Ramesh availed a Car Loan of ₹ 100 lakhs from Excellent Bank of India on 01.02.2015 for purchase of an Audi Car, repayable over 15 years by EMI. The Bank collected post-dated cheques duly signed by Ramesh drawn on his SB

Under Section 138 of the Negotiable Instruments Act, 1881, dishonour of a cheque is a criminal offence liable to be punished with 2 years' imprisonment. To make dishonour a criminal offence under the said provisions, it is necessary that: There is a legally enforceable debt and the cheque was given for repayment/discharge of the liability. The cheque was returned due to insufficient funds. The cheque was presented within its validity period (within 3 months from the date mentioned on the cheque). Notice is sent to the drawer of the cheque within 30 days along with the cheque return memo. The payer / holder of the cheque doesn't receive the payment within 15 days of such intimation. Cheques issued towards payment of debt only attract the provisions of Section 138 of Negotiable Instruments Act, 1881. Post-dated cheques issued for security purpose, cheques given for donation, undated cheques etc. don't fall under the above provision. Facts of the Case: Here the post-dated cheques were given to the Bank as security to the loan for discharging the instalment dues. The post-dated cheques carried different dates based on the instalment due dates. When the cheque was presented for payment, it was dishonoured. Relevant Case Laws: ICDS Ltd. vs. Beena Shabeer & Anr., (2002) 6 SCC 426: The Supreme Court clarified that for Section 138 to apply, the cheque must be issued in discharge of a legally enforceable debt. Cheques issued as security may not fulfil this requirement. Sampelly Satyanarayana Rao vs. Indian Renewable Energy Development Agency Ltd., (2016) 10 SCC 458: The court differentiated between cheques issued as security and those issued in discharge of a liability. If the liability arises in the future, the cheque is not considered for an existing debt under Section 138. Balaji Seafoods Exports (India) Ltd. vs. Mac Industries Ltd., (1998) 1 CTC 222 (Madras HC): A cheque issued as security, even if dishonoured, does not constitute an offense under Section 138. Excellent Bank of India cannot sue Ramesh under Section 138 of the Negotiable Instruments Act, 1881 unless it can demonstrate that the dishonoured cheque was issued specifically to discharge the April 2024 EMI. If the cheque was collected as a general security for the loan, its dishonour does not constitute a violation of Section 138, as per the principles established in the cases cited above. The bank, however, retains the right to recover the dues through other legal mechanisms, such as enforcing the loan agreement or initiating civil proceedings.