DISHONOUR OF POST-DATED CHEQUE, SEC. 138 OF NEGOTIABLE INSTRUMENTS ACT?
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The Apex Court on 19.09.2016 pronounced a landmark judgement on dishonour of post-dated cheques stating that Dishonour of post-dated cheque being for discharge of existing liability is covered by Section 138 of the Negotiable Instruments Act, 1881.
Brief facts of the caseThe appellant gave 18 post-dated cheques of the value of about Rs.10.3 crores by way of security to a loan agreement with the respondent. The cheques carried different dates depending on the dates when the installments were due and upon dishonour thereof, complaints were filed by the respondent in the court of the concerned Magistrate at New Delhi. Upon the Delhi High Court not quashing these complaints the appellant approached the Hon’ble Apex Court.
Contention of the appellant is that the cheques were given by way of security as mentioned in the agreement and that on the date the cheques were issued, no debt or liability was due. Thus, dishonour of post-dated cheques given by way of security did not fall under Section 138 of the NI Act, 81.
However, on the basis of several case laws the Supreme Court observed that “once the loan was disbursed and installments have fallen due on the date of the cheque as per the agreement, dishonour of such cheques would fall under Section 138 of the Act. The cheques undoubtedly represent the outstanding liability.”
The Apex Court ruled that “Dishonour of cheque in the present case being for discharge of existing liability is covered by Section 138 of the Act, as rightly held by the High Court.”
Case Details:
Bench of Dipak Misra and A.K. Goel, JJ
Criminal Appeal No. 867 of 2016 (Arising out of S.L.P. (Crl) No. 5410 of 2014)
Judgement Pronounced on September 19, 2016
STATUTORY PROVISION
“Sec. 138. Dishonour of cheque for insufficiency, etc., of funds in the account. -
Where any cheque drawn by a person on an account maintained by him with a banker for
payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provisions of this Act, be punished with imprisonment for a term which may be extended to two years, or with fine which may extend to twice the amount of the cheque, or with both:
Provided that nothing contained in this section shall apply unless –
(a) the cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier;
(b) the payee or the holder in due course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving a notice in writing, to the drawer of the cheque, within thirty days of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and
(c) the drawer of such cheque fails to make the payment of the said amount of money to the payee or, as the case may be, to the holder in due course of the cheque, within fifteen days of the receipt of the said notice.
Explanation. - For the purposes of this section, "debt or other liability" means a legally enforceable debt or other liability.”
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