In Brief
A company issued a cheque of Rs 2.67 crores marked "for security purpose only" as per a power supply agreement. When power was supplied but payment defaults occurred and the cheque was dishonored, the supplier filed a criminal complaint under Section 138 of the Negotiable Instruments Act. The High Court dismissed the company's petition to quash the case. On appeal, the Supreme Court held that a cheque issued as security in a commercial arrangement can be presented and treated as discharge of legally enforceable debt once the underlying transaction (supply) is performed. Whether the cheque was truly for security is a defence matter for trial, not for deciding at the petition stage. The Court dismissed the appeal and upheld the complaint proceedings.
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