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Mahinder Singh Bhasin v. Ssangyong Engineering & Construction Co. Ltd. - (High Court of Madhya Pradesh) (14 Aug 2015)

Post-dated cheques given as security against advance do not constitute a legally enforceable liability



When cheques are given as security against an advance, and could not be encashed unless the account between the parties was settled, the amount of such cheques cannot be considered a “debt or other liability”. Since the dispute between the parties was not settled and the Respondent had to pay for expenditure by the Applicant to fulfil the terms and conditions of the sub-contracting agreement, the cheques given by the Applicant to the Respondent could not be prematurely encashed, particularly since they were post-dated. Unless the dispute between the parties was settled, the cheques given as security did not satisfy the definition of a legally enforceable liability.

Relevant : Section 138 Negotiable Instruments Act, 1881 Act M.S. Narayana Menon @ Mani Vs. State of Kerala and another MANU/SC/2881/2006 Indus Airways Private Limited Vs. Magnum Aviation Private Limited and another MANU/SC/0288/2014 State of Haryana Vs. Ch. Bhajanlal MANU/SC/0115/1992


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