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Liability or debt must exist on the date cheque issued to attract NI Act

In RANCH MANAGER, PCA & RD BANK LTD. vs SURESH DAS,  the respondent had issued a blank cheque as security while availing loan from the Bank. It was filled on a later date by a clerk of the Bank.  Subsequently when the Bank presented for collection, that the same was returned with an endorsement ‘insufficient funds’ in the account. Since the cheque issued by the accused was dishonoured, the complainant – Bank had issued a notice on 20.12.2004. However, in spite of service of notice, the accused failed to pay the cheque amount nor had replied to the said notice. Subsequently, the complainant – Bank initiated proceedings under Section 200 Cr.P.C. for an offence under Section 138 of the NI Act for dishonour of cheque.  The said complain was rejected by the trial court.

On appeal, the High Court referring to Sampelly Satyanarayana Rao vs. Indian Renewable Energy Development Agency Limited which was actually quoted by the Bank in support of their claim held that as clearly stated in the said judgment “If on the date of the cheque liability or debt exists or the amount has become legally recoverable, the Section is attracted and not otherwise.”  Held - It is proved that  as on the date of issuing the cheque, there was no legally recoverable debt which was due by the accused to the complainant – Bank. Exhibit P1 was a blank cheque which was issued for the sake of security and it is proved by the evidence of PW-1 the Bank Manager himself, that that it was filled on a later date by a clerk of the Bank.

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