Cheque given as ‘Security’ is covered within the ambit of Section 138 of N.I Act #indianlaws

The Supreme Court in a judgment delivered in September has held that the dishonour of a post-dated cheque given for repayment of loan installment which is also described as “security” in the loan agreement is covered by Section 138 of the Negotiable Instruments Act. Contention of the Appellant in support of his case was 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. The Court negatived the contention and held that dishonour of cheque in the present case is for discharge of existing liability and is therefore covered by Section 138 of the Act.

Sampelly Satyanarayana Rao vs. Indian Renewable Energy Development Agency Limited  SLP (Crl.) No. 5410 of 2014