Unaccounted money can not be recovered u/s138 of ni act

The alleged liability to repay an unaccounted cash amount admittedly not disclosed in the Income Tax Return cannot be a legally recoverable liability u/s 138 NI Act

The Apex Court has held that the laws relating to the said Act are required to be interpreted in the light of the object intended to be achieved by it despite there being deviation from general law. The Apex Court expressed that the object of section 138 of the said Act was to ensure that commercial and mercantile activities are conducted in smooth and healthy manner. The explanation to section 138 of the said Act clearly provides that a debt or other liability

referred to in section means a legally enforceable debt or other liability. The alleged liability to repay an unaccounted cash amount admittedly not disclosed in the Income Tax Return cannot be a legally recoverable liability. If such liability is held to be a legally recoverable debt, it will render the explanation to section 138 of the said Act nugatory. It will defeat the very object of section 138 of the Act of ensuring that the commercial and mercantile activities are conducted in a healthy manner. The provision of section 138 cannot be resorted to for recovery of an unaccounted amount. A cheque issued in discharge of alleged liability of repaying "unaccounted" cash amount cannot be said to be a cheque issued in discharge of a legally enforceable debt or liability within the meaning of explanation of section 138 of the said Act. Such an effort to misuse the provision of section 138 of the said Act has to be discouraged.

Bombay High Court

Sanjay Mishra vs Ms.Kanishka Kapoor @ Nikki on 24 February, 2009

https://www.lawweb.in/2013/03/alleged-liability-to-repay-unaccounted.html