Security cheque liability under negotiable instruments law when the underlying debt has matured and remains unpaid.

A cheque issued as security can still attract liability under the Negotiable Instruments Act when the underlying loan has matured and remains unpaid. The complainant's loan agreement and supporting evidence were treated as showing a legally recoverable debt, while the accused failed to produce material of repayment or any circumstance showing that the cheque had not become enforceable. The challenge to the complainant's financial capacity also failed, as business activity and vehicle ownership supported the lending version and the defence did not rebut it on a preponderance of probabilities. On that reasoning, dishonour was treated as constituting liability and the acquittal was set aside.

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Issues: Whether the cheque was issued towards discharge of a legally recoverable debt so as to constitute an offence under Section 138 of the Negotiable Instruments Act, 1881, and whether the first appellate court's acquittal called for interference.

Analysis: The complainant's evidence and the loan agreement were accepted as establishing that the cheque was issued in connection with a loan transaction. The admission that the cheque had been given as security did not, by itself, exclude liability under Section 138, because a security cheque can be acted upon when the underlying debt has matured and remains unpaid. The accused did not produce material to show repayment or any circumstance showing that the cheque had not become enforceable. The challenge to the complainant's financial capacity also failed, since the evidence showed business activity and ownership of vehicles, and the defence did not rebut the complainant's version on a preponderance of probabilities.

Conclusion: The cheque was held to have been issued for discharge of a legally recoverable debt, dishonour attracted liability under Section 138 of the Negotiable Instruments Act, 1881, and the acquittal recorded by the first appellate court was set aside.

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