Suresh Chandra Goyal v. Respondent

1. The appellate courfrnc0''v^pverfule.^or otherwise disturb the trial court's.^^itt^l^^^t(hc^y'mr^^bstaraial and compellingreasons''fordbins:so. A nutfibef^insta^^^^i^jj^ch the:.0>^eliate court would hape,f^ry suljM00J^Ial§i^bmpellmg^edsons'' to discard thc^-^rial court'swfyfi'g.^^"Very su^siani}ql and compellingreasons"exist I I llflH ' I i) The trial court's concluMph^tih regard to the facts is palpablylrong; n I tJc-/Yz?/?jpyiriM\-ii}>^n_ A*/r»o/7W % ii) The trialfpu^sfdepisitmwMsfbd^offM^effoneods view of X'i.''-'e''*-'?- i'y // ••^'"ll ¥ 'Cf? Hi) The' trial court'sfjudgthyntliS^^y%Presult in "grave miscarriage ofjustice iv) The entire approach ofthe trial court in dealing with the evidence waspatently illegal; v) The trial court's judgment was manifestly unjust and unreasonable; vi) The trial court has ignored the evidence or misread the materialevidence or has ignored materialdocuments like dying declarations/reportofthe Ballistic expert, etc. vii) This listis intendedto be illustrative, notexhaustive." CRL.L.P.No.706/2014 Page6of36 r

12. Therefore, the impugned judgment has to be tested in the aforesaid light.

13. The MOU (Ex. CW-1/4) has been duly proved by the appellant/ complainant. The accused has not challenged the genuineness and authenticity of the MOU(Ex. CW-1/4)executed between him (as the first party), and the appellant/ complainant (as the second party). This MOU -ky' acknowledges the debt owed by the accused in favour of the appellant/ complainant of Rs.[3] Lakhs. The?-:M©UiE^int^.,,alia, records "and whereas both the parties agrefd^lh0t\^r^ipar^cmil^return full amount of Rs.3,00,000/-(Rs. Thre!e^fdkhsgrdyfitS;Secpnd Faftf.Skh^Suresh Chandra Goyalinsixinstdlm^fofRs. thoils^g^dFnly)by wayof six monthlychefue-itartingfron^^e^^^2Oil...... Thus,the factum of the jdebt of Rs.[3] Laldiis|fbeiiig owed by the accused to the appellant/complainantstands dulyMprpvl^and established by the MOU(Ex. CW-1/41. 'WCHi'u H-Pf 1/

14. The approach%f^the4earned M the existence of the debt,and m going behind:M^U'(Ex.C^#/4)4is"€learly misdirected. No further inquiry was called for on dif^id'^Tpect since the MOU(Ex. CW- 1/4)was not even challenged by the accused,and the exercise undertaken by the learned Magistrate was even barred by law.

15. The endeavour ofthe learned Magistrate to go behind the MOU(Ex. I CW-1/4)was not permissible, in view of Sections 91 & 92 ofthe Evidence Act. When the terms of a contract have been reduced to the form of a document, no evidence could be given in proof ofterms of such contract. CRL.L.P.No.706/2014 Page 7of36 except the document itself. The two exceptions and three explanations to Section 91 of the Evidence Act do not come into play in the facts of the present case.

16. The accused admitted as correct the suggestion that to discharge the legal liability towards the complainant, he had issued three post-dated cheques in question,namely Ex.CW-1/1, CW-1/2 & CW-1/3. However,he qualified his admission by stating that the cheques were given as security. n He did not dispute the legal hability-owed^Orthe^appellant. But he admitted his liability to the exterif"ofiRsf^BjOOof- only^^and%ot of the amount of Rs.1,50,000/-. ^^ X

17. Section 92^orfe Eyideif<^S|-Bl^^^s that wHenTne terms ofany // such contract h^e been proved Spgj^ftg^^'Section 91,no e\|dence ofany P ' |1 hp'''' II il oralagreement,|iorStatementshal|^^&mhedasbetweenthejpartiestoany such instrument^ or their represbntati^^Mh interest for tbib purpose of contradicting, vaiying,^.aqdmgfttb^a^|iSub^^^ terms. Thus,the accused could'not n'^|fe^%ght^contra4ie1?%e^]^y^x. CW-1/4)by claiming thatan amounf<o.^^^^Khs'^5^^d£l9wed bythe accused,or refundableintermsofthe MOUtExfeW^'f/IJ'totheappellant/complainant. Pertinently,the accused did not set up a defence in terms ofprovisos 1 to 6 to Section 92 ofthe Evidence Act.

18. Thus, in my view, the approach of the learned Magistrate was completely misdirected in law, in proceeding to examine the issue whether the debt in question was owed by the accused to the appellant/ complainant. The finding returned by the learned Magistrate on the said issue is clearly CRL.L.P.No.706/2014 Page8of36 contrary to the terms of the MOU (Ex. CW-1/4), and certainly cannot be sustained. It is even contrary to the statement/stand ofthe accused that he was indebted to the complainant, though to the extent ofRs. 60,000/- and not to the extent of Rs. 1.50 lakhs. The finding returned by the learned Magistrate on the aforesaid aspect cannot even be termed as one of the plausible views. It is afinding,which the learned Magistrate could not have returned in the face ofthe terms contained in the MOU(Ex. CW-1/4),and the stand ofthe accused.

19. The defenceselM^y0%eMsS |ut^nding liability was Rs.60,000/-, and n^t'Rs>)..[5] lal0|.if|®;rely an ipiifdfxit ofthe accused. Neither on a reading^ofthe e|m|rain#^Mrom the^^ddnce led by the complainant and thcicross exammM^^®^^ complaMantlwitness, the, [J i accused has been able to createi a Ireasonable doubt with regard to the quantumofthe|utstandingdebt^^Jhga|^s^dhasalsonotle^^nyevidence toshowthatthektstandteJidii^^ andn^Rs.1.5lakhs. The accused,to rebjitThe,m.resumptW S'emiot§y9fead with Section 118 ofthe NI Act, hds^.setvup^ldeWfCprpbabl^^^^ The defence cannotbefrivolousor moonshin^^^^WlgqtJeim^^^ a"possible"defence.

20. This Courtin KS. Yadav v. Reena,172(2010)DLT 561,commented on the obligation ofthe accused while setting up a defence to repulse the presumption created by virtue of Section 118 and 139 of the NI Act as follows: "5.Itmustbe borne in mindthatthestatementofaccusedunder Section 281 Cr.P.C. or under Section 313 Cr.P.C. is not the evidence of the accused and it cannot be read as part of CRL.L.P,No.706/2014 Page9of36 evidence. The accused has an option to examine himselfas a witness. Where the accused does not examine himself as a witness, his statement under Section 281 Cr.P.C. or 313 Cr.P.C. cannot be read as evidence ofthe accused and it has to he looked into only as an explanation of the incriminating circumstance and not as evidence. There is no presumption of law that explanation given by the accused was truthful. In the present case, the accused in his statement stated that he had given cheques as security. Ifthe accused wanted to prove this, he was supposed to appear in the witness box and testify and; get himselfsubjected to cross examination. His explanation that he had the cheques asjecurfy^fyr^taking loan from the complainant but np<^lofm^ wqSf/gfyenf^ not have been considered by the^'TridijGdiii'Pds hisjSidenB&^jmd this was /r (i "--A. liable to be f^0ected-mnce theymcc^^ didihgfappear in the witness boyfio^^pel thfkpKfsfm00p0iat ihe,^cheqpes were issuedasfecuijjp.Mere%^^0Jyg^0p0he witneks'ihd^fheques were issuedZiqs security§^^r000^^0planation ^iyehf^in the statement!of accused un%er0^epkb^ 281 Cr.P.C., that the cheques yi;ere issued as se0M0^jmes not amount to^proof Moreover, the Trial CourtlsAmed\d)be obsessed with!idea of proof befgnd reasonablefdp0t;ffgrgetiing that offencf under Section of0f^Af^w^00M0rmaI^^ the complainankispnfyfstdpposedi^fdfmove tmtfHefypeqiies issued by the resporidenti^iepe dishgnoured,pifHatemehjfihatcheques were issued agdinsfpdpilit^0%0eh$^^^ proofofthe debt or liability anajhefpfyussshiftsktrfhedespondent/accused to show the circumstances unSePWliich the cheques came to be issued and this could be proved by the respondent only by way k: ofevidence and not by leading no evidence."

21. The Courtfurther observed: "7. Mere pleading not guilty and stating that the cheques were issued as security, would not give amount to rebutting the presumption raised under Section 139 ofN.l. Act. Ifmere statement under Section 313 Cr.P.C. or under Section 281 Cr.P.C. ofaccused ofpleading not guilty was sufficient to CRL.L.P.No.706/2014 Page10of36 Ia rebut the entire evidence produced by the complainant/ prosecution, then every accused has to be acquitted. But, it is not the law. In order to rebut the presumption under Section 139 ofN.I. Act, the accused, by cogent evidence, has to prove the circumstance under which cheques were issued. It wasfor the accused to prove ifno loan was taken why he did not write a letter to the complainantfor return ofthe cheque. Unless the accused had proved that he acted like a normal businessman/prudentperson entering into a contract he could nothave rebuttedthepresumption underSection 139N.I.Act.If no loan was given, but cheques were retained, he immediately would have protestedand qskeddtheicheques to be returned and if still cheques werej^Tj-eturned, he^would have served a notice ascomplqmanfNothing wasproved mjhisxase. N" 'O j/% n %

22. The accused#aid''^n6t leadfah>%^Slideiree to shdw^that apart from the amount of Rs.l.'S lakhs, admittedl#Jreturned?to the appellant/complainant after the execution ofthe MOU a further sum pfRs.90,000/fl f a was returned by the accused to ttfeiicbm^l^inant. The accuse!did not step into the witness\box to stand Kfem^ in this respect? He did not A A V ^ 1 A produce any documentaiwfeMdencei?in\theporm:,;Ois'an acknowledgment or receipt nor claimed^thaToiie had been, issuedf-bypB^etcbnipiainant, to show thatthe said amount,i."^^J^9,^0^%i^ad?i^^^al€^td^'thecomplainantover and above the amount ofRs.fTS^lal^s-ad'mitte^and acknowledged by the complainant. He did not produce any other person as a witness in whose presence the amount may have been returned.

23. The parties, admittedly, recorded the outstanding liability of the accused,existing on the date ofthe execution ofthe MOU(Ex.CW-1/4). In this light, it does not stand to reason as to why they would not record the repayment of the amount of Rs.90,000/- in some form, if the money had CRL.L.P.No.706/2014 Page 11 of36 actually been so returned by the accused to the complainant. Pertinently, CW-1 in his deposition stated that at the time ofrepayment ofRs.1.[5] lakhs in three instalments of Rs.50,000/- each, not only three security cheques were returned by the complainant to the accused, but the accused also got the vouchers signed from the complainant. On this aspect, there was no challenge raised by the accused during the course ofthe complainants cross examination. Thus, ifthe amount of Rs.90,000/- had been returned, over __ and above the amountofRs.1.[5] lakhs,the accused would have been holding not only a receipt/ackno.wJeafmept-sgw complainant, but the complainant would ndfha'yejbeen in,^|3pssessi6n qfralTthe three remaining securitycheques d#Rs.%,000/-each. At least,one ofthem wMd have b^igrgfhKfeb the accused,^hus,it stands.U,-U..U ^ A W. established beyond all reasonabMpubphlfthe debt ofRs.liSO lakhs was fl Ir outstanding and!payable by the aeeuledito'lthe complainant when the three Cheques m question were presentbdTorpayment. if n. n n n A'

24. The next issue tnat-neeps ekamiMtitih is.j^l^jfibrJhd^complaint ofthe appellant was maint^ybli; NI Act since'the chequesin question were"secUri^^gu^g^^MOU(Ex.CW-1/4)itself provides that the first party/ accused will return the amount ofRs.[3] Lakhs to / the second party/appellantin six installments ofRs.50,000/- each by way of six monthly cheques starting from December, 2011 and second party/ Suresh Chandra Goyal will return all security cheques drawn in favour of the second party, if any. Thus,the MOU(Ex. CW-1/4)provided that the amountofRs.3Lakhsshall bereturned by way ofsix monthly cheques. The complainant(CW-1)in his cross-examination accepted that he had in his CRL.L.P.No.706/2014 Page12of36 • s II possession some security cheques issued by the accused. He further stated that he had received Rs.1.50 Lakhs in cash from the accused. He volunteered thatthe same was received by him in three monthly installments of Rs.50,000/- each and that whenever the accused had given a sum of Rs.50,000/- to him, he had taken back a cheque, and had also got the voucher signed from the complainant. He stated that he did not have the said security cheques with him anymore. He accepted that the security cheques have been filed by him with his complaint before the Court. It is. therefore, evident that the^jtransactioa betweerf'the,parties was that at the time ofexecution ofthe'MCtJX'Ex'!CW-1/4)sixpostsdated monthly cheques ofRs.50,000/- each^tojvafds seiairi&l^yyeiietdelivered^^^^^ the accused to the /^ "I complainant/ accused'. These#cl%lutsMwere issuefi}MnVespect of a crystallized and/admitted debt oflR^Sf^LaMiE The accused returned Rs.1.50 fl P Lakhs to the complainant in cash,^ih!three||installments ofRs.60,000/- each I Mi I and on each such occasion,ih#4Gompfaihant returned one cheque of Rs.50,000/-. AcGordinf'#oi;5,tfi^/Gbmplaihaht/vthetj amount of \ Rs.1.50Lakhswashb,t^fetumed'-and,^&i^Jhesap^ to enforce the security by presentin|¥J%''t5^^^febunl^^eque^tEx.CW-1/1,CW-1/2 & CW-1/3),which were dishonoured/^' "^

25. It has come in evidence that the cheques (Ex. CW-1/1, CW-1/2 & CW-1/3)were all filled up in all respects by the accused at the time oftheir being delivered to the complainant,simultaneously with the execution ofthe MOU (Ex. CW-1/4). The said original cheques are placed on the Trial Court Record which has been summoned and perused, and it is clear to the naked eye that they had been filled by the same person,and in the same ink. CRL.L.P.No.706/2014 Page 13of36 It is not even the case ofthe accused that these cheques were blank when given to the complainant, or that the appellant/ complainant had filled them up subsequently. Even otherwise, merely because the cheque may be blank in some or all respects(exceptthat it bears the signatures ofthe drawer),and the blanks may have been filled in by the drawee subsequently,that by itself does not invalidate the cheque. It cannot be said that a complaint under Section 138 NI Act would not lie in respect of such a cheque, consequent upon its dishonor for reason ofinsufficient funds [see Sandeep Khanna & Anr. V. State & Ors., MAUM'fQUl23B^I-^Q\QCF^vi-^hopra v. State &Anr., 2008(102)DRJ 147)#"

26. The submissiomoTlearnbdlcouh^ilifofethe accused¥:is,%nd the finding returned by theSiearfeed•Magistr^®§|^^^|e said three'-€he|ues Ex.CW- 1/1,CW-l/2&|CW-l/3 being securMfeheques,could notformlthe basis ofa |i y iji i/, j-j complaintundenSection 138ofthe^^cIA,, ']

27. Reliance had been:iplabed.by>?the,AaebUsbd:/^^^^^^ itidgment of the Supreme Court m MiS:%^dmyttna Menon.-@^Mdrii'Vs.4State ofKerala & Another,(2006)6 SCC''39;^Of5Jtis^^ D. Vs. State of Delhi & Another, MANU/DE/i53S7J0Tl,''and; of the Supreme Court in Vijay(supra).

28. There is no magic in the word "security cheque", such that, the momentthe accused claims that the dishonoured cheque(in respect whereof a complaint under Section 138 of the Act is preferred) was given as a "security cheque",the Magistrate would acquit the accused. The expression "security cheque"is not a statutorily defined expression in the NI Act. The CRL.L.P.No.706/2014 Page14of36 NI Act does not per se carve out an exception in respeet of a 'security cheque' to say that a complaint in respect ofsuch a cheque would not be maintainable. There ean be mirade situations in which the cheque issued by the aecused may be called as security cheque, or may have been issued by way ofa security,i.e. to provide an assurance or comfort to the drawee,that in case of failure ofthe primary consideration on the due date, or on the happening (or not happening) of a eontingency, the security may be enforeed. While in some situations, the dishonor of sueh a cheque may attraet the penal provisionsgc6ntained';inT7Section^Ti38 ofthe Act, in others it may not. i ^

29. To elaborate,on/the afbfe§^id§sp0OE may cbnsid^r the different ■f *>5- V\ kindsofsituationstllattheCourt^^^p|^|M^withfromtimeto^time,andthe manner in which the defenee off^fe^itVllheque'', or that the cheque was given as a security, set up by theycd^sedlhas,been dealt with, ll

30. In ICDS Mtd. 6^^'SCC 426, the cheque in question nadH|^en issued by th^.guafanfofe[5],(^fe) of the principal debtor (husband) mrespeGt^ofvaJ^ipurchasgsai^^ entered into by the principal debtor with the complaihahtToFpirchase of a car. The cheque in question was issued by the guarantor towards part payment to the appellant/complainant. The same was returned unpaid on aecount of insufficient funds. The issue raised before the Supreme Court was whether a complaint under Section 138 of the NI Act was maintainable in respect of the said cheque. The High Court had come to the conelusion that when a cheque was issued as security, no complaint would lie under Section 138 of theNI Act, since the cheque issued couldnot be said to be for the purpose of CRL.L.P. No.706/2014 Page 15 of36 discharging any debt or liability. The High Court held that the cheque must be for payment ofmoney from out ofthe drawer's account. In the case ofa cheque issued by a guarantor or surety, it could not be said to be for immediate payment of money. The High Court placed reliance on the decision ofthe Kerala High Court inSreenivasan Vs.State ofKerala(1999) 3 K.L.T.849 wherein the Kerala High Court had observed: "A comparative reading of the principle laid down by the AndhraPradesh High Courtgnfjhe mandatoryprovisions laid down in Section 13,8:^^ tlie^^Ns^ Act is crystalclear thajt^yvli^(a'^jch§qMe has%em4sMedasasecurity, no complaint/mil liefunder^Sgction ISS^pf,th\Negotiable Instrumentsjfct - V"insirumcnis^ci X, \\

31. The Supi^ine^ourt reV^^(^,|4€^teision of f^e;._ High Court by placing reliance/on the languagewf|SeGtipnwl38 ofthe NI Actl Section 138. ii It tf huil ',..1, „.11.5SJ/:iU],j| 11 begins with the- word, 'where ahyfchemei. These three' words were held to be significant. In partieulaE'/emphasis was laid on/the use of the •,•■4 'V- // word, 'fl«y'-which\suggdsts^that*iif\/fofwhatey#reason a cheque drawn on an account maintairiedw5the*drawer withTh^'bahKer ihTavour of another person for the discharg^Q|^|^gD^jbr^^^.^l^.ifril^ is dishonoured, the liability under Section 138 Nl A^"'ckWn6t"be avoided. The Supreme Court also emphasized that the legislature had been careful enough to use not only the expression '''discharge, in whole or inpart, of any debt', but has also included the expression ''other liability' in the language of Section 138 Nl Act. The Supreme Court held that the issue regarding the liability of a guarantor and the principal debtor being co-extensive, was out ofpurview of Section 138 of theNl Act and did not call for any discussion. The Supreme Court held: y CRL.L.P. No.706/2014 Page 16 of36 "11 The language ofthe Statute depicts the intent of the law-makers to the effectthat wherever there is a default on thepartofone infavour ofanother andin the eventa cheque is issued in discharge ofany debt or other liability there cannot be any restriction orembargo in the matter ofapplication ofthe provisions ofSection 138 ofthe Act. 'Any cheque'and 'other liability'are the two key expressions which stand as clarifying the legislative intentso as to bring thefactualcontextwithin the ambitoftheprovisionsofthe Statute. Anycontra interpretation would defeat the intent ofthe legislature. The High Court, it seems, got carried away by the issue of grantee and guarantor's liability and thusrzha&iigyprlooked the true intent andpurportofSectiopd'SSnftheAct. H 0- Thus, the view taken? By the^iKerala High^CoUit in Sreenivasan (supra) was cle^ly appr^|^h|fe™|^|^|reme The Supreme Courtrejected tlie w^e proposi^j^Ji^ll^iishonour o£as^^urity cheque a %mMmt " t issued by a guarantor from his accQUht%vhUid not attract Section 138 ofthe NIAct I I I.MItk

32. The accused has id has plfchdTChahc^.on/MiS'/i'pra^ Menon (supra). In this case, the cheque^ffadj,been issued by^The^<appeH - who was transacting shares withvthe,^share-t?broker/(seg0nd^T;espondent/complainant. The appellant/accused disputed"thfest^^ent-OT"account relied upon by the complainant, on the basis whereof it was claimed that the cheque amount was due and outstanding. The Supreme Court examined the nature ofthe transactions undertaken between the parties in the light of the evidence before it. The Supreme Court held thatthe complainant had not been able to explain the discrepancies in his books ofaccounts. The complainant did not bring on record any material to show that the parties had transactions, other than those which had been entered into through the Cochin Stock Exchange. CRL.L.P.No.706/2014 Page17of36 The Supreme Court held that the so called acknowledgement,as correct, of some ofthe statements of account was not enough since, admittedly, there was no acknowledgement in respect offiye statements of accounts. After examining the evidence,the Supreme Court observed as follows: "26. In view ofthe said error ofrecord, thefindings ofthe High Court to the effect that the appellant had not been able to substantiate his contention as regards the correctness of the accounts ofEx.PIO series must be rejected."

33. The Supreme Court thempfd^efdidto^delve into Sections 118(1)and 139 ofthe NX Act whicftTaise|ajpWshmptiomd|gtinst^the,drawer ofa cheque. In para 52 ofthejudgment,the Suprelie5Couft,interaJlia, dbserved; ' ^Y"f " 77z|'appellant cledf^f0aj^^h0^nothing isfdjie^and the cheque \^as issued by The said defence has been accepted as probabl4ff ffth^^defence is acceptable as probablef0e cheque therJffre %p0hot be held to have been issuedinXdischarge ofth^fd£b§;a^foi%^ample,ifa cheque is » 'Ort \. aV'."?t'A nn nwtv nthi?r)'ntM (emphasis suppl!edfe>''''^w

34. The aforesaid observ^fionS^made by^thb^'iSupreime Court in Narayana Menon(supra)have been relied toTafp'tfiafin respectofachequeissued by way ofsecurity,a complaint under Section 138 NI Actis not maintainable.

35. The aforesaid observations have to be read in the context in which they were made. It is well settled that a judgment cannot be read like a Statute. Construction of a judgment should be made in the light of the factual matrix involved therein. What is more important is to see the issues involved in a given case, and the context wherein the observations were r- CRL.L.P.No.706/2014 Page18of36 )h made by the Court while deciding the case. Observation made in a judgment,it is trite, should not be read in isolation and out ofcontext.[See Goan Real Estate & Construction Ltd. v. Union ofIndia,(2010)5 SCO 388]. It is the ratio ofthejudgment, and not every observation made in the context of the facts of a particular case under consideration of the court, which constitutes a binding precedent. The Supreme Court in P.S. Sathappan v. Andhra BankLtd.,AIR 2004 SC 5152 has held as follows: "755. While analyzing^^fferent~--idecisl^s rendered by this Court, an attempt has^beenjp^cie^T^*^bad''the^ud^ asshould be read under the rfile QfpmC'etents. A aedisior^^^tdsjrite,should not be readas asfatute.^''^' fr^" V\

139. A decisio%isHan authoMt^fdr-AheWde^ionsoflaw'determined by it. While applying the ratiyi^H'e/ebkrt^may not piclc-^Ouila word or a sentence jrom the judgr^e00,i^.^j7cedfrom the coritext in which thesdidquestion arose^^op^^yisi^eration. Ajudgmentasis well-known,\must be readin its ehtif0vtandthe observation^ made therein should receive considierdtibMinHhe light ofthe questions raised before if. (See/f[d}^piiq.'F4pqncialfCqp^ and Anr. v. Jagdamba ofIndia and Ors. v. Dhdh^akiiff5eVi::^(md Ors.^,i.^ff99d^f0^SjCC 44, Dr. Nalini Mahajan v.'^^I^ifep^^f>I^o^fff^-'(Ifiyi'stigation) and Ors., [2002] 257 and Anr. v. Synthetics and Chemicals Ltd'^dhW'Whr, 1991 (4)SCC 139, A- One Granites v. State of UP. and Ors., AIR 2001 SCW 848 and Bhavnagar University v. Palitana Sugar Mill (P) Ltd. and Ors., (2003)2SCC111.

140. Although, decisions are galore on this point, we may refer to a recent one in State ofGujarat and Ors. v. Akhil Gujarat Pravasi V.S. Mahamandal and Ors., AIR2004SC3894 wherein this Court held: CRL.L.P.No.706/2014 Page19of36 "... Itis trite thatany observation made during the course of reasoning in ajudgment should not be read divorcedfrom the contextin which they were used.

36. The Supreme Court in Narayana Menon(supra)was not particularly dealing with the issue as to whether, or not, a cheque issued for security or for any other purpose would come within the purview ofSection 138 ofthe NI Act. The observation of the Supreme Court as extracted above cannot, therefore, be understood as laying down a general proposition that a cheque issued as security would not cQmeswithinThezpuiview ofSection 138 ofthe NI Act in all eases. SuphTeadingJ)i'theljudgment would go contrary to the •express language the M^Acf,^which uses the expression, where^qnp chequ^^^f^^^ffp0payment^j:pf any amount of money oftmy^debtorotheniwdjlfiMm^...'. t 11 wfmsm0 u p fi /I H n n

37. The KarnktakaHigh Court|in|]|l/||'^/i^ Ganesh SteelR^ ollingMills Ltd. V. M/s SfipL Limited, C^minal-^ltltion No.4104/200^ decided on 21.05.2013,2O13^CC4<gi!Mhe^^®093ai®(2O^ I&nt R 70,inter,.,,. "x---.41 aha,observed m relatidB^^drajijipflMenonf^\xpT^Yf ''It is to be noticed thdt^tJjef^servatidf^.yaade by the apex court in Narayana Menon's case thai "I... ifa cheque is issuedfor security orfor any otherpurpose the same would not come within the purview ofSection 138 ofthe Act This was a passing observation in that case with reference to the factsfound therein. It cannot be construed as an axiomatic statement of law to be mechanically applied, in all circumstances'".

38. I may also observe that in Narayana Menon (supra), the earlier decision ofthe Supreme Court in Beena Shabeer(supra) was not cited or CRL.L.P.No.706/2014 Page20of36; broughttothe notice ofthe Court,and has notbeen considered bythe Court. In fact, on a reading ofNarayana Menon (supra), it is clear that the said decision was rendered in the specific facts of that case, and upon examination ofthe evidence led beforethe Court by holding thatthe accused had been able to discharge his initial hurden ofraising a probable defence, and that the complainant had failed to establish that the cheques in question have been issued in discharge ofa legal debt or other liability.

39. Thus, the decision in Nqrjiyana'-MmonJisupYa) is of no avail, as it cannot be said to have^laM^^dO^h^anyigeneraLpro that a complaint under Section 138 M''Actxw6'uld..not^lfe^aintainahleTmr&pect ofa security cheque or a cheqqe given as a'-s^ljqpfKtMasspre the performance ofanother I Ww i

40. I may take note of a decision;pf.\the Karnataka High Court m M/s. A-6 issued a hundi in faVbur'Sfthe accused^A-Htowards'supply ofcertain materials. Under an agfeemen|.'%eMeeni^^ complainant, the complainant discounted the hundfaMd^afd'ah amount ofRs.50 lacs to A-1. In addition to the discounted hundi, A-1 also issued a cheque as security to bind himself, in case A-6 does not pay the hundi amount on the due date. Eventually,the hundi was not paid hy A-6 and the cheque issued by A-1 was presented for encashment, but was dishonoured. Consequently, after issuance ofstatutory notice under Section 138 of NI Act, the complainant preferred the complaint. The accused raised several defences,including the defence that the cheque in question was a security cheque. In this regard. CRL.L.P.No.706/2014 Page21 of36 the parties andperu^qd>ihe infirmity^ the impugned ordef\ Thus,Ae^iew oftfi^^itbKMigh Cou&->-intoA. Klen & the accused relied on thejudgment in Sreenivasan (supra). By referring to an earlier decision in the case ofSmt. Umaswamy v. K.N.Ramanath,2006 (5) AIR Kar R 171, wherein a contrary view had been taken, reliance on Sreenivasan (supra) was rejected. In Umaswamy (supra), the Kamataka High Court had taken the view thatthe cheque issued either for discharge of debt or as a security makes little distinction in law. Dishonour ofcheque in both the situations attracts valid prosecution under Section 138 ofN.l. Act. Criminal Appeal No.1842/2008 from th^judgment ofthe Kamataka High Court m M/s Klen & MarsKali^ -syas^disniissed by the Supreme Court on 17.08.2010.by obieiwiSng"thatj'77av//f|'h^arMearned counselfor us^ddhe recofdtiMeifiha " pMMl Marshalls(supra)wasaffirmed.'^|^^^' | i IlifWl {I.

41. In Bhkshi v. State, 146p()(|^]|LT 125,the issue/that arose for y, ^..■''-Vv p. consideration before this^<CQurtH|vas|thb scbpii and- ambit of the expression, other liability occui^ing>in^Sectidh^^ the'*'5^f?^et.,# collaboration agreement was entered^nt^bg;(w||mfoe'^^ Buildwell Co. (referred to as ABC) - whdse^direetorswvefCth before the Court (in apetitionunder Section 482 Cr.P.C. seeking quashing ofthe summoning order issued by the Magistrate), and another company who was termed as the confirmingparty. Clause 5 ofthe agreement stipulatedthat, as a security for due performance of the agreement (whereunder the immovable property of the complainant had to be developed by ABC), a defined sum was to be deposited by ABC with the complainant and other owners. ABC issued 30 cheques in favour of the complainant. Six of these cheques were CRL.L.P.No.706/2014 Page22of36 / ^ dishonoured upon presentation with the remarks, 'exceeds arrangement'. After issuance ofthe statutory notice ofdemand,a complaint was preferred wherein, apart from a company ABC, its directors-which included the petitioner before the High Court, were named as accused. The submission ofthe petitioners before the High Court was that the sine qua non for an action under Section 138 ofthe NI Act is that the dishonored cheque has been issued towards discharge of "a debt or other liability". The expression,'other liability'envisaged under Section 138 ofthe NI Act was akin to a debt or money owed:''|tf,vv^as'^^argued^^^ cheques in question ii B t fl (Q) could not be said to have beetf'issued towards' payment,of a debt or other liability, for the reasonf^that theiramquht^'oyefed by the^cheques, m terms of clause(v)ofthe/colfeboration"a^b^Bht^as liable t^bfe returned by the complainant tc)'|the accused co^mySqw the due performance of the agreement. I! I U i) n ^

42. The petitioner had;.splacedTeliSnceV6rilthe-^decision of the Supreme Court in Narayand\Mle^dh'<(supfd)f^'fm^ Couft heldjhat the expression, Vv*5^ "C: '«r./ 'other liability'could hof'be cPpstmed^^af'akinyto It was held that the expression, 'other //aZ>///(v'%ouId^akq^it^meamng and colour from the preceding word, 'debt', only if the rule of ejusdem generis is held to be applicable. The learned Judge held that the said rule could not be invoked because the expression,'other liability' follows only one single expression i.e.'debt' which is not a distinct genus. The learned Judge placed reliance on thejudgment ofthe Supreme CourtinBeenaShabeer(supra)to hold that the expression,'other liability' must be given its ordinary and grammatical meaning. The learned Judge held that provisions and phrases used in CRL.L.P.No.706/2014 Page23of36 Section 138 ofthe NI Act must be construed in the same sense,as people in the commercial world would understand the same. Thus, the expression, 'other liability' would take within its broad sweep any 'liability' to pay. The Court also held thatthe term stipulating creation ofa security deposit in favour ofthe complainant was a fundamental term, breach whereofwent to the root of the contract, entitling the complainant to rescind the contract. The Court,inter alia,observed: "31. A distinction has to,Jb.er-drW^rr-bet\y^en a cheque issuedas security anda cheq^^'isjjied^t^dfdsidi^cM ofa liability to pay notwithstandihg(tHhMke rnoney iiky yyqy-ofsecurityfor dueperformqpcefbfjTie coptraci^?A ^feque^giy^q ds^security is not to be enbashgd in pr^skMtr$Mt$becprnes elriforcedble ifan obligationfisffuture is nofffffgi^^ff'^'lt is notftehdered in dischargejofafiabilitywHi^^^PTdfcfped.

32. Thiis whereachequdfdy^^0ftofaconsideration under q contractitispaidtowards^pjliabUity." | \t • rfSiS-.-Ai,y u „ fx \. ? li \\ |;y /;

43. The Court also^heldThat me|gx^ used in the ContractActis a veiy^wideTermj^an^Ms,;^^ monetary benefit. Consideration does not heeessarij^|me return of money, or money in lieu ofgoods,or services. Any benefit or detriment ofsome value can be a consideration. The Court held that the complainant and the other owners ofthe property blocked their assettill the period ofcompletion ofthe construction as per the collaboration agreement. The same was the consideration within the meaning ofSection 2(d)ofthe Indian Contract Act. Thus, the reciprocal obligations ofthe builder, namely to create a security deposit was also a consideration for the contract. Consequently, the court dismissed the quashing petition. CRL.L.P.No.706/2014 Page24of36 ■r /

44. InSaiAutoAgencies through itspartnerDnyandeoRantdasRane v. Sheikh Yusuf Sheikh Untar, 2011 (1) Crimes 180, the defence of the respondent/accused was that, in relation to purchase of a tractor and equipments from the appellant, five blank cheques were given only as security. The respondent claimed that the complainant had already received the entire purchase consideration, and that the cheque in question was without consideration. The Court rejected the defence of the accused that the entire consideration stood paid to the appellant supplier. Relying upon BeenaShabeer (supra), theiTIifh Court qbseiw^&r"

7. ■'7' ie _ • ■ /A, J?M^-issarily.^ig'0ie^-^e gif^M (i^ecurity, if bounced, sHdllfhe' the SubfeMwAfkrPbf a prosecution under C loM vV A, A 41 4 Section 13'8 omhe Act. Somheicontention of the^accused that cheque (fxhibit 28) was^0?^d0t^^ as a security will not enablehim to escapefrom^ifte^cfMenks oflaw". 1? i fjlilirf (emphasis siijjplied) l\ 7®'I 'I

45. TheHiglilCourt furtherhefMsjfolib^L k

46. Imay now deal with the decision in Ravi Kumar D (supra) relied upon by the respondent. In this case the petitioner preferred a petition under Section 482 Cr PC to seek the quashing of the complaint filed against him CRL.L.P. No.706/2014 Page 25 of36 y % under Section 133 ofNI Act by respondent no.2,on account ofdishonour of three cheques of Rs.25 lacs each. Respondent no.2 placed an order for supply of machinery and spare parts on the company ofthe petitioner, and gave a cheque for Rs.90 lacs towards advance payment. The said cheque was encashed hy the company of the petitioner. The company of the petitioner failed to deliverthe machinery/spare parts. When approached,the petitioner expressed his inability to supply the machinery/spare parts and requested the respondent no.2 to treat the amount of Rs.90 lacs, given as advance payment, as a loam^^The;pet=itionerJssuedxa post dated cheque for Rs.70 lacs m favquf o^^respdndent^.no.2.^ cheque, upon presentation, was/repeitedly dishdridufedihyi.the drawee%ank. Then the petitioner issuedf/thejthree cheque|^Miii|Mn ofRs.25'3'acs^each in favour ofrespondent np.[2] as security, dnd%tat|d®at in the event ofthe cheque of H 1^}fts r I] Rs.70 lacs heiiig again dishonour;edUi"^^hondent no.2 may encash the said fe 11 three cheques given as securit)ff^6wever#the cheque of Rs.70 lacs was once again dishdhpured'M^rekentatidti.^^^ a legal notice upon the petilidhenian'd''his companysmrider^-SVction 138 of NI Act. However, no payment wla^^^Jlgbn^ii&l^-;?r^pondent no.2 filed a complaint under Section 138 read^WiM''SeSion 141 NI Act. Respondent no.2 also presented the three cheques of Rs.25 lacs each for encashment, which too were dishonoured with the remarks "account closed". Another notice under Section 138 of the NI Act was issued in respect of the said three cheques upon the petitioner and his company. Since the payment was not made, three separate complaints were filed in respect ofthe said three dishonoured cheques ofRs.25 lacs each. -Tv CRL.L.P.No.706/2014 Page26of36

47. The submission ofthe petitioner before the High Court was that the said 3 cheques in question were issued from his personal account only as a security with the assurance that the cheque of Rs.70 lacs issued by the petitioner's company would be encashed upon presentation. Therefore, it was,claimed that the three cheques ofRs.25 lacs each could not be stated to have been issued in discharge ofan existing liability and,therefore, it was contended that Section 138 of the NI Act was not attracted. It was also argued that the complainant had preferred multiple complaints - both in respect ofthe cheque of Rs'?7() laGSFand^alsojthfee.different complaints in H S. O respect ofthree cheques oT^!2'5 lacs^each. -

48. The Court,fbyJpiacing fllianliJ^J^flyartfl MenonUsupra)and in particular the extrateCofthe saic£ifG^;ib®s|quoted above'lrlpara 33,held p ii that Section 13:8 ofthe NI Act isjattrMtbclfonly ifthe dishonoured cheque [1 _ Ih \l ffIIf ^ was issued in whole or in part payihentlofvan existing debt ofiliability, and I n n I that the said section ^ ^ j.J. liability, which may, anac^onThe happening ofesbrne^cont-mgency. It was ifsu^df held that a post dated cheque,vifr.issuqdTKfSispharge'^^ due debt,in event ofdishonour, would attract'Sectmn^I^S^fjHAct,but a cheque issued not 'A existing debt/liability, but issued by way of a security for meeting some future contingency,would not attract Section 138 ofNI Act.

49. Firstly, I may observe that the present is a case where the post dated cheques in question were issued for discharge ofa due debt, since the debt was existing at the time ofexecution ofthe MOU(Ex.PW-Cl/4)between the parties. Secondly, what appears to have influenced the decision ofthe Court in RaviKumarD(supra)is the above quoted extract from Narayana CRL.L.P.No.706/2014 Page27of36 Menon (supra), which does not appear to be the ratio ofthe said decision. The Court while deciding RaviKuntarD(supra)has neither considered the earlier decision in Beena Shabeer(supra), nor the decision in K.S. Bakshi (supra). Since BeenaShabeer(supra)is an earlier deeision ofthe Supreme Court, whieh has not been dealt with in Ravi Kumar D (supra), the view taken in RaviKumarD(supra)would not bind this Court and this Court is bound by the ratio ofthe decisions inBeenaShabeer(supra).

50. InIndusAirwaysPvt Ljd^&^0rm-v,Magnum Aviation Pvt.Ltd.,IV (2014) SLT 321, the.^jqi^tip^f#af8an)sQ%» c6hsideration before the Supreme Courtwas,<Swh^thCT'the^po^Sisd.chequ#s45|V^4bythe appellants (purchasers)as ahadvShce pay|Si^^^^^4^ofpurchase orders could be f/ considered in dischrarge ofa legE^ll'ypnfbit^eable debtor other liability and,if if '. so, whether the dishonour of suchlchedues amount to an openee under E E Seetion 138 ofMI Act. The appellarits'ihblore the Supreme Cjburt were the - /f if purehasers who had plaeed^purGnas®Mersfahd issued post dated eheques in favour ofthe resp6hden€jt,myards''aSWhci"payffi^^ the terms and conditions ofthe contrac?^v"as5that3he'enhfe-p>yment.^6 be made to the supplier in advance. The suppli'^Jlgi^Jat'tfii'advance paymenthad to be made, as it had to procure the parts from abroad. The eheques were Jpdishonoured upon presentation on the ground that the purchasers had stopped payment. Thereafter,the purchasers eaneelled the purchase orders and requested for return ofthe cheques. The respondent/seller insisted on collecting payment and initiated a eomplaint under Seetion 138 of NI Act after sending a demand notice. CRL.L.P.No.706/2014 Page28of36

51. This Court,following its decision in MojiEngineering Systems Ltd. & Ors. V. A.B.SugarsLtd., 154(2008)DLT 579,held that the issuance.ofa cheque at the time ofsigning such a 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.

52. The Supreme Court did not agree, and held that to attraet an offenee under Section 138, there should be a legally enforeeable debt or other liability subsisting on the date..^ofedrawai=ioTThe cheque. In other words, drawal ofthe cheque in4ischarge\^f'fetistingor/pasf liability is a sine qua non for biingihg ah Sectibri!;^!^8%,fthe NI Act. It nne qua non for brmgirig ah offenel^lffi'der Sectibri!J88%f• c-A'/C,--.•j" ■(£% V. %,, ^ was held that ii the pheque is issuedsasiaii"adyiance paymenfTor purchase of ff ^ w goods and, fonJariyCreason, puijcha^e^d^^^ is not carried \to its logical conclusion either because of its cahcellktioh or otherwise, and the material j.re„ 1,.. i. ismii, or goods for whichthepurchase Qrd|r|wia4piacedis not supplied, the eheque eould not be held\to have4been drawn forfahe'xistingKdebt or liability. It was held that the paynfentSrhad^^^^ a 6he^uf"ih the?hatU^e^b%kdvance payment indicates that at the time^6f|[rawalj5Teheque,Jhere^w existing liability. While disagreeing with the%ew-^f~this"Courtr^^^ Supreme Court held as follows: " Ifat the time ofentering into a contract, it is one of the conditions of the contract that thepurchaser has topay 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 criminalliability to be made out under Section 138, there should be legally enforceable debt or other liability subsisting on the date of drawal of the CRL.L.P.No.706/2014 Page 29 of36 53. cheque. We are unable to accept the view ofthe Delhi High Court that the issuance ofcheque towards advance payment at the time of signing such contract has to be considered as subsisting liability and dishonour ofsuch cheque amounts to an offence underSection 138ofthe N.I. Act. In what we have discussed above, ifa cheque is issued as an advance paymentfor purchase of the goods and for any reason purchase order is not carried to its logical conclusion either because ofits cancellation or otherwise and materialor goodsfor which purchas^'ofd^'Wa^ is notsupplied by the supplier, in our^considered hieWMhe ^hequ cannot be saidto have been drawnfor anexistmg'debtorliability. f^ &n}|hasissupplied) The SupremefCburt referflMMfe^afeions oftMAndhra Pradesh High CourtandiGujaratHigh Couj^^'s®te Itj n n Vi 4 IH;It tl. S jl. nn n I ''14. In %vastik Coaters^ffbtfy^DeepakBrothers arid Ors., rn/rr r in^'^ /■a S 1997 CrfL.J 1942^ (AM)Xt0kslfiglf\Judge of the&Andhra Pradesh High CouHl^whifeMddhsM^i^ing^^^ to Section138hejS^y^a ExpldiiqtiQMiid^ieMohi'M^^ Instruments A'ct^e^wjyffn^ that the cheque shall be relateaBle to an enforceable liability or debt and as on the date of the issuing ofthe 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 Concretes Pvt. Ltd. and Ors. V. State of Gujarat and Anr., 2000 Cri.L.J. 1988 (Guj.) 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 CRL.L.P.No.706/2014 Page 30 of36 V iZ V fact that the payment was agreed to somefuture date and there was no debt or liability on the date of delivery ofthe cheques wouldtake the case outofthepurview ofSection 138 ofthe N.L Act. While holdingso, GujaratHigh Courtfollowed a decision of the Madras High Court in Balaji Seafoods Exports (India) Ltd. and Anr. v. Mac Industries Ltd. 1999(1) CTC 6". (emphasis supplied)

54. Reference was also made to the decision ofthe Kerala High Court in Supply House, represented by Managing Partner v. Ullas, Propreitor BrightAgencies & Am.,20O'6'Cri[5].M)4T330..(Kdfdla). In this case,the post dated cheque had beeii issued the»a,ccuse(Fwhile placing the order for supply of goods.#However,4h'ejMMMo^^^ Ws nipt made by the complainant. Cbnseqhcntly, tli|M||uMi|fife^ instructcph^bank to stop f 1 payment ofthcfchcquc, and thciifeqjdfet#thc complainant not to present u Isl'iMll-f.[1] the cheque as tie goods had not beepsupplied. The Kerala High Court held

I. ylij. p that the said chlque could notfri#faid lovbei one issued in discharge of a liflbilitV -yv ' "I •• '' "I'v. /"!naoiniy. v« j \ tsiSTfeiju - • x <,:n % 4/ V,

55. I may refer ta:|^pcffi^|lMsi|m Haryana Petrochemicals Ltd. & Anr."Pl^Li^i^^etKOGh^micals Ltd. & Anr., 2015 (1) JCC (NI) 11. The petitioner, Haryana Petrochemicals had issued cheques in lieu of supply of chemicals by the respondent Indian Petrochemicals, which had been dishonoured upon presentation. The learned Magistrate had convicted the petitioners under Section 138 of Nl Act. The said judgment was endorsed by the learned Sessions Judge. Consequently, a revision has been preferred before the High Court. The primary submission ofthe petitioner was that the cheques in question were CRL.L.P.No.706/2014 Page31 of36 ■<- -f \ i--security cheques, as it was a regular trade practice that after the goods had been received by the petitioner company, fresh cheques in lieu of the security cheques were issued by the petitioners. It was argued that the security cheques,by themselves, wouldnot constitute alegal debt or liability of the petitioner towards the complainant. The Court observed that the manner in which the parties transacted their business was, that the complainant company would send the goods along with the invoices as per the value of the goods. The petitioner/purchaser enjoyed a credit facility, i.e. thepayment wasnot ta,br''^deimn^ediatply^ ofgoods. For this reason, the security cheques were issued.byThe^petitioner at the time of taking delivery of/t^^jgoods.i However,- they wefd to be returned upon receipt of payn:i,ent4]|y the respondent/seller. In casej^payment was not " 'As- - J 1 forthcoming, th| security chequesi^erelcpnsidered as consideration towards I ■ 'iii-fti-if I supply of goodl, and the respondfplfMldlbank the cheques.SThe cheques.... I m question hadAsimilarly been#lMil%d^^^^ payment wasAot otherwise %■ ■■ -Tf'Y'"' A madeby thepetiti^ner/^^^>bh.tfie"expJ|^ofthecreditpenod.

56. This Court, by placing^reliance^on^Be^iifl^i^^aAe^e/' (supra), reiected the petitioner's submissiort^&Ohggeques iiff'question being security cheques couldnot be the foundation of a complaint under Section 138 ofNI Act. In the present case as well, the transaction clearly stipulated that the cheques in question were issued as security cheques, which were to be returned upon receiving payment in installments of Rs.50,000/- each from the respondent/accused by cheque. The oiily difference is that inHutyana Petrochemicals Ltd. (supra), the Court found that as a matter of the inter se dealings between theparties, whenever thepayment was not made at the end CRL.L.P.No.706/2014 Page32of36 ¥' V •V ofthe credit period,the security cheques were banked for realization ofthe amount due. However,in the present case,there is no express agreement of the parties to this effect, and there is no established practice ofthis nature between the parties. Pertinently,the MOU(Ex.CW-1/4)does notexpressly prohibit the appellant/ complainant from banking the security cheques, in case the installments are not paid on the due dates.

57. At this stage, I consider it appropriate to analyse as to what is the meaning of the word "seeurityik>--'Wfrat-d0es_^ the issuance of a security cheque entail, and if there is''mb|specifiera:^peii&nt. touching upon this a security cheque,in casethe pfinlary oM%^ibu^m(^^}ire whidfrthe'security cheque ^ /f.. kA... \. n was given,is not'discharged. The^ia|%^%Ea^Dictionary(6 ^edition),inter a/ia,defines"security"to mean: |i =^1 in]tj | I01III /I 'Protection; assurance;j^demnijie^ The term iS/fusually applied to%n obli0iionff;ple^^^rJmp}^^^,lUn, etc., given by ckdebtdi^^ih drder^^fo'^asmre or performance'bfAtis0ebt,,,^by furnishing the'^;.cre:aitor with a resource to be^ted^^it^MsAA^^^^^ principal obligation. CollateraApven^by^d^ secure loan. Documentthat indicates evidehte~ofindebtedness. The name is A; also sometimes given to one who becomes surety or guarantor for another". (Emphasissupplied)

58. Similarly, the word "security" is defined in the Shorter Oxford English Dictionary(5^*^ edition),inter alia,to mean: '^Property etc. deposited orpledged by or on behalfofaperson as a guarantee of the fulfillment of an obligation (as an CRL.L.P.No.706/2014 Page33of36 • - -% appearance in court or the payment ofa debt) and liable to forfeitin the eventofdefault"". (Emphasis supplied)

59. Thus,when one party gives a security to the other,implicitin the said transaction is the understanding that in case of failure of the principal obligation,the security may be enforced.

60. In V.K. Ashokan v. CCE,(2009) 14 SCC 85, the Supreme Court observed that: %4' -■ - ■' v.-4,4^--. ''The term ''s^cTirityfj\ign^ie^ secure or certain. It ^dkesfthe rnQne^^r^e^ps^imekfifftf or "^orereadilyt^verabl^^^^^^fboni'^f^example, amereiqp,^ichis orO^p^jpp^adebt, an^h^ordis not confineddb a docum^ -which.giyes a chargTon%pecific property!) but includes pepormf securities for money, (See Chetumdl^Bulchand v. No(^^ofpfperji, AIR 1928 Sind89). Itisaworpofgeneralimp0(0^pp^anassurance''. | \." if

61. Thus, in m$^vie^^^^m^esmoJlfie^ oigliot, there is an express understanding'bMveemA parties thatTlieldcMtfmav be enforced m the event of failure'^jfJthgdgapj^tojpa^ or discharge other liability on the due date. EvefriT-there4s-®"'such express agreement, the mere fact that the debtor has given a security in the form of a post dated ^ cheque or a current cheque with the agreement that it is a security for fulfillment of an obligation to be discharged on a future date itself, is sufficient to read into the arrangement, an agreement that in case of failure of the debtor to make payment on the due date, the security cheque may be presented for payment, i.e. for recovery of the due debt. If that werenot so, there wouldbenopurpose ofobtaininga security cheque fromthe debtor. A CRL.L.P.No.706/2014 Page34of36 * ♦ security cheque is issued by the debtor so thatthe same may be presented for payment. Otherwise,it would not be a security cheque. As observed above, the MOU(Ex.CW-1/4)does not expressly, or even impliedly states that the security cheques are not to be used to recover the installments,even in case offailure to pay the same by the respondent/debtor.

62. Section 138 ofNI Act does not distinguish between a cheque issued "4^ by the debtor in discharge ofan existing debt or other liability, or a cheque issued as a security cheque qn^the^-pf^m^iBeiihat^on the due future date the " •» frj>'W'. debt which shall have ciWBiallizediDyitheh,sMljJbe paid. So long as there is a debt existing, in r^spqct Miereof.tlSSheque in%tie^ti6n is issued, in my 0 /? Rrli'A.. view,the same wduld^ttract Se;ictiphrf3i3p® in case of|dts dishonour.

63. Thus,thefdefence that the^eb6^U|SJi;yquestion-Ex. CW||1/1, CW-1/2 R - '--h fr»j „ IfMi,I -. II and CW-1/3 were issued as "security'^cheques has no force inithe facts and

I. nn I. ' circumstances ofithis case,as,omtbeMat'e w.fien the said chequ'es were issued simultaneously with thei^Mecu#pfe4fftfeK^ the debt of Rs.1.[5] lacs was oulstahdpl|. ^Ije^appeUanfi^asl/w^tf^^ his rights to enforce the security in respecT4yhereqftheicnequesTn question were issued and to seek to recover the outstanBiil§'"'debt by encashment of the said cheques.Since the cheques in question were dishonoured upon presentation, the accused suffered all consequences as provided for in law and the appellant became entitled to invoke all his rights as created by law. Thus, the appellant was entitled to invoke Section 138 ofthe NI Act; issue the statutory notice of demand, and; upon failure of the accused to make payment in terms of notice of demand — to initiate the complaint under Section 138 ofthe NI Act. CRL.L.P.No.706/2014 Page35of36

64. The learned Magistrate has returned findings of faet which are palpably wrong;its approach in dealing with evidence is patently illegal; its decision is based on an erroneous view of the law, and; the impugned judgment,ifsustained, would lead to grave miscarriage ofjustice. For the aforesaid reasons, the impugned judgment is set aside. The accused is convicted ofthe offence under Section 138 ofthe NI Act. MAY J/f ^4^ t S li-4' H SANGHI) lUDGE ■n V\ F t'M ¥ li 'Mhl Ml, I? it \ i - ^ U.'tu}lr '-'if- ■%- 'frSpriV-, „ "■&.V •-'■•&> *^-14"l.c? <=-01° t./ // CRL.L.P. No.706/2014 Page 36 of36