• Cancellation of sale deed - section 138 of NI act

A purchased property from B through registered sale deed and issued cheque for 5,00,000/- A came to know that the property is in dispute. A stopped payment to B. B filed 1. case u/s 138 of negotiable instruments act 2. for cancellation of sale deed 3.filed a complaint under sec 420 to the police station. Police has closed the complaint as false complaint. my question to the learned members is 
Q1. is the case u/s 138 of NI act maintainable ?
Q2. once suit for cancellation of sale deed is filed ,does liability to pay subsists ?
Q3. can the 2 suits be maintainable independently ?
Asked 1 month ago in Property Law from bangalore, Karnataka
Religion: Hindu

Case under section 138 NI is maintainable as cheque has been dishonoured in presentation and inspite of notice A has failed to make payment 


2) sale deed has not been set aside . Liability to pay subsists 


3) 2 cases can proceed simultaneously 

Ajay Sethi
Advocate, Mumbai
70894 Answers
4259 Consultations

5.0 on 5.0

1. Case u/s 138 is a private criminal complaint can can be filed independently along with the Civil Suit for Cancellation of Sale Deed.  In the given circumstances, Cheque Bounce case is not Maintainable in criminal court, PROVIDED you have not taken possession of the property.

2. Cancellation of Sale Deed, is a Civil case and can be filed independently alongwith the cheque bounce case u/s 138.  Payment for liability will subsist till payment OR till court orders to set aside /dismiss the civil case OR matter be settled amicably.

3. IF the property is in anyway under legal dispute /claim by anybody (with documentary evidence), THEN irrespective of the both the above points, the buyer is entitled to file Criminal proceedings for Cheating, Intimidation, Fraud, Breach of Trust etc....



Hemant Agarwal
Advocate, Mumbai
3387 Answers
19 Consultations

5.0 on 5.0

1. If sale deed is registered and payment in lieu of dame was payable 138 NI act is maintainable.

2. The defence can be taken, though still.the deed is not cancelled so liability is there to pay in lieu of property.

3.  Yes.

Shubham Jhajharia
Advocate, Ahmedabad
22222 Answers
88 Consultations

5.0 on 5.0

Dear Sir,

My answers are as follows:


Q1. is the case u/s 138 of NI act maintainable ?

Ans: The maintainability of 138 proceedings cannot be questioned in the Magistrate Court as there is no provision for discharge of accused. However one can challenge such proceedings before High Court and initially get a stay order and at the end such proceedings may be quashed.


Q2. once suit for cancellation of sale deed is filed ,does liability to pay subsists ?

Ans: Simply because a suit for cancellation of Sale Deed is filed it cannot be said that there is no liability which is subsisting.


Q3. can the 2 suits be maintainable independently ?

Ans: Two suits if filed can be clubbed together and under Section 10 of Civil Procedure Code the later suit may be stayed.

Kishan Dutt Kalaskar
Advocate, Bengaluru
4899 Answers
149 Consultations

5.0 on 5.0

1. B cannot file a case in the criminal court for cancellation of sale deed

2. the criminal court will only adjudicate on the offense u/s 138 of NIA

3. if B has also filed a civil suit for cancellation of sale deed, then the buyer can be said to owe no debt or liability towards the seller/drawee of cheque

4. on basis of the civil suit filed by B for cancellation of sale deed, you can apply to the magistrate court for dismissal of the complaint u/s 138 against you

5. the 138 case and civil suit for cancellation of sale deed will proceeds independently. But in the facts of the case, the mere filing of a suit for cancellation of sale deed, will take away the cause of action of B to pursue his 138 case against the buyer

Yusuf Rampurawala
Advocate, Mumbai
4819 Answers
29 Consultations

5.0 on 5.0

Since the property is in dispute and same is concealed by B, therefore agreement executed by playing fraud is voidable and any payment in respect of such contract is not legal debt.

But this will be matter of court to decide,  at present due to sale deed, amount is payable. You can agree for cancellation of sale deed and recovery of advance paid.

Than no payment payable and case u/s 138 will become infractuous. 

Yogendra Singh Rajawat
Advocate, Jaipur
15896 Answers
19 Consultations

4.6 on 5.0

1. If the sale  is not complete then the cheque was not drawn to dischrage a valid debt and hence the case under NI Act does not lie.

2. No as mere pendency of the suit is of not much help though the outcome would have.

3. Yes


Devajyoti Barman
Advocate, Kolkata
18424 Answers
261 Consultations

5.0 on 5.0

1. Since, A has given,  the said cheque for discharging his liability towards the purchasing property from B, hence the case u/s.138 of NI Act is maintainable,  and also due to the reason that the police has found the complaint of property dispute as false.

2. Yes, Till the judgement for cancellation of sale deed , the liability to pay subsist, mere the pendency of the suit for cancellation is not enough. 

3 .Yes

Mohammed Shahzad
Advocate, Delhi
1431 Answers
23 Consultations

5.0 on 5.0

1. Case is maintainable but B have to prove that the property is not disputed.

2. No 

3. Yes 

Mohit Kapoor
Advocate, Rohtak
5919 Answers
2 Consultations

5.0 on 5.0

1. Since there is no legally liable debt the case under section 138 NI act  may not be maintainable 

2. You are right, let the court decide and pass a judgment, you will come to know about the liability based on the prayer made by the plaintiff.

3. Where are two suits?

One is civil suit and another is a private criminal complaint, hence both can run parallel.


T Kalaiselvan
Advocate, Vellore
60781 Answers
782 Consultations

5.0 on 5.0

both cases are different. 138ni act and Cancellation of sale deed. 

138/A ni Act case is Maintainable. 

The seller/buyer cannot cancel the registry by a unilateral act and can only be done through the process of the court. Also non payment of consideration is not a reason to cancel the sale unless the deed. 

yes, 2 cases can be proceed 

Mohammed Mujeeb
Advocate, Hyderabad
13080 Answers
4 Consultations

4.5 on 5.0

Before registering the sale deed if A had stopped payment and not gone ahead with the registration, then the case is different. But in this case, A got the property registered through a sale deed, and then he came to know that there is a dispute over the same property and he stopped the payment on the cheque issued on the sale deed. This is illegal. B therefore can file a case U/s 138 of NI Act against A, also B can file a civil suit seeking cancellation of the sale deed which has transferred ownership from B to A. This is also correct and legal. 

Now after seeking cancellation of the sale deed, whether the cheque bounce case U/s 138 of NI Act is still maintainable, yes it is maintainable so long as the sale deed is not cancelled by a competent civil court, the NI case is still maintainable. 

Next, after filing suit for cancellation of sale deed, whether the liability to pay carries on?, It carries on upto the time the sale deed is not cancelled by a competent civil court, not thereafter.

Both the 138 NI Act and civil suit can be prosecuted independently. But once the civil suit is decided, the 138 case will have to be withdrawn by the complainant, i.e., B and not before that. The liability to pay ceases once the sale deed is cancelled, and therefore the 138 case also becomes infructous. 

Kiran N. Murthy
Advocate, Bangalore
1240 Answers
171 Consultations

5.0 on 5.0

No it's not maintainable you can go for quashing of the said complaint before HC

Prashant Nayak
Advocate, Mumbai
15888 Answers
28 Consultations

4.6 on 5.0

1. Unless the competent civil court has cancelled the sale deed executed in favour of A on the ground that the sale was done in a fraudulent manner by B, there is a legally enforceable debt against A in favour of B. In a proceeding under Section 138 of NI Act the criminal court cannot adjudicate the question of validity of sale deed, for this is the realm of the civil court alone.

2. It is not clear from your query as to who between A and B filed the suit for cancellation of sale deed.

3. The complaint under Section 138 NI Act has to proceed on merits irrespective of the filing of suit for cancellation of sale deed.

4. If the suit for cancellation of sale deed has been filed by the accused (buyer) in 138 NI Act case then he should file an application before the magistrate to not to proceed further unless the suit is firstly decided. If this application is disallowed then he should immediately go to the High Court.

Ashish Davessar
Advocate, Jaipur
27287 Answers
805 Consultations

5.0 on 5.0

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