In a significant ruling, the Rajasthan High Court has affirmed that for prosecution under Section 138 of the Negotiable Instruments Act, 1881, the dishonor of a cheque against a valid loan is sufficient, regardless of whether the drawee possesses a money lending license. The judgment was delivered by Justice Arun Monga in the case of Ishak Mohammad vs State of Rajasthan (S.B. Criminal Misc(Pet.) No. 3691/2024).
The case originated from a complaint filed under Section 138 of the Negotiable Instruments Act against Ishak Mohammad, the petitioner. In response, Mohammad filed an application under Section 91 of the Criminal Procedure Code, seeking a direction for the complainant to produce his Income Tax Return and money lending license.
The Additional Chief Judicial Magistrate, Rawatbhata, Chittorgarh, dismissed this application on May 11, 2023. Aggrieved by this decision, Mohammad filed a revision petition before the Additional Sessions Judge, Begu, District Chittorgarh, which was also dismissed on October 9, 2023. Subsequently, Mohammad approached the High Court challenging these orders.
Justice Monga, after reviewing the lower courts’ orders, found them to be based on valid reasoning. The court noted that the petitioner had failed to file an affidavit in support of his application under Section 91 Cr.P.C. and did not demonstrate how the requested documents were necessary for the judicial disposal of the case.
In a crucial observation, the court stated, “Whether the complainant had a license to lend on interest is not relevant in the case of cheque dishonor. In the case of cheque dishonor, what is to be seen is if the cheque was issued in relation to a valid loan and was dishonored without payment, even after giving notice”.
The High Court emphasized that in cases of cheque dishonor under Section 138 of the NI Act, the court’s primary concern is to determine whether an offense has been committed by the accused. If such an offense is established, the consequences would follow, regardless of the complainant’s possession of a money lending license.
Justice Monga dismissed the petition, terming the petitioner’s application before the trial court as “merely a dilatory tactic to delay the proceedings”. The court found no irregularity in the facts or law of the impugned orders and deemed no interference necessary.
This judgment clarifies the scope of prosecution under Section 138 of the NI Act, emphasizing that the validity of the underlying loan transaction is paramount, rather than the lender’s licensing status. It serves as a significant precedent in cases involving cheque dishonor and reinforces the Act’s primary objective of enhancing the credibility of cheques in commercial transactions.
The petitioner was represented by Mr. Mohit Singh Choudhary, while Mr. Gaurav Singh appeared as the Public Prosecutor for the respondents.
This ruling by the Rajasthan High Court provides valuable guidance to lower courts and practitioners dealing with cases under the Negotiable Instruments Act, particularly in matters related to cheque dishonor and the relevance of money lending licenses in such prosecutions.
