In ICDS Ltd. Vs. Beena Shabeer &Anr. (2002) 6 SCC 426, the cheque in question had been issued by the guarantor (wife) of the principal debtor (husband) in respect of a hire purchase agreement entered into by the principal debtor with the complainant for purchase of a car. The cheque in question was issued by the guarantor towards part payment to the appellant/complainant. The same was returned unpaid on account of insufficient funds. The issue raised before the Supreme Court was whether a complaint under Section 138 of the NI Act was maintainable in respect of the said cheque. The High Court had come to the conclusion that when a cheque was issued as security, no complaint would lie under Section 138 of the NI Act, since the cheque issued could not be said to be for the purpose of discharging any debt or liability. The High Court held that the cheque must be for payment of money from out of the drawer's account. In the case of a cheque issued by a guarantor or surety, it could not be said to be for immediate payment of money. The High Court placed reliance on the decision of the Kerala High Court in Sreenivasan Vs. State of Kerala (1999) 3 K.L.T. 849 wherein the Kerala High Court had observed:
"A comparative reading of the principle laid down by the Andhra Pradesh High Court and the mandatory provisions laid down in Section 138 of the Negotiable Instruments Act is crystal clear that when a cheque has been issued as a security, no complaint will lie under Section 138 of the Negotiable Instruments Act."
31. The Supreme Court reversed the decision of the High Court by placing reliance on the language of Section 138 of the NI Act. Section 138 begins with the word, 'where any cheque......'. These three words were held to be significant. In particular, emphasis was laid on the use of the word, 'any'-which suggests that, if, for whatever reason a cheque drawn on an account maintained by the drawer with the banker in favour of another person for the discharge of any debt or other liability is dishonoured, the liability under Section 138 NI Act cannot be avoided. The Supreme Court also emphasized that the legislature had been careful enough to use not only the expression "discharge, in whole or in part, of any debt", but has also included the expression 'other liability' in the language of Section 138 NI Act. The Supreme Court held that the issue regarding the liability of a guarantor and the principal debtor being co-extensive, was out of purview of Section 138 of the NI Act and did not call for any discussion. The Supreme Court held:
"11. .........The language of the Statute depicts the intent of the law-makers to the effect that wherever there is a default on the part of one in favour of another and in the event a cheque is issued in discharge of any debt or other liability there cannot be any restriction or embargo in the matter of application of the provisions of Section 138 of the Act. 'Any cheque' and 'other liability' are the two key expressions which stand as clarifying the legislative intent so as to bring the factual context within the ambit of the provisions of the Statute. Any contra interpretation would defeat the intent of the legislature. The High Court, it seems, got carried away by the issue of grantee and guarantor's liability and thus has overlooked the true intent and purport of Section 138 of the Act."
Thus, the view taken by the Kerala High Court in Sreenivasan (supra) was clearly not approved by the Supreme Court. The Supreme Court rejected the wide proposition that the dishonour of a security cheque issued by a guarantor from his account would not attract Section 138 of the NI Act.