N.I.Act 138/No legal debt

Querist : Anonymous (Querist) 03 April 2010 This query is : Resolved

Hello Sir,
One of my brother has availed a loan from a bank,and he is a defaulter,in due course I had given him a cheque in the name of his firm for other purpose,which he has handed over to the manager.I am not a guarantor nor a surity to the loan.Now the bank has filed a complaint against me and since 5 months the case is running in the court and till now the bank authoriy never attended the court.
The bank authority has told in the notice that they have issued a DD against the clearance of my cheque and I am not at all
related to this transaction.
Please share your valuable suggestions
Regards
Basanna

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Harshada Shukl Kulkarni (Expert) 03 April 2010
Hi !

Your query is full of ambiguities, as you are not sure who has issued the DD against the clearance of your cheque. If once ur cheque is cleared then S-138 of NI Act will not attract, and if the bank has filed a case u/s 138 of the said Act against you then your cheque must be bounced. But the most imp. thing is that if u r not at all involved in the trasaction and u don't have any legal debt against the Bank, then the said provision does not attract.

prakash vathore (Expert) 03 April 2010
i do agree with harshada

Kiran Kumar (Expert) 03 April 2010
your query does not make out any legally enforceable debt, if u were not guarantor then there is no question of your liability, and as far as status of ur cheque is concerned I do agree with Harshada.

Parthasarathi Loganathan (Expert) 03 April 2010
Bank can exercise the Right to Set off of any valid proceeds received to the credit or adjustment of loan and the drawee of the cheque in question has no relevence to the issue

Parveen Kr. Aggarwal (Expert) 03 April 2010
Even if you have not availed any credit facility and also have not stood surety for any debtor of the bank still you can be made liable under section 138 of the Negotiable Instruments Act, 1881 if the cheque drawn by you on your bank account in favour of the creditor bank has dishonoured for insufficient funds. You may have issued cheque against liability of any other person but your liability under section 138 is not limited to the issuance of cheque against your own liability.