loan agreement that has been drawn up in my father's name, w

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Where a loan agreement is executed in the father’s name and family members have signed, liability depends on the capacity in which each person signed. 1. Effect of Cheques Issued by Son and Daughter Under law, a cheque creates a statutory presumption of liability in NI Act. The defence that the cheques were given “only as security” does not automatically defeat liability. Courts consistently hold that if, on the date of presentation, a legally enforceable debt exists, even a “security cheque” attracts Section 138. Thus, if the loan amount remains unpaid, dishonour of those cheques can still lead to prosecution. 2. Who Is Legally Liable? Father (Borrower): Primarily liable under the loan agreement. Son/Daughter (Cheque Drawers): Independently liable under NI Act for dishonoured cheques issued from their accounts. Other Family Members: Only liable if they signed as co-borrowers or guarantors. Mere signatures as witnesses do not create liability. 3. “Security Cheque” Defence This defence succeeds only if the accused proves: No debt existed on the date of presentation, OR The cheque was misused contrary to terms. The burden is on the accused to rebut the presumption. 4. Legal Position in Chennai (and across India) NI Act is a central legislation; principles apply uniformly. Courts focus on: ✔ Existence of debt ✔ Issuance of cheque ✔ Dishonour ✔ Statutory notice compliance Family disputes or internal arrangements do not override cheque liability. Conclusion If the loan is outstanding, cheques issued by the son and daughter can legally sustain proceedings, regardless of their claim of “security”. Liability of other family members depends strictly on whether they are guarantors or co-borrowers. Proper document scrutiny is essential to determine the exact legal exposure of each signatory.

Advocate Pavani Kumari LawRato