S.138 Complaints Maintainable; Security Cheques Enforceable | HC

Case Details: Mandava Ashapriya vs. State - [2025] 181 taxmann.com 105 (HC - Delhi)

Judiciary and Counsel Details

• Neena Bansal Krishna, J.
• Pramod Kumar Dubey, Sr. Adv., Abhishek Saket, Abhigyan, Ms. Amrita Vatsa, Manish Madhukar, Nishaank Maitoo, Rupraj Banerjee, Rama Chanduin B. Siddhartha, Devrishi Tyagi & Manish Madhukar, Advs. for the Petitioner.
• Shoaib Haider, APP, Siddharth Agarwal, Sr. Adv., Sidharth Sethi, Ms. Shreya Sircar & Kunal Saini, Advs. for the Respondent.

Facts of the Case

In the instant case, the complainant-lender sanctioned a bridge loan to the borrower company, intended to be converted into a term loan on achievement of milestones. The arrangement was amended to require post-dated cheques from the accused group company to secure the borrower’s quarterly principal and interest repayments.

The borrower sought conversion of the outstanding bridge loan into a regular project finance term loan. The complainant stated it would consider the request, subject to the clearance of outstanding dues and approval of its competent authority. The borrower paid outstanding dues. The complainant withdrew its Loan Recall Notice and began withdrawing proceedings under section 138 for dishonoured cheques up to 31-8-2016.

Further, two cheques issued by the accused group company as security for instalments due after 31-8-2016 were presented and dishonoured for insufficiency of funds. Thereafter, the complainant filed criminal complaints under Section 138 of the Negotiable Instruments Act, 1881. The Metropolitan Magistrate passed summoning orders for offences under section 138 of the Act.

It was noted that there was only a proposal to convert a bridge loan into a term loan, and no final agreement. Further, since no novation of contract occurred, the original agreement remained in force, and the security cheques represented a legally enforceable debt.

High Court Held

The High Court observed that the cheques issued as security for the original bridge loan agreement remained valid instruments for that debt and, consequently, their subsequent presentation for encashment was towards a liability that was legally enforceable at the time of their presentation. Thus, complaints under section 138 of the Act were maintainable.

The High Court held that since the complainant had pleaded facts showing individuals’ involvement as directors responsible for the company’s business, which led to the issuance and dishonour of cheques, such averments were legally sufficient to summon the directors to face trial.

Further, the High Court held that, in the absence of any averments defining the role of accused no. 2 in the complaint, it could not be said that he was in charge or responsible for the day-to-day working of the accused company, and he was entitled to be discharged.

List of Cases Reviewed

• Order of Metropolitan Magistrate (Summoning Orders) Dated 31-1-2017 and 1-3-2017 in Complaint Case Nos. 1659/2017, 1660/2017 and 3474/2017 (para 89) partly affirmed

List of Cases Referred to

• National Small Industries Corporation Limited v. Harmeet Singh Paintal [2010] 98 SCL 407 (SC) (para 81)
• Kamalkishor Shrigopal Taparia v. India Ener-Gen (P.) Ltd. [2025] 171 taxmann.com 715/188 SCL 312 (SC) (para 82)
• Pooja Ravinder Devidasani v. State of Maharashtra [2015] 53 taxmann.com 434/129 SCL 393 (SC) (para 85)
• Chitalapati Srinivasa Raju v. SEBI AIR 2018 SC 241 (para 86).