Cheque issued as security without legally recoverable debt cannot sustain cheque dishonour liability.

Cheque dishonour liability under the Negotiable Instruments Act was rejected because the cheque was found to have been issued only as security for a loan, not in discharge of a legally recoverable debt. The High Court noted that no legal liability existed when the blank cheque was issued and that the absence of account extracts or supporting loan documents weakened the claim of enforceable debt. Finding no illegality in the Trial Court's appreciation of evidence, the Court upheld the acquittal and dismissed the appeal.

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Issues: Whether the acquittal in a prosecution under Section 138 of the Negotiable Instruments Act, 1881 called for interference when the cheque was issued as security and no legally recoverable debt was shown to exist on the date of issuance.

Analysis: The cheque was admitted to have been issued in blank as security in connection with a loan transaction. The evidence of the bank manager did not establish that any legally enforceable liability existed on the date of the cheque. The complainant also failed to produce the loan account extract or other material showing the subsisting debt. On the facts proved, the cheque did not represent discharge of an existing debt or liability, and the principle applied was that Section 138 is attracted only where such liability exists or the amount has become legally recoverable on the date of the cheque.

Conclusion: The acquittal was justified and no ground was made out to interfere with it. The appeal was rightly dismissed, and the accused remained acquitted.

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