SRIPATI SINGH (SINCE DECEASED) THROUGH HIS SON GAURAV SINGH versus THE STATE OF JHARKHAND & ANR.

Citation: [2021] 10 S.C.R. 116 · Decided: 28-10-2021 · Supreme Court of India · Bench: M.R. SHAH · Disposal: Case Partly allowed

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Judgment (excerpt)

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SUPREME COURT REPORTS
[2021] 10 S.C.R.
SRIPATI SINGH (SINCE DECEASED) THROUGH HIS SON
GAURAV SINGH
v.
THE STATE OF JHARKHAND & ANR.
(Criminal Appeal Nos. 1269-1270 of 2021)
OCTOBER 28, 2021
[M. R. SHAH AND A. S. BOPANNA, JJ.]
Negotiable Instruments Act, 1882: s.138 – Respondent no.2
obtained financial assistance of Rs.2 crore from the appellant due
to previous acquaintance and assured that the amount would be
returned in June/July 2015 – Towards the same, cheques were
handed over to appellant – Based on assurance of payment,
appellant presented the cheques for realisation in October 2015,
however same were dishonoured on account of insufficiency of
funds – Appellant filed complaint under s.420 IPC and also under
s.138 NI Act – Respondent no.2 on appearance filed discharge
application before trial court which was rejected – High Court,
however, set aside the order of trial court – Hence instant appeal –
Held: Mere dishonourment of the cheque cannot be construed as
an act on the part of the respondent No.2 of deliberate intention to
cheat and the mens rea in that regard cannot be gathered from the
point the amount was received – In the facts and circumstances of
the instant case, there was no sufficient evidence to indicate that
the offence under s.420 IPC was made out – However, on dishonour
of cheques, the consequences contemplated under the Negotiable
Instruments Act would befall on respondent No.2 – Respondent No.2
may have the defence in the proceedings which will be a matter for
trial – In any event, the respondent No.2 in the fact situation cannot
make a grievance with regard to the cognizance being taken by the
Magistrate or the rejection of the petition seeking discharge at this
stage – Penal Code, 1860 – s.420.
Negotiable Instruments Act, 1882: s.138 – Claim of
respondent no.2-drawer that the cheque was towards towards
“security” and the same could not have been treated a a cheque
issued towards the discharge of legally recoverable debt and
therefore, complaint under s.138 was not maintainable – Held: A
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[2021] 10 S.C.R. 116
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cheque issued as security pursuant to a financial transaction cannot
be considered as a worthless piece of paper under every
circumstance – ‘Security’ in its true sense is the state of being safe
and the security given for a loan is something given as a pledge of
payment – It is given, deposited or pledged to make certain the
fulfilment of an obligation to which the parties to the transaction
are bound – If in a transaction, a loan is advanced and the borrower
agrees to repay the amount in a specified time frame and issues a
cheque as security to secure such repayment; if the loan amount is
not repaid in any other form before the due date or if there is no
other understanding or agreement between the parties to defer the
payment of amount, the cheque which is issued as security would
mature for presentation and the drawee of the cheque would be
entitled to present the same – On such presentation, if the same is
dishonoured, the consequences contemplated under s.138 and the
other provisions of N.I. Act would flow.
Partly allowing the appeal, the Court
HELD: 1.1 There is no error in the conclusion reached by
the High Court that no case punishable under Section 420 IPC
can be made out in these facts. This is due to the fact that even
as per the case of the appellant, the amount advanced by the
appellant is towards the business transaction and a loan agreement
had been entered into between the parties. Under the loan
agreement, the period for repayment was agreed and the cheque
had been issued to ensure repayment. It is no doubt true that the
cheques when presented for realisation were dishonoured. The
mere dishonourment of the cheque cannot be construed as an
act on the part of the respondent No.2 with a deliberate intention
to cheat and the mens rea in that regard cannot be gathered from
the point the amount had been received. In the present facts and
circumstances, there is no sufficient evidence to indicate the
offence under Section 420 IPC is made out and therefore on that
aspect, there is no reason to interfere with the conclusion reached
by the High Court. [Para 11][125-H; 126-A-D]
1.2 The High Court has itself arrived at the conclusion that
the instant case becomes a simpliciter case of non-refunding of
loan which cannot be a basis for initiating criminal proceedings.
SRIPATI SINGH (SINCE DECEASED) THROUGH HIS SON GAURAV
SINGH v. THE STATE OF

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