The Delhi High Court has held that the offence under Section 138 of the Negotiable Instruments Act is applicable for cheques that are issued as consideration for sale of property even though the cheque is not mentioned in the sale deed. This judgment was delivered in the matter of Bhawish Chand Sharma v. Bawa Singh wherein Justice Vipin Sanghi answered this question of law while considering an appeal against the acquittal order passed by the trial court.

The facts are that the Complainant had sold his property for a consideration of Rs. 20 lakhs to the Accused. The Accused paid partly in cash and the remainder of the consideration was paid in cheque, which ultimately got dishonoured and thereby the Complainant filed the complaint against the Accused after the Accused failed to discharge his liability as per the Complainant’s statutory notice.

During the hearing in the Trial Court, the trial court made the observation that even though the complainant stated the sale consideration to be Rs.20 lakhs, the value reflected in the sale deed was just Rs.4 lakhs.  On this count, and also by accepting the version of the accused, the trial court acquitted the accused.

In the appeal filed by the Complainant against the order of acquittal of the Accused, the High court noted that the mere failure to mention the complete sale consideration does not invalidate the transaction as a whole in respect of the cheque and further held that:

“The agreement, namely, the sale of the property is not prohibited by law. The mutual agreement between the parties to disclose only a part of the consideration under the sale deed may attract other consequences for the parties. However, that by itself does not render the underlying transaction unlawful. Pertinently, it is not claimed that at the relevant time, there was a bar to payment of consideration in cash and the said bar had the effect of invalidating the transaction.”

The Hon’ble Court rejected the argument of the cheque being issued for an unlawful agreement and thereby set aside the order of the trial court and held the Accused to be convicted under Section 138 of the NI Act.


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Judgment: Bhawish Chand Sharma Versus Bawa Singh