Section 138 liability fails when post-dated cheques no longer reflect an enforceable debt after repossession and sale of the vehicle.

A prosecution under Section 138 of the Negotiable Instruments Act cannot be sustained on post-dated cheques issued towards a hypothecation liability once the financier has repossessed and sold the vehicle. The court reasoned that cheque liability under Section 138 depends on a legally enforceable debt, and that debt ceased to support the earlier cheques after seizure, repossession, and adjustment of sale proceeds. The financier must pursue any remaining balance through other legal remedies or a fresh arrangement. On that basis, the complaint was held not maintainable and the criminal proceedings were quashed.

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Issues: Whether a prosecution under Section 138 of the Negotiable Instruments Act could be sustained on post-dated cheques issued towards a hypothecation liability after the financier had repossessed and sold the vehicle and adjusted the sale proceeds.

Analysis: Liability under Section 138 arises only when the cheque is drawn towards a legally enforceable debt or liability. Once the financier exercises the option of seizure and repossesses the vehicle, the consideration supporting the earlier post-dated cheques fails. After repossession and subsequent sale of the vehicle, the financier must work out the balance claim through other legal remedies or any fresh arrangement, and the earlier cheques cannot automatically be presented for encashment as if the original liability remained unchanged.

Conclusion: The complaint based on the post-dated cheques was not maintainable under Section 138 of the Negotiable Instruments Act, and the criminal proceedings were quashed in favour of the petitioner.

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