Offence under S.138 of NI Act is attracted even if cheque issued for sale consideration not disclosed in sale deed: Delhi HC

Team SoOLEGAL 11 Jul 2018 4:30pm

Offence under S.138 of NI Act is attracted even if cheque issued for sale consideration not disclosed in sale deed: Delhi HC

The Delhi HC, while hearing a cheque dishonour case, has held that offence of dishonoured cheque under Section 138 of the Negotiable Instruments (NI) Act is attracted even in the case cheque issued for sale consideration is not disclosed in the sale deed.

The verdict was delivered, in the Bhawish Chand Sharma v. Bawa Singh case, by Justice Vipin Sanghi while considering a plea challenging the acquittal order passed by the trial court.

Story so far:

In his appeal, the complainant submitted that he had sold a property to the accused for a sum of Rs.20 lakhs, out of which Rs.15 lakhs was received by the appellant and two cheques were issued for the balance consideration. The two cheques amounting to Rs.4 lakhs have been mentioned in the sale deed, the appellant further said. However, the cheque got dishonoured and the complaint was filed under Section 138 of NI Act when the accused did not make the payment despite being served a legal notice.

The accused admitted that the amount of sale consideration was Rs.20 lakhs and said that he had paid Rs.16 lakhs in cash.

However, in his defence, the accused stated that the issued cheques amounting to Rs.4 lakhs were returned by the complainant stating that he had no bank account; the accused further said that he had paid the outstanding balance in cash to the complainant. He even stated that he handed over a cheque of Rs.5 lakhs, without writing the name of payee, to the broker as security for discharging some electricity dues on the property, but the cheque was misutilized by the complainant to cause the dishonour.

The trial court, however, acquitted the accused of the offence under Section 138 of the NI Act.

Following this, the appellant filed an appeal in the Delhi High Court.

The High Court after hearing the submissions made by both the parties held that the failure to disclose full sale consideration will not nullify the transaction underlying the cheque, although it may attract other legal penalties.

The Court observed that,

The agreement, namely, the sale of the property is not prohibited by law. The mutual agreement between the parties to disclose only a part of the consideration under the sale deed may attract other consequences for the parties. However, that by itself does not render the underlying transaction unlawful. Pertinently, it is not claimed that at the relevant time, there was a bar to payment of consideration in cash and the said bar had the effect of invalidating the transaction”.

Read the Judgement Here:

Delhi HC   Section 138   Negotiable Instruments Act   Cheque Dishonour Case  

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