A Section 138 prosecution cannot proceed without statutory notice compliance and a legally enforceable debt.

The respondent filed a private complaint under Section 138 of the Negotiable Instruments Act, alleging that the petitioner had borrowed ₹15,00,000 and issued a cheque dated 7 October 2022, which was dishonoured for insufficient funds.

The petitioner sought to quash the proceedings, contending that the cheque was security given to R. Ramesh in connection with a partnership dispute, not payment of a debt to the respondent, and that the statutory notice requirements had not been met.

The petitioner had earlier filed a civil injunction suit against the respondent and Ramesh’s wife; the respondent later filed a separate money-recovery suit, in which the petitioner denied borrowing the alleged sum.

The High Court considered the quashing petition under Section 528 of the Bharatiya Nagarik Suraksha Sanhita.

Whether the complaint disclosed compliance with the statutory notice requirements under Section 138 of the Negotiable Instruments Act.

Whether the proceedings could continue where the Court concluded that the cheque was security given to a third party and was not issued towards a legally enforceable debt owed to the respondent.

Section 138 of the Negotiable Instruments Act requires, among other conditions, a cheque issued towards a legally enforceable debt or liability and compliance with the statutory notice requirements.

Sections 118 and 139 provide presumptions concerning consideration and the holder’s entitlement, which the Court considered rebutted on the facts before it.

The petition invoked the High Court’s quashing jurisdiction under Section 528 of the BNSS.

No judicial precedents were cited in the order.

The Court noted that the complaint did not specify the date the statutory notice was issued, the date it was received, or proof of acknowledgment, and found no proof on record that notice had been issued.

It also relied on the prior injunction suit, the petitioner’s denial of the loan in the recovery suit, and the background of the petitioner’s business dispute with Ramesh to conclude that the cheque had been given as security to Ramesh, rather than to discharge a debt owed to the respondent.

On that basis, the Court held that the statutory presumptions had been rebutted and that continuing the prosecution would amount to an abuse of process.

The connected miscellaneous petition was closed.