
20-02-2010 - Bombay High Court
Bombay High Court held - Banks cannot prosecute borrowers under section 138, Negotiable Instrument Act, if blank post-dated cheques issued by them as collateral security are dishonoured. The court upheld the acquittal of Ahmednagar resident Rajendra Warma, who was prosecuted after a blank cheque issued by him for a loan was dishonoured.
''It is doubtful if the provisions of Section 138 of the Negotiable Instruments Act can apply to a case in which a blank or post-dated cheque is obtained by a bank or money lender before or while sanctioning or disbursing loan amounts as security for the loan,'' said Justice P R Borkar. The order is likely to come as a huge setback to lending agencies who ask borrowers to deposit blank post-dated cheques as security. ''Law-makers must not have intended or imagined that money lenders or banks would obtain blank or post-dated cheques while sanctioning/disbursing loans as securities and would use them to make debtors/borrowers repay the loan under threat of prosecution and punishment (under the cheque-bouncing law),'' added the judge".