Liability for cheque dishonour in case of blank cheque or Cheque given as Security and for offence under S.138 of Negotiable Instruments Act, 1881

Liability for cheque dishonour in case of blank cheque and for offence under S.138 of Negotiable Instruments Act, 1881 was explained in Signaps v. Bumpy Udyog [2008] GCtR 6452 (Delhi). In this case cheque was issued on 14/12/99 and cheque was returned on 21/12/99. Accused had argued that cheque was given as security. 

Liability for Cheque Dishonour under Negotiable Instruments Act, 1881

Liability for Cheque Dishonour :  The principles laid down in Anu Products Ltd v. Raj Agro Tech [2015] GCtR 6452 (Delhi) that the scope of Section 138 of Negotiable Instruments 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. 

S.138, NI Act, 1881 : Supreme Court Explains the Law

 S.138, NI Act, 1881 : Supreme Court Explains the Law

An important Judgment was passed on 7 April 2014.

In Indus Airways Private Limited v. Magnum Aviation Private Limited [2014] GCtR 2931 (SC), the issue was whether dishonour of post-dated cheques which were issued by the purchasers towards ‘advance payment’ would be covered by Section 138 of the Negotiable Instruments Act if the purchase order was cancelled subsequently. It was held that Section 138 would only be applicable where there is a legally enforceable debt subsisting on the date when the cheque is drawn.

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Written by 

Vishal

Delhi

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