Security Cheques Given For Specific Purpose Can’t Be Encashed For Liability Or Existing Legally Enforceable Debt: Delhi High Court

The Delhi High Court held that the security cheques given for a specific purpose cannot be encashed for a liability or an existing legally enforceable debt.

The Court held thus in five Petitions under Section 482 of the Criminal Procedure Code, 1973 (CrPC), seeking quashing of the summoning orders.

A Single Bench of Justice Neena Bansal Krishna observed, “It is thus, held that the impugned cheques were security cheques given for a specific purpose and could not have been encashed for a liability which may have subsequently arisen. The Complaints under S.138 NI Act are therefore, liable to be quashed.”

The Bench said that the Court is well empowered to consider any document which is either a public document, or one which though placed by the accused, is beyond suspicion or doubt.

Advocate Girdhar Govind represented the Petitioner, while APP Shoaib Haider represented the Respondents.

Facts of the Case

The Respondent company (Complainant) was engaged in the business of resale of imported steam coal and other related products. The Respondent on different occasions supplied the coal to the Petitioner and as per the accounts maintained by the Respondent, a sum of Rs. 1,91,72,159.51/- was due and recoverable from the Petitioner as on November 3, 2014, besides interest. In discharge of the said liability, the Petitioner issued some cheques and on presentation by the Respondent, the same were dishonoured with the remarks ‘Stop Payment’.

Legal notice was served and since the cheque amounts were not paid, five separate complaints under Section 138 of the Negotiable Instruments Act, 1881 (NI Act) were filed. Thereafter, summons were issued against the Petitioner vide Order of the Additional Civil Judge, however, the Metropolitan Magistrate (MM), Bellary returned the complaints for want of jurisdiction and directed that they be presented before the Court of competent jurisdiction. Subsequently, the cases were assigned to MM, Patiala House where they were pending. The summoning order was under challenge before the High Court.

Reasoning

The High Court after hearing the arguments from both sides, noted, “The primary issue between the parties revolves around the security cheques issued by the Petitioner Company, which were subsequently presented by the Complainant Company.”

The Court clarified that regardless of whether evidence has been led before the Magistrate at the pre-summoning stage, either by affidavit or by oral statement, the complaint will be maintainable only at the place where the cheque stands dishonoured.

“To obviate and eradicate any legal complications, the category of complaint cases where proceedings have gone to the stage of Section 145(2) or beyond shall be deemed to have been transferred by us from the court ordinarily possessing territorial jurisdiction, as now clarified, to the court where it is presently pending. All other complaints (obviously including those where the respondent-accused has not been properly served) shall be returned to the complainant for filing in the proper court, in consonance with our exposition of the law”, it added.

The Court reiterated that where the stage under Section 145(2) of the NI Act is not reached, the Complaint must be returned for presentation before the Court having competent territorial jurisdiction.

“It is a settled principle of law that once a Complaint is returned, all proceedings conducted in that Court becomes non-est in the eyes of law. … From the above, it is evident that the Ld. MM, Patiala House Courts, erred in adopting the summons earlier issued by the Ld. MM, Bellary, even though those Orders of Summoning had already become non-est in law, upon return of the Complaint”, it said.

Conclusion

The Court further observed that fresh summoning order was required to be made by MM, Delhi, however, this mandatory step was overlooked.

“Despite the Complaints being filed afresh and there being no fresh Summoning Order, the summons were erroneously issued by the Ld. MM, by wrongly adopted/ relying on the Summoning Order of the Ld. MM, Bellary”, it also noted.

The Court, therefore, concluded that the cheques in question were security Cheques and were not issued or encashable for any legally enforceable liability or debt and the Complaints under Section 138 NI Act on account of dishonour of such cheques, is not maintainable.

Accordingly, the High Court disposed of the Petitions and quashed the summoning order.

Cause Title- Sri Sai Sapthagiri Sponge Pvt. Ltd. v. The State (GNCT of Delhi) & Anr. (Neutral Citation: 2025:DHC:9362)

Appearance:

Petitioner: Advocates Girdhar Govind and Noor Alam.

Respondents: APP Shoaib Haider, Advocates Alok Tripathi, and Saurabh Mishra.

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