Security cheque, stop-payment and limitation under Section 138
Meera advanced ₹15,00,000 to Arjun in January 2024 for his trading business. The loan was repayable on demand. Arjun gave her a cheque dated 10 February 2024 for ₹15,00,000, saying it was 'security' and would be encashed when she demanded repayment. In June 2024 Meera demanded repayment; Arjun sought two months' time. On 20 July 2024 Meera presented the cheque at her bank. It was returned with the remark 'payment stopped by drawer'. Meera sent a demand notice under Section 138 of the Negotiable Instruments Act, 1881 on 5 August 2024 by registered post; it was served on Arjun on 12 August 2024. She filed a complaint on 10 October 2024. Arjun contends that (i) the cheque was only security and no debt was due on its date, (ii) the cheque had become stale by presentation, and (iii) the complaint is time-barred. Meera relies on the presumption under Section 139.
1. Does the return remark 'payment stopped' attract Section 138, given that the cheque was presented about five months after its date?
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Issue: Whether dishonour for stop-payment is enough when the cheque was presented beyond its validity period.
Rule: Section 138 applies when a cheque drawn for discharge of a legally enforceable debt or liability is returned unpaid. 'Payment stopped' is a dishonour. However, the cheque must be a valid cheque when presented. Under RBI clearing rules, a cheque is ordinarily valid for three months from its date. Presentation of a stale cheque is not a valid presentation for Section 138.
Application: The cheque was dated 10 February 2024. Its normal validity expired around 9 May 2024. Meera presented it on 20 July 2024, about five months later. The bank's remark was 'payment stopped', not 'out of date', but the remark does not cure the invalidity. A drawer's stop instruction cannot revive a stale instrument. The complaint therefore does not rest on a valid presentment of a cheque.
Conclusion: Section 138 is not attracted on these facts because the cheque was stale when presented. The stop-payment remark does not by itself create an offence.
2. Assuming the cheque was validly presented, is Arjun's 'security cheque' defence available?
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Issue: Whether a cheque given as security can support Section 138 if the debt becomes due later.
Rule: Section 138 does not require the cheque to be issued on the same date as the debt. A cheque given as security can fall within Section 138 if, at the time of presentation, there is a legally enforceable debt or liability. Section 139 raises a presumption that the cheque was received for discharge of such a debt or liability. The drawer must rebut that presumption with cogent evidence.
Application: Arjun gave the cheque for a ₹15,00,000 loan. The loan was repayable on demand. Meera demanded repayment in June 2024 and Arjun asked for time. By the date of presentation, the liability was due and outstanding. The fact that the cheque was described as 'security' does not make it a worthless piece of paper. Arjun has not shown repayment or a novation. His bare assertion that no debt was due on 10 February 2024 is not enough to rebut Section 139.
Conclusion: If the cheque had been validly presented, the security-cheque defence would fail. The debt existed and was due when Meera presented the cheque.
3. Compute the limitation for the complaint and state the effect of the delay.
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Issue: Whether the complaint filed on 10 October 2024 is within the period prescribed by Section 142.
Rule: Under the proviso to Section 138, the demand notice must be sent within 30 days of receipt of information of dishonour. The drawer gets 15 days from receipt of the notice to pay. Under Section 142(1)(b), the complaint must be filed within one month of the date on which the cause of action arises under clause (c) of the proviso to Section 138. Section 142(2) permits the court to condone delay for sufficient cause.
Application: The dishonour information was received on 20 July 2024. The notice sent on 5 August 2024 was within 30 days. It was served on 12 August 2024. The 15-day period expired on 27 August 2024. The cause of action arose on 28 August 2024. The one-month period for the complaint ended on 27 September 2024. The complaint was filed on 10 October 2024, about 13 days late.
Conclusion: The complaint is beyond the one-month period. It is not automatically dead: the magistrate may condone the delay under Section 142(2) if Meera shows sufficient cause. Without condonation, the complaint is time-barred.