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Criminal LawSupreme Court of India

Sureshbhai Bhadabhai Pansuriya vs The State of Gujarat & Anr.

Not available · 2024 INSC 1057Decided 21 Nov 2024
Not available
Justice Sudhanshu Dhulia · Justice Ahsanuddin Amanullah

Background

The complainant held rights to purchase a large plot of land under an Agreement to Sell with the original landowners. When the petitioner's firm, M/s Brahmani Buildcon, later wanted to buy part of that land, it entered into a Memorandum of Understanding (MoU) with the complainant and agreed to pay him about Rs 7.68 crore through five post-dated cheques. After the first cheque (for Rs 84 lakh) was deposited, the petitioner instructed the bank to stop payment, and instead executed a separate Cancellation Deed of the MoU with just the landowners, without involving the complainant. The complainant then filed a cheque-bounce complaint under Section 138 of the Negotiable Instruments Act, which the Gujarat High Court refused to quash, prompting the petitioner to approach the Supreme Court.

Decision Breakdown

The Supreme Court held that since the MoU was still legally alive on the date the cheques were presented, the debt underlying them was a legally enforceable one, and the petitioner could not unilaterally decide he was no longer interested in the deal and simply stop payment, especially since he never formally communicated this to the complainant or returned the cheques, instead executing a cancellation deed behind the complainant's back. The Court rejected the argument that the dispute was purely civil in nature, holding that a Section 138 criminal complaint and a parallel civil suit for specific performance can both proceed simultaneously, since neither law bars the other. It found that the issuance of the cheques, the amounts, and the signatures were all admitted, leaving no ground to quash the criminal proceedings, and dismissed the petitions.

Lesson Learnt

If you issue post-dated cheques under a live business agreement and then decide you no longer want to go through with the deal, simply instructing your bank to stop payment does not shield you from criminal liability under the cheque-bounce law. You remain liable unless you formally cancel the underlying obligation with the cheque-holder's knowledge and involvement, not just with a third party.

Sureshbhai Bhadabhai Pansuriya vs The State of Gujarat & Anr. – Legal Case Shots | LegalAware