Impact of Security Cheque Defence on a Quashing Petition Fails

Table of Contents

1. Judgment Details: Understanding the Impact of Security Cheque Defence on a Quashing Petition
2. Brief Facts of the Case: The Loan, the Shares, and the Dishonoured Cheque
3. Timeline of the Cheque Dishonour Complaint
4. The Core Dispute: The Impact of Security Cheque Defence on a Quashing Petition
   1. Accused’s Stand: “Admitted the Issuance of the Cheque for Other Purpose But Not to Discharge the Debt”
   2. Complainant’s Stand: Dishonour of a Valid Cheque
5. Hon’ble High Court’s Judgment on the Quashing Petition
   1. The Deciding Factor for the Accused to Face the Trial or File a Quashing Petition
   2. The Critical Role of Admission of Issuance of Cheque in a Quashing Petition
   3. Why the “Security Cheque” Defence is a Matter for Trial, Not Quashing
   4. The Negative Impact of Filing a Quashing Petition After a Long Delay
   5. Key Judgments Cited by the Hon’ble High Court
6. Final Decision and Conclusion: Impact of Security Cheque Defence on a Quashing Petition Fails
   1. Operative Part of the Judgment
   2. Key Takeaways for Complainants and Accused
7. Frequently Asked Questions (FAQs)

1. Judgment Details: Understanding the Impact of Security Cheque Defence on a Quashing Petition

This article analyzes a petition filed under Section 482 of the Cr.P.C. before the Hon’ble High Court of Delhi. The petitioners (the accused) sought to quash summoning orders issued by the learned Trial Court in a criminal complaint under Section 138 of the NI Act. The case provides crucial insights into the impact of a Security Cheque Defence on a Quashing Petition.

• Title of the Judgment: NOUAM FINANCIAL CONSULTANTS PVT. LTD. & ANR vs. THE STATE (GOVT. OF NCT DELHI) & ANR.
• Name of the Hon’ble Judge: HON’BLE DR. JUSTICE SWARANA KANTA SHARMA
• Citation Number of the Judgment: CRL.M.C. 1602/2022 & CRL.M.A. 6869/2022
• Date of the Judgment: September 16, 2025

2. Brief Facts of the Case: The Loan, the Shares, and the Dishonoured Cheque

The case originates from a business transaction between the parties. The complainant (Respondent No. 2) is a company that provides loan services. The accused (Petitioner No. 1, with Petitioner No. 2 as its director) is in the business of lending money.

• The parties entered into a transfer agreement dated 07.12.2015, where the complainant availed a loan.
• This agreement was later modified by an Addendum dated 26.02.2016, fixing the loan amount at ₹1,07,51,400/- against the value of shares transferred by the complainant.
• The complainant alleged that it became apprehensive about its shares and expressed willingness to repay the loan with interest to get its shares back.
• The accused (petitioner no. 1) admittedly issued a cheque for ₹5,76,40,000/- dated 31.03.2017. The accused claimed this was ‘security’ for the shares , while the complainant presented it for encashment.
• The cheque was dishonoured with the remarks “Payment Stopped by Drawer” vide a return memo dated 05.06.2017.

3. Timeline of the Cheque Dishonour Complaint

• 07.12.2015: Original transfer agreement signed between the parties.
• 26.02.2016: Addendum executed, fixing the loan amount at ₹1,07,51,400/-.
• 31.03.2017: Date of the cheque (No. 180463) for ₹5,76,40,000/- issued by the accused.
• 05.06.2017: The cheque was dishonoured with remarks “Payment Stopped by Drawer”.
• 16.06.2017: Statutory notice issued to the accused (petitioners).
• 22.06.2017: Statutory notice was served upon the accused.
• 21.07.2017: Criminal complaint (No. 3490/2017) filed by the complainant.
• 21.05.2018 & 21.07.2018: The learned Trial Court passed the impugned summoning orders.
• 2022: The accused filed the present quashing petition (CRL.M.C. 1602/2022).

4. The Core Dispute: The Impact of Security Cheque Defence on a Quashing Petition

The central conflict was the legal status of the dishonoured cheque, which directly tested the impact of a Security Cheque Defence on a Quashing Petition.

4.1. Accused’s Stand: “Admitted the Issuance of the Cheque for Other Purpose But Not to Discharge the Debt”

The petitioners (accused) argued for quashing the summons on one primary ground:

• The cheque was not issued for any ‘legally enforceable debt or liability’.
• They contended that the cheque was merely a ‘security’ cheque.
• They claimed the complainant was, in fact, trying to evade its own liability of repaying the loan it had taken from the petitioners.
• At the Trial Court, the accused (petitioner no. 2) did not dispute issuing the cheque or filling the details. He admitted the issuance of the cheque for other purpose (as security) but disputed that it was not to discharge the debt.

4.2. Complainant’s Stand: Dishonour of a Valid Cheque

The complainant (respondent no. 2) strongly opposed the quashing petition, arguing:

• The accused had indulged in misappropriation of the shares.
• The cheque was issued in the backdrop of these transactions and could not be termed as mere ‘security’.
• All required steps for a Section 138 complaint—dishonour of the cheque, statutory notice, and failure to pay—were completed, making a clear case.
• Crucially, the complainant argued that the petition should fail due to filing a quashing petition after a long delay of four years.

5. Hon’ble High Court’s Judgment on the Quashing Petition

The Hon’ble High Court of Delhi, after hearing both sides, rejected the petition to quash the summoning orders. The judgment clarified several key legal principles.

5.1. The Deciding Factor for the Accused to Face the Trial or File a Quashing Petition

The Hon’ble Court found that the deciding factor for the accused to face the trial or file a quashing petition rests on whether the facts are disputed.

The accused argued the cheque was for security, while the complainant argued it was for a liability. The Hon’ble High Court noted that these were disputed questions of fact that required evidence to be led. It held that the High Court, in its 482 Cr.P.C. jurisdiction, should not conduct a detailed factual inquiry, especially when the Trial Court is already handling the matter.

5.2. The Critical Role of Admission of Issuance of Cheque in a Quashing Petition

The Hon’ble Court highlighted the role of admission of issuance of cheque in a quashing petition. It observed that:

“…at the time of framing of notice, the petitioner no. 2 herein did not dispute the issuance of cheque in question, and rather stated that a duly-filled cheque had been issued to the respondent no. 2, but disputes the purpose of issuance of the said cheque.”

The Hon’ble Court held that since the issuance of the cheque, the details, and the signatures were admitted, the presumption under Section 139 of the NI Act squarely gets attracted. This legal presumption mandates that the Hon’ble Court must presume the cheque was issued for a legally enforceable debt or liability.

5.3. Why the “Security Cheque” Defence is a Matter for Trial, Not Quashing

The judgment decisively concluded that the impact of a Security Cheque Defence on a Quashing Petition is minimal because it is a defence that must be proven at trial.

• The Hon’ble Court stated that while the presumption under Section 139 can be rebutted by the accused, this rebuttal must happen “at the stage of trial before the learned Trial Court, and not at a pre-trial stage”.
• The petitioner’s main contention—that the cheque was for ‘security’—was held to be a “matter of trial”. This finding was supported by the Hon’ble Supreme Court’s decision in M.M.T.C Ltd. & Anr v. Medchl Chemicals & Pharma (P) Ltd. & Anr.

5.4. The Negative Impact of Filing a Quashing Petition After a Long Delay

The Hon’ble High Court also noted the severe negative impact of filing a quashing petition after a long delay.

• It was apparent that the petition challenging the 2018 summoning orders was filed after a “delay of about 4 years”.
• During this period, the trial had already progressed to the stage of defence evidence, as no stay had been granted. This delay and the advanced stage of the trial weighed against the accused’s petition.

5.5. Key Judgments Cited by the Hon’ble High Court

The Hon’ble High Court relied on several Hon’ble Supreme Court precedents to dismiss the quashing petition:

• Oriental Bank of Commerce v. Prabodh Kumar Tewari (2022): A drawer who signs and hands over a cheque is presumed liable unless they provide evidence to rebut the presumption.
• Rajeshbhai Muljibhai Patel v. State of Gujarat (2020): The Hon’ble Supreme Court held that when the Section 139 presumption is attracted, it is not “judicious” for the High Court to quash the case under Section 482 Cr.P.C., as the burden is on the accused to rebut the presumption with evidence at trial.
• Rathish Babu Unnikrishnan v. State (NCT of Delhi) (2022): The burden of proving there is no legally enforceable debt must be discharged during the trial and cannot be a ground for quashing a complaint or summoning order.

6. Final Decision and Conclusion: Impact of Security Cheque Defence on a Quashing Petition Fails

6.1. Operative Part of the Judgment

The Hon’ble High Court of Delhi concluded that the impact of a Security Cheque Defence on a Quashing Petition was insufficient to warrant quashing the proceedings.

The Hon’ble Court stated:

“Thus, in view of the foregoing discussion, and considering the fact that presumption under Section 139 of NI Act is prima facie attracted against the petitioners and the only argument of the petitioner pertains to the cheque being not issued a legally enforceable debt or liability which is a matter of trial, this Court finds no ground to exercise its power under Section 482 of the Cr.P.C., which has to be sparingly exercised and cannot be invoked casually, to quash the impugned summoning orders and the proceedings arising therefrom.”

Accordingly, the petition was dismissed.

6.2. Key Takeaways for Complainants and Accused

This judgment provides critical takeaways for both parties in a Section 138 complaint:

• For the Accused: Simply claiming a cheque was for “security” is not enough to quash a summoning order. The deciding factor for the accused to face the trial or file a quashing petition is that if you have admitted the issuance of the cheque for other purpose, the presumption under Section 139 is triggered. Your “security cheque” defence must be proven with evidence during the trial. Furthermore, filing a quashing petition after a long delay (e.g., 4 years) when the trial is already progressing is highly unlikely to succeed.
• For the Complainant: If the issuance of the cheque and signatures are admitted by the accused, the legal presumption is in your favour. The role of admission of issuance of cheque in a quashing petition is your strongest point. The accused’s defences, such as the cheque being for security, become a matter of trial, allowing your complaint to proceed.

7. Frequently Asked Questions (FAQs)

Q: Can a Section 138 complaint be quashed if the cheque was given only as security?

No. This judgment clarifies that simply claiming the cheque was for ‘security’ is not a sufficient ground to quash a complaint or summoning order. This defence must be established during the trial.

Q: What is the presumption under Section 139 of the NI Act, and when does it apply?

The presumption is that a cheque was issued to discharge a legally enforceable debt or liability. This presumption applies the moment the accused admits to issuing the cheque and the signatures on it.

Q: Is “security cheque” a valid ground for filing a quashing petition under Section 482 Cr.P.C.?

Based on this judgment, it is not a valid ground for quashing. The Hon’ble High Court held that the claim of a cheque being for “security” is a disputed question of fact that must be proven with evidence during the trial, not decided in a quashing petition.

Q: What happens if I file a quashing petition after a long delay (e.g., 4 years)?

This judgment shows the negative impact of such a delay. The Hon’ble High Court specifically noted that the petition was filed after a “delay of about 4 years” while the trial was already progressing, which was a factor in dismissing the petition.

Q: Why did the Hon’ble High Court refuse to quash the summoning order in this case?

The Hon’ble High Court refused for two main reasons: 1) The accused admitted issuing the cheque, which triggered the Section 139 presumption. 2) The claim that the cheque was for security was a “matter of trial” and not a ground for quashing under Section 482 Cr.P.C., which should be used “sparingly”.

Q: What did the Hon’ble Supreme Court say in Rajeshbhai Muljibhai Patel v. State of Gujarat about quashing 138 complaints?

The Hon’ble High Court relied on this judgment, which held that when the Section 139 presumption is attracted, it is not “judicious” for a High Court to conduct a detailed factual inquiry and quash the complaint. The burden is on the accused to provide evidence at trial.

Q: When does an accused have to prove a cheque was not for a debt?

The accused has to prove this defence during the stage of trial before the learned Trial Court, not at the pre-trial stage in a quashing petition.