Madras HC | Case under S. 138 NI Act is maintainable against person who issues cheque even if loan is secured by Trust

Madras High Court: The Bench of M. Nimal Kumar, J. refused to quash proceedings pending on the file of Judicial Magistrate (III), Coimbatore.

The complainant filed a case against the petitioner for an offence punishable under Section 138 NI Act, 1881 (dishonour of cheque). Petitioner took a hand loan of Rs 6 lakhs from the complainant. The amount was agreed to be repaid within 6 months along with an interest at 18% per annum for which petitioner issued a cheque. However, petitioner defaulted in paying either the amount or the interest. Consequently, complainant presented the cheque on the bank but it was dishonoured. Hence, he instituted the case.

M. Prabhakaran, counsel for the petitioner submitted that the subject cheque was issued for collateral security for the loan secured by Sri Venkateswara Educational and Charitable Trust. It was contended that the case which was preferred against the petitioner in his individual capacity was not maintainable.

However, the High Court held the said contention to be not acceptable for the reason that the cheque was issued in the name of the petitioner for the loan availed. Further, the petitioner neither repaid the money nor replied to the statutory notice sent by the complainant. It was also held that the claim of “security cheque” was a matter of fact which had to be decided only in the trial. Resultantly, the present petition was dismissed.[K. Velu v. P. Damodharan, 2019 SCC OnLine Mad 315, dated 07-01-2019]

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