{"id":388314,"date":"2026-06-24T10:00:26","date_gmt":"2026-06-24T04:30:26","guid":{"rendered":"https:\/\/www.scconline.com\/blog\/?p=388314"},"modified":"2026-06-24T11:52:05","modified_gmt":"2026-06-24T06:22:05","slug":"employment-bond-security-cheque-section-138-ni-act-acquittal-bengaluru-sessions-court","status":"publish","type":"post","link":"https:\/\/www.scconline.com\/blog\/post\/2026\/06\/24\/employment-bond-security-cheque-section-138-ni-act-acquittal-bengaluru-sessions-court\/","title":{"rendered":"<p style=\"font-family: ED Garamond;\">Treating Employment Bond Amount as Debt Without Establishing Actual Loss Impermissible under Section 138 NI Act; Employee Acquitted in Cheque Dishonour case: Bengaluru Sessions Court<\/p>"},"content":{"rendered":"<div style=\"text-align: justify; line-height: 150%;\">\n<p style=\"margin-bottom: 3%; font-family: ED Garamond;\"><span style=\"font-weight: bold;\">Disclaimer:<\/span> <span style=\"font-style: italic;\">This has been reported after the availability of the order of the Court and not on media reports so as to give an accurate report to our readers.<\/span><\/p>\n<p style=\"margin-bottom: 3%; font-family: ED Garamond;\"><span style=\"font-weight: bold;\">LVI Addl. City Civil &amp; Sessions Judge, Bengaluru:<\/span> In an appeal against conviction under Section <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0001544366\" target=\"_blank\">138<\/a>, <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002726957\" target=\"_blank\">Negotiable Instruments Act (NI), 1881<\/a>, arising from the dishonour of a &#8377;5,00,000 cheque issued under an employment bond, the Single Judge Bench of I.P. Naik, J., set aside the conviction and acquitted the accused. The Court held that the cheque had been obtained at the time of joining as a security towards the service bond and not in discharge of an existing debt. Emphasising the principles under Sections <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0001527489\" target=\"_blank\">73<\/a> and <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0001527490\" target=\"_blank\">74<\/a>, <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002726954\" target=\"_blank\">Contract Act (ICA), 1872<\/a>, the Court observed that a claim for liquidated damages must be founded on actual and reasonable loss. Since the employer failed to establish any such loss, the stipulated bond amount could not be treated as a legally enforceable liability, rendering the prosecution under Section <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0001544366\" target=\"_blank\">138<\/a>, <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002726957\" target=\"_blank\">NI Act<\/a> unsustainable.<\/p>\n<h3 style=\"font-family: ED Garamond;\">Background<\/h3>\n<p style=\"margin-bottom: 3%; font-family: ED Garamond;\">In the instant case the complainant company appointed a trainee employee and upon appointment he executed non-disclosure agreement and service agreement in favour of complainant company. Accused was to undergo a two-year training period on a stipend of &#8377;15,000 per month and undertook to pay &#8377;5,00,000 if he violated the service agreement. After working for about six months, he left the company before completing the bond period. Treating this as a breach of the service agreement, the company presented the cheque which was dishonoured for &#8220;exceeds arrangement&#8221;, after which notice was issued and a complaint under Section <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0001544366\" target=\"_blank\">138<\/a>, <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002726957\" target=\"_blank\">NI Act<\/a> was filed.<\/p>\n<p style=\"margin-bottom: 3%; font-family: ED Garamond;\">The trial court convicted the accused for offence under Section <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0001544366\" target=\"_blank\">138<\/a>, <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002726957\" target=\"_blank\">NI Act<\/a> on 29 August 2024, aggrieved thereby the accused filed the present appeal.<\/p>\n<h3 style=\"font-family: ED Garamond;\">Analysis and decision<\/h3>\n<p style=\"margin-bottom: 3%; font-family: ED Garamond;\">Relying upon Section <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0001527489\" target=\"_blank\">73<\/a> and <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0001527490\" target=\"_blank\">74<\/a> <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002726954\" target=\"_blank\">ICA<\/a> and <span style=\"font-style: italic;\">Kailash Nath Associates<\/span> v. <span style=\"font-style: italic;\">DDA<\/span>, (<a href=\"http:\/\/www.scconline.com\/DocumentLink\/A8m4W3d4\" target=\"_blank\">2015) 4 SCC 136<\/a>, for liquidated damages, the Court noted that the accused had issued the &#8377;5 lakhs cheque at the time of joining the company as part of the employment bond and that the agreement treated the amount as liquidated damages payable in the event of resignation or breach of the bond conditions. The Court observed that any claim towards liquidated damages must be reasonable and that a party alleging breach of contract is entitled to compensation for the actual loss or damage suffered and further found that the stipulation of &#8377;5,00,000 was in the nature of a penalty or liquidated damages. Since the actual loss allegedly caused to the complainant company on account of the accused&#8217;s breach of the terms and conditions had not been determined, the same required adjudication by a competent court of law.<\/p>\n<p style=\"margin-bottom: 3%; font-family: ED Garamond;\">The Court observed that the complainant company did not present the cheque they obtained from the accused and which thus showed the misuse by the them. Since the complainant had not established any actual loss suffered due to the alleged breach of the agreement, the Court found that no legally enforceable liability existed against the accused on the date of issuance of cheque and, therefore, the complaint under Section <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0001544366\" target=\"_blank\">138<\/a>, <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002726957\" target=\"_blank\">NI Act<\/a> was not maintainable.<\/p>\n<p style=\"margin-bottom: 3%; font-family: ED Garamond;\">Accordingly, the Court allowed the appeal, set aside the judgment of conviction and order of sentence passed by the trial court, and acquitted the accused of the offence punishable under Section <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0001544366\" target=\"_blank\">138<\/a>, <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002726957\" target=\"_blank\">NI Act<\/a>. The bail bond executed by the accused stood cancelled and the surety was discharged.<\/p>\n<p style=\"margin-bottom: 3%; font-family: ED Garamond;\">[<span style=\"font-weight: bold; color: #632423;\"><span style=\"font-style: italic;\">Sandeep Iragouda Taradale<\/span> v. <span style=\"font-style: italic;\">APPSTEC ERP Solutions (P) Ltd.<\/span>, Crl. App No. 1678\/2024, decided on 8-6-2026<\/span>]<\/p>\n<hr\/>\n<p style=\"font-family: ED Garamond;\">Advocates who appeared in this case:<\/p>\n<p style=\"margin-left: 18pt; font-family: ED Garamond;\"><span style=\"font-weight: bold;\">For the appellant:<\/span> R.P, Advocate<\/p>\n<p style=\"margin-left: 18pt; font-family: ED Garamond;\"><span style=\"font-weight: bold;\">For the respondent:<\/span> G.P. advocate<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p style=\"font-style: italic;\">Any dispute arises in respect of liquidated damages, it should be reasonable. A party to contract violated a terms or conditions, he is liable to pay actual damages or loss caused to other party.<\/p>\n","protected":false},"author":67543,"featured_media":388322,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3,10],"tags":[4561,27704,29922,108004,69554,108006,49094,33384,2963,17041,108009,108005,48916,108007,108008],"class_list":["post-388314","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-casebriefs","category-highcourts","tag-acquittal","tag-breach-of-contract","tag-cheque-dishonour","tag-city-civil-sessions-judge","tag-conviction-set-aside","tag-employment-bond","tag-employment-law","tag-legally-enforceable-debt","tag-liquidated_damages","tag-negotiable-instruments-act","tag-penalty-clause","tag-section-138-niact","tag-security-cheque","tag-service-agreement","tag-training-bond"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v27.4 (Yoast SEO v27.4) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>Security Cheque Issued Under Employment Bond Cannot Attract Section 138 NI Act Without Proof of Loss: Bengaluru Sessions Court | SCC Times<\/title>\n<meta name=\"description\" content=\"Bengaluru Sessions Court acquitted an employee in a cheque dishonour case holding that an employment bond amount cannot be recovered under Section 138 NI Act without establishing actual loss.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.scconline.com\/blog\/post\/2026\/06\/24\/employment-bond-security-cheque-section-138-ni-act-acquittal-bengaluru-sessions-court\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Treating Employment Bond Amount as Debt Without Establishing Actual Loss Impermissible under Section 138 NI Act; 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