'Security Cheque' Not Statutorily Defined, Not Exempt From Cheque Bounce Proceedings: Himachal Pradesh HC

The Himachal Pradesh High Court has refused to quash cheque dishonour proceedings at the threshold in a case where the accused claimed the dishonoured cheque had been issued only as security.

Justice Sandeep Sharma said a cheque described as a “security cheque” is not automatically excluded from cheque dishonour proceedings.

“Needless to say, expression “Security Cheque” is not a statutorily defined expression in the Negotiable Instruments Act, rather same is to be inferred from the pleadings as well as evidence, if any, led on record with regard to issuance of security cheque. The Negotiable Instruments Act does not per se carve out an exception in respect of a “security cheque” to say that a complaint in respect of such a cheque would not be maintainable as there is a debt existing in respect whereof the cheque in question is issued, same would attract provision of Section 138 of the Act in case of its dishonour. The Negotiable Instruments Act does not per se carve out an exception in respect of a “security cheque” to say that a complaint in respect of such a cheque would not be maintainable as there is a debt existing in respect whereof the cheque in question is issued, same would attract provision of Section 138 of the Act in case of its dishonour.”

The case arose from a complaint filed by Goel Motors against OM-CHEEVA Business (India) LLP and another before the Judicial Magistrate First Class, Bilaspur.

According to the petitioners, the parties had entered into an agreement for provision of ten transport vehicles, which was later terminated. They claimed the cheque in question had been issued only as security, sought its return after termination of the agreement, and also instructed their bank to stop payment.

The petitioners alleged that despite this, the respondent presented the cheque and initiated criminal proceedings. They argued that no liability survived after termination of the agreement and that allowing the complaint to continue would unnecessarily subject them to a protracted trial.

Opposing the plea, Goel Motors argued that the petitioners had admitted issuance of the cheque and their signatures on it, attracting the statutory presumption in favour of the holder that the cheque was issued towards a lawful liability.

It further argued that whether the cheque was issued as security or towards discharge of liability was a disputed factual question that could only be determined on evidence before the trial court.

Referring to Sripati Singh v. State of Jharkhand, the Court reiterated that dishonour of a cheque issued as security can also attract prosecution.

The court also relied on the Supreme Court's ruling in Sri Om Sales v. Abhay Kumar, which held that a complaint cannot be quashed at the threshold if it discloses a prima facie offence, since disputed factual issues and appreciation of evidence must be left to trial.

Finding no merit in the petition, the Court dismissed it.

For Petitioners: Senior Advocate Vijay Kumar Arora, Advocates Tarun Sharma, Guarv Kumar and Hitansh Raj

For Respondent: Senior Advocate T.S Chauhan and Advocate Surya Chauhan