DELHI HIGH COURT – SECURITY CHEQUE – THE SECURITY CHEQUE MAY BE ENFORCED IN THE EVENT OF FAILURE OF THE DEBTOR TO PAY THE DEBT OR DISCHARGE OTHER LIABILITY ON THE DUE DATE

Delhi High Court

Date of Judgement: 14.05.2015

It makes no difference whether, or not, there is an express understanding between the parties that the security may be enforced in the event of failure of the debtor to pay the debt or discharge other liability on the due date.

Even if there is no such express agreement, the mere fact that the debtor has given a security in the form of a post dated cheque or a current cheque with the agreement that it is a security for fulfilment of an obligation to be discharged on a future date itself, is sufficient to read into the arrangement, an agreement that in case of failure of the debtor to make payment on the due date, the security cheque may be presented for payment, i.e. for recovery of the due debt. If that were not so, there would be no purpose of obtaining a security cheque from the debtor.

A security cheque is issued by the debtor so that the same may be presented for payment. Otherwise, it would not be a security cheque.

Section 138 of NI Act does not distinguish between a cheque issued by the debtor in discharge of an existing debt or other liability, or a cheque issued as a security cheque on the premise that on the due future date the debt which shall have crystallized by then, shall be paid.

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Advocate Amaresh Singh

Advocate Amaresh Singh is a lawyer practicing in Supreme Court of India, Delhi High Court and various District Courts including Saket Court, Tis Hazari Court, Karkardooma Court, Patiala House Court and Dwarka Court. (M) 9999678571

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