In Brief
A son appealed against the High Court's decision to quash a complaint against a borrower who had received a Rs 2-crore loan and issued cheques that were later dishonoured. The Supreme Court held that while cheating charges under Section 420 IPC could not be sustained (as there was insufficient proof of initial fraudulent intent), the complaint under Section 138 NI Act for cheque dishonour was maintainable. The Court clarified that cheques issued as 'security' for a loan can be presented after the loan matures for repayment, and dishonour can trigger criminal liability. The case was remitted to the trial court to proceed only on the Section 138 charge, leaving all defences to be determined during trial.", <parameter name="cited_cases">[{"raw_citation": "(2018) 14 SCC 233", "case_name": "Samir Sahay alias Sameer Sahay v. State of UP & Anr.", "cited_year": "2018", "paragraph": "10", "treatment": "referred", "treatment_by": "this_court"}, {"raw_citation": "2008 7 SCC 137", "case_name": "Sudhir Kumar Bhalla v. Jagdish Chand and Others", "cited_year": "2008", "paragraph": "7, 13", "treatment": "distinguished", "treatment_by": "this_court", "treatment_quote": "There is no categorical declaration by this Court in the said case that the cheque issued as security cannot be presented for realisation under all circumstances. The facts in the said case relate to the cheques being issued and there being alterations made in the cheques towards which there was also a counter complaint filed by the drawer of the cheque. Hence, the said decision cannot be a precedent to answer the position in this case and the High Court was not justified in placing reliance on the same."}, {"raw_citation": "Criminal Appeal No.867 of 2016", "case_name": "Sampelly Satyanarayana Rao v. Indian Renewable Energy Development Agency Ltd.", "cited_year": "2016", "paragraph": "7, 14", "treatment": "relied", "treatment_by": "this_court", "treatment_quote": "Reference to the facts of the present case clearly shows that though the word 'security' is used in Clause 3.l (iii) of the agreement, the said expression refers to the cheques being towards repayment of instalments. The repayment becomes due under the agreement, the moment the loan is advanced and the instalment falls due."}, {"raw_citation": "Criminal Appeal No.1382-1383 of 2019", "case_name": "M/s Womb Laboratory Pvt. Ltd. v. Vijay Ahuja and Anr.", "cited_year": "2019", "paragraph": "7, 15", "treatment": "relied", "treatment_by": "this_court", "treatment_quote": "The cheques were given by way of security, is a matter of defence. Further, it was not for the discharge of any debt or any liability is also a matter of defence. The relevant facts to countenance the defence will have to be proved-that such security could not be treated as debt or other liability of the accused. That would be a triable issue."}, {"raw_citation": "(2014) 12 SCC 539", "case_name": "Indus Airways Pvt. Ltd. v. Magnum Aviation Pvt. Ltd.", "cited_year": "2014", "paragraph": "14", "treatment": "distinguished", "treatment_by": "this_court", "treatment_quote": "Judgment in Indus Airways (supra) is clearly distinguishable. As already noted, it was held therein that liability arising out of claim for breach of contract under Section 138, which arises on account of dishonour of cheque issued was not by itself at par with criminal liability towards discharge of acknowledged and admitted debt under a loan transaction."}]
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