Bom HC | Dishonour of a cheque issued as a mere guarantee does not attract punishment under S. 138 NI Act

Bombay High Court: K.R. Shriram, J., dismissed a criminal appeal filed against the order of the trial court whereby the accused was acquitted of the charge under Section 138 (dishonour of cheque) of the Negotiable Instruments Act, 1881.

The appellant had initiated a complaint under Section 138 against the accused alleging dishonour of cheque issued by him in favour of the appellant. It was alleged that the subject cheque was issued by the accused for payment of outstanding liability in relation to purchase of grapes from the appellant. The accused did not deny the purchase of grapes; he, however, contended that the subject cheque was given only as a security cheque and the outstanding payment was already made in three installments. The accused was tried for the offence as aforesaid. At the conclusion of the trial, the accused was found not guilty and was, therefore, acquitted. Aggrieved, the appellant preferred the instant appeal.

 The High Court reiterated the well-settled law that it is settled law that the important ingredient for the offence punishable under Section 138 is that cheque must have been issued for the discharge in whole or in part of any debt or other liability. If the cheque is not issued for the discharge of any debt or other liability, Section 138 can not be invoked.

Perused the facts of the instant case, the Court found that the appellant, in his cross-examination, had admitted that the cheque issued was only for guarantee. Relying on its earlier decisions, the Court noted that if the cheque is issued only as security for performance of a certain contract or an agreement and not towards the discharge of any debt or other liability, offence punishable under Section 138 is not made out.

Following the aforenoted position of law, and noting the admission of the appellant in his cross-examination, the Court concluded that there could be no other conclusion that the cheque was not issued for the discharge of any debt or other liability. The important ingredient for the offence punishable under Section 138, therefore, was missing.

Moreover, it was found that the appellant had been giving different dates on which the cheque was issued, which shows that he was economical with the truth. Reiterating that a person, who’s case is based on falsehood, has no right to approach the Court, the High Court dismissed the instant appeal. [Shantaram Namdeo Sathe v. State of Maharashtra, 2019 SCC OnLine Bom 4354, decided on 15-11-2019