In Brief
The Supreme Court examined whether post-dated cheques given as security for loan repayment installments fall under Section 138 of the Negotiable Instruments Act when dishonoured. The company borrowed funds for a power project, providing post-dated cheques for installment repayment. When dishonoured, complaints were filed. The Court held that Section 138 applies when a cheque represents discharge of existing enforceable debt or liability. Since the loan was advanced and installments fell due on the cheque date per the agreement, the cheques constituted discharge of outstanding liability, regardless of being termed "security." The designation as security did not change the legal character. The appeal was dismissed, confirming criminal proceedings could continue.
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