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The HC dismissed the petition and upheld the summoning order, holding that a cheque issued as security may assume the character of a cheque issued in discharge of a legally enforceable debt for purposes of Section 138 once the underlying liability crystallises. The Court found the complainant averred an existing debt when the cheque was presented and that the cheque had been furnished to secure potential losses under the contract; the complainant had quantified an outstanding liability and presented a cheque accordingly. Whether the cheque amount exceeds the legally recoverable debt is a disputed factual issue for trial, and there was no merit to quash the complaint or set aside the summoning order.
The HC dismissed the petition and upheld the summoning order, holding that a cheque issued as security may assume the character of a cheque issued in discharge of a legally enforceable debt for purposes of Section 138 once the underlying liability crystallises. The Court found the complainant averred an existing debt when the cheque was presented and that the cheque had been furnished to secure potential losses under the contract; the complainant had quantified an outstanding liability and presented a cheque accordingly. Whether the cheque amount exceeds the legally recoverable debt is a disputed factual issue for trial, and there was no merit to quash the complaint or set aside the summoning order.
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