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2. Before adverting to the legal issues it would be appropriate to give a brief background of the case. The Religare Finvest Limited (in short 'Religare') entered into an Assignment Agreement dated 25th July, 2015 with the petitioner No.2/ Strategic Credit Capital Private Limited (in short 'the Strategic') through its Director Padma Vathy/petitioner No.1, for assignment of the loans and receivables along with all rights, title and interest therein for a total consideration of ₹530,02,40,678/- (Rupees five hundred and thirty crore two lakh forty thousand six hundred and seventy eight only). The Assignment Agreement obligated Strategic to issue a Standby Letter of Credit (in short 'the SBLC') for a sum of ₹540 crores in favour of Religare, to guarantee the balance purchase consideration. Religare received an initial purchase consideration of ₹10 crores from Strategic on June 24, 2015 and the balance purchase consideration was required to be given within a period of 90 days from the initial purchase consideration. However, Strategic failed to pay the balance purchase consideration under the Assignment Agreement. So around 22nd October, 2015 Religare informed Strategic that it would invoke the SBLC on account of default in payment of the balance purchase consideration. On the representation of Strategic, SBLC was not invoked and time was agreed to be extended subject to payment of ₹60 crores out of the balance purchase consideration and a Supplemental Agreement was entered in this regard on 30th December, 2015. The SBLC was extended till June 22, 2016. Pursuant to the Assignment Agreement and Supplemental Agreement, Religare transferred the loans, receivables and securities in favour of Strategic as per its demand, however Strategic even failed to pay ₹60 crores as promised. Later to meet the payment obligations, Strategic handed-over a cheque dated 21st March, 2016 bearing No.709845 drawn on HDFC Bank for a sum of ₹180 crores only (in short the cheque in question) in favour of Religare and assured that the balance payment would be made before the agreed date.

12. As regards issue No. (ii) to contend that in view of the SBLC there was no liability to pay at the time of issuance of the cheque, the dishonour of which would not maintain a complaint under Section 138 of the Negotiable Instruments Act, learned counsel for Strategic relies upon the decision reported as (2014) 12 SCC 539 Indus Airways Private Limited & Ors. Vs. Magnum Aviation Private Limited & Anr. and seeks quashing of the complaint. Rebutting the said contention learned counsel for Religare submits that once a cheque is issued, Section 139 NI Act raises a presumption of indebtedness and whether the cheque issued is in discharge of a liability or not is an issue which is required to be gone into at the stage of trial and cannot be decided in the present petition. The terms of the Assignment Agreement clearly stipulate that if Strategic fails to pay, the SBLC can be encashed. Thus the SBLC was only a guarantee and not in discharge of the liability.

13. Before adverting to this issue it would be appropriate to note the terms in the Agreement in respect to the SBLC. In the Assignment Agreement SBLC was defined as "SBLC means a standby letter of credit for an amount aggregating INR 520,00,00,000 (Rupees Five Hundred and Twenty Crores) issued by LA FINANCIERE (EUROPE), UNICREDITO BANCA S.A, in favour of the Assignor (in a form and manner acceptable to the Assignor) on behalf of the Assignee". Further Clause 2.3(c) of the Assignment Agreement noted that "If the Assignee fails to pay the Outstanding Balance Purchase Consideration on the Balance Purchase Consideration Payment Date, the Assignor shall be entitled to invoke the SBLC in accordance with the terms of the SBLC to the extent of the Outstanding Balance Purchase Consideration". It is thus apparent that SBLC was not issued as a consideration of the Assignment Agreement but was a guarantee to be invoked in case the assignee failed to pay the outstanding balance purchase consideration.

16. As noted above a guarantee is an ancillary contract whereby the promisor undertakes to be answerable to the promisee for the debt, default or miscarriage of another person whose primary liability to the promisee must exist or be contemplated. Thus merely because the SBLC was valid on the date of presentation of cheque in question, it cannot be held that there was no existing liability, which fact is also fortified by Clause 2.3 (c) of the Assignment Agreement which provided that assignor will be entitled to invoke SBLC if the assignee fails to pay Outstanding Balance Purchase Consideration on the payment date. Thus the contention of learned counsel for Strategic that the complaint was not maintainable for a non-existing liability deserves to be rejected.