TaxTMI 
TaxTMI 
2002 (8) TMI 577
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....eding under section 138 of the Negotiable Instruments Act, 1881, vis-a-vis, a guarantor. The High Court negated it and, hence, the matter before this Court under article 136 of the Constitution. In order, however, to appreciate the contentions raised in the matter, it would be worthwhile at this juncture to notice section 138 for its true terms, scope and effect as also to assess the situation ourselves. Section 138 reads as below : "Dishonour of cheque for insufficiency, etc., of funds in the account.-Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is....
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.... provision as above, the High Court came to a conclusion when a cheque was issued as security, no complaint will lie under section 138 since the cheque issued cannot be said to be for the purpose of discharging any debt or liability : In justification of the said conclusion the High Court records the following reasons : "Reading of the above section would make it clear that issuance of a cheque must be for payment of amount of money from out of the account. In the case of a guarantor or surety, even if a cheque is issued, that cannot be said to be for immediate payment of money : Section 138 of the Act further says that issuance of cheque to another person is towards discharge, in whole or in part of any debt or other liability." ....
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....s been issued as a security, no complaint will lie under section 138 of the Negotiable Instruments Act." 6. After having noted the interpretation of the High Court as regards section 138, time has, thus, now come for us to assess the acceptability of such a wisdom. Before, however, doing so, a brief factual reference would be convenient. The facts reveal : The appellant herein is a company incorporated under the provisions of the Companies Act, 1956, having its registered and administrative office at Syndicate House, P.B. No. 46, Upendra Nagar, Manipal-576119 and branches among other places at Palayam, Trivandrum. The husband of respondent No. 1 entered into a hire purchase agreement with the appellant for the purposes of the purchase of....
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....puram. 8. The High Court, as noticed above, did allow the petition upon a categorical finding that being a cheque from the guarantor it could not be said to have been issued for the purpose of discharging any debt or liability and the complaint under section 138, thus, cannot be maintained. 9. As noticed herein before, the principal reason for quashing of the proceeding as also the complaint by the High Court was by reason of the fact that section 138 provides for issuance of a cheque to another person towards the discharge in whole or in part of any debt or liability and on the factual context, the High Court came to a conclusion that issuance of the cheque cannot be co-related for the purpose of discharging any debt or liability and....
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.... issued in discharge of any debt or other liability, there cannot be any restriction or embargo in the matter of application of the provisions of section 138 'Any cheque' and 'other liability' are the two key expressions which stand as clarifying the legislative intent so as to bring the factual context within the ambit of the provisions of the statute. Any contra interpretation would defeat the intent of the Legislature. The High Court, it seems, got carried away by the issue of guarantee and guarantor's liability and, thus, has overlooked the true intent and purport of section 138. The judgments recorded in the order of the High Court do not have any relevance in the contextual facts and the same, thus, do not lend any assistance to the c....