Now the Kerala HC said that rather than looking at the nomenclature of the word ‘guarantee’ mentioned in the complaint, the right approach would be to consider the ‘nature’ of the complaint.
It is not transaction of loan, if the amount is to be repaid the moment it is paid to borrower.
So, the court held that such a situation is not hit by S.138 of the Act .
The court held that if it holds otherwise, then every creditor would abuse the provisions of this section by obtaining blank cheques and putting the debtors in fear of prosecution and insist on discharge of the debts at any time.
Though the fear expressed by the court is practical, but with due respect, it is difficult to see that the cheque was not issued in respect to a debt due from the drawer , a distinction between issue of cheque as security or in repayment of debt is illusory on the ground that where a cheque is prevented for payment according to its apparent tenor and dishonoured, it amounts to an offence under S.138 whatever may be the background story of the chequer.
Later, at the time of presentment of the cheque by the appellant, one of these cheques was dishonoured on the grounds of insufficiency of funds. 138 the cheque drawn must be for the discharge, in whole or in part, of any debt or other liability.
So the debt or other liability must be in existence when the cheque, whether blank or post dated was issued.20,000/- from him and had issued a post-dated cheque for Rs.22,000/- for the due discharge of the said liability (including interest).The cheque, when presented for encashment, was dishonoured on the ground of 'insufficiency of funds'.So, according to the court, a cheque whether issued for payment of a debt or as security, makes no difference in law. It is humbly submitted that in Warma case, the court wrongly relied on the afore-said distinction as I think that if a cheque can’t be recognized as an instrument against a debt or liability, then it can’t be said that it has been kept as a ‘security’ because it would not be of any use to the creditor.But in Warma case, the court accepted the observation made in Pawan Enterprises v. CASE DECIDED ON ADVERSE INFERENCE In the said case, the court itself agreed to the findings of the trial court inspite of the records being with them.It is an established law that for attracting S.138 of the Act, the cheque should have been issued in discharge of a debt or liability.