M/S. INDUS AIRWAYS PVT. LTD. & ORS. versus M/S. MAGNUM AVIATION PVT. LTD. & ANR.

Citation: [2014] 5 S.C.R. 56 · Decided: 07-04-2014 · Supreme Court of India · Bench: RAJENDRA MAL LODHA · Disposal: Appeal(s) allowed

Cited by 4 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

A 
B 
[2014] 5 S.C.R. 56 
MIS. INDUS AIRWAYS PVT. LTD. & ORS. 
v. 
M/S. MAGNUM AVIATION PVT. LTD. & ANR. 
(Criminal Appeal No. 830 of 2014) 
APRIL 7, 2014 
[R.M. LODHA AND SHIVA KIRTI SINGH, JJ.] 
Negotiable Instruments Act, 1881 - s. 138 - Post-dated 
cheques issued by purchasers as advance payment in 
C respect of purchase orders - If could be considered in 
discharge of legally enforceable debt or other liability, and, if 
so, whether dishonour of such cheques amounts to offence 
u/s. 138 - Held: For a criminal liability to be made out u/s.138, 
there should be legally enforceable debt or other liability 
D subsisting on the date of drawal of the cheque - Payment by 
cheque in the nature of advance payment indicates that at the 
time of drawal of cheque, there was no existing liability - If a 
cheque is issued as an advance payment for purchase of the 
goods and for any reason purchase order is not carried to its 
E logical conclusion either because of its cancellation or 
otherwise and material or goods for which purchase order was 
placed is not supplied by the supplier, the cheque cannot be 
said to have been drawn for an existing debt or liability - View 
of the High Court that the issuance of cheque towards 
F advance payment at the time of signing such contract has to 
be considered as subsisting liability and dishonour of such 
cheque ·amounts to an offence uls. 138 cannot be accepted. 
The question which arose for consideration in this 
appeal was whether the post-dated cheques issued by 
G the appellants-purchasers as advance payment in 
respect of purchase orders could be considered in 
discharge of legally enforceable debt or other liability, 
and, if so, whether the dishonour of such cheques 
H 
56 
INDUS AIRWAYS PVT. LTD. & ORS. v. MAGNUM 
57 
AVIATION PVT. LTD. & ANR. 
amounts to an offence under Section 138 of the A 
Negotiable Instruments Act, 1881. 
Allowing the appeal, the Court 
HELO: 1.1. The interpretation of the expression 'for 
discharge of any debt or other liability' occurring in 
8 
Section 138 of the Negotiable Instruments Act, 1881 is 
significant and decisive of the matter. The explanation 
appended to Section 138 explains the meaning of the 
expression 'debt or other liability'_ for the purpose of 
Section 138. This expression means a legally C 
enforceable debt or other liability. Section 138 treats 
dishonoured cheq1.1e as an offence, if the cheque has 
been issued in discharge of any debt or other liability. 
The explanation leaves no manner of doubt th~t to attract 
an offence under Section 138, there .should be legally D 
enforceable debt or other liability subsisting on the date 
of drawal of the cheque. In other words, drawal of the 
cheque in discharge of existing or past adjudicated 
liability .is sine qua non for bringing an offence under 
Section 138. The payment by cheque in the nature of E 
advance payment indicates that at the time of drawal of 
cheque, there was no existing liability. [Paras 12, 13] [62·. 
C-E, G] 
1.2. There is a fine distinction between civil liability, 
F 
and criminal liability under Section 138 of the Negotiable 
Instruments Act, 1881. If at the time of entering into a 
contract, it is one of the conditions of the contract that 
the purchaser has to pay the amount in advance and 
there is breach of such condition then purchaser may G 
have to make good the loss that might have occasioned 
to the seller but that does not create a criminal liability 
under Section 138. For a criminal liability to be made out 
under Section 138, there should be legally enforceable 
debt or other liability subsisting on the date of drawal of 
H 
58 
SUPREME COURT REPORTS 
[2014] 5 S.C.R. 
A the cheque. The view of the High Court that the issuance 
of cheque towards advance payment at the time of 
signing such contract has to be considered as 
' 'Subsisting liability and dishonour of such cheque 
amounts to an offence under Section 138 of the N.I. Act 
B eannot be accepted. The High Court has traveled beyond 
the scope of Section 138 of the N.I. Act by holding that 
the purpose of enacting Section 138 of the N.I. Act would 
stand defeated if after placing orders and giving advance 
payments, the instructions for stop payments are issued 
c and orders are cancelled. If a cheque is issued as an 
advance payment for purchase of the goods and for any 
reason purchase order is not carried to its logical 
conclusion either because of its cancellation or otherwise 
and materia

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