News

November 19, 2019

Dishonor of cheque issued as a guarantee is not punishable under Sec 138 of the NI Act


[ by Kavita Krishnan ]

Cheque

Jutice K.R. Shriram of the Bombay High Court ruled that if a cheque has not been issued for the discharge of any debt or other liability, and only as a guarantee, Section 138 of the Negotiable Instruments Act, 1881 cannot be invoked.

A complaint had been initiated against the accused who had given a cheque for Rs. 2 lakhs which was given as a security cheque for purchase of grapes from the complainant. The accused had however paid the entire amount in consideration for the grapes in installments. The security cheque of Rs. 2 lakhs was returned dishonored.

Though in the examination in chief and in the complaint, the complainant states the cheque was given for the grapes that he sold to the accused, in the cross examination, the complainant agreed that the cheque issued was as guarantee.

The Bombay High Court held that it is settled law that the important ingredient for the offence punishable under Section 138 is that cheque must have been issued for the discharge in whole or in part of any debt or other liability. If the cheque is not issued for the discharge of any debt or other liability, Section 138 of the Negotiable Instruments Act, 1881 cannot be invoked.

Full View Judgement


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