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Kaycee (Self Employed)     29 October 2012

Ni act 138

Dear All,

1) I shall be thankfull if someone can clear the issue with regards to a Cheque issued by borrower as Gurantee for the principal amount received bu him and mentioned in MOU signed by both the parties. 

2) Can the same cheque be used under the NI act 138?,if the same returns dishounered by the bank?

Should a notice be issued to the borrower prior to deposit of "Gurantee" cheque,?

Any other useful information/judgements etc...

Thanks in advance


 4 Replies

Goutam Prasad (Advocate)     29 October 2012

Such cheque will come within purview of section 138 of N.I. Act only after proper notice of gurantee becomes due is given to the issuer of the cheque. Otherwise normally, security cheques are not covered.

Kaycee (Self Employed)     29 October 2012

Thanks Mr. Goutam Prasad for your reply,however can you please elaborate and explain "only after proper notice of gurantee becomes due",


YOGESHWAR. (ADVOCATE HIGH COURT-criminal /civil     29 October 2012

Judgments on security and guarntee cheques are misquoted and not read in proper context.

In your case the cheque is for payment of principal so on bounce NI 138 is applicable.

However the accused have many othe eascape routes which arise due to comman lapses by the complainant or creditor.

Kaycee (Self Employed)     29 October 2012

Mr. Yogeshwar thank you for the update Kindly identify and help me to plug the escape routes and please list the lapses that need to be avoided.


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