Section 138 N I Act

Vijyant Nigam (09807349001) (Querist) 18 August 2010 This query is : Resolved
Dear Members

one of my seniors mr. Prem Jha told me about a judgment which may be useful for someone. Hence I am placing the same before your good selves.

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 v/s 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.

ragards

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H. S. Thukral (Expert) 18 August 2010
I am aware of the judgment. Please go through it thoroughly. The accused were convicted and sentenced to serve imprisonment and fine as well in the first case. Therefore the complaint in the second case on bouncing of the cheque which was in settlement of earlier complaint which was not withdrawn, it was rightly held by the SC that the cheque was not in discharge of liability.

s.subramanian (Expert) 19 August 2010
Thank You brothers.

Surrender K Singal (Expert) 19 August 2010
Bouncing of a cheque towards settlement would nullify the settlement itself !

DEFENSE ADVOCATE.-firmaction@g (Expert) 19 August 2010
Mr Nigam has submitted a good judgment and Mr Thukral has rightly dignosed that second complaint can not survive since accused already convicted.

Any way this type of analysis is needed on this site , otherwise it is flooded with querries mostly from students which has no resemblace to realities.

Such querries are mostly urgent most urgent , wants HC SC citations and annonymus. And same querry is put up again and again by just redrafting the sentences. TAKE CARE.