SC ruling on Section 138 of Negotiable Instruments Act

Court :
Supreme Court

Brief :
SC ruling on Section 138 of Negotiable Instruments Act LEGAL DIGEST

Citation :
Lalit Kumar vs State of Uttar Pradesh

SC ruling on Section 138 of Negotiable Instruments Act




BS Repoter / New Delhi June 23, 2008, 0:32 IST




The Supreme Court has ruled that criminal proceedings for issuing a cheque without sufficient balance in the account would be valid only if it is drawn for discharging a debt or liability. If it is issued to satisfy the terms of a compromise or settlement, Section 138 of the Negotiable Instruments Act could not be used to proceed against the drawer of the cheque.


The court stated so in the case, Lalit Kumar vs State of Uttar Pradesh. Earlier, two cheques were issued by the directors of a company and they were prosecuted. Meanwhile, there was a settlement under which Rs 5 lakh was to be paid to the creditor. However, this cheque also bounced, leading to another prosecution.

The Allahabad High Court rejected their plea to quash the proceedings. But on appeal, the Supreme Court stated that the latter cheque was issued in terms of a compromise agreement and not to satisfy any debt or payment due. Therefore, the second instance would not invite prosecution under Section 138. The high court judgment was set aside.

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The Supreme Court has allowed the appeal of Oriental Insurance Co Ltd and ruled that a pillion rider in a two-wheeler could not be treated as a third party when an accident has taken place owing to the rash and negligent riding of the scooter and not on the part of the driver of another vehicle.

The Kerala high court had held the insurer liable to pay compensation for the death of a woman who was riding pillion when the accident took place. On the appeal of the company, the Supreme Court set aside the high court judgment. It said that the liability of the insurer does not extend to a pillion rider unless the requisite amount of premium is paid for covering the extra risk.

CESTAT asked to re-examine micronutrient compound issue

The Supreme Court has asked Customs, Excise and Service Tax Tribunal (CESTAT) to reconsider whether micronutrient compounds are chemical products belonging to the ‘plant growth regulator' category for excise purpose or whether it is a fertiliser. If it is a fertiliser, it would get excise benefit.

This issue arose in the appeal of the Commissioner of Central Excise against the order of the CESTAT, which ruled that the micronutrients produced by Karnataka Agro Chemicals are fertilisers. The excise department issued show cause notice to the company alleging that it had misdeclared that its product contained nitrogen and thus cleared it without paying the duty.

It cited chemical reports to allege that the compound produced by the company did not contain the main elements of fertilisers. The company stated that its product contained 0.31 per cent nitrogen to make it a fertiliser. The Supreme Court stated that the issue was whether such a quantity would make the product fertiliser. It asked CESTAT to re-examine the issue.

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The Supreme Court has set aside the ruling of the Customs, Excise and Service Tax Tribunal and ruled in the case, Deepak Agro Solution Ltd vs Commissioner of Customs, that ‘Brimstone 90' imported by the company was in the nature of a fertiliser used for improving the quality of the farm and not insecticide or pesticide as maintained by the revenue customs authorities. Since it is a fertiliser, it would get the benefit of Customs duty.

MRTPC dismisses petition against Campa Beverage Ltd

The Monopolies and Restrictive Trade Practices Commission has dismissed the petition of Alankar Bottling Co alleging unfair and restrictive trade practices against Campa Beverage Ltd. Alankar had entered into a contract for bottling soft drinks for five years.

Though it was not renewed, the arrangement continued for many years. Then it was terminated by Campa. Then Alankar moved the commission alleging restrictive trade practices due to which it suffered losses. The commission dismissed the petition as it could not examine the terms of the contract. Campa could terminate the arrangement as it had to maintain the quality of its product.








on 29 August 2010
Published in Criminal Law
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