AI Overview...
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Security Cheque - Cheques issued as security are often involved in cases under Section 138 of the Negotiable Instruments Act, 1881, where dishonor leads to criminal proceedings. Several cases highlight that the legal presumption under Section 139 can be rebutted if it is proven that the cheque was given solely as security and not for the discharge of a debt or liability Manoj Kumar Saini VS Sunil Gupta - Punjab and Haryana.
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Rebuttal of Presumption - Courts have held that the presumption of liability under Section 139 stands rebutted when the accused proves that the cheque was only a security instrument and not issued for a specific debt. Evidence such as the nature of the transaction and the purpose of issuing the cheque is crucial. For instance, if the cheque was given as a collateral security, Section 138 may not apply ASHOK LEYLAND FINANCE LTD. VS BRIJESH MOURYA - Consumer, R. Jayanthi VS K. Yasodha - Madras.
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Dishonor of Security Cheques - When security cheques are dishonored, the question arises whether Section 138 applies. Courts have clarified that if the cheque was only for security and not issued in discharge of a debt, the dishonor does not automatically attract Section 138. The burden shifts to proving that the cheque was intended as a security instrument R. Jayanthi VS K. Yasodha - Madras.
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Legal Cases and Precedents:
- In cases like IND_HC_KLHC010353982010, the dishonor of a security cheque led to criminal conviction, but the court examined the context of issuance.
- In INDKER00000087244, the court dismissed the Section 138 complaint, reaffirming that a security cheque's dishonor does not necessarily constitute an offense unless it was issued in relation to a specific debt.
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Several cases emphasize that the mere issuance of a cheque as security, without evidence of a debt or liability, weakens the case under Section 138 V. Jayalakshmi VS Dhanashekar K - Karnataka, Sathyanarayana Jetty VS Shivalingaiah - Karnataka.
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Insights:
- The primary factor is the purpose behind issuing the cheque—whether as security or as a payment instrument.
- Evidence such as transaction records, correspondence, or agreements is vital to establish the nature of the cheque.
- Courts tend to scrutinize the circumstances to determine if the dishonored cheque was issued in the course of a debt or purely as security, affecting the applicability of Section 138.
Conclusion: A dishonored security cheque does not automatically lead to criminal liability under Section 138 of the NI Act. The onus is on the complainant to prove that the cheque was issued in connection with a debt or liability, not merely as security. If the cheque was given solely as collateral, and this is established, the offense under Section 138 may not be made out Manoj Kumar Saini VS Sunil Gupta - Punjab and Haryana, ASHOK LEYLAND FINANCE LTD. VS BRIJESH MOURYA - Consumer.
References: - Negotiable Instruments Act, 1881, Sections 138 and 139. - Judicial cases analyzing security cheques and their dishonor (e.g., IND_HC_KLHC010353982010, INDKER00000087244).
Search Results for "Security Cheque is Dishonored"
2016 0 Supreme(P&H) 1059 • India - Punjab and Haryana
INDERJIT SINGH
(A) Negotiable Instruments Act, 1881, S.138--Dishonor of Cheque--Security Cheques--Acquittal--Dishonored cheque was presented in ... that these cheques have been given as security cheques--Presumption u/s 139 stands rebutted--Accused acquitted. ... Para 7) ... (B) Negotiable Instruments Act, 1881, S.138--Dishonor of Cheque ... From the statement of account Ex.D2, it has been proved that the cheque Nos.338706, 3387....
• India - Consumer
VEENA MISRA, R.S.AWASTHI
Ratio Decidendi: The court found that the complainant could not be termed as a defaulter unless the security cheque was dishonored ... , and the O.P. did not provide evidence of the dishonored cheque. ... Neither the dishonoured cheque nor any letter from the bank has been produced. In our opinion, the complainant could not have been termed as defaulter unless the cheque obtained as security was dishonoured. ... A....
2016 0 Supreme(Mad) 422 • India - Madras
R.SUBBIAH
Whether the cheque was given only as collateral security. 2. ... The cheque was dishonored, and the respondent filed a complaint under Section 138 of the Negotiable Instruments Act. ... as collateral security. ... ... (1) The cheque was given only as a collateral security; therefore, Section 138 of the Negotiable Instruments Act will not be attracted. ... 20.03.2013; when it got dishonoured, again on the request of the petitioner, the cheq....
2022 0 Supreme(Kar) 852 • India - Karnataka
H. P. SANDESH
The cheque was dishonored, and despite legal notice, the amount was not repaid. ... The respondent/complainant lent Rs.5,00,000/- to the petitioner/accused, who issued a post-dated cheque as security. ... Issues: Dispute over the issuance and dishonor of the cheque, defense regarding chit transaction, handwriting on the cheque ... Believing the words, the complainant paid an amount of Rs.5,00,000/- and the accused had issued the post dated cheque as securit....
2022 0 Supreme(Kar) 895 • India - Karnataka
H. P. SANDESH
The cheque was dishonored, and the complainant filed a complaint under Section 138 of the N.I. Act. ... Fact of the Case: The petitioner borrowed Rs. 2 lakh from the complainant and issued a post-dated cheque as security ... Finding of the Court: The court found that the petitioner's defense, claiming the cheque was issued as security for ... The counsel would submit that the very contention of the petitioner is that the cheque was given as security#HL_E....
2024 0 Supreme(Chh) 47 • India - Chhattisgarh
DEEPAK KUMAR TIWARI
The cheque was dishonored, leading to a legal dispute. ... as security. ... Issues: The issues revolved around the validity of the loan transaction, the dishonored cheque, and the complainant's ... Considering the aforesaid evidence, it appears that the complainant is in habit of obtaining cheque as a security purpose and loan has been advanced in exorbitant interest rate to defeat the object of the Chhattisgarh Money Lenders Act, 1934. ... When he failed to return t....
2016 Supreme(Online)(KER) 29730 • India - High Court of Kerala
ANTONY DOMINIC, A.HARIPRASAD, JJ
The cheque was dishonored, leading to a criminal case where the appellant was convicted. ... Fact of the Case: The appellant borrowed `4,00,000 from the respondent on 29.07.2002, issuing a cheque as security. ... Instruments - Borrowing and Repayment - NI Act Section 138, Code of Civil Procedure Section 34 - The court analyzed the dishonor of a cheque ... On the same day, the appellant issued a cheque drawn on Union Bank of India in discharge of the liability, as a security....
2025 Supreme(Online)(Guj) 4158 • India - IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
MS. S.V. PINTO, J
3-6) ... ... Facts of the case: ... The complainant had loaned an amount to the accused, who provided a cheque ... The applicant deposited the said cheque in his account with Mehsana Urban Bank, Chandkheda Branch, but the cheque returned unpaid with the endorsement “Funds Insufficient”. ... When the amount was demanded, the respondent no.1 issued cheque no.471501 dated 17.05.2016 for the amount of Rs.7,00,000/- from his account with State Bank of India, Chandkheda Branch.
2017 Supreme(Online)(KER) 8103 • India - High Court of Kerala
SUNIL THOMAS, J
The cheque was dishonored, leading to a complaint under Section 138 of the NI Act, which was dismissed by the trial court. ... Cheque - Negotiable Instruments Act - Section 138 - The court reaffirmed that a cheque issued as security for a transaction does ... Fact of the Case: The complainant alleged that the accused borrowed Rs. 4 Lakhs and gave a cheque as security. ... An advance was paid by accused and a signed cheque for Rs. 4 Lakhs was given ....
2025 Supreme(Online)(KAR) 2763 • India - IN THE HIGH COURT OF KARNATAKA AT BENGALURU
MRS JUSTICE M G UMA, J
The cheque was dishonored, leading to the complaint under Section 138 of the NI Act. ... (A) Negotiable Instruments Act - Section 138 - Conviction for dishonor of cheque - Accused convicted for issuing a cheque as security ... as security. ... As security, the accused had issued cheque bearing No.667457 dated 12.09.2016. As the accused has not repaid the loan amount, the complainant presented the cheque issued by the accused, but th....
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