The Delhi High Court dismissed a petition under Section 482 CrPC seeking quashing of a complaint under Sections 138 and 141 of the Negotiable Instruments Act, 1881. The petitioner, Director of M/s Mahesh Prefab Pvt. Ltd., had issued a cheque of ₹6,82,416 as security against a mobilization advance received from the respondent, M/s Negolice India Pvt. Ltd., under a work order for supply and installation of GRC grills. Following termination of the contract and dispute over accounts, the cheque was presented and dishonoured with the remark “account closed.” The petitioner contended that the cheque was merely a security instrument and could not attract Section 138. Relying on precedents including Sampelly Satyanarayana Rao v. IREDA and Sripati Singh v. State of Jharkhand, the Court held that a cheque issued as security becomes enforceable if the underlying liability subsequently crystallizes into a legally recoverable debt. Observing that the respondent had claimed a definite outstanding liability under the indemnity bond and that the factual dispute over the exact amount required trial adjudication, the Court refused to interfere, holding that no case was made out to quash the summoning order.
Negotiable Instruments Act, 1881 — Section 138 — Dishonour of cheque — Cheque given as security — Cheque issued as security can mature for presentation if a legally enforceable debt or liability crystallizes later, and the drawer fails to repay. The onus is on the accused to prove otherwise with cogent evidence. (Paras 28, 31, 33)
Negotiable Instruments Act, 1881 — Section 138 — Dishonour of cheque — Legally enforceable debt or liability — The determining factor is whether a legally enforceable debt or liability exists on the date the cheque is presented, not when it was drawn or handed over. (Para 27)
Negotiable Instruments Act, 1881 — Section 138 — Dishonour of cheque — Contractual dispute — Where a cheque is given as security for a loan or contract, and a liability crystallizes later into a legally enforceable debt, the cheque can be considered as issued in discharge of that debt for the purposes of Section 138. (Para 28)
Negotiable Instruments Act, 1881 — Section 138 — Dishonour of cheque — Security cheque exceeding legally recoverable debt — A dispute regarding the exact amount due as per a contract and whether the presented cheque amount exceeds the legally recoverable debt is a matter to be decided during trial, not at the summoning stage. (Paras 51, 52)
Criminal Procedure Code, 1973 (CrPC) — Section 482 — Quashing of criminal proceedings — Summoning order for offence under Section 138 of NI Act — High Court will not quash a summoning order if there is a dispute about whether a legally enforceable debt existed or if the cheque amount exceeded the recoverable debt, as these are triable issues. (Para 53)
Negotiable Instruments Act, 1881 — Section 138 — Dishonour of cheque — Indemnity Bond — A cheque given as security under an Indemnity Bond, which allows encashment without prior notice if the owner suffers loss or damages, can be presented if a liability for liquidated damages arises. (Para 42)
Manmohan Gaind v. Negolice India Pvt. Ltd., decided on : 11-11-2025