Dishonor Of Cheque Given As Security Attracts Section 138 NI Act, Cases of 'Account Closed' And 'Payment Stopped' Also Covered: Delhi HC

The Delhi High Court recently observed that dishonor of a cheque given as security attracts Section 138 of the Negotiable Instruments Act (“NI Act”) and cases where cheques are dishonored for reasons “payment stopped” or “account closed” also fall within the ambit of the provision. The observations were made by Justice Rajnish Bhatnagar while hearing the plea of one Payal Malhotra, who sought quashing of the NI Act case pending against her before the Trial Court. Malhotra contended that the cheque in question was given to the respondent/complainant as a security, and not in discharge of any existing legally recoverable debt or liability. However, the same was misused by the respondent and not returned despite sending of legal notices notifying about closure of the relevant bank account. After hearing the submissions, the court reiterated that cases where the dishonored cheque was statedly given as a security attracted Section 138. It was added, “…not only the cases of dishonour of cheques on account of insufficient funds or exceeding of arrangement but the cases involving dishonour of cheques on accounts of “payment stopped” and “account closed” have also been brought within the ambit of offence under the aforesaid provision.” Speaking of the limited jurisdiction of High Courts under Section 482 CrPC, the court said, “…this Court does not find any material on record which can be stated to be of sterling and impeccable quality warranting invocation of the jurisdiction of this Court under Section 482 Cr.PC at this stage. More so, the defence as raised by the petitioner in these petitions requires evidence, which cannot be appreciated, evaluated or adjudged in the proceedings under Section 482 of Cr.PC and the same can only be proved in the Court of law.” Notably, Justice Bhatnagar deprecated the practice of litigants to approach High Courts for quashing of cases under NI Act, without first leading a defense before the Magistrate. Without following due procedure in terms of the NI Act and CrPC, the court noted, parties approach High Courts intending that the court step into the shoes of the Metropolitan Magistrate and exonerate them after hearing their defense. It was opined that the NI Act provides ample opportunities to issuers of cheques before they are proceeded against in a court of law. But when dues ultimately remain unpaid, criminal trial ought to begin. “The High Court cannot usurp the powers of the Metropolitan Magistrate and entertain a plea of accused, as to why he should not be tried under Section 138 of the N.I. Act. This plea, as to why he should not be tried under Section 138 of the N.I. Act is to be raised by the accused before the Court of the Metropolitan Magistrate under Section 251 of the Cr.PC & under Section 263(g) of the Cr.PC.” The court also added that the burden of taking a defense and proving why he must not be put to trial is on the accused, and the same cannot be shifted on the complainant. Once summoning order has been issued, the accused must take notice under Section 251 CrPC and enter plea of defense before the Metropolitan Magistrate. “If an accused has a defence against dishonour of the cheque in question, it is he alone who knows the defence and responsibility of spelling out this defence to the Court and then proving this defence is on the accused.” The petition was dismissed without issuing notice to the respondent. Advocate Yogendra Kumar Verma appeared for petitioner Case Title: Payal Malhotra v. Sulekh ChandCitation: 2023 LiveLaw (Del) 1231Click here to read/download judgment

Dishonor Of Cheque Given As Security Attracts Section 138 NI Act, Cases of 'Account Closed' And 'Payment Stopped' Also Covered: Delhi HC

Debby Jain

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