ORDER
This application, under Section 482 of Cr.P.C., has been filed against order dated 12.07.2024 passed by JMFC, Dabra, District Gwalior (M.P.) in Case No.253/2021 by which applicant has been directed to deposit 20% of the cheque amount as interim compensation.
2. It is submitted by counsel for applicant that since cheque in question was issued by way of security, therefore, the court below should not have directed applicant to deposit 20% of the cheque amount by way of interim compensation. It is further submitted that the aforesaid provision is not mandatory.
3. Considered the submissions made by counsel for applicant.
4. Applicant has admitted issuance of cheque. The only defence of applicant is that the cheque was issued not in discharge of any legal liability but it was issued by way of security.
5. Now, the moot question for consideration is as to whether cheque issued by way of security would be covered under Section 138 of the Negotiable Instruments Act or not?
6. Supreme Court in the case of Sripati Singh (since deceased) through his
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son Gaurav Singh Vs. State of Jharkhand And Another reported in (2022) 18 SCC 614 has held as under:
17. In order to consider this aspect of the matter we have at the outset taken note of the four loan agreements dated 13-8- 2014 which is the subject-matter herein. Under each of the agreements, the promise made by Respondent 2 is to pay the appellant a sum of Rs 50 lakhs. Thus, the total of which would amount to Rs 2 crores as contended by the appellant. Towards the promise to pay, the repayment agreed by Respondent 2 is to clear the total amount within June/July 2015. Para 5 of the loan agreement indicates that six cheques have been issued as security. The claim of the appellant has been negated by the High Court only due to the fact that the agreement indicates that the cheques have been given by way of security and the complainant has also stated this fact in the complaint. Though the High Court has taken note of the decision in Sudhir Kumar Bhalla [Sudhir Kumar Bhalla v. Jagdish Chand, (2008) 7 SCC 137 : (2008) 3 SCC (Cri) 11] to hold that the cheque issued as security cannot constitute an offence, the same in our opinion does not come to the aid of Respondent 2. There is no categorical declaration by this Court in the said case that the cheque issued as security cannot be presented for realisation under all circumstances. The facts in the said case relate to the cheques being issued and there being alterations made in the cheques towards which there was also a counter complaint filed by the drawer of the cheque. Hence, the said decision cannot be a precedent to answer the position in this case and the High Court was not justified in placing reliance on the same.
20. Further, this Court in Womb Laboratories (P) Ltd. [Womb Laboratories (P) Ltd. v. Vijay Ahuja , (2022) 18 SCC 631] has held as follows : (SCC p. 632, paras 4 & 5)
"4. In our opinion, the High Court has muddled the entire issue. The averment in the complaint does indicate that the signed cheques were handed over by the accused to the complainant. The cheques were given by way of security, is a matter of defence. Further, it was not for the discharge of any debt or any liability is also a matter of defence. The relevant facts to countenance the defence will have to be proved—that such security could not be treated as debt or other liability of the accused. That would be a triable issue. We say so because, handing over of the cheques by way of security per se would not extricate the accused from the discharge of liability arising from such cheques.
5. Suffice it to observe, the impugned judgment [ Vijay Ahuja v. State (NCT of Delhi) , 2018 SCC OnLine Del
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10028] of the High Court cannot stand the test of judicial scrutiny. The same is, therefore, set aside."
21. A cheque issued as security pursuant to a financial transaction cannot be considered as a worthless piece of paper under every circumstance. "Security" in its true sense is the state of being safe and the security given for a loan is something given as a pledge of payment. It is given, deposited or pledged to make certain the fulfilment of an obligation to which the parties to the transaction are bound. If in a transaction, a loan is advanced and the borrower agrees to repay the amount in a specified time-frame and issues a cheque as security to secure such repayment; if the loan amount is not repaid in any other form before the due date or if there is no other understanding or agreement between the parties to defer the payment of amount, the cheque which is issued as security would mature for presentation and the drawee of the cheque would be entitled to present the same. On such presentation, if the same is dishonoured, the consequences contemplated under Section 138 and the other provisions of the NI Act would flow.
22. When a cheque is issued and is treated as "security"
towards repayment of an amount with a time period being stipulated for repayment, all that it ensures is that such cheque which is issued as "security" cannot be presented prior to the loan or the instalment maturing for repayment towards which such cheque is issued as security. Further, the borrower would have the option of repaying the loan amount or such financial liability in any other form and in that manner if the amount of loan due and payable has been discharged within the agreed period, the cheque issued as security cannot thereafter be presented. Therefore, the prior discharge of the loan or there being an altered situation due to which there would be understanding between the parties is a sine qua non to not present the cheque which was issued as security. These are only the defences that would be available to the drawer of the cheque in a proceeding initiated under Section 138 of the NI Act. Therefore, there cannot be a hard- and-fast rule that a cheque which is issued as security can never be presented by the drawee of the cheque. If such is the understanding a cheque would also be reduced to an "on demand promissory note" and in all circumstances, it would only be a civil litigation to recover the amount, which is not the intention of the statute. When a cheque is issued even though as "security" the consequence flowing therefrom is also known to the drawer of the cheque and in the circumstance stated above if the cheque is presented and dishonoured, the holder of the cheque/drawee would have the option of initiating the civil proceedings for recovery or the criminal proceedings for punishment in the fact situation, but in any event, it is not for the drawer of the cheque to dictate terms with regard to the nature of litigation.
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(G. S. AHLUWALIA)
JUDGE
7. Thus, it is clear that even if cheque is issued by way of security, consequences flowing therefrom are also known to the drawer of the cheque. Thus, the choice is with the complainant either to initiate civil proceedings for recovery or to initiate criminal proceedings for punishment. However, in any circumstances, drawer of cheque has no right to dictate terms with regard to nature of litigation. Thus, when issuance of cheque is not disputed by applicant, then no case is made out for directing the applicant to deposit interim compensation less than 20% of the cheque amount.
8. Accordingly, no illegality was committed by the trial Court. As a consequence thereof, order dated 12.07.2024 passed by JMFC, Dabra, District Gwalior (M.P.) in Case No.253/2021 is hereby affirmed.
9. Application fails and is hereby dismissed. (and)
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