As per Section 138 of the Negotiable Instruments Act, one of the essential conditions to make out an offence under that section is that the dishonoured cheque must have been issued “for the discharge, in whole or in part, of any debt or other liability”.
Now, the question arises – if the cheque which has been dishonoured was issued in accordance with an agreement to sell a property, then whether that would amount to an offence under Section 138 of the Negotiable Instruments Act? Can it be said that an agreement to sell creates a debt or other liability, for the purposes of Section 138 of this Act?
This question was recently settled by the Supreme Court in the case of Ripudaman Singh v. Balkrishna, (2019) 4 SCC 767, and it was held that:
“Though it is well settled that an agreement to sell does not create any interest in immovable property, it nonetheless constitutes a legally enforceable contract between the parties to it. A payment which is made in pursuance of such an agreement is hence a payment made in pursuance of a duly enforceable debt or liability for the purposes of Section 138.”
In the above case, two cheques had been given to the owners of a property in terms of the agreement to sell the property. Both these cheques were returned unpaid with the remarks “insufficient funds”.
It was held by the Supreme Court that the dishonour of these cheque may amount to an offence under Section 138 of the Negotiable Instruments Act, since they can be said to have been given for the purpose of payment made in pursuance of a duly enforceable debt or liability for the purposes of Section 138.
Thus, even if the cheque which has been dishonoured was issued in accordance with an agreement to sell a property, it may amount to an offence under Section 138 of the Negotiable Instruments Act.
