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Rajinder Kumar Arora (Advocate)     01 December 2017

Filing of suit u/s 138 nia

A couple of years back my client has given blank cheque to a finance company through builder of flats towards security for loan money drawn by the builder against 'subvention plan' scheme wherein the builder draws the amount on behalf of the allottee and the allottee pays EMI only after he gets the possession.

Now the builder has made no progress in construction but has withdrawn substantial amount from the finance company. Further, the builder is not paying the EMI against the money drawn by it from the finance company.

The allottee is in Delhi and the builder as well as the finance company have their offices in Delhi but the finance company's Registered Office is in Mumbai.

Now having the cheque dishonoured from the bank of my client, it seems the financing company may file a suit in Mumbai u/s 138 NIA  for dishonour of cheque which was otherwise given as security only.

Please advise provisions or steps that can be taken to stop the finance company from filing a suit in Mumbai?

Thanks for your help in advance.


 5 Replies

R.Ramachandran (Advocate)     01 December 2017

1. The cheque was presented to the Bank by the Finance Company, in which City?  Whether it was presented in Delhi or Mumbai.

2. If it was presented in Mumbai, then the finance company can file the case u/s. 138 only at Mumbai.  It cannot be stopped.

3. However, if the Finance Company had presented the cheque in Delhi, then it cannot file the case u/s. 138 at Mumbai.


Rajinder Kumar Arora (Advocate)     01 December 2017

Thanks for the reply. Finance company has presented the cheque in Mumbai, ostensibly to harass the drawer. Any way out please?

If you receive notice u/s 138 from the company then don't forget to reply the said notice rejecting the said claims and do mention that the cheques were for security..... Send the said reply through Register A. D.

This will be a great defence for you during the case.....
1 Like

Rajinder Kumar Arora (Advocate)     01 December 2017

Yes.  Thanks!

But, the anxiety is to save the Client from going to Mumbai every now and then!

To defend yourself you need to struggle.... And that's the harsh reality

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