AI Drafter 
TaxTMI 
TaxTMI 
2026 (4) TMI 601
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....tion case, in brief, is that there is a friendly relationship between the complainant and the accused and for his personal needs, the accused had asked for a loan of Rs. 2,00,000/- from the complainant. Keeping in view the friendly relationship, the accused gave the amount of Rs. 2,00,000/- to the accused on 24.04.2015 as a loan. While giving the said amount, the accused had told the complainant that he would return the said amount to him within 06 months. A loan agreement was executed in respect of the said loan dated 24.04.2015. When the accused did not return the said amount within 06 months, on making a demand by the complainant, the accused issued two cheques, bearing numbers 039296 and 039297, dated September 24, 2015 and October 24, 2015, respectively, for an amount of Rs. 1,00,000/- each, drawn on State Bank of Bikaner and Jaipur, Kolar Branch, Bhopal, in favor of the complainant. When the complainant presented these cheques to his bank, they were returned unpaid on November 25, 2015, with the remark "insufficient funds." The complainant contacted the accused on phone and informed him of the same, the accused started verbally abusing him and refused to return the money. Con....
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....te of agreement since there was a legally recoverable debt, therefore, it was not given as security. Keeping in view the law laid down by the Hon'ble Apex Court in case of Sampelly Satyanarayana Rao vs. Indian Renewable Energy Development Agency Limited reported in (2016) SC 458, the case of complainant against the accused is proved and the acquittal by the learned appellate Court is erroneous. Therefore, prays for allowing the appeal, to convict the accused and sentence him appropriately. 9. Per contra, the learned counsel appearing on behalf of the respondent/accused has submitted that the learned appellate Court in paragraphs-6, 7 and 8 has discussed the entire facts revealed from the evidence and rightly acquitted the accused on the ground that since the cheques have been given for security, therefore, the offence under Section 138 of N.I. Act, did not constitute in this case and has rightly acquitted the accused. There is no ground to interfere with the findings of the learned appellate Court. Therefore, prayed of dismissal of appeal. 10. I have heard the learned counsel for the parties and perused the record meticulously. 11. The complainant has specifically stat....
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....ver this money from the accused. 14. The entire wording used in Ex.P/1 nonetheless shows that both the cheques have been given as security but the cheques have been given on the date of execution of the document which has been executed after landing Rs. 2,00,000/- by the complainant to the accused and after landing aforesaid money, these two cheques amounting to Rs. 1,00,000/- each, total Rs. 2,00,000/- have been given by the accused. Hence, it cannot be said that on the date i.e. 24.04.2015, these two cheques were issued without there being any legally enforceable debt. Undisputedly, on that date, there was a legally enforceable debt on the accused of Rs. 2,00,000/-. The wording used in paragraphs-3 and 4 of this agreement further shows that these cheques were not given simply as security but they were given for the purpose of assuring return of the aforesaid money i.e. Rs. 2,00,000/-. If such amount would not be returned within six months i.e. up to 24.10.2025, undisputedly, these cheques would be submitted before the concerning bank for enchashment on 24.11.2015 i.e. after elapsing six months' period on 24.10.2025 and this happens in this case too. 15. In case of Sampe....
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....ability in praesenti in terms of the loan agreement, as against Indus Airways [Indus Airways (P) Ltd. v. Magnum Aviation (P) Ltd., (2014) 12 SCC 539 : (2014) 5 SCC (Civ) 138 : (2014) 6 SCC (Cri) 845] where the purchase order had been cancelled and cheque issued towards advance payment for the purchase order was dishonoured. In that case, it was found that the cheque had not been issued for discharge of liability but as advance for the purchase order which was cancelled. Keeping in mind this fine but real distinction, the said judgment cannot be applied to a case of present nature where the cheque was for repayment of loan instalment which had fallen due though such deposit of cheques towards repayment of instalments was also described as "security" in the loan agreement. In applying the judgment in Indus Airways [Indus Airways (P) Ltd. v. Magnum Aviation (P) Ltd., (2014) 12 SCC 539 : (2014) 5 SCC (Civ) 138 : (2014) 6 SCC (Cri) 845], one cannot lose sight of the difference between a transaction of purchase order which is cancelled and that of a loan transaction where loan has actually been advanced and its repayment is due on the date of the cheque. 12. The crucial question....
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....' cannot be presented prior to the loan or the instalment maturing for repayment towards which such cheque is issued as security. Further, the borrower would have the option of repaying the loan amount or such financial liability in any other form and in that manner if the amount of loan due and payable has been discharged within the agreed period, the cheque issued as security cannot thereafter be presented. Therefore, the prior discharge of the loan or there being an altered situation due to which there would be understanding between the parties is a sine qua non to not present the cheque which was issued as security. These are only the defences that would be available to the drawer of the cheque in a proceedings initiated under Section 138 of the N.I. Act. Therefore, there cannot be a hard and fast rule that a cheque which is issued as security can never be presented by the drawee of the cheque. If such is the understanding a cheque would also be reduced to an 'on demand promissory note' and in all circumstances, it would only be a civil litigation to recover the amount, which is not the intention of the statute. When a cheque is issued even though as 'security' the consequence ....
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.... repayment towards which such cheques are issued. The borrower certainly had an option of repaying the loan amount within stipulated period. In that circumstance, the cheques cannot be presented thereafter, but the evidence shows that no prior discharge of liability by the borrower/accused. 19. Though it is revealed from the document Ex.P/1 that both the cheques have been given on the date of execution of this agreement i.e. 24.04.2015, but in the complaint it is stated that within a period of six months when this amount has not been returned then the cheques have been given by the accused. Similar is the statement of the complainant in examination-in-chief. There is variation revealed qua Ex.P/1 but such variation has not been got proved by the defence while cross-examining Ramesh (PW-1). He remained intact in the cross-examination despite lengthy cross-examination. A suggestion has been given to this witness by the defence that the agreement Ex.P/1 was executed with free will and having full knowledge of it which shows that the wording used in the agreement was very well known to both the parties and they agreed to the terms of it and executed the document. Nothing revealed fr....