Legally Enforceable Debt not proved.

Payment in advance - Debt not proved

There was sufficiency of material on record to justify that the cheques were issued as advance payment for purchase of goods, and one of the terms and conditions of the contract was that the entire payment would be made to the supplier in advance. However, much within the time, the supplier-complainant received the letter from the purchasers cancelling the purchase orders and requested the supplier to return both the cheques. The supplier pursuant thereto, sent response asking the purchasers as to when the supplier could collect the payment, and only thereafter, the suppler sent a legal notice to the purchasers and filed a complaint under Section 138 of the Act. In the given circumstances, it was observed by this Court that the complainant had failed even prima-facie that there was a legally enforceable debt or other liability subsisting on the date of drawal of the cheque as contemplated under Section 138 of the Act.

Indus Airways Private Limited and Others Vs. Magnum Aviation Private Limited and Another, (2014) 12 SCC 539