Security Cheques Vs. Enforceable Debt: Delhi High Court Reiterates Limits Of Section 138 NI Act

Introduction

The Delhi High Court, in a significant judgment has once again highlighted the legal distinction between security cheques and those issued in discharge of a legally enforceable debt or liability under the Negotiable Instruments Act, 1881.

In the case of Sri Sai Sapthagiri Sponge Pvt. Ltd. v. State (GNCT of Delhi) & Anr.¹, the Court quashed five complaints filed under Section 138 of the NI Act, holding that cheques issued merely as security or for audit purposes cannot be treated as instruments issued in satisfaction of a debt. The Court also found that the summoning orders adopted by the Delhi Magistrate originally issued by a court in Bellary that lacked jurisdiction were non-established in law.