Cheque Issued As Security Would Mature For Presentation On Default When Payment Is Due: Kerala HC

While dismissing the contention of the Respondent that cheque given as security cannot be presented by the Appellant for payment, the Kerala High Court observed that the very fact that cheque was issued as security by itself imply that, in the event of non-payment, the security is liable to be enforced, and a cheque issued as security would mature for presentation on default when payment is due.

“Consequent on the non-payment of the amount, the plaintiff was compelled to present the cheque for payment. Presentation of the cheque was only for the enforcement of the security”, added the Court.

Reiterating that Section 98(c) of the Negotiable Instruments Act does not require issuance of notice when the party charged could not suffer damage from non-issuance of notice, the Single Judge Bench of Justice Sathish Ninan rejected the contention raised by the Defendant that the suit is not maintainable as notice for dishonor was not served.

Advocate P. Parameswaran Nair appeared for the Appellants, whereas Senior Advocate O. V. Radhakrishnan appeared for the Respondents.

In the background, Plaintiff had filed a suit before the Trial Court for recovery of Rs. 5,50,000/- which were given to the defendant, against which the defendant had later served a cheque as security. When the Plaintiff submitted the cheque for payment, it got dishonored. It is the contention of the defendant, that the cheque was in fact a signed blank cheque on which the plaintiff had itself filled in the details, and it was merely given as a security. The Trial Court after noting that it did not have territorial jurisdiction, decided the suit in favour of the defendant. Hence, present appeal.

After perusing the facts, the Bench observed that the Trial Court had territorial jurisdiction and even if there was a doubt, the issue of lack of jurisdiction should have been raised by the parties at the earliest possible opportunity and the plaint should have been returned under Order 7 Rule 10.

With respect to submission by the defendant that he issued a blank cheque and the money borrowed was Rs. 50,000/- and not Rs. 5,50,5000/-, the Bench held that, “Though the defendant would contend that it is a signed blank cheque that was entrusted to the plaintiff, the same is denied by the plaintiff. The first defendant as DW1 has admitted that the borrowed amount has not been repaid. In the circumstances as noticed above, and in the absence of evidence to the contrary, the case of the plaintiff is liable to be accepted”.

Hence, the decree of the Trial Court was set aside while granting decree in favour of the plaintiff with 6% interest per annum till the date of the appeal.

Cause Title: Ashok Kumar v. Sankarankutty Pillai

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