Cheque bounce case – Loan account – (i) Where the borrower agrees to repay the loan within a specified timeline and issues a cheque for security but defaults in repaying the loan within the timeline, the cheque matures for presentation. When the cheque is sought to be encashed by the debtor and is dishonoured, Section 138 of the Act will be attracted; (ii) However, the cardinal rule when a cheque is issued for security is that between the date on which the cheque is drawn to the date on which the cheque matures, the loan could be repaid through any other mode. It is only where the loan is not repaid through any other mode within the due date that the cheque would mature for presentation; and (iii) If the loan has been discharged before the due date or if there is an ‘altered situation’, then the cheque shall not be presented for encashment.

(SC) Decided on: 11.10.2022

Cheque bounce case – Post-dated cheque – Though a post-dated cheque might be drawn to represent a legally enforceable debt at the time of its drawing, for the offence to be attracted, the cheque must represent a legally enforceable debt at the time of encashment -- If there has been a material change in the circumstance such that the sum in the cheque does not represent a legally enforceable debt at the time of maturity or encashment, then the offence u/s 138 is not made out.

(SC) Decided on: 11.10.2022

Part payment – Cheque cannot be presented for encashment without recording the part payment -- If the unendorsed cheque is dishonoured on presentation, the offence u/s 138 would not be attracted since the cheque does not represent a legally enforceable debt at the time of encashment.

(SC) Decided on: 11.10.2022

Part payment – (i) For the commission of an offence under Section 138, the cheque that is dishonoured must represent a legally enforceable debt on the date of maturity or presentation; (ii) If the drawer of the cheque pays a part or whole of the sum between the period when the cheque is drawn and when it is encashed upon maturity, then the legally enforceable debt on the date of maturity would not be the sum represented on the cheque; (iii) When a part or whole of the sum represented on the cheque is paid by the drawer of the cheque, it must be endorsed on the cheque as prescribed in Section 56 of the Act. The cheque endorsed with the payment made may be used to negotiate the balance, if any -- If the cheque that is endorsed is dishonoured when it is sought to be encashed upon maturity, then the offence under Section 138 will stand attracted.

(SC) Decided on: 11.10.2022

Quashing of Complaint u/s 138 of NI Act – High Court quashed the complaint -- Dispute between the parties regarding the quality of the material supplied – Respondent/ accused made a complaint in writing of the defective material and then stopped the payment – Respondent has already filed a Civil Suit for damages – Held, the issues between the parties can be effectively resolved through Civil Suit only – Petitioner shall be at liberty either to file counter claim or a separate suit in accordance with law – Observations made by the High Court in its impugned order shall have no bearing on the outcome of the Civil Suit.

(SC) Decided on: 22.07.2022

Loan agreement – Complaint u/s 138 of N.I. Act, 1881 -- A cheque cannot be considered as a worthless piece of paper under every circumstance -- If in a transaction, a loan is advanced, the cheque which is issued as security would mature for presentation and the drawee of the cheque would be entitled to present the same -- On such presentation, if the same is dishonoured, the consequences contemplated u/s 138 and the other provisions of N.I. Act would flow.

(SC) Decided on: 28.10.2021

Loan transaction – Civil remedy -- Complaint u/s 138 of N.I. Act, 1881 -- Holder of the cheque/drawee would have the option of initiating the civil proceedings for recovery or the criminal proceedings for punishment in the fact situation, but in any event, it is not for the drawer of the cheque to dictate terms with regard to the nature of litigation.

(SC) Decided on: 28.10.2021

Offence u/s 138 of NI Act -- Cheques undoubtedly represent the outstanding liability -- Dishonour of cheque issued for discharge of later liability is clearly covered by the statute in question.

(SC) Decided on: 19.09.2016

Offence u/s 138 of NI Act -- Crucial question to determine applicability of Section 138 of the Act is whether the cheque represents discharge of existing enforceable debt or liability or whether it represents advance payment without there being subsisting debt or liability.

(SC) Decided on: 19.09.2016

Though the word “security” is used in the agreement, the said expression refers to the cheques being towards repayment of installments -- Repayment becomes due under the agreement, the moment the loan is advanced and the installment falls due -- Disbursement of loan was prior to the date of the cheques -- 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.

(SC) Decided on: 19.09.2016

Promissory note executed contained an unequivocal acknowledgment of not only the debt/liability but promised to liquidate the same within one month with interest at the bank rate -- Five cheques handed over were to be returned but only upon payment of the amount in question -- Such being the fact situation, it cannot be said that the cheques had nothing to do with any debt or other liability -- In case the amount was not paid within the period stipulated, the cheques were liable to be presented for otherwise there was no logic or reason for their having been issued and handed over in the first instance and delivery of any such cheques would be meaningless and futile if not absurd – High Court fell in error in upsetting the conviction recorded by the Courts below – Conviction order restored.

(SC) Decided on: 28.01.2016