Section 138 NI Act Prosecution is Vitiated Where Cheques Were Allegedly Procured Through Custodial Coercion and Extortion

The Petitioner challenged an order dated 23.12.2024 and 07.03.2025 passed by the S.D.J.M., Balangir, taking cognizance and issuing process against him under Section 138 of the Negotiable Instruments (NI) Act

The Petitioner alleged that the two cheques (totaling Rs. 50 lakhs) were not issued for a legally enforceable debt but were forcibly extracted under custodial duress within the locked chamber of a police official in conspiracy with Opposite Party No. 2

Prior to the NI Act complaint, the Petitioner had filed a private complaint (I.C.C. Case No. 25 of 2024) alleging extortion and coercion

An inquiry in that prior case under Section 225 of the BNSS resulted in an order dated 19.02.2025, where the Magistrate found a prima facie case of extortion against the accused persons

1. Whether the criminal proceedings under Section 138 of the NI Act should be quashed as an abuse of process when the underlying instruments were allegedly obtained through coercion and extortion

2. Whether the statutory presumption of a legally enforceable debt can be maintained when a coordinate court has already found prima facie evidence of the forcible extraction of the cheques

Section 138 of the Negotiable Instruments Act, 1881, which requires a cheque to be issued for the discharge of a "legally enforceable debt or other liability"

The court referenced Jugesh Sehgal v. Shamsher Singh Gogi regarding the cumulative ingredients necessary to constitute an offense under the Act

The court cited Bir Singh v. Mukesh Kumar, noting that while blank signed cheques carry a presumption under Section 139, such presumption is rebuttable by cogent evidence

High Court's inherent powers under Section 482 of the Cr.P.C. (Section 528 of the BNSS) to prevent the abuse of the process of law, as elucidated in Kapil Agarwal v. Sanjay Sharma

The Court observed that the NI Act prosecution appeared to be a malicious "counterblast" to the Petitioner’s earlier complaint of extortion

The Court emphasized that a coordinate Court, in the Petitioner's prior complaint, had already acknowledged prima facie substance in the allegations that the cheques were forcibly extracted within a police station

Consequently, the Court reasoned that the essential legal requirement of "free and voluntary consent" for the execution of a negotiable instrument was missing

It held that statutory presumptions cannot be mechanically applied to legitimize instruments procured through custodial intimidation, as doing so would allow the judicial process to be weaponized for harassment

The Court allowed the petition, quashed the impugned orders dated 23.12.2024 and 07.03.2025, and set aside the proceedings in I.C.C. Case No. 66 of 2024. Any interim orders were vacated