G. P. Mittal, J.:—

1. These two Petitions raise a very interesting question for consideration, viz. whether a cheque issued by the Client (the borrower) in a Factoring Agreement is towards liability or security.

2. The facts of the case are not very much in dispute. The Petitioner Company (M/s. Krish International Pvt. Ltd.) approached Respondent No.2 IFCI Factors Limited to grant it domestic factoring facilities.

Respondent No.2 by an Agreement dated 18.02.2010 allowed the factoring facility to the maximum pre-payment amount of Rs.5 crores. M/s. Koutons Retails India Limited (Koutons) was approved as debtor in terms of Clause 4 (i) of the Agreement. The approved terms of trade was 90 days or less from invoice date as was to be approved by Respondent No.2 (the factor). A copy of the Factoring Agreement dated 18.02.2010 has been placed on the paper book by the Petitioners as well as by Respondent No.2.

3. The Petitioner was granted pre-payment (after deducting the commission) to the extent of Rs. 3 crores. The cheques for this sum of Rs. 3 crores issued by the debtors (Koutons) were dishonoured. The Respondent No.2 presented the cheques bearing Nos.541554, 541555, 541556, 5415