NI Section 138 invoked in partnership
Querist :
Anonymous
(Querist) 22 February 2010
This query is : Resolved
Mr. X is a property dealer with many investments around the country. Mr. Y is an Indian businessman based abroad but interested in making an investment in India. Mr. X proposes a hotel investment to Mr. Y. Mr. Y is interested and makes multiple cheque payments addressed in the name of Mr. X to be invested towards the hotel project. After a few months X and Y register a partnership firm for the project, and Y pays some more cheques in the name of the partnership towards funds for the project.
In the meantime Mr. X is making another investment and asks Y if he would be interested in the project. Since Y was leaving India the next day, he pays a cheque for investment towards this other project to X. He tells X that there is no money in the account and he will advise X on when to present the cheque. Later in the evening, Y decides not to be part of the new project since it is not part of their partneship. Y calls X informing him, and asking him to destroy the cheque. X assures Y that the cheque is destroyed.
X and Y continue their relationship on their partnership project and Y pays another cheque to X. When X asks for more funds, Y arranges an investor to the project. The investor asks to see the project papers and books of the partnership before making the investment. At this point X refuses to show any documents. Therefore the investor that Y brought does not commit any money. This upsets Y who feels X is not investing the money in the project correctly. He also refuses to contribute any further money to the project.
About 4-5 later, without informing Y, X submits the cheque that he should have destroyed. The cheque bounces due to lack of funds. X then files a case against Y under NI section 138 and thier is a summon recived from court.
How should Y approach this case? He is still a director in the partnership firm with X but thier relations have now soured.
Raj Kumar Makkad
(Expert) 22 February 2010
As there is no legally enforceable debt of X over Y so Y should come to the court with entire facts. As the complaint under section 138 is bailable so bail shall be granted immediately and then he can approach HC to quash the complaint.
