To make any person liable under Section 138 Negotiable Instruments Act (hereinafter to be read as 'The Act'), the following ingredients are required to be proved by the complainant: Person must have drawn a cheque on an account maintained by him; The Cheque should have been issued for the discharge, in whole or in part, of any debt or other liability; That Cheque has been presented to the bank within a period of three months from the date on which it is drawn or within the period of its validity whichever is earlier; That Cheque is returned by the bank unpaid, either because of the amount of money standing to the credit of the account is insufficient to honour the Cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with the bank; The payee or the holder in due course of the Cheque makes a demand for the payment of the said amount of money by giving a notice in writing, to the drawer of the Cheque, within 30 days of the receipt of information by him from the bank regarding the return of the Cheque as unpaid; The drawer of such Cheque fails to make payment of the said amount of money to the payee or the holder in due course of the Cheque within 15 days of the receipt of the said notice. Plea of Security or advance cheque The Hon'ble High Court of Delhi in the case of Suresh Chandra Goyal Vs. Amit Singhal CRL. L.P. No. 706 of 2014 Decided On : 14-05-2015 has held that section 138 NI Act covers any cheque drawn on an account maintained by the drawer with the bank in favour of another person for the discharge of any debt or other liability. The expression 'any debt or other liability' is unqualified in section 138 NI Act and it includes any future debt or liability which may arise after the issuance of the cheque. It was observed that section 138 NI Act does not distinguish between a cheque issued by the debtor in discharge of an existing debt or other liability, or a cheque issued as a security cheque on the premise that on the due future date the debt which shall have crystallized by then, shall be paid. So long as there is a debt existing, in respect whereof the cheque in question is issued, the same would attract Section 138 of NI Act in case of its dishonour. Thus, mere defence that the cheque in question was issued as a security cheque or as an advance cheque is not sufficient. The accused would still be liable if there is an outstanding liability of the accused towards the complainant at the time of presentation of the cheque. That the relevant paras of the said judgements are as follows: 57. At this stage, I consider it appropriate to analyse as to what is the meaning of the word “security”. What does the issuance of a security cheque entail, and if there is no specific agreement touching upon this aspect, what would be the rights and obligations of the parties qua a security cheque, in case the primary obligation – to secure which the security cheque was given, is not discharged. The Black’s Law Dictionary (6th edition), inter alia, defines “security” to mean: “Protection; assurance; Indemnification. The term is usually applied to an obligation, pledge, mortgage, deposit, lien, etc., given by a debtor in order to assure the payment or performance of his debt, by furnishing the creditor with a resource to be used in case of failure in the principal obligation. Collateral given by debtor to secure loan. Document that indicates evidence of indebtedness. The name is also sometimes given to one who becomes surety or guarantor for another”. 58. Similarly, the word “security” is defined in the Shorter Oxford English Dictionary (5th edition), inter alia, to mean: “Property etc. deposited or pledged by or on behalf of a person as a guarantee of the fulfillment of an obligation (as an appearance in court or the payment of a debt) and liable to forfeit in the event of default”. 59. Thus, when one party gives a security to the other, implicit in the said transaction is the understanding that in case of failure of the principal obligation, the security may be enforced.\ 60. In V.K. Ashokan vs. CCE, (2009) 14 SCC 85, the Supreme Court observed that: “The term “security” signifies that which makes secure or certain. It makes the money more assured in its payment or more readily recoverable as distinguished from, as for example, a mere IOU, which is only evidence of a debt, and the word is not confined to a document which gives a charge on specific property, but includes personal securities for money. (See Chetumal Bulchand vs. Noorbhoy Jafeerji, AIR 1928 Sind 89). It is a word of general import signifying an assurance”. 61. Thus, in my view, it makes no difference whether, or not, there is an express understanding between the parties that the security may be enforced in the event of failure of the debtor to pay the debt or discharge other liability on the due date. Even if there is no such express agreement, the mere fact that the debtor has given a security in the form of a post dated cheque or a current cheque with the agreement that it is a security for fulfillment of an obligation to be discharged on a future date itself, is sufficient to read into the arrangement, an agreement that in case of failure of the debtor to make payment on the due date, the security cheque may be presented for payment, i.e. for recovery of the due debt. If that were not so, there would be no purpose of obtaining a security cheque from the debtor. A security cheque is issued by the debtor so that the same may be presented for payment. Otherwise, it would not be a security cheque. As observed above, the MOU (Ex.CW-1/4) does not expressly, or even impliedly states that the security cheques are not to be used to recover the installments, even in case of failure to pay the same by the respondent/ debtor. 62. Section 138 of NI Act does not distinguish between a cheque issued by the debtor in discharge of an existing debt or other liability, or a cheque issued as a security cheque on the premise that on the due future date the debt which shall have crystallized by then, shall be paid. So long as there is a debt existing, in respect whereof the cheque in question is issued, in my view, the same would attract Section 138 of NI Act in case of its dishonour. Further the Hon’ble Supreme Court of India in I.C.D.S. Ltd. Vs Beena Shabeer & Anr. AIR 2002 SC 3014, held as follows: “10. The language, however, has been rather specific as regards the intent of the legislature. The commencement of the Section stands with the words "Where any cheque". The above noted three words are of extreme significance, in particular, by reason of the user of the word "any" - the first three words suggest that in fact for whatever reason if a cheque is drawn on an account maintained by him with a banker in favour of another person for the discharge of any debt or other liability, the highlighted words if read with the first three words at the commencement of Section 138, leave no manner of doubt that for whatever reason it may be, the liability under this provision cannot be avoided in the event the same stands returned by the banker unpaid. The legislature has been careful enough to record not only discharge in whole or in part of any debt but the same includes other liability as well. This aspect of the matter has not been appreciated by the High Court, neither been dealt with or even referred to in the impugned judgment.” Further the Hon’ble High Court of Delhi in Ravi Chopra Vs State and Anr. 2008 102 DRJ 147, held as follows: “20. A collective reading of the above provisions shows that even under the scheme of the NI Act it is possible for the drawer of a cheque to give a blank cheque signed by him to the payee and consent either impliedly or expressly to the said cheque being filled up at a subsequent point in time and presented for payment by the drawee. There is no provision in the NI Act which either defines the difference in the handwriting or the ink pertaining to the material particulars filled up in comparison with the signature thereon as constituting a material alteration for the purposes of Section 87 NI Act. What however is essential is that the cheque must have been signed by the drawer. If the signature is altered or does not tally with the normal signature of the maker, that would be a material alteration. thereforee as long as the cheque has been signed by the drawer, the fact that the ink in which the name and figures are written or the date is filled up is different from the ink of the signature is not a material alteration for the purposes of Section 87 NI Act.” Further the Hon’ble Supreme Court of India in Bir Singh Vs Mukesh Kumar, 2019 4 SCC 197 held as follows: “21. In passing the impugned judgment and order dated 21.11.2017, the High Court mis-construed Section 139 of Negotiable Instruments Act, which mandates that unless the contrary is proved, it is to be presumed that the holder of a cheque received the cheque of the nature referred to in Section 138, for the discharge, in whole or in part, of any debt or other liability. Needless to mention that the presumption contemplated under Section 139 of the Negotiable Instruments Act, is a rebuttable presumption. However, the onus of proving that the cheque was not in discharge of any debt or other liability is on the accused drawer of the cheque. 22. In Hiten P. Dalal vs. Bratindranath Banerjee, (2001) 6 SCC 16 this Court held that both Section 138 and 139 require that the Court shall presume the liability of the drawer of the cheques for the amounts for which the cheques are drawn. Following the judgment of this Court in State of Madras vs. Vaidyanatha Iyer, AIR 1958 SC 61 this Court held that it was obligatory on the Court to raise this presumption. 23. Section 139 introduces an exception to the general rule as to the burden of proof and shifts the onus on the accused. The presumption under Section 139 of the Negotiable Instruments Act is a presumption of law, as distinguished from presumption of facts. Presumptions are rules of evidence and do not conflict with the presumption of innocence, which requires the prosecution to prove the case against the accused beyond reasonable doubt. The obligation on the prosecution may be discharged with the help of presumptions of law and presumptions of fact unless the accused adduces evidence showing the reasonable possibility of the nonexistence of the presumed fact as held in Hiten P. Dalal (supra). 36. The proposition of law which emerges from the judgments referred to above is that the onus to rebut the presumption under Section 139 that the cheque has been issued in discharge of a debt or liability is on the accused and the fact that the cheque might be post dated does not absolve the drawer of a cheque of the penal consequences of Section 138 of the Negotiable Instruments Act. 37. A meaningful reading of the provisions of the Negotiable Instruments Act including, in particular, Sections 20, 87 and 139, makes it amply clear that a person who signs a cheque and makes it over to the payee remains liable unless he adduces evidence to rebut the presumption that the cheque had been issued for payment of a debt or in discharge of a liability. It is immaterial that the cheque may have been filled in by any person other than the drawer, if the cheque is duly signed by the drawer. If the cheque is otherwise valid, the penal provisions of Section 138 would be attracted. 38. If a signed blank cheque is voluntarily presented to a payee, towards some payment, the payee may fill up the amount and other particulars. This in itself would not invalidate the cheque. The onus would still be on the accused to prove that the cheque was not in discharge of a debt or liability by adducing evidence. 39. ……………. 40. Even a blank cheque leaf, voluntarily signed and handed over by the accused, which is towards some payment, would attract presumption under Section 139 of the Negotiable Instruments Act, in the absence of any cogent evidence to show that the cheque was not issued in discharge of a debt.” As a result, any future obligation or liability that may emerge after the issuing of the cheque is included because Section 138 of the NI Act uses the phrase "any debt or other liability." The Section does not differentiate between a cheque issued by the debtor to pay off an existing debt or other liability or a cheque issued as a security cheque on the premise that on the due future date the debt which shall have crystallized by then, shall be paid. The accused would still be liable if there is an outstanding liability of the accused towards the complainant at the time of presentation of the cheque. The mere fact that the debtor has given a security in the form of a post dated cheque or a current cheque with the agreement that it is a security for fulfillment of an obligation to be discharged on a future date itself, is sufficient to read into the arrangement, an agreement that in case of failure of the debtor to make payment on the due date, the security cheque may be presented for payment, i.e. for recovery of the due debt.
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