IN THE HIGH COURT OF JUDICATURE AT BOMBAY

ORDINARY ORIGINAL CIVIL JURISDICTION

IN THE COMMERCIAL DIVISION
COMMERCIAL SUIT NO 123 OF 2024

Name - Rajesh
S/o. Ram
An adult
Age about 30 Years
Occ. Engaged in the business related to exports in the firm name i.e. Pankaj and Co.
Indian habitant of Mumbai
Residing At Vile Parle West
Aadhar No. 0000 0000 0000
Mob. No.: +91 – 9876543219
Email Id.: [email protected] … PLAINTIFF

VERSUS

Name - Amit
S/o. Shyam
An adult, age about 30 Years,
Occupation – Textile Business , Indian habitant of Mumbai,
Residing At Vile Parle West
Aadhar No. – 0000 0000 0000
Mob. No.: +91 – 1234567891
Email Id.: [email protected] …DEFENDANTS
WRITTEN STATEMENT OF THE DEFENDANT

1. At the outset, these defendants say and submit that the present Suit filed by the plaintiff
is not maintainable against these Defendants on the following grounds, which are without
prejudice to one another:-

a. That the suit filed by the Plaintiff is misconceived and liable to be dismissed with
compensatory costs. It is stated that the plaintiff and defendant knew each other well and
had a thick bond thus the plaintiff took into consideration the defendants request on the
sake of their friendship and issued a loan , thus making it a personal loan being taken by
the defendant on behalf of the plaintiff. It is stated that the defendant took a loan for
personal accommodation and not for the purpose of business. Thus the terms and
conditions of repayment were not formalized as a transaction. The plaintiff was well
aware about the financial difficulties which was being faced by the defendant and that no
formal loan or agreement as such was created.

b. The defendant also states that the postdated cheques issued to the plaintiff were merely
issued as security in proceedings as mentioned under the Negotiable Instruments Act ,
1881 , the defendant also uses precedents by the High court and Supreme court to further
affirm this , The Supreme Court, in the case of Sripati Singh vs. The State of Jharkhand
& Anr provided clarity with accordance to the central question pertaining to “Whether
cheques can be used as security rather than for discharge of a debt”. Thus while
examining the details of the loan agreement between the parties, the Supreme Court
acknowledged that the cheques were indeed issued as security. However, the Court
rejected the High Court’s reliance on the ruling in Sudhir Kr. Bhalla vs. Jagdish Chand &
Ors., which had suggested that a cheque given as security could not attract the provisions
of the Act. The Supreme Court clarified that this was not correct, as it depended on the
nature of the transaction and the date the cheque was presented for payment. If, at the
time of presenting the cheque, the liability to pay still existed, the provisions of Section
138 would apply. In support of its position, the Court cited the decisions in Sampelly
Satyanarayana Rao vs. Indian Renewable Energy Development Agency Ltd and M/S
Womb Laboratories Pvt. Ltd. The Court emphasized that a cheque issued as security in
the context of a financial transaction should not be dismissed as worthless. A security is
intended to ensure the fulfillment of an obligation. If a cheque is issued as security for a
loan repayment, and the loan is not repaid on time, the drawee is entitled to present the
cheque for payment. If the cheque is dishonoured, the consequences under Section 138
will follow. When a cheque is issued as security for repayment with a specified
repayment date, it merely means that the cheque cannot be presented before that date. A
discharge of the loan is necessary before the drawee can refrain from presenting the
cheque.
c. . In this case, the Supreme Court addressed a commonly misunderstood defense to
cheque bouncing under the Act. The argument that a cheque, which has bounced and is
the subject of proceedings under the Act, was issued only as security rather than as an
instrument of payment, is not a foolproof defense. In fact, this misconception has often
led parties involved in commercial transactions—where post-dated cheques are provided
as security—to believe they are immune from consequences under the Act. With this
ruling, the Supreme Court has cleared up any confusion, emphasizing that the nature of
the cheque (whether issued as security or not) does not affect the initiation of proceedings
under the Act, as long as there is an amount due and payable on the date the cheque is
presented. The purpose of the Act is to regulate financial promises in business dealings
and establish strict liability to ensure greater accountability in financial matters. The
criminal provisions of the statute are designed to deter individuals from dishonoring their
financial commitments. If cheques issued as security were entirely excluded from the
Act’s provisions, the law would lose its efficacy, as the drawer of such cheques would
have the power to dictate the terms of litigation. With this judgment, the Supreme Court
has clarified the issue regarding the validity of proceedings under the Act when the
cheques in question were issued as security

2. The defendant also states that he has been facing genuine financial difficulties in
repaying the amount and that it was not his willful intention to default , he also states that
his phone’s software had a malware function due to which random calls automatically got
blocked and that he was not able to use his device for any means of communication. The
defendant asserts that the failure to pay money was not willful or intentional but because
of circumstances beyond control which includes the improper functioning of his
communication device and due to certain business setbacks and cash flow issues. The
defendant also asserts that the agreement to issue postdated cheques and the dishonor of
them was merely because of insufficient funds and that there was no intention to avoid
the repayment of money , he also claims that the statuatory notice sent by the plaintiff
was premature thus alleging that the plaintiff acted hastily in initiaing legal action rather
than resolving the matter in an amicable manner. The defendant thus proposes to issue
fresh arrangements for repayment.

3. The defendant also states that there was no formal loan agreement or clear terms
signed by the plaintiff and that the entire transaction was solely based on trust and
friendship thus there was no legally binding agreement stipulating the specific terms of
repayment. The defendant claims that the arrangement was informal and that the plaintiff
accepted the cheques as an indication of the defendant to pay and not as a formal
contract.

4. The defendant asserts that the suit of the plaintiff is barred by Law of Limitation

5. The defendant claims that the plaintiff’s conduct post the dishonor of cheques was
overly aggressive and harassing and that despite the defendants claim of requesting for
more time the plaintiff still persisted to make calls and messages even though the
defendants device was malfunctioning and that the plaintiff did not try to communicate
by any other means which ended up adding to the stress of the defendants already
ongoing situation of financial strain.

6. The defendants claims that due to there not being a formal loan agreement and contract
there was no timely claim made by the plaintiff and that there was lack of clarity in terms
of repayment of money.

7. The defendant respectfully submits that due to the grounds of financial strain , informal
nature of the loan , lack of a formal agreement and the absence of damages or loss as
such incurred by the plaintiff , this suit hereby be dismissed on the above mentioned
grounds and that the defendant issues fresh arrangements of returning the money to the
plaintiff

Advocate for Defendant

VERIFICATION
I, Amit an Indian Inhabitant, Aged about 30 years, residing at Vile Parle West
The defendant do hereby solemnly declare that what is stated from the above paras be
true to my own best of knowledge as per the records and whatever stated in remaining
paras are on information and I believe to be true and correct.

Solemnly declared at Mumbai

This day of January , 2025
Defendant

Identified by me: Before me

Advocate for defendant