The criminal liability attracted under Section 138 of the Negotiable Instruments Act in the event of dishonour of cheque extends to the guarantor who issues a cheque in fulfilment of his obligations as guarantor.
So held the Andhra Pradesh High Court in Laila Finance Ltd vs SA Engineering Services when the second respondent — the widow of the sole proprietor of SA Engineering who inherited the properties of her husband on his demise, including the sole proprietary business, and who had stood guarantee for payment of hire purchase obligations of her husband — issued a cheque in discharge of the obligations of her husband, but which bounced.
The High Court did not go into the question whether she indeed had stepped into the shoes of her deceased husband's business. It did not deem it necessary to do so in view of her other role in the transaction — guarantor. A guarantor issuing a cheque issues the same in discharge of ‘debt' and hence is criminally liable when the same is dishonoured.