tonmoy (advocate) 22 August 2017

Us 138 of ni act

Please help me on Section 138 of NI Act. I would like to know if a blank cheque is kept with a company as a security for the supply of product on credit. If payment is not made on time then the security Cheque can be dis honoured and initiate a case U/s 138 of NI Act. can anyone share me with the case laws if this is invalid.

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18 Replies

Sachin (N.A) 22 August 2017

Bounce of security check doesn't come under 138 N.I Act.

But you must have proof that check was given as security.

tonmoy (advocate) 22 August 2017

Thanks Sachin. Is there any judgement from SC where it says that initiating a case u/s 138 on Security Cheque is invalid.

Rama chary Rachakonda (Secunderabad/Telangana state Highcourt practice watsapp no.9989324294 ) 22 August 2017

You can browse the related cases online. www.supremecourtcases.com

Sachin (N.A) 22 August 2017

There are many judgements for the same and same is mentitoned in 138 N.I Act

138 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 returned by the bank unpaid,

Sachin (N.A) 22 August 2017

So, as per 138 N.I Act , cheque given to discharge the liability comes under the ambit of 138 N.I Act

Kumar Doab (FIN) 22 August 2017

Is there any communication on record that establishes the said cheque is security cheque?

Kumar Doab (FIN) 22 August 2017

It is a practise to keep such cheques.

If stock is supplied and payment is not made then make the payment and close the matter.

tonmoy (advocate) 22 August 2017

Yes it is being mentioned in the agreement that 3 pieces of undated cheques should be kept as security.

Kumar Doab (FIN) 22 August 2017

Hand it over to the lawyer of the establishment.

R Trivedi (advocate.dma@gmail.com) 23 August 2017

This issue of security cheque or blank cheque is not so straightforward. The key is if your supplier can establish that he has carried out all the prudence, that is supplied the material, sought payment in time, payment gets due and despite all this you have not paid, and then only he has invoked the security cheque, then his case becomes very strong. From your side you can prove that liability does not exist or liability claim of complainant is bad.

Kumar Doab (FIN) 23 August 2017

Pls relate with the finer points in agreement............

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Originally posted by : tonmoy
	Please help me on Section 138 of NI Act. I would like to know if a blank cheque is kept with a company as a security for the supply of product on credit. If payment is not made on time then the security Cheque can be dis honoured and initiate a case U/s 138 of NI Act. can anyone share me with the case laws if this is invalid.