Position of Guarantor u/s 138 of the Negotiable Instruments Act, 1881

Important ingredient for the offence punishable under Section 138 is that cheque must have been issued for the discharge in whole or in part of any debt or other liability and if the cheque is not issued for the discharge of any debt or other liability, Section 138 cannot be invoked.

The Hon’ble High Court of Bombay in the matter of Shantaram Namdeo Sathe vs. the State of Maharashtra & Ors., Criminal Appeal No. 388 of 1999 found that the subject cheque was given only as a security cheque and that the appellant, in his cross-examination, had admitted that the cheque issued was only for guarantee. It is settled law that the important ingredient for the offence punishable under Section 138 is that cheque must have been issued for the discharge in whole or in part of any debt or other liability. If the cheque is not issued for the discharge of any debt or other liability, Section 138 cannot be invoked. This Court in the matter of Joseph Vilangadan vs. Phenomenal Health Care Services Private Limited and Anr. and Adarsh Gramin Sahakari Pat Sanstha Maryadit, Wadi, Nagpur vs. Dattu Ramdasji Paithankar has held that if the cheque is issued only as security for performance of certain contract or an agreement and not towards the discharge of any debt or other liability, offence punishable under Section 138 is not made out.