Security cheque dishonour and SARFAESI recovery proceedings do not bar Section 138 prosecution where disputed defences need trial evidence.

A cheque described as a security cheque, when dishonoured with the endorsement "account closed", can still attract Section 138 of the Negotiable Instruments Act, 1881; at the quashing stage, the court should not accept disputed factual defences unless supported by unimpeachable material, and the presumption under Section 139 applies once execution is undisputed. A bare plea that the cheque was only security does not by itself negate liability, because questions about intended presentation and existence of legally enforceable debt require evidence at trial. Pendency of SARFAESI recovery proceedings does not bar prosecution under Section 138, as the two remedies operate in different spheres.

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Issues: (i) whether a cheque described as a security cheque, and dishonoured on the ground of account closed, could be quashed at the threshold in proceedings under Section 138 of the Negotiable Instruments Act, 1881; (ii) whether pendency of proceedings under the SARFAESI Act bars prosecution under Section 138 of the Negotiable Instruments Act, 1881.

Issue (i): whether a cheque described as a security cheque, and dishonoured on the ground of account closed, could be quashed at the threshold in proceedings under Section 138 of the Negotiable Instruments Act, 1881.

Analysis: The inherent power to quash at the summoning stage must be used sparingly, because disputed factual defences ordinarily belong to trial. A cheque returned with the endorsement "account closed" falls within the ambit of dishonour attracting Section 138. Once execution of the cheque is not disputed, the presumption under Section 139 operates, and the drawer must rebut it with material of unimpeachable character. A mere assertion that the cheque was issued as security does not by itself negate liability; whether it was intended to be presented, whether any arrangement excluded its encashment, and whether any legally enforceable liability existed are factual matters requiring evidence.

Conclusion: The security-cheque defence could not justify quashing at the threshold, and the complaint under Section 138 was maintainable to proceed to trial.

Issue (ii): whether pendency of proceedings under the SARFAESI Act bars prosecution under Section 138 of the Negotiable Instruments Act, 1881.

Analysis: Proceedings under the SARFAESI Act and under the Negotiable Instruments Act serve different purposes. SARFAESI is a recovery mechanism, while Section 138 creates criminal liability for cheque dishonour. The two remedies operate in independent spheres, and the existence of recovery proceedings does not create a legal bar to criminal prosecution for dishonour of the cheque.

Conclusion: Pendency of SARFAESI proceedings did not bar continuation of the complaint under Section 138.

Final Conclusion: The petition was found to raise defences that required evidence at trial, and no ground for interference in inherent jurisdiction was made out.

Ratio Decidendi: At the stage of quashing, disputed defences against a cheque dishonour complaint, including the plea that the cheque was only a security cheque, cannot be conclusively accepted unless supported by unimpeachable material; and parallel recovery proceedings do not bar prosecution under Section 138.

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