Case Law Analysis
|Karnataka High Court
Section 138 NI Act | Investment Converted to Enforceable Debt via Written Acknowledgment and Dishonoured Cheque : Karnataka HC
The Karnataka High Court has ruled that funds initially given as business investment become a legally enforceable debt under Section 138 of the Negotiable Instruments Act when documented in writing and later evidenced by a dishonoured cheque. This clarifies that the original intent of the transaction - whether as equity or loan - is irrelevant if the parties later treat it as a repayable liability, significantly expanding liability exposure for investors-turned-creditors in commercial disputes.