Facts of the case was, Accused was a service provider. Complainant availed of his services and paid him 90% of the contractual amount. Thereafter the Complainant started to have grievance with regard to the services rendered by the Accused and was tarnishing the image of the Accused in the industry. Therefore the Accused in order to have an amicable settelement with the complainant was ready to accept the offer of cancelation of the original contract. As a counter proposal to the offer the accused issued the dishonored cheque with certain terms and conditions for the acceptance of the counter proposal. One of the condition of the counte proposal for cancellation of the original contract was that the complainant has to accept the counter proposal by acknowledging it under his signature and the rubber stamp. The Complainant did not do so. In fact during the trial the complainant under cross examination took the stand he had not accepted the counter proposal for cancellation of the original contract.
Therefore the accused pleaded that since the contract for cancellation has not come into existence there is no existing debt or liability. Whereas the trial court took the view that since it is a criminal trial the court is not concerned with the law of contract. It was pointed out to the trial court that u/s 138 one is concerned with liability and therefore the liability can be either statutory or contractual. Yet the trial court did not bother with the law of contract.
In Appeal the Appellate court took the view that the complainant by depositing the cheque has accepted the counter proposal of cancellation and therefore contractual liability has come into exitence and therefore accused is liable u/s 138. This view was held by the Appellate court despite overwhelming evidence by the Complainant that he has not accepted the porposal of cancellation.
My contention is if at all the accused is liable he would be liable only if the contract of cancellation has come into existence. Merely because the complainant is not satisfied with the service rendered under the original contract the accused would not be liable to refund the amount under the original contract.
Since in this case admittedly the offer of cancellation of the original contract has not be accepted by the Complainant no liability has come into existence against the accused. Even if the Appellate courts reliance on s. 8 is correct and that a contract of cancellation has come into existence, yet the accused would not be liable u/s 138 because cheque was drawn and accepted before the liability has come into existence by formation of contract of cancellation. Looked at from a different angle, it can also be argued as the cheque was drawn as consideration for counter proposal, the dishonour of the cheque would only mean that the proposal of cancellation of original contract was withdrawn before acceptance by the Complainant.
Therefore my contention in either case the accused cannot be fastened with a liability u/s 138.