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Payment made in pursuance of an agreement for sale is a legally enforceable debt under NI Act

In CRIMINAL APPEAL NO. 483 OF 2019, RIPUDAMAN SINGH vs BALKRISHNA, cheques issued for part payment of the consideration settled as per agreement for sale of certain agricultural land were returned by bank due to insufficiency of funds.

The trial court framed the charges but the High Court quashed the complain stating that the cheques were issued for the payment of balance consideration and therefore no existence of  enforceable debt.

On appeal the Supreme Court disagreeing with the High Court decided that admittedly, the cheques were issued under and in pursuance of the agreement to sell. Though it is well settled that an agreement to sell does not create any interest in immoveable property, it nonetheless constitutes a legally encforceable contract between the parties to it. A payment which is made in pursuance of such an agreement is hence a payment made in pursuance of a duly enforceable debt or liablity for the purposes of Section 138.

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