Debt and Cheque Dishonour in Context of S.138 of Negotiable Instruments Act, 1881 : Legal Parameters Explained

Debt and Cheque Dishonour in Context of S.138 of Negotiable Instruments Act, 1881 : Legal Parameters Explained

The case of Credential Leasing and Credits Ltd v. Shruti Investments [2015] GCtR 6433 (Delhi) has explained the law around S.138 of Negotiable Instruments Act, 1881. It was held that the scope of Section 138 NI Act, 1881 would cover cases where the ascertained and crystallised debt or other liability exists on the date that the cheque is presented, and not only to case where the debt or other liability exists on the date on which it was delivered to the seller as a post-dated cheque, or as a current cheque with credit period. 

The liability, though, should be in relation to the transaction in respect whereof the cheque is given, and cannot relate to some other independent liability. If, on the date that the cheque is presented, the ascertained and crystallised debt or other liability relatable to the dishonoured cheque exists, the dishonor of the cheque would invite action under Section 138 NI Act. There could be situations where, for example, an issue may be raised with regard to the quality, quantity, deficiency, specifications, etc. of the goods/services supplied, or accounting. 

The onus to raise a probable defence would lie on the accused, as the law raises a presumption in favour of the holder of the cheque that the dishonoured cheque was issued in respect of a debt or other liability.  The said onus does not cast as stringent an obligation on the accused, as it casts on the complainant, who has to prove beyond reasonable doubt the guilt of the accused.