A cheque issued as security for a debt or liability is subject to Section 138 of the Negotiable Instruments Act, and the specific language of the statute clarifies the intent of the legislature in this regard.

Reversing the conviction ordered by the Judicial Magistrate of the First Class-II, Kochi, learned II Additional Sessions Judge, Ernakulam acquitted the 1st respondent. Therefore the appellant/complainant has come up with this appeal against the acquittal.

2. The offence alleged are that punishable under Sections 138 of the Negotiable Instruments Act and under Section 420 of the IPC. The subject matter was Ext.P2 cheque dated 5-5-1993 for an amount of Rs.20,000/- issued by the accused/Ist respondent. When the cheque was presented to the bank, it bounced. So the offence as alleged has been committed by the 1st respondent. Reversal of the conviction is therefore bad; the appellant submits.

3. The finding of the learned Sessions Judge that Ext.P2 cheque was issued as a security and therefore does not attract Section 138, now cannot be accepted in the light of the decision of the Apex Court in I.C.D.S. Ltd. v. Beena Shabeer (2002 (3) KLT 218). Even a cheque issued by the guarantor to ensure repayment of loan by the principal debtor was found in that case, supported by due consideration and issued to discharge legally enforceable liability to attract the provision in Section 138. Moreover, there was Ext.P1 agreement between the parties with regard to the sale of the bus. The cheque in question was issued with the stipulation in the said agreement that the cheque was issued as a security for the payment of the amount assured in Ext.P1 agreement. It could have been encashed if the assured payment was not made after six months from the date of Ext.P1. Ext.P1 was dated 27-10-1992. Ext.P2 cheque was dated 5-5-93, after six months from Ext.P1. When presented, it was not cashed. Therefore, this was a cheque for an amount towards the liability incurred by the Ist respondent/accused. So on merits also the learned II Additional Sessions Judge committed error to reverse the conviction, the counsel submits.

4. The submission made by the counsel for the Ist respondent is that the amount has already been paid to the counsel appearing for the appellant in the court below. In another proceedings, receipt has been produced before the court below. Therefore there was no liability. Moreover, Ext.P1 is earlier than Ext.P2 cheque which was issued for future payment. Therefore Ext.P2 which was made mention of in Ext.P1 did not represent any liability at all. So, there is no reason to reverse the acquittal, the counsel for the respondent submits.

5. The case relating to I.C.D.S. is one in respect of a cheque issued by a guarantor ensuring payment of a debt incurred by principal debtor in case of his default. Considering the word "any debt or liability" appearing in Section 138, The Supreme Court held as follows :

"The language, however, has been rather specific as regards the intent of the legislature, the commencement of the section stands with the words "Where any cheque". The above noted three words are of extreme significance, in particular, by reason of the user of the word "any" the first three words suggest that in fact for whatever reason if a cheque is drawn on an account maintained by him with a banker in favour of an other person for the discharge of any of debt or other liability, the highlighted words if read with the first three words at the commencement of section 138, leave no manner of doubt that for whatever reason it may be, the liability under this provision cannot be avoided in the event the same stands returned by the banker unpaid. The legislature has been careful enough to record not only discharge in whole or in part of any debt but the same includes other liability as well. This aspect of the matter has not been appreciated by the High Court, neither been dealt with or even referred to in the impugned judgment".

It has also been made clear that :

"The language of the Statute depicts the intent of law-makers to the effect that whatever there is a default on the part of one in favour of another and in the event a cheque is