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Supreme Court dismisses appeal of loan defaulter, upholds Karnataka HC order

The appeal was filed against the order of the Punjab and Haryana High Court seeking directions to quash and set aside the proceedings for the offence punishable under Section 138 of the NI Act.

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The Supreme Court has upheld the order of Karnataka HC which had dismissed the appeal of a loan defaulter and refused to quash the proceeding initiated against him under section 138 of the Negotiable Instruments Act.

The petitioner submitted before the Apex Court that the disputed cheque was never issued by him, in fact, at the time of taking loan, the said respondents had mortgaged the property of value 9 Crore, to which the SC replied, “we do not find any error in the order passed by HC.”

The bench led by Justice Hemant Gupta and Justice V. Ramasubramanian has refused to pass any directions in the matter.

The appeal was filed against the order of the Punjab and Haryana High Court seeking directions to quash and set aside the proceedings for the offence punishable under Section 138 of the NI Act. The High Court in its order dated March 30, 2021, had refused to quash the proceedings while stating that as per the prima facie material before the court would disclose that the cheque was presented and bounced, for which notice was issued and thereafter when the demand was not complied, the cause of action arose to invoke Section 138 of the NI Act against the petitioner.

The Counsel for the petitioner before the High Court had submitted that he was under financial distress, he even produced documents of ITR to show he has suffered huge loss due to the collapse of real estate market. The petitioner also contended that the properties are pledged in the favour of respondents and they are having civil right to seek appropriate remedy, but instead they had filed criminal proceedings, to which the court had stated that the fact as to whether the petitioner is having financial distress or not has to be considered by the Learned Magistrate only during the course of the trial. The petitioner’s counsel also submitted before the Court that he was not in position to appear before the Court since he was almost on death bed by showing the medical records.

The High Court had said that the same may be presented before the learned Magistrate contesting with regard to the financial distress and also the health condition of the petitioner.

Read Also: Supreme Court refuses 6 months moratorium on repayment of bank dues amid second wave of Covid-19

The High Court had further held that, “I do not find any merit in the petition to quash the very initiation of the proceedings against the petitioner. the judgement which have been quoted by the learned counsel for the petitioner are on the merits with regard to the financial distress and not at the stage of issuance of process against the petitioner. Hence, it is not a fit case to exercise the powers under Section 482 of C.r.P.C. to quash the proceedings.

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