of Section 138.
1. This revision is directed against the order dated 25-10-1999 passed by Judicial Magistrate First Class, Jabalpur in Criminal Case No. 814/99.
2. The non-applicant Ravikant Talwar filed a complaint against the applicant under Section 138 of the Negotiable Instruments Act, 1881 (henceforth 'the Act'). The non-applicant alleged in his complaint that he is the holder of power of attorney of one Shri Shashikant Talwar. The applicant and the complainant entered into two agreements dated 8-5-1990 and 10-5-1992, whereby the applicant was required to construct building No. 183, A.P.R. Colony, Katanga, Jabalpur. Pursuant to the aforesaid agreements, it is alleged that the non-applicant advanced Rs. 2,70,000/- to the applicant. It was agreed that the work of construction of above mentioned house shall be over by 30-8-1992. It is alleged in the complaint that the applicant was not able to deliver the completed building by 30-8-1992 and, therefore, the non-applicant agreed to extend the time till 30-4-1993. It is alleged in the complaint that pursuant to the aforesaid agreements, three post dated cheques dated 30-4-1993 were issued by the applicant in favour of the non-applicant bearing No. 0646945 of Rs. 30,000/-, No. 0646946 of Rs. 30,000/- and No. 0646947 of Rs.40,000/-. These cheques were in respect of the deposit of the applicant in the Bank of India, Napier Town Branch, Jabalpur. It is alleged that after 30-4-1993, when the construction was not completed, the non-applicant presented the cheques to the Bank of India on 5-5-1993. The Bank dishonoured the cheques issued by the applicant with the remarks that "Refer to Drawer Insufficient Funds". The dishonoured cheques alongwith the advice of the Bank were returned to the non-applicant on 7-5-1993.
3. Thereafter, the non-applicant served a notice dated 18-5-1993 to the applicant under Section 138 of the Act which was received by the applicant on 19-5-1993. In the notice, a demand of Rs. 1,00,000/- (Rupees One Lakh) was made by the non- applicant. On receiving no response from the applicant, the non- applicant filed a complaint under Section 138 of the Act on 18-6-1993 within the period of limitation prescribed therefor.
4. On the aforesaid allegations and after registering the complaint and noticing the applicant, the Court proceeded to examine the non-applicant, Ravikant Talwar before framing the charge. Thereafter, it framed the charge on 25-10-1999 against the applicant Jitendra Singh Flora.
5. Shri Ranjan Banerjee, learned counsel for the applicant in this revision has argued that no offence under Section 138 of the Act is made out on the ground that Section 138 of the Act is attracted where a person issues cheque in order to discharge, in whole or in part, any debt or other liability. It was the contention of learned counsel for the applicant that there was no debt or other liability which could be legally held to be debt or other liability in the eyes of law. It was contended by the learned counsel for the applicant that the cheques issued by the applicant were of normal nature and did not create any liability in favour of the non-applicant. The cheques were issued by way of security for giving timely discharge of the construction of building. In such cases, no offence is made out for the reason already stated above.
6. Nobody appeared to support the case of the non- applicant before this Court,
7. In order to examine if the applicant is guilty of offence committed under Section 138 of the Act, it is necessary to consider this fact of the nature of the agreements entered into by the parties. The first agreement is dated 8-5-1990. The other agreement is dated 10-5-1992 and the third agreement is dated 10-2-1993. These agreements are cumulatively marked as Annexure P-3. In the agreement dated 8-5-1990, the cost of construction is mentioned as Rs. 3,00,000/- (Rupees Three Lakhs) and the details of the building to be constructed upon plot No. 183, A.P.R. Colony, Katanga, Jabalpur are given. It appears that on the plot of 1500 sq. ft., the applicant was required to -construct a house for the non-applicant. We are not concerned much with this agreement. There is yet another agreement dated 10-5-1992. It is stated in the agreement dated 10-5-1992 that the party No. 1 i.e., the non-applicant was unable to supervise the construction of the dwelling unit over the plot in question on account of the fact that he remains away from Jabalpur. The applicant was given time till 30-8-1992 for the completion of building. It was, however, further agreed that the owner may grant a period of twenty days further for completion of building by way of extended period. It was also agreed between the parties that the amount which has already been received by the applicant shall be treated as a consideration and the balance of Rs. 30,000/-(Rupees Thirty Thousand) shall be paid to the applicant after completion of the building. In Paragraph 5 of the agreement dated 10-5-1992, the following terms were made:--
"Clause 5 : That in order to demonstrate desire to carry out the obligations enshrined in the agreement and by way of Security the Builder/Party No. 2 has delivered three Post dated cheques bearing Nos. 414175 dated 15-7-92 and 414176 dated 30-8-92 for Rs. 60,000/- and 414177 dated 30-8-92 for Rs. 40,000/- of Punjab & Sind Bank, Jabalpur.
Clause 6: That cheque No. 414175 shall be returned to Party No. 2 on completion of Ground Floor, cheque No. 414176 shall be returned on casting of first floor slab and Cheque No. 414177 shall be returned on handing over of the building complete in all respect subject to deductions if any."
8. It appears that the applicant was unable to finish the construction of the building by 30-8-1992 and, therefore, the period appears to have been appended in a fresh agreement entered into on 10-2-1993. Now the time was extended upto 30-4-1993 on the same conditions as were made in the previous agreement. Since the time for encashing the new cheques mentioned in the second agreement dated 10-5-1992 was expired, new cheques were issued, as already stated, by the applicant and they were made payable at Bank of India. It appears that after the agreement was styled and the last date of 30-4-1993 was given, there was one more clause was added to agreement i.e., the building was to be completed by way of grace period upto 30-4-1993 and it was agreed also that the non-applicant shall pay to the applicant a part of money during the course of the construction of the building.
9. It is clear from a fair reading of Clauses 5 and 6 of the second agreement dated 10-5-1992 that the amount of Rs. 1,00,000/- (Rupees One Lakh) issued by way of three cheques was not in any way due to the non-applicant. These cheques were issued normally by way of security of loan and the cheques issued were liable to be returned on completion of the construction of the building. Clause No. 6 states that the first cheque shall be returned after completion of ground floor. The second cheque shall be returned after casting of the first floor and the third cheque shall be returned after completion of the building.
10. It is thus clear that there was no intention of the parties to create any debt or other liability. The cheques were not issued for discharge of the aforesaid liability but only normally by way of security for construction of building.
11. The nature of substantive offence shall be clear from Section 138 of the Negotiable Instruments Act, 1881, which reads as under :--
"Section 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 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 extend to one year, 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 fifteen 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. It is clear from the aforesaid section read with the explanation that the debt or other liability means a legally enforceable debt or other liability. Now, it is clear that the cheques were not issued for creating any liability. They cannot be enforceable in the eyes of law. The applicant did not owe any money to the non-applicant. In fact, the non-applicant was not entitled to recover the amount mentioned in the cheques even if the building was not completed within the period prescribed by the agreement. All that he could do is to withhold the cheques till the building is complete. Moreover, the last date of completion of the building was extended by one month, i.e., by 30-4-1993. The non-applicant instead of waiting till 30-4-1993, sought to encash the cheques on 3-5-1993. Even if the applicant was held to be liable, his liability will accrue only when building was not completed on 30-4-1993. In this case, the applicant has further suppressed the fact from the eyes of the Court in the complaint that at least how far the applicant has made the construction because first two cheques were to be returned even before the completion of the building. However, this Court is taking the broader view of the matter and holds that there was no debt or other liability under Section 138 of the Act in view of the agreements. The result is that the applicant cannot be held liable under Section 138 of the Act.
13. Consequently, this revision succeeds and is allowed. The order dated 25-10-1999 framing a charge against the applicant is hereby set aside and he is discharged.
14. Criminal Revision allowed.
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