The Supreme Court of India has ruled that when an individual acknowledges handing over a signed cheque with a specified amount, they cannot subsequently dispute the interest rate as a defense in a prosecution for dishonoring a cheque under Section 138 of the Negotiable Instruments Act, 1881.

In this case, the respondent had issued a cheque for Rs. 19 Lakhs to a chit fund company towards outstanding dues. Upon presentation, the cheque was returned with the endorsement “Account Closed.” The trial court convicted the respondent under Section 138 of the NI Act, but the appellate court and High Court acquitted them. The chit company then appealed to the Supreme Court.

The appellate court had held that the amount was incorrectly calculated, applying an interest rate of 3% per month instead of 1.8% per month. However, the Supreme Court observed that the dispute over the interest rate was moot, as the accused had admitted to executing the cheque. Furthermore, the respondent’s actions in closing the account immediately after issuing the cheque raised suspicions.

The Supreme Court rejected the respondent’s contentions, noting that once the interest rate of 3% per annum was added to the principal amount and reflected in the cheque, it cannot be argued that the cheque was not intended for principal repayment.