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karan   26 July 2018

Section 138

I am a director in a construction company. We obtained loans from the banks and financial institutions for equipment finance. At the time we had to give them cheques against the loan We have paid half of our emis. Due to a downturn in the economy we were unable to pay our balance installments and our account became NPA. The banks have now filed criminal cases against us citing section 138. I want to know if we are liable under section 138 under these circumstance.


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 4 Replies

ALINAWAZ VAKIL   26 July 2018

it depends upon the manner in which the cheque is issued by you.

karan   27 July 2018

The cheques are issued at the time of taking the finance from the bank. They use it mainly as a security. These are normally blank cheques with just the name of the financier mentioned. No date or amount is given.

The loan itself is guaranteed in two ways - 1. The machine itself which belongs to the banks till the loan is paid off 2. Personal guarantees of all the directors.

 

manoj   28 July 2018

yes you are liable 

 

Karanveer Singh (Advocate)     28 July 2018

The post dated cheques are taken by the institutions for the purpose of security. In case there is a default these can be used to file a 138 NI Act complaint. You do become liable to pay. The only, and the advisable, solution you have is to work out on some kind of a settlement with the institution.

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