Complaint u/s 138 can’t be quashed as the cheque became stale before its presentation

Case Details: Reyaz Azad v. Mohammad Irfan - [2023] 146 taxmann.com 103 (Jammu & Kashmir and Ladakh)

Judiciary and Counsel Details

• • Sanjay Dhar, J.
  • Wajid Haseeb, Adv. for the Petitioner.
  • M. Ashraf Bhat, Adv. for the Respondent.

Facts of the Case

In the instant case, the respondent had a business transaction with the petitioner. It was alleged that the petitioner issued six cheques for liquidating the liability towards the respondent.

It was alleged that the said cheques, when presented before the banker for their encashment, were dishonoured for the reasons of insufficiency of funds/payees name required/account frozen by virtue of six separate memos of dishonour.

The respondent served a notice of demand for payment. Even after waiting for the prescribed period, the petitioner did not pay the cheque amount to the respondent, as a result, a complaint was filed before the trial Magistrate.

The trial Magistrate awarded compensation to the extent of 20 per cent of the total cheque amount in favour of the respondent.

Later, the petitioner challenged the complaint as well as the impugned order by urging several grounds. It was contended that some of the cheques, which were the subject matter of the impugned complaint, were not presented for encashment within the period of their validity, as such, the impugned complaint could not have been lodged on the basis of those stale cheques.

Further, it was also contended that the impugned order awarding interim compensation in favour of the respondent/complainant was devoid of any reasons and, as such, the same deserved to be quashed.

High Court Held

Hon’ble High Court observed that merely because one of the cheques, which was the subject matter of complaint under section 138 had become stale before its presentation for encashment, same would not offer a ground for quashing of the impugned complaint as a whole.

Further, it was also held that the grant of interim compensation is a discretionary power which has to be exercised by a Magistrate trying a complaint under section 138 and such an order has to be based on reason and logic. Therefore, the said order granting interim compensation is not sustainable in law.