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LVI Addl. City Civil & Sessions Judge, Bengaluru: In an appeal against conviction under Section 138, Negotiable Instruments Act (NI), 1881, arising from the dishonour of a 5,00,000 cheque issued under an employment bond, the Single Judge Bench of I.P. Naik, J., set aside the conviction and acquitted the accused. The Court held that the cheque had been obtained at the time of joining as a security towards the service bond and not in discharge of an existing debt. Emphasising the principles under Sections 73 and 74, Contract Act (ICA), 1872, the Court observed that a claim for liquidated damages must be founded on actual and reasonable loss. Since the employer failed to establish any such loss, the stipulated bond amount could not be treated as a legally enforceable liability, rendering the prosecution under Section 138, NI Act unsustainable.
In the instant case the complainant company appointed a trainee employee and upon appointment he executed non-disclosure agreement and service agreement in favour of complainant company. Accused was to undergo a two-year training period on a stipend of 15,000 per month and undertook to pay 5,00,000 if he violated the service agreement. After working for about six months, he left the company before completing the bond period. Treating this as a breach of the service...
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