{"id":261375,"date":"2022-02-09T14:00:53","date_gmt":"2022-02-09T08:30:53","guid":{"rendered":"https:\/\/www.scconline.com\/blog\/?p=261375"},"modified":"2022-02-18T10:05:07","modified_gmt":"2022-02-18T04:35:07","slug":"law-on-security-cheques","status":"publish","type":"post","link":"https:\/\/www.scconline.com\/blog\/post\/2022\/02\/09\/law-on-security-cheques\/","title":{"rendered":"Law on Cheque Dishonour | Merely because cheques in question are security cheques, would that save accused from clutches of law under S. 138 NI Act, in case of admitting taking loan against cheques? Court answers"},"content":{"rendered":"

Rohini Court, North-West, Delhi: <\/strong>Ritika Kansal, MM(NI) reiterated the settled position of law that,<\/p>\n

\n

\u201c\u2026an accused has to prove his defence by preponderance of probabilities, but a defence would be considered probable only if it appeals to the Court as probable and reasonable keeping in mind the natural course of conduct of a prudent human being of reasonable intelligence.\u201d<\/span><\/p>\n<\/blockquote>\n

Present complaint was filed against the accused under Section 138 of the Negotiable Instruments Act, 1881 (NI Act).<\/p>\n

Complainant on account of good friendly relations advanced a loan of Rs 80,000 to the accused as the latter was in dire need of the money for her parlour with a promise by the latter to repay the same within 6 months.<\/p>\n

It was alleged by the complainant that after much insistence in the month of August 2020, the accused sought some time \u201cdue to financial crisis\u201d and \u201clockdown\u201d but thereafter issued two cheques each of Rs 40,000 in the complainant\u2019s favour which were dishonoured due to insufficiency of the funds in her bank account, leading to the complainant issuing a legal demand notice and eventually the present complaint.<\/p>\n

Analysis, Law and Discussion<\/span><\/h4>\n

High Court observed the following significant points:<\/p>\n

(a) Initially, it is upon the complainant to prove foundational facts.<\/p>\n

(b) Once foundational facts are proved, it is mandatory upon the court to raise presumption under Section 118 r\/w Section 139 of NI Act i.e., cheque has been issued\/drawn for consideration by the accused to discharge a debt or a liability in favour of the holder of cheque. In other words, it shall be presumed that the accused\/drawer of the cheques owes any legal liability or debt to the holder of the cheque\/complainant.<\/p>\n

(c) Accused can rebut the presumption.<\/p>\n

(d) The burden of proof upon accused is not to prove his defence beyond all reasonable doubts but raise a probable defence<\/p>\n

(e) Accused needn’t examine himself to prove his defence. He can do so with help of material already on record i.e. by cross-examining the complainant and\/or his witnesses.<\/p>\n

(f) Though, rebuttal does not have to be conclusively established, nevertheless, the evidence must be such that the court either believes the defence to exist or consider its existence to be reasonably probable, the standard of reasonability being that of the prudent man.<\/p>\n

In the present matter, the complainant had established by virtue of Sections 118(a) and 139 NI Act, that a presumption arises in his favour and against the accused.<\/p>\n

\n

While adjudging whether in a case the presumption of consideration has been rebutted, it becomes important to underscore that a mere denial of liability or vague defence of blank cheque as security, cannot be taken at the mere ipse dixit of the accused.\u00a0<\/span><\/p>\n<\/blockquote>\n

In the instant case, the whole defence of the accused was based upon the existence of a document marked as “A” and \u201cB\u201d. She had deposed that the same had been signed by the complainant in her presence. It was on the basis of said document, that the accused claimed that she has made payment in monthly instalments. Thus, clearly the initial burden to prove the alleged factum of issuance of the said documents lied upon the accused.<\/p>\n

Cheques Issued as Security cheques<\/span><\/strong><\/h4>\n

The question of maintainability of complainant under Section 138 in case of security cheque was examined by Delhi High Cout in judgement of Suresh Chandra Goyal v. Amit Singhal<\/em> Crl.L.P. No. 607.2014.<\/p>\n

It was observed: “There is no magic in the word “security cheque”, such that, the moment the accused claims that the dishonoured cheque (in respect whereof a complaint under Section 138 of the Act is preferred) was given as a “security cheque”, the Magistrate would acquit the accused. The expression “security cheque” is not a statutorily defined expression in the NI Act. The NI Act does not per se carve out an exception in respect of a ‘security cheque’ to say that a complaint in respect of such a cheque would not be maintainable…”<\/em><\/p>\n

The Court opined that, merely because cheques in question were security cheques, would not save accused from clutches of law, latter having admitted taking loan against the cheques.<\/p>\n

Decision<\/span><\/h4>\n

The Bench held that the accused failed miserably to prove the alleged factum of repayment.<\/p>\n

Accused failed to prove that the documents \u201cA\u201d & \u201cB\u201d purportedly the money lending cards, bear the signature of the complainant\/appellant, also no witness was examined by her who may have seen the accused\u2019s husband making payment in installments.<\/p>\n

Further, the accused testified in her evidence that she made repayments in monthly instalments in cash. However, to substantiate the same, neither she has placed on record any bank account statement reflecting withdrawals nor examined any witness<\/p>\n

With regard to the contention that the complainant was engaged in money lending business without a licence, the accused did not place on record any material to substantiate the same and it is well settled that for an activity to be called money lending, there should be a systematic business of money lending which should be repetitive and continuous, and the loans are granted to a large number of persons. Even if the said contention was accepted, the accused\u2019s sinking ship could not be saved in light of the settled position of law.<\/p>\n

Accused in response to the legal notice did not even insist on taking back the cheques in question, rather stated therein that she had returned 80% of the amount and expressed anguish over the cheques being presented without her knowledge.<\/p>\n

Bench also noted that,<\/p>\n

\u201c\u2026the accused didn’t issue any “stop payment” instructions to the bank. Despite opportunity, she didn’t place on record any police complaint as referred to by her during her evidence. Even if everything is taken out of the purview, I fail to understand how a reasonably prudent person who has paid a sum of money more than she borrowed would wait in silence, and not protest over her cheques not being returned.\u201d<\/em><\/p>\n

Noting the sheer lack of even an iota of material on the record, lead to the irresistible conclusion that the defence of the accused was a sham and nothing but an implausible story.<\/p>\n

Accused had miserably failed to probablise lack of legal liability with respect to the cheques in question. The presumption of legal liability, therefore, has gone unrebutted.<\/p>\n

Therefore, accused was convicted of an offence under Section 138 of the NI Act. [Manmohan Bansal v. Saroj Sharma, CC NI Act No. 119 of 2021<\/a>, decided on 7-2-2022]<\/p>\n","protected":false},"excerpt":{"rendered":"

Rohini Court, North-West, Delhi: Ritika Kansal, MM(NI) reiterated the settled position of law that, \u201c\u2026an accused has to prove his defence by <\/p>\n","protected":false},"author":8808,"featured_media":261381,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[3,4721],"tags":[2862,33385,29785,42834,30292,23584,48572],"class_list":["post-261375","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-casebriefs","category-district-court","tag-dishonour_of_cheque","tag-insufficient-funds","tag-law","tag-legal-news","tag-loan","tag-section-138-ni-act","tag-security-cheques"],"yoast_head":"\nLaw on Cheque Dishonour | Merely because cheques in question are security cheques, would that save accused from clutches of law under S. 138 NI Act, in case of admitting taking loan against cheques? 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Explained by Tis Hazari Courts","author":"Bhumika Indulia","date":"May 12, 2022","format":false,"excerpt":"Tis Hazari Courts, New Delhi: While addressing a decision revolving around Section 138 of Negotiable Instruments Act, 1881, Sanjay Sharma-II, Additional Sessions Judge-03, upheld the decision of the Trial Court and held that all the ingredients of Section 138 NI Act were fulfilled by the complainant. A criminal appeal under\u2026","rel":"","context":"In "Case Briefs"","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"Tis-hazari","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2018\/08\/Tis-hazari.jpg?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2018\/08\/Tis-hazari.jpg?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2018\/08\/Tis-hazari.jpg?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2018\/08\/Tis-hazari.jpg?resize=700%2C400&ssl=1 2x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2018\/08\/Tis-hazari.jpg?resize=1050%2C600&ssl=1 3x"},"classes":[]},{"id":257091,"url":"https:\/\/www.scconline.com\/blog\/post\/2021\/11\/15\/dishonour-of-cheques-2\/","url_meta":{"origin":261375,"position":1},"title":"Dishonour of Cheque | Not filling details in cheque, Non-filing of ITR by complainant, Handing over cheque as security, etc.: Delhi Court discards all defence, orders conviction under S. 138 NI Act \u00a0","author":"Bhumika Indulia","date":"November 15, 2021","format":false,"excerpt":"Saket Courts, Delhi: Swati Gupta, Metropolitan Magistrate (South) NI Act, convicted the accused for an offence under Section 138 (dishonour of cheque) of the Negotiable Instruments Act, 1881. While delivering the judgment, the Court reiterated the well-settled position of law and discarded various defence taken by the accused. Factual Matrix\u2026","rel":"","context":"In "Case Briefs"","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"Saket Court","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2020\/08\/District-Court-Saket.jpg?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2020\/08\/District-Court-Saket.jpg?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2020\/08\/District-Court-Saket.jpg?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2020\/08\/District-Court-Saket.jpg?resize=700%2C400&ssl=1 2x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2020\/08\/District-Court-Saket.jpg?resize=1050%2C600&ssl=1 3x"},"classes":[]},{"id":255501,"url":"https:\/\/www.scconline.com\/blog\/post\/2021\/10\/12\/section-138-negotiable-instruments-act\/","url_meta":{"origin":261375,"position":2},"title":"Law on S. 138 NI Act | Cheque dishonored, case filed under S. 138 NI Act: Can borrower raise defense that lender had no financial capacity to lend money? Complete report on ruling by Tis-Hazari Courts","author":"Bhumika Indulia","date":"October 12, 2021","format":false,"excerpt":"Tis Hazari Courts, New Delhi: Devanshu Sajlan, MM NI Act-05, while noting the ingredients of Section 138 of the Negotiable Instruments Act, 1881 acquitted a person charged for offence punishable under Section 138 NI Act. Factual Matrix Present complaint was filed under Section 138 of the Negotiable Instruments Act, 1881.\u2026","rel":"","context":"In "Case Briefs"","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"Tis-hazari","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2018\/08\/Tis-hazari.jpg?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2018\/08\/Tis-hazari.jpg?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2018\/08\/Tis-hazari.jpg?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2018\/08\/Tis-hazari.jpg?resize=700%2C400&ssl=1 2x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2018\/08\/Tis-hazari.jpg?resize=1050%2C600&ssl=1 3x"},"classes":[]},{"id":364043,"url":"https:\/\/www.scconline.com\/blog\/post\/2025\/10\/16\/rajasthan-hc-section-138-ni-act-on-cheque-for-time-barred-debt-revives-enforceability-under-contract-act\/","url_meta":{"origin":261375,"position":3},"title":"Cheque for Time-Barred Debt Revives Enforceability Under S. 25(3) Contract Act; Dishonour attracts Section 138 NI Act: Rajasthan High Court","author":"Editor","date":"October 16, 2025","format":false,"excerpt":"\u201cA meaningful reading of Sections 20, 118 and 139 of the NI Act makes it clear that a person who signs a cheque and delivers it to the payee remains liable unless he successfully rebuts the statutory presumptions.\u201d","rel":"","context":"In "Case Briefs"","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"Section 138 NI Act on Cheque for Time-Barred Debt","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2025\/10\/Section-138-NI-Act-on-Cheque-for-Time-Barred-Debt.webp?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2025\/10\/Section-138-NI-Act-on-Cheque-for-Time-Barred-Debt.webp?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2025\/10\/Section-138-NI-Act-on-Cheque-for-Time-Barred-Debt.webp?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2025\/10\/Section-138-NI-Act-on-Cheque-for-Time-Barred-Debt.webp?resize=700%2C400&ssl=1 2x"},"classes":[]},{"id":240707,"url":"https:\/\/www.scconline.com\/blog\/post\/2020\/12\/15\/bom-hc-does-ni-act-authorises-a-complaintant-to-fill-an-incomplete-cheque-court-discusses-while-reversing-acquittal-of-accused-under-s-138-ni-act\/","url_meta":{"origin":261375,"position":4},"title":"Bom HC | Does NI Act authorises a complainant to fill an incomplete cheque? Court discusses while reversing acquittal of accused under S. 138 NI Act","author":"Bhumika Indulia","date":"December 15, 2020","format":false,"excerpt":"Bombay High Court:\u00a0Vibha Kankanwadi, J., reversed the acquittal of the respondent-accused holding him guilty of having committed an offence under Section 138 (dishonour of cheque) of the Negotiable Instruments Act, 1881. Facts on record The complainant had come with a case wherein he stated he had friendly relations with the\u2026","rel":"","context":"In "Case Briefs"","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2016\/09\/Bombay-HC.jpg?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2016\/09\/Bombay-HC.jpg?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2016\/09\/Bombay-HC.jpg?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2016\/09\/Bombay-HC.jpg?resize=700%2C400&ssl=1 2x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2016\/09\/Bombay-HC.jpg?resize=1050%2C600&ssl=1 3x"},"classes":[]},{"id":266804,"url":"https:\/\/www.scconline.com\/blog\/post\/2022\/05\/13\/law-on-liability-of-guarantor-dishonour-of-cheque-section-138-ni-act\/","url_meta":{"origin":261375,"position":5},"title":"Liability of Guarantor for Cheque Dishonour: Can lender enforce his right against either principal borrower or his guarantor? Dwarka Courts answers","author":"Bhumika Indulia","date":"May 13, 2022","format":false,"excerpt":"Dwarka Courts, Delhi: Rahul Jain, Metropolitan Magistrate, while addressing a matter regarding dishonour of cheque, held that mere assertion of non-receipt of legal notice cannot help the accused in escaping liability under Section 138 Negotiable Instruments Act, 1881. It was alleged in complaint that accused had approached the complainant to\u2026","rel":"","context":"In "Case Briefs"","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2019\/06\/Dwarka-Court.jpg?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2019\/06\/Dwarka-Court.jpg?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2019\/06\/Dwarka-Court.jpg?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2019\/06\/Dwarka-Court.jpg?resize=700%2C400&ssl=1 2x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2019\/06\/Dwarka-Court.jpg?resize=1050%2C600&ssl=1 3x"},"classes":[]}],"amp_enabled":true,"_links":{"self":[{"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/posts\/261375","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/users\/8808"}],"replies":[{"embeddable":true,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/comments?post=261375"}],"version-history":[{"count":0,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/posts\/261375\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/media\/261381"}],"wp:attachment":[{"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/media?parent=261375"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/categories?post=261375"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/tags?post=261375"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}