Security cheque against an accrued contractual liability can attract Section 138 of the Negotiable Instruments Act.

The phrase "other liability" in Section 138 of the Negotiable Instruments Act was given its ordinary wide meaning and was not confined by ejusdem generis to "debt", so it covers any legally enforceable liability to pay. Where a collaboration agreement made payment of the cheque amount an essential contractual obligation, a cheque described as security still fell within Section 138 if it was issued against an accrued liability. The distinction between a mere security cheque and a cheque issued towards discharge of an existing liability was applied, and the latter attracted criminal liability. The complaint and summoning order were therefore not liable to be quashed under Section 482 of the Code of Criminal Procedure.

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Issues: Whether a cheque issued as security under a collaboration agreement, where payment under the agreement constituted a liability to pay, attracts Section 138 of the Negotiable Instruments Act, 1881 and whether the complaint and summoning order were liable to be quashed under Section 482 of the Code of Criminal Procedure, 1973.

Analysis: The expression "other liability" in Section 138 was held to bear its ordinary and wide meaning and not to be confined by ejusdem generis with the word "debt", since the provision uses only one specific word followed by a general expression and no distinct genus is created. The Court treated the statutory phrase as covering any legally enforceable liability to pay. On the facts, the agreement made payment of the cheques an essence of the contract and the builder had an existing obligation to pay the stipulated amount to the owners; the circumstance that the amount was described as security for performance did not alter the character of the liability at the time the cheques were issued. A distinction was drawn between a cheque given merely as security and a cheque issued towards discharge of an accrued liability, and it was held that the latter falls within Section 138. The reliance on the decision in Narayana Menon was treated as not assisting the petitioners on the facts, as the observations there were clarificatory.

Conclusion: Section 138 of the Negotiable Instruments Act, 1881 was attracted and the complaint was not liable to be quashed; the summoning order also survived.

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