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The High Court of Delhi through its judgment dated 11.11.2025 in Manmohan Gaind v. Negolice India Pvt. Ltd , held that a cheque issued as a security may constitute a legally enforceable instrument under Section 138 of the Negotiable Instruments Act, 1881 ("NI Act"), if any subsisting liability exists on the date of its presentation.
The Court held that the nature of the cheque, whether issued for security or for discharge of debt, depends upon the existence of a legally enforceable liability on the date of its presentation and even a cheque originally issued as a security, may mature into a negotiable instrument enforceable under Section 138 of the NI Act, if a financial obligation arises thereafter.
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