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Hemant kaushik (Mr.)     01 December 2009

Is it Legal ?

If someone takes a secured home loan from a bank against mortagage of a land, bank fixes some penal interest on non payment of installments (borrower is free to pay through cash/cheque), and is free to sell the mortagaged property on failure of borrower, then question is that is it legal to serve the borrower a notice u/s 138 N.I. Act on dishonor of any one cheque ?

i know banks serve such notice on regular basis, but i think it is illegal practice to serve such notice to such borrower because on non payment of installments bank is free to charge penal interest and further on falure of borrower bank is entitled to sell the property and recover the amount....  please give ur valuable thoughts and case law if any...


 3 Replies

Raj Kumar Makkad (Adv P & H High Court Chandigarh)     01 December 2009

Selling the mortgaged property is the harsh and extreme step on the part of bank. If the loanee do not repay his loan amount even after complaint under section 138 NI Act then no chance remains with the bank to follow your suggestion.

N RAMESH. (Advocate Chennai. Formerly Civil Judge. Mobile.09444261613)     03 December 2009

Giving cheque towards repayment of loan and subsequently dishounouring it,  is distinct offence. The remedies mentioned by you are civil remedies and bank is at liberty to chose any action as it deem fit. It is not illegal. but several distinct legal rights available to bank.

Hemant kaushik (Mr.)     04 December 2009

Thanks for reply!
lets see it - for intance i gave rs. 10,000/- to A and in return as "security" he
gave me a cheque of rs. 10,000/- . here the cheque is given as
security and my money is unsecured loan (no security except cheque) , but in bank
loan case we have mortgaged property as security and bank further has
right to charge penal interest/enforcement of security and i have read in some case laws that
cheque u/s 138 should be given as "security" but in this case
security is land and parties have legal civil contract between them, and it's on will of borrower to pay though cash/cheque...

so i think this should/must not fall u/s 138, and it's matter of
proper trial & serious proceedings in higher courts to determine
whether it falls u/s 138 or not... i think it has not been tested properly..

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