Cheques issued as security can still attract Section 138 when statutory presumptions are admitted and unrebutted.

Dishonour of a cheque issued as security under a loan-cum-hypothecation arrangement was treated as attracting Section 138 of the Negotiable Instruments Act, 1881 where the accused admitted signature and issuance, thereby triggering the presumptions under Sections 118 and 139. The accused failed to rebut those presumptions, as no evidence was led and the defence remained unsupported beyond cross-examination suggestions. A continuing security clause was held to preserve liability despite partial payments, repossession, or sale of the vehicle, and the trial court's insistence on proof of full loan adjustment was found unsustainable. The conviction was therefore warranted.

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Issues: Whether dishonour of a cheque issued as security under a loan-cum-hypothecation arrangement attracts liability under Section 138 of the Negotiable Instruments Act, 1881, and whether the accused rebutted the statutory presumptions arising from admitted signature and issuance of the cheque.

Analysis: The accused admitted his signature on the cheque and its issuance to the complainant, thereby attracting the presumptions under Sections 118 and 139 of the Negotiable Instruments Act, 1881. The accused did not adduce evidence and his defence remained unsupported except for suggestions in cross-examination. The loan agreement contained a continuing security clause, under which the liability would subsist notwithstanding partial payments, repossession, or sale of the vehicle, and the trial court's approach in treating the matter as one of hire purchase and insisting on proof of the full loan adjustment was held to be unsustainable. The material on record, including the cheque, dishonour memo, statutory notice, and proof of service, supported the complainant's case.

Conclusion: The dishonour of the cheque attracted Section 138 of the Negotiable Instruments Act, 1881, and the accused failed to rebut the statutory presumptions; the conviction was therefore warranted.

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