Advance rent cheques and subsisting lease obligations can support cheque dishonour liability despite sealing of premises.

Advance cheques issued towards monthly rent under a continuing lease remained linked to a legally enforceable liability where the lessees retained possession of the premises despite municipal sealing. Because the lessees did not exercise the option under Section 108(e) of the Transfer of Property Act to avoid the lease when the premises allegedly became unfit for use, the tenancy continued and rent remained payable under Section 108(l). The lessees could not unilaterally suspend rent payment, and the cheques were treated as drawn against an ascertained and crystallised liability. Authorities on advance and security cheques were distinguished because they involved no subsisting enforceable debt or a cancelled transaction.

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Issues: Whether dishonour of cheques issued in advance towards monthly rent, in respect of leased premises later sealed by municipal authorities but not surrendered by the lessee, attracts liability under Section 138 of the Negotiable Instruments Act, 1881.

Analysis: The lease remained subsisting because the lessees did not exercise the option available under Section 108(e) of the Transfer of Property Act, 1882 to avoid the lease on the premises becoming unfit for the intended purpose. So long as possession was retained, the lessees continued to be bound under Section 108(l) of the Transfer of Property Act, 1882 to pay rent, and could not unilaterally suspend payment merely because the premises had been sealed. The cheques were issued in advance towards rent under a continuing tenancy, and the liability to pay rent was an ascertained and crystallised liability. The authorities on advance cheques and security cheques were distinguished on the facts, as those cases concerned situations where no legally enforceable liability existed or the underlying transaction had been cancelled.

Conclusion: The dishonoured cheques were drawn towards a legally enforceable liability and were within the scope of Section 138 of the Negotiable Instruments Act, 1881.

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