Security cheque without existing liability does not attract Section 138 of the Negotiable Instruments Act.

Section 138 of the Negotiable Instruments Act applies only where the cheque is issued to discharge an existing legally enforceable debt or liability. A blank signed cheque given as security in a dealership arrangement, when no subsisting liability existed on the date of issue, does not satisfy that requirement. The Court distinguished security cheques from cheques issued against an admitted due amount and treated the absence of enforceable liability on the relevant date as fatal to the prosecution. On that basis, the complaint proceedings were quashed as unsustainable.

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Issues: Whether proceedings under Section 138 of the Negotiable Instruments Act were liable to be quashed where the cheque was admittedly issued as a security cheque at a time when no debt or liability existed.

Analysis: The statutory requirement under Section 138 is the existence of a legally enforceable debt or other liability on the date of the cheque. The material on record showed that the cheque was a blank signed cheque handed over in 2011 as security in the course of a dealership arrangement, while the liability claimed by the complainant arose only later over a period of business transactions. Applying the principle that a cheque issued without a subsisting enforceable liability does not attract Section 138, the Court distinguished cases where the cheque is issued towards an existing due amount from cases where it is merely security. In such a situation, continuation of the prosecution would not be sustainable.

Conclusion: The complaint proceedings were quashed because the cheque was issued as security without any subsisting debt or liability on the relevant date.

Ratio Decidendi: Section 138 of the Negotiable Instruments Act is attracted only when the cheque is issued for discharge of an existing legally enforceable debt or liability, and a security cheque issued without such subsisting liability does not by itself create criminal liability.

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