srihari (finance manager) 31 October 2009
I understand from our forum that the honoroble supreme court had given one land mark judgement with regard to the security cheque in the ' case of Krishna Janardhan Bhat ' .
Can any one post the whole judgement here for our friends idea. We can also discuss and analyse this judgement in depth. As all of us know that now a days most of the cases, accused parties are trying to escape by saying that the cheque was issued for security.
A V Vishal (Advocate) 31 October 2009
CASE NO.:Appeal (crl.) 518 of 2006 PETITIONER: Krishna Janardhan Bhat RESPONDENT:Dattatraya G. Hegde DATE OF JUDGMENT: 11/01/2008 BENCH: S.B. Sinha & Harjit Singh Bedi JUDGMENT: J U D G M E N T S.B. SINHA, J : 1. Appellant and one R.G. Bhat were jointly running a business in the name and style of Vinaya Enterprises at Hubli together. Appellant executed a Power of Attorney in his favour. 2. Allegedly, he had handed over four blank cheques to the said constituted attorney for meeting the expenses of the business. The counter foil of the cheque books was also allegedly filled in by Shri R.G. Bhat. The cheque bearing No. 044483 was shown to have been a self drawn one for a sum of Rs. 1500/−. 3. Disputes and differences having arisen between the appellant and the said R.G. Bhat in connection with running of the said business, the power of attorney granted in his favour was cancelled by the appellant. Disputes and differences between the parties were referred to the Panchayat. In the meeting of the Panchayat held on 02.10.1996, complainant/respondent who is the brother−in−law of the said R.G. Bhat was admittedly present. He participated therein. The result of the said meeting of the Panchayat is not known but it is not in dispute that the appellant herein issued a public notice through his advocate in a local newspaper on 3.10.1996 to the following effect: My client Sh. Krishna Janardhana Bhat,Proprietor of Vinaya Enterprises, Tarihal Hubli has given authority to give notice as follows. My client appointed Shri Raghavendra Ganapati Bhat as his power of Attorney Holder on 21.8.1993 to run Vinay Enterprises as agent. He has started misusing the terms and conditions of the Power of Attorney. Hence my client cancelled the Power of Attorney on 21.8.96 by giving notice. If at all anybody deals with him on the Power of Attorney my client is not responsible in future. 5. On the premise that the respondent advanced a sum of Rs. 1,50,000/− to the appellant on 14.6.1998 and the latter on his own went to his house on 20.7.1998
6. Prior thereto, a notice was sent on 27.8.1998 which was allegedly served on the appellant on 5.9.1998. He on that day itself sent a reply alleging in substance that the complainant had been colluding with R.G. Bhat in regard thereto, stating: Your client D.G. Hegde Goddalamane is husband of sister of my power of attorney holder R.G. Bhat (Proprietor Prasad Enterprises Tarihal Industrial Estate) of Hubli. I do not have any dealing with him as alleged in your letter. Knowing that the power of attorney holder R.G. Bhat has lost faith and having acted illegally and in anticipation of his committing further illegal acts I have legally cancelled my power of attorney and published the notice in a famous Kannada daily Samyukta Karnataka on 3.10.96. From that date I do not have any relation with him or any of his relatives including your client. Please verify the handwriting and signature on the cheque and advice your client not to do such (illegalities) colluding with his brother−in−law. 7. The learned Trial Judge convicted the appellant and sentenced him to undergo imprisonment for six months and further directed payment of compensation for a sum of Rs. 1,50,000/−. An appeal preferred thereagainst was dismissed by the Sessions Judge by a judgment and order dated 28.7.2004. 8. The High Court in exercise of its revisional jurisdiction, however, on a revision petition filed by the appellant, partly allowed the same by reducing the substantive sentence to one week. 9. The Special Leave Petition was filed by the appellant in person. As it was noticed by a Bench of this Court that some question of law arises for its consideration, Mr. S. Balakrishnan, learned senior counsel was requested to assist the Court. 10. Mr. Balakrishnan urged that the learned Trial Judge, the Sessions Court as also the High Court committed a serious illegality insofar as it misread and misapplied the provisions of Section 139 of the Negotiable Instruments Act (for short the Act). It was contended that the procedural requirements of Section 138 are: (i) There is a legally enforceable debt. (ii) The drawer of the cheque issued the cheque to satisfy part or whole of the debt. (iii) The cheque so issued has been returned due to insufficiency of funds. It was urged that only ingredient No. 2 is a subject matter of presumption under Section 139 of the Act and not the first one. It was argued that except the word of mouth of the complainant nothing has been brought on record to prove the offence as against the appellant. 11. Mr. S.N. Bhat, learned counsel appearing on behalf of the respondent, on the other hand, submitted that the appellant has rightly been found guilty of
It was urged that it is not believable that the appellant despite referring the dispute to the Panchayat and issuing a paper publication on 3.10.1996 would not insist on taking back the cheque book from his erstwhile constituted attorney or would not inform the bank thereabout. Moreover, he having come out with a positive defence, it was for him to prove the same. 12. Before we embark upon the factual issue involved herein, we would notice the manner in which the court proceeded to determine the case. The learned Trial Judge framed the following points for its determination: (1) Whether the complainant proves the hilt that the accused to discharge earlier debt of Rs.1,50,000/−, has got issued a cheque on 20.7.1998 for Rs.1,50,000/− drawn at Vijay Bank, Tarahal Branch, Hubli? (2) If so, whether the said cheque came to be dishonoured as funds insufficient after its presentation and despite of issuance of notice, the accused did not pay the due amount within stipulated time without any cause, thereby Negotiable Instruments Act? The learned Trial Judge noticed the contents of the claim petition as also the evidence of PW−1. It also noticed the suggestions given to the said PW−1 by the appellant herein. Upon taking into consideration the same as also the statement of the appellant under Section 313 of the Code of Criminal Procedure, it posed a question as to whether there was no debt payable by the accused to the complainant and if so, whether the complainant colluding with R.G. Bhat had created the cheque with an intention to cause loss to the appellant. It, however, without making any further discussion, answered the said question directly on the material brought on record referring to a decision of the Karnataka High Court in S.R. Muralidar v. Ashok G.Y. [ILR 2001 Karnataka 4127]in extenso and opining that his decision in the case is similar to that of the Karnataka High Court, stating: Considering the proposition of law, in the present case also the accused admitted the signature on Ex.P.1. But, the contention is that his P.A. Holder mis−utilized his signed blank cheques through his relative complainant and the fact of the present case and fact of the decision mentioned by me are similar one and the observation made by the Honble High Court in the above decision and principle laid down therein are clearly applicable to the case in hand. Therefore, the defence taken by the accused herein without stepping into the witness−box, is not acceptable one and there is no cogent evidence produced by the accused to prove his special reasons for issuance of the cheque in question. 13. It again referred to a decision of this Court in K. Bhaskaran v. Sankaran Vaidhyan Balan and Others [AIR 1999 SC 3762] and made almost a similar
Here, the accused has not produced any evidence to discard the testimony of PW−1. Therefore, the presumption is to be drawn in favour of the holder of the cheque, who has received it for discharge of liability in view of the decision of the Honble Supreme Court. 14. Yet again, it relied upon a decision of the Karnataka High Court in M/s.Devi Tyres v. Nawab Jan [AIR 2001 Karnataka H.C.R. 2154], wherein it was opined: There is issued (sic) that the amount is payable and no criminal court is required to embark upon any enquiry that goes behind the Act of issuance of the cheque. If the drawer contends that there were certain special reasons whereby a cheque was issued and that the cheque was not intended to be encashed or honoured, the onus of establishing this shifts squarely to the accused. 15. The complainants case was, thus, primarily accepted for the reason that the appellant did not step into the witness box. 16. The appellate court took an identical stand. It proceeded on the premise that the statement of accused under Section 313 of the Code of Criminal Procedure regarding misuse of blank cheque by the complainant and filling up Rs. 1,50,000/− instead of Rs. 1500/− is contradictory to his own admission in the reply to the notice issued to him. On what basis the said opinion was formed is not known. The appellate court refused to enter into the question as to whether the prosecution case is wholly unreliable, as the complainant had not been able to show his source of income so as to enable him to advance a huge loan of Rs. 1,50,000/−, holding: Now as far as the financial ability of the complainant to issue cheque for such huge amount to the accused is not a matter to be considered by the trial court or by me also since issue of Ex.P.1 and its dishonour is proved by the complainant beyond reasonable doubt. 17. The High Court in exercise of its revisional jurisdiction although accepted the contention of the appellant that the presumption under Section 139 of the Act extends only to the extent that the holder of the cheque received the cheque for the discharge in whole or in part of any debt or other liability and the same only means that cheque was issued for consideration, but does not extend to the extent that the cheque was issued for the discharge of the debt or liability as pleaded by the accused, opined that the complainant had discharged that onus by adducing his own evidence. Observing that the appellant did not step into the witness box, it was opined that although the relationship between the appellant and Shri R.G. Bhat was strained, there was nothing to show that the relationship between the appellant and the complainant became strained despite the fact that a panchayat meeting was held in regard to the said dispute in 1996. The High Court, however, refused to go into the factual aspect of the matter stating that it was exercising a revisional jurisdiction, stating: Since the burden of proving that the cheque had been misused is on the accused− petitioner, and there being a concurrent finding of the Trial Court and the Appellant Court with regard to that holding that the petitioner had failed to discharge that burden, I do not find any ground to interfere in the order of the Trial Court and that the Appellate Court, so far as they hold the petitioner guilty of an offence punishable under Section 138 of the
18. Before embarking upon the legal issues, we may analyse the deposition of PW−1 Complainant. He was a resident of village Goddalmane. Appellant is a resident of village Kekkar. As he was running an industry at Hubli, he sometimes resided in Hubli also. They were said to be friends. He asked him to give a loan of Rs. 1.5 lakhs in the first week of June, 1998 and the amount was handed over to him on 14th June, 1998. It was allegedly agreed that on the appellants failure to repay the said loan within one month, 15% interest would be charged. No document was executed; no pronote was executed; no receipt was obtained. Appellant is said to have come to his house suo moto on 20.07.1998 and handed over the cheque which was sent to Varada Grameen Bank for collection whereupon notice had been issued. Despite the fact that he was aware that a dispute had been raised in regard to the writings in the cheque, the same was not proved. Merely, the cheque was tendered and it was marked as an exhibit. The cheque appears to have been issued as a proprietor of a business concern. Despite the fact that R.G. Bhat was his brother−in−law, he denied that he was running the said business. He also feigned his ignorance as to whether the said industry was being run by R.G. Bhat on the basis of the Power of Attorney executed by the appellant. He, however, accepted that they had been running it together. He also accepted the relationship between him and R.G. Bhat. He knew about the dispute. He accepted that a panchayat meeting was held in regard thereto. Surprisingly, he denied his knowledge in regard to the existence of the power of attorney stating that the same was not made in his presence. He admitted that he was present on 2.10.1996 in the panchayat meeting to resolve the problem arising out of the dispute between R.G. Bhat and the appellant. He accepted that wooden and steel materials were placed in Vinay Enterprises and R.G. Bhat had been running the same type of industry in Tarihal Industrial Estate. According to him, he had been running such an industry in the name of Prasad Enterprises even prior to 1996. His acquaintance, according to him, with the appellant was only through his brother−in−law. He did not say that he had friendship with the appellant. There also does not appear to be any business transactions between them. He could not state about the denomination of the notes although according to him he had drawn the amount from the society. He did not produce any books of accounts or any other proof to show that he got so much money from the bank. He admittedly did not have any written document pertaining to the accused. He accepted that there was no witness to the transaction. He, of course, denied certain suggestions, but the suggestions put to him were required to be considered by the court below in the backdrop of the facts and circumstances of the case. 19. The courts below failed to notice that ordinarily in terms of Section 269SS of the Income Tax Act, any advance taken by way of any loan of more than Rs.20,000/− was to be made by way of an account payee cheque only. Section 271D of the Income Tax Act reads as under: 271D. Penalty for failure to comply with the provisions of section 269SS. (1)If a person takes or accepts any loan or deposit in contravention of the provisions of section 269SS, he shall be liable to pay, by way of penalty, a sum equal to the amount of the loan or deposit so taken or accepted. (2) Any penalty imposable under sub−section (1) shall be imposed by the Joint Commissioner. 20. Indisputably, a mandatory presumption is required to be raised in terms of Section 118(b) and Section 139 of the Act. Section 13(1) of the Act defines negotiable instrument to mean a promissory note, bill of exchange or cheque payable either to order or to bearer. Section 138 of the Act has three ingredients, viz.:
(i) that there is a legally enforceable debt; (ii) that the cheque was drawn from the account of bank for discharge in whole or in part of any debt or other liability which pre− supposes a legally enforceable debt; and (iii) that the cheque so issued had been returned due to insufficiency of funds. 21. The proviso appended to the said section provides for compliance of legal requirements before a complaint petition can be acted upon by a court of law. Section 139 of the Act merely raises a presumption in regard to the second aspect of the matter. Existence of legally recoverable debt is not a matter of presumption under Section 139 of the Act. It merely raises a presumption in favour of a holder of the cheque that the same has been issued for discharge of any debt or other liability. 22. The courts below, as noticed hereinbefore, proceeded on the basis that Section 139 raises a presumption in regard to existence of a debt also. The courts below, in our opinion, committed a serious error in proceeding on the basis that for proving the defence the accused is required to step into the witness box and unless he does so he would not be discharging his burden. Such an approach on the part of the courts, we feel, is not correct. 23. An accused for discharging the burden of proof placed upon him under a statute need not examine himself. He may discharge his burden on the basis of the materials already brought on records. An accused has a constitutional right to maintain silence. Standard of proof on the part of an accused and that of the prosecution in a criminal case is different. 24. In Bharat Barrel & Drum Manufacturing Company v. Amin Chand Payrelal [(1999) 3 SCC 35] interpreting Section 118(a) of the Act, this Court opined: Upon consideration of various judgments as noted hereinabove, the position of law which emerges is that once execution of the promissory note is admitted, the presumption under Section 118(a) would arise that it is supported by a consideration. Such a presumption is rebuttable. The defendant can prove the non−existence of a consideration by raising a probable defence. If the defendant is proved to have discharged the initial onus of proof showing that the existence of consideration was improbable or doubtful or the same was illegal, the onus would shift to the plaintiff who will be obliged to prove it as a matter of fact and upon its failure to prove would disentitle him to the grant of relief on the basis of the negotiable instrument. The burden upon the defendant of proving the non− existence of the consideration can be either direct or by bringing on record the preponderance of probabilities by reference to the circumstances upon which he relies. In such an event, the plaintiff is entitled under law to rely upon all the evidence led in the case including that of the plaintiff as well. In case, where the defendant fails to discharge the initial onus of proof by showing the non−existence of the consideration, the plaintiff would invariably be held entitled to the benefit of presumption arising under Section 118(a) in his favour. The court may not insist upon the defendant to disprove the existence of consideration by leading direct evidence as the existence of negative evidence is neither possible nor contemplated and even if led, is to be seen with a doubt [Emphasis supplied] 25. Furthermore, whereas prosecution must prove the guilt of an accused beyond all reasonable doubt, the standard of proof so as to prove a defence on the part of an accused is preponderance of probabilities. Inference of preponderance of 26. A statutory presumption has an evidentiary value. The question as to whether the presumption whether stood rebutted or not, must, therefore, be determined keeping in view the other evidences on record. For the said purpose, stepping into the witness box by the appellant is not imperative. In a case of this nature, where the chances of false implication cannot be ruled out, the background fact and the conduct of the parties together with their legal requirements are required to be taken into consideration. 27. In M.S. Narayana Menon Alias Mani v. State of Kerala and Another [(2006) 6 SCC 39], it was held that once the accused is found to discharge his initial burden, it shifts to the complainant. 28. Four cheques, according to the accused, appear to have been drawn on the same day. The counterfoil of the cheque book, according to the appellant, was in the handwriting of R.G. Bhat wherein it was shown that apart from other payments, a sum of Rs. 1500/− was withdrawn on a self− drawn cheque. The courts below proceeded to hold that the defence raised by the appellant has not been proved, which, in our opinion, is not correct. He did not know that the said cheque had not been encashed. He replied to the notice thinking that one of the cheque has been misused. There is nothing on record to show that he knew that one of the cheques was still with R.G. Bhat. 29. Disputes and differences between him and R.G. Bhat stood established by admission of the respondent himself. Similar industry was being run by R.G. Bhat although he was acting as the constituted attorney of the appellant. According to the appellant, R.G. Bhat had cheated him. The counterfoil showed that not more than Rs. 20,000/− had ever been withdrawn from that bank at a time. The courts were required to draw an inference as to the probability of the complainants advancing a sum of Rs. 1.5 lakhs on mere asking and that too without keeping any documentary proof. Even there was no witness. The purported story that the appellant would himself come forward to return the amount by a cheque knowing fully well that he did not have any sufficient funds is difficult to believe. 30. In K. Prakashan v. P.K. Surenderan [2007 (12) SCALE 96], this Court following M.S. Narayana Menon (supra) opined: 12. The Act raises two presumptions; firstly, in regard to the passing of consideration as contained in Section 118 (a) therein and, secondly, a presumption that the holder of cheque receiving the same of the nature referred to in Section 139 discharged in whole or in part any debt or other liability. Presumptions both under Sections 118 (a) and 139 are rebuttable in nature. Having regard to the definition of terms proved and disproved as contained in Section 3 of the Evidence Act as also the nature of the said burden upon the prosecution vis−‘−vis an accused it is not necessary that the accused must step into the witness box to discharge the burden of proof in terms of the aforementioned provision. 13. It is furthermore not in doubt or dispute that whereas the standard of proof so far as the prosecution is concerned is proof of guilt beyond all reasonable doubt; the one on the accused is only mere preponderance of probability. In John K. John v. Tom Varghese & Anr. [JT 2007 (13) SC 222], this Court held: 10The High Court was entitled to take notice of the conduct of the parties. It Why no instrument was executed although a huge sum of money was allegedly paid to the respondent was a relevant question which could be posed in the matter. It was open to the High Court to draw its own conclusion therein. Not only no document had been executed, even no interest had been charged. It would be absurd to form an opinion that despite knowing that the respondent even was not in a position to discharge his burden to pay instalments in respect of the prized amount, an advance would be made to him and that too even after institution of three civil suits. The amount advanced even did not carry any interest. If in a situation of this nature, the High Court has arrived at a finding that the respondent has discharged his burden of proof cast on him under Section 139 of the Act, no exception thereto can be taken. 31. Mr. Bhat relied upon a decision of this Court in Hiten P. Dalal v.Bratindranath Banerjee [(2001) 6 SCC 16] wherein this Court held: 22Presumptions are rules of evidence and do not conflict with the presumption of innocence, because by the latter, all that is meant is that the prosecution is obliged to prove the case against the accused beyond reasonable doubt. The obligation on the prosecution may be discharged with the help of presumptions of law or fact unless the accused adduces evidence showing the reasonable possibility of the non−existence of the presumed fact. 23 . In other words, provided the facts required to form the basis of a presumption of law exist, no discretion is left with the court but to draw the statutory conclusion, but this does not preclude the person against whom the presumption is drawn from rebutting it and proving the contrary. A fact is said to be proved when, after considering the matters before it, the court either believes it to exist, or considers its existence so probable that a prudent man ought, under the circumstances of the particular case, to act upon the supposition that it exists. Therefore, the rebuttal does not have to be conclusively established but such evidence must be adduced before the court in support of the defence that the court must either believe the defence to exist or consider its existence to be reasonably probable, the standard of reasonability being that of the prudent man. [See also K.N. Beena v. Muniyappan and Another (2001) 8 SCC 458] 32. We assume that the law laid down therein is correct. The views we have taken are not inconsistent therewith. 33. But, we may at the same time notice the development of law in this area in some jurisdictions. The presumption of innocence is a human right. [See Narender Singh & Anr. v.State of M.P. (2004) 10 SCC 699, Ranjitsing Brahmajeetsing Sharma v. State of Maharashtra and Anr. (2005) 5 SCC 294 and Rajesh Ranjan Yadav @ Pappu Yadav v.CBI through its Director (2007) 1 SCC 70] Article 6(2) of he European Convention on Human Rights provides : Everyone charged with a criminal offence shall be presumed innocent until proved guilty according to law. Although India is not bound by the aforementioned Convention and as such it may not be necessary like the countries forming European countries to bring common law into land with the Convention, a balancing of the accused rights and the interest of the society is required to be taken into consideration. In India, however, subject to the statutory interdicts, the said principle forms the basis of criminal jurisprudence. For the aforementioned purpose the nature of the offence,seriousness as also gravity thereof may be taken into consideration. The courts must be on guard to see that merely on the application of presumption as contemplated under Section 139 of the Negotiable Instruments Act, the same may not lead to injustice or mistaken conviction. It is for the aforementioned reasons that we have taken into consideration the decisions operating in the field where the difficulty of proving a negative has been emphasized. It is not suggested that a negative can never be proved but there are cases where such difficulties are faced by the accused e,g,. honest and reasonable mistake of fact. In a recent Article The Presumption of Innocence and Reverse Burdens : A Balancing Duty published in [2007] C.L.J. (March Part) 142 it has been stated:−
In determining whether a reverse burden is compatible with the presumption of innocence regard should also be had to the pragmatics of proof. How difficult would it be for the prosecution to prove guilt without the reverse burden? How easily could an innocent defendant discharge the reverse burden? But courts will not allow these pragmatic considerations to override the legitimate rights of the defendant. Pragmatism will have greater sway where the reverse burden would not pose the risk of great injustice where the offence is not too serious or the reverse burden only concerns a matter incidental to guilt. And greater weight will be given to prosecutorial efficiency in the regulatory environment. 34. We are not oblivious of the fact that the said provision has been inserted to regulate the growing business, trade, commerce and industrial activities of the country and the strict liability to promote greater vigilance in financial matters and to safeguard the faith of the creditor in the drawer of the cheque which is essential to the economic life of a developing country like India. This, however, shall not mean that the courts shall put a blind eye to the ground realities. Statute mandates raising of presumption but it stops at that. It does not say how presumption drawn should be held to have rebutted. Other important principles of legal jurisprudence, namely presumption of innocence as human rights and the doctrine of reverse burden introduced by Section 139 should be delicately balanced. Such balancing acts, indisputably would largely depend upon the factual matrix of each case, the materials brought on record and having regard to legal principles governing the same. 35. Keeping in view the peculiar facts and circumstances of this case, we are of the opinion that the courts below approached the case from a wholly wrong angle,viz., wrong application of the legal principles in the fact situation of the case. In view of the legal position as has been enunciated by this Court in M.S.Narayana Menon (supra) and later cases, we are of the opinion that the High Court should have entertained the revision application. 36. For the reasons aforementioned, the appeal is allowed. The judgments of conviction and sentence passed against the appellant are set aside.
K.C.Suresh (Advocate) 01 November 2009
Dear Vishal
Thank you for the speedy supply. Thank you very much With love KC Suresh
Srihariji, The whole judgement was attached in response to your earlier query by Shri P.Janardhan Reddy. Please note the said judgement is not with regard to security cheque but is with regard to interpretation of s.139 of NI act. As per the interpretation the cheque should have been received by the complainant in "discharge" of debt or liability. Hence, If the cheque was not drawn or received in "discharge" of debt or liability according to me s.138 would not apply despite the fact the cheque must have been issued with respect or in relation to a debt or liability for example "Security cheque". Though Security cheques are drawn with reference to or in relation to debt or liability it is pertinent to note that at the time of drawing of the cheque or receipt of the cheque by the complainant there was no debt liable for "discharge" as security cheques are drawn or received when the debt or liability is brought into existence and not at the time of discharge. The deceision in Krishna Janardan Bhatt lays emphasis on the purpose for which the cheque was drawn or received i.e. whether it was drawn for "discharge". Since as pointed out by me the cheque was not drawn or received in "discharge" s.138 would not apply. Drawing of such cheques only creates a contract based on which civil remedy can be pursued.
This is my view, there are no judgements to that effect. Further merely because the accused pleads that the cheques were "Security cheques" he cannot escape liability in s.138 cases. He has to prove that it was a "security cheque" in which case my arguement can support his case.
In a case handled by me the Complainant pleaded that the accused had issued the cheques as "Security cheques" which was admitted by the accused also. Yet the magistrate convicted him of 138 overlooking my arguements as above. However the matter is now pending in appeal.
PJANARDHANA REDDY (ADVOCATE & DIRECTOR) 01 November 2009
ONE SHOULD VERY CARE BEFORE ISSUEING THE CHQ, NI ACT SEC.FOR PUBLIC-----
FOR ADVOCATES ONE MUST THOROUGH ALL SEC.OF PARTICULARLY NI ACT--6,118,119,138,139,140,141,142 AND 143,145,146LASTLY 147 ARE SO INTERPRETED 100S OF JUDGMENTS CONFLICTING EACH OTHER.BETTER ALWAYS DOWN LOAD AT LATEST ON WWW.JUDIS.NIC.IN
SECURITY,LEGALY ENFORCEBLE DEBT,PRESSUMPTION,REBUTAL PRESUMPTION SOME OF THE WORDS FOR INTERPRETED VERY DEPTH IN ALL JUDGMENTS, WE SHOULD CAREFUL WHILE RELAYING THE JUDGMENT WITH THE CLIENT NEED,TO AQUIT FROM CONVICTION
Adinath@Avinash Patil (advocate) 01 November 2009
REDDY, THANX FOR VALUABLE INFORMATION.
srihari (finance manager) 02 November 2009
Dear Visalji, Reddy garu & Anil kumar ji
Thanks for the valuable informatin. Yes lot of nteresting points in this NI Act cases.
But can any accused escape from the liability by saying that the cheque was issued as security. Here in one case ' outstation cheque was issued with the request to hold the cheque and accused promised to remit the funds by RTGS since the outstation cheque takes 15 days for collection. Pl note that the debt is clear debt and established debt and leaglly enforceable debt' at the time of issuance of cheque. Since the accusedfail to remit the funds, complaint presented the cheque and it got bounced dueto insufficient funds. Now accused is taking stand that the cheque was issued only as security and it shouldn't be presented and security cheque will not attarct NI act.
Moreover, the complaint informed abot the presentation of chequr to the complainant by fax and emails. The cheque reached accused bank only after 10 days of the information. It can be proved that the accuses was in full knowledge of the 'presentation of cheque'
Can u sugget your valuable openions.
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
BENCH AT AURANGABAD
CRIMINAL APPLICATION NO. 898 OF 2009
Ramkrishna Urban Cooperative
Credit .. Applicant
Society Ltd., Maliwada, Ahmednagar,
through Authorised Signatory,
Shri Chhagan Tukaram Raut,
Age. 36 years, Occ. Service,
R/o. Mutha Chambers, Maliwada,
Ahmednagar.
Versus
Shri Rajendra Bhagchand Warma .. Respondent
Age 38 years, Occ. Business,
R/o. 2044, Daware Galli,
Near Vithal Mandir, Ahmednagar.
Shri L.B. Pallod, Advocate for the applicant.
Shri J.M. Murkute, Advocate for sole respondent.
CORAM : P.R. BORKAR,J.
RESERVED ON : 03.02.2010
PRONOUNCED ON : 16.02.2010
The above judgement upholds the view articulated by me earlier on this forum page
In the matter handled by me refferred to in the earlier post where the trial court had convicted the two accused for 1 year rigorous imprisonment. The Hon'ble Sessions Court two days back quashed and set aside the trial courts order and acquitted the accused. Full Judgement is not received. When it is received it will be uploaded on this site. In that case both the complainant and the accused had pleaded that the cheque was security cheque, yet trial court convicted. It appears my arguement referred above found favor with the Sessions Judge.
Rajesh Kumar (Manager) 04 May 2011
Can you answer the question posted at https://yedhulaprakash1.lawyersclubindia.com/forum/Security-Cheque-NI-Act-36297.asp
Shantanu Rastogi (ADVOCATE) 08 July 2011
(2008) 3 SCC(Cri) 11]
SUPREME COURT OF
(S. B. SINHA & LOKESHWAR SINGH PANTA JJ.)
SUDHIR KUMAR BHALLA
Petitioner
VERSUS
JAGDISH CHAND, ETC. ETC.
Respondent
Criminal Appeal No. 776 of 2008[Arising out of s.l.p. (crl.) No.2541 of 2007] With criminal appeal nos. 780, 781, 779, 782, 777 & 778 of 2008[Arising out of S.L.P. (crl.) No. 2545, 2546, 2548, 2550, 2988, 2990 of 2007] - Decided on 1-5-2008 (From: P&H)
ORDER
1. Leave granted in all the above-said Special Leave Petitions.
2. We have seven appeals before us in which the parties are similar. Since all these appeals arise out of common judgments and orders dated 25.01.2007 and 19.02.2007 passed by a learned Single Judge of the High Court of Punjab and Haryana in Criminal Appeal No. 1410-SBA of 2002, Criminal Appeal No. 1411-SBA of 2002, Criminal Appeal No. 1412-SBA of 2002, Criminal Appeal No. 1413-SBA of 2002, Criminal Appeal No. 1433-SBA of 2002, Criminal Misc. Petition No.29090-M of 2001 and Criminal Misc. Petition No.36987-M of 2001. As similar questions of facts and law are involved, therefore, for the sake of convenience they are being heard together and disposed of by this common judgment.
3. Brief facts, which led to the trial of the appellant, are as follows:-
Jagdish Chand - respondent herein and his wife Smt. Ramesh Rani are the proprietors of M/s Mehra Export Corporation and M/s Mehra International, Katra Hari Singh,
4. In the month of May, 1997, the appellant on behalf of his firm issued six cheques Nos. 442344, 442345, 442346, 442347, 442348 and 442349 dated 01.05.1997, 03.05.1997 and 05.05.1997 in favour of M/s Mehra Export Corporation and M/s Mehra International. Out of those six cheques, two cheques were in the sums of Rs.30,000/- each and four cheques were in the sums of Rs.40,000/- each. All those cheques were drawn in favour of the Indian Overseas Bank,
5. One of the cheques, in the sum of Rs.30,000/-, was stated to have been encashed, whereas the other five cheques have been dishonoured on the ground of 'Exceed Arrangement'. On 20.05.1997, the respondent sent statutory notices under Section 138 (5) of the Negotiable Instruments Act, 1881 [for short 'the Act'] to the appellant, which were despatched through registered post on 24.05.1997. However, the same were received back on 28/29.5.1997 with a report that the addressee was 'not met'. The respondent again sent another notice on 04.06.1997 through courier, which again was not accepted by the appellant and the same was received back on 05.06.1997 with the report of refusal.
6. It was on 13.06.1997 that the respondent, on his behalf and on behalf of his wife as her attorney, filed five criminal complaints under Section 138 of the Act read with Section 420 of the Indian Penal Code [for short 'the IPC'] in the Court of Chief Judicial Magistrate, Amritsar, against the appellant. On 09.07.1997, the respondent-complainant made a statement that he wanted to withdraw the said complaint with permission to file the fresh complaint. The learned Chief Judicial Magistrate vide his order dated 09.07.1997 passed the following order:-
"In view of the statement given by the complainant, recorded separately, the present complaint is hereby dismissed as withdrawn."
7. On 12.07.1997, the respondent filed second complaint on similar and practically the same points purported to have accrued on identical causes of action. The second complaint was entrusted to the Court of Judicial Magistrate, 1st Class,
8. Being aggrieved by the order of acquittal of the appellant by the trial court, the respondent filed five criminal appeals, two as an attorney of his wife and three on his behalf, in the High Court.
9. In April 1998, the appellant approached the Court of Judicial Magistrate, 1st Class,
10. The trial court charge sheeted the respondent and his wife vide two separate orders dated 15.01.2000. They filed two revision petitions against the orders of framing charges against them, which were dismissed by the learned Sessions Judge, Ludhiana, vide separate orders dated 04.06.2001. The respondent and his wife filed two Criminal Miscellaneous Petitions Nos. 29090 and 36987-M of 2001 in the High Court challenging the validity and correctness of the orders of the learned Trial Magistrate as also of the learned Sessions Judge.
11. The High Court vide its judgment dated 25.01.2007 allowed the above-said five appeals and convicted the appellant under Section 138 of the Act. By the same order, Criminal Misc. Petitions Nos. 29090 and 36987-M of 2001 were allowed and FIR Nos. 93 and 94 of 1998 lodged by the respondent and his wife were quashed. By order dated 19.02.2007, the appellant was sentenced to undergo R.I. for one year and to pay a fine of Rs.8 lacs and in default thereof, the appellant shall undergo further R.I. of one year. Hence, the appellant has preferred these appeals.
12. We have heard the learned counsel for the parties and with their assistance, examined the entire material placed on record.
13. Mr. P.S. Patwalia, learned senior counsel appearing on behalf of the appellant, assailed the judgment of the High Court inter alia contending:-
(i) that the learned Single Judge erred in not appreciating the statement of the respondent-complainant in which he admitted that all the cheques were filled by him, the date and figures of the amounts were also in his handwriting and the appellant simply had signed the cheques. According to the learned counsel, the cheques in question have been forged and fabricated by the respondent by making material alteration by changing figure in digit from Rs.30,000/- to Rs.3,00,000/- by adding 'zero' at the end of Rs.30,000/- and Rs.40,000/- to Rs.4,00,000/- by adding 'zero' at the end of Rs.40,000/-; and
(ii) that the learned Single Judge erred in not addressing the legal arguments raised on behalf of the appellant that the provisions of Section 138 of the Act are only attracted if the cheques issued in discharge of liability or debt are dishonoured, but not on account of security cheques.
14. Mr. Ankit Singhal, learned counsel for the respondent, on the other hand, contended that the reasons given by the High Court recording the order of conviction of the appellant are based upon proper appreciation of evidence led by the respondent in the case.
15. He submitted that this Court should be slow to interfere in the well-reasoned and well-merited judgment of the High Court. We have given our anxious consideration to the rival contentions of the learned counsel for the parties. The arguments put forward by Mr. Patwalia deserve to be accepted.
16. We have gone through the record of the trial Magistrate placed before us. In support of the complaint filed under Section 138 of the Act, the trial Magistrate examined the respondent on 27.04.1999. On 05.05.2000, the respondent in his cross-examination admitted as under:-
"I have brought the account books for the year 1995-96 and 1996-97. I have seen the ledger for the year 1995-96 where there is a payment of rupees one lac dated 26.10.1995 having been made by the accused to me but the remaining amounts are for an amount of Rs.35,000/- each and at one time it was for an amount of Rs.40,000/-. Once a payment of Rs.25,000/- was also made in the said year. This ledger relates to the firm M/s Mehra Exports. The payments of Rs.35,000/- each have been made either through cheques or through drafts. I have also seen the ledger book of M/s Mehra International for the year 1995-96. Except Rs.10,000/- all the payments made in this account are either through draft or through cheque. The lowest payment in this account in this year is Rs.10,000/- the maximum payment made by the accused to this firm in this account is Rs.50,000/-. The notices were sent only to the firm M/s Sudhir Kumar Bhalla and Brothers before filing the complaint and not to the partners individually. We did not receive any cheque from the accused bearing No.442344. We never received any advance payment from the accused. As per account books of firm M/s Mehra International for the year 1997-98 a sum of Rs.7,16,672.50 ps. On account of principal amount is due from the accused."
The respondent again stated as under:-
"The cheque No.442347 is in my hands which is dated 5.5.1997 but the same is signed by accused Sudhir Kumar Bhalla. All the cheques which are subject-matter of other complaints are filled in by me and are signed by Sudhir Kumar Bhalla accused. The dates on the cheques are also in my hands. The amount of the cheques in words and figures are also in my hands. I can read the contents of the cheques clearly."
17. On 05.05.2000, the trial court on the basis of the statement of the respondent-complainant in his cross-examination made the following observations:-
"At this stage, counsel for accused had made a request for giving note regarding the demoneur of the witness as well as to give note on the aforesaid fact so that the document may not be tampered with subsequent. Heard, without commenting upon the demoneur of the witness at this stage. I have observed from cheque No. 442349 dated 3.5.1997 the last zero of the figure written in the column of rupees is separate from the remaining four zeros which are attached with each other in the same flow."
18. Thereafter, on 21.05.2001 the cheques were sent to Mr. Sardara Singh Parmar, Document Expert, for examination, who in his report dated 21.05.2001 submitted to the Court, opined as under:-
"In view of the reasons stated above, I am of the opinion that the last figure (0) in above mentioned cheque has not been written in the continuous process by the same person with the same pen and ink, but it has been subsequently changed into by adding figure (0) in the original amount Rs. 40,000/- and it is free hand forgery."
19. Mr. Sardara Singh Parmar was examined as DW-3 before the trial court on 13.08.2001 and deposed as under:-
"I am of the opinion that the last figure zero in above mentioned cheque has not been written in the continuous process by the same person with the same pen and ink, but it has been subsequently changed into by adding figure zero in the original amount Rs. 30,000/- and it is free hand forgery. The reasons have already been given in my report dated 21.5.2001. It consists of 6 pages and it is Ex.DW3/1. It has been prepared by me signed by me and is correct. One photograph chart bearing the photograph cheque No. 442345 dt. 5.5.97 is Ex.DW3/2, one negative is Ex.DW/3."
20. As noticed above, the Judicial Magistrate vide his judgment dated 06.02.2002 acquitted the appellant of the charge under Section 138 of the Act and consequently dismissed the complaint of the respondent.
21. The learned Single Judge of the High Court, after hearing the learned counsel for the parties, recorded the conviction of the appellant vide order dated 25.01.2007 for an offence under Section 138 of the Act, which reads as under:-
"Lastly, it was contended by the learned counsel for Sudhir Kumar Bhalla that the figures of Rs.30,000/- and Rs.40,000/- mentioned in the cheques were interpolated by adding 'zero' to make the same Rs.3,00,000/- and Rs.4,00,000/-. He contended that there is evidence of the handwriting expert to establish the afore-stated fact and the trial court had rightly dis-believed the claim of Jagdish Chand on this court.
The contention of the learned counsel for Sudhir Kumar Bhalla is misplaced. The trial court had clearly fallen in error by ignoring the fact that the cheques were not only filled in figures, but in words as well, according to which Rs.3 lacs and Rs.4 lacs were written thereon. Even though, the handwriting expert opined that the zero has been added in the cheques subsequently, but it was clearly in consonance with the wishes of Sudhir Kumar Bhalla, who had issued the cheques by depicting the amounts in words also.
That apart, there is cogent evidence on record in the shape of original bills and the complete details of the prices of the goods supplied and the registers of account, which could not be countered by Sudhir Kumar Bhalla during the course of evidence. In view of the overwhelming evidence in favour of Jagdish Chand, the findings of the trial court awarding an acquittal to Sudhir Kumar Bhalla are unsustainable.
On the basis of the above discussion, it is held that Sudhir Kumar Bhalla, who was one of the partners of M/s Sudhir Kumar Bhalla & Brothers,
22. On examination of the above-stated findings of the learned Single Judge in the judgment impugned before us, we find that the learned Single Judge has not addressed himself on the legal question raised before him by the appellant that the criminal liability of the appellant under the provisions of Section 138 of the Act are attracted only on account of the dishonour of the cheques issued in discharge of liability or debt, but not on account of issuance of security cheques. The learned Single Judge has also not given cogent, satisfactory and convincing reasons for disbelieving and discarding the pre-charge evidence of the appellant corroborated by the evidence of the expert opinion in regard to the interpolation in and fabrication of the cheques by adding one more figure '0' to make Rs.30,000/- to Rs.3,00,000/- and similarly adding one more figure '0' to make Rs.40,000/- to Rs.4,00,000/-.
23. In the backdrop of the facts of these cases, we are of the opinion that the judgments and orders of the High Court cannot be sustained on the premise that the High Court has not addressed itself on the above-said two legal questions raised by the appellant and, therefore, the impugned judgments and orders dated 25.01.2007 and 19.02.2007 are set aside.
The interest of justice should be sub-served if the matters are remitted to the High Court to decide the appeals filed by the respondent against the appellant and criminal miscellaneous petitions seeking for quashing the first information reports registered against the respondent and his wife by the police for commission of the offences stated in FIR Nos.93 and 94 of 1998. Needless to say that any observation made by us in this judgment shall not be construed as an expression of opinion on the merits of the cases, which shall be decided by the High Court on their own merits in accordance with law.
24. The appeals shall stand disposed of in the aforesaid terms.
Appeal allowed.
BHARGAV BHATT (Lawyer) 27 June 2015
Hi !
How is about following judgment of GUJ HIGH COURT ?
2009 (3) G.L.H. 742
D.H.WAGHELA, J.
Hitenbhai Parekh Proprietor-Parekh Enterprises ... Appellant
Versus
State of Gujarat and Anr.....Respondents
Criminal Appeal No. 1189 of 2009
An Appeal challenging the judgment and order dated 12.01.2009 in Criminal Appeal No.48 of 2008 whereby learned Additional Sessions Judge set aside the judgment and order dated 09.01.2008 of learned Chief Judicial Magistrate, Ahmedabad in Criminal Case No.3243 of 2004 and acquitted the respondent of the offence under Section 138 of the Negotiable Instruments Act, 1881.
D/-06.10.2009
[A] CRIMINAL LAWS DISHONOUR OF CHEQUE - Negotiable Instruments Act, 1881 - S. 118, S.138, and S.139 - Complainant and the accused had business transactions - Cheque issued by the accused dishonoured - Magistrate recorded conviction and awarded sentence - On the appeal, Sessions Court set aside the conviction on the ground that complainant did not produce books of account, income-tax returns, etc. so as to prove legally enforceable debt - On a challenge to the acquittal by the complainant - Held, documents like original invoice, debit notes and ledger produced and exhibited clearly showed debit balance - Though there is no presumption as regards any debt or liability being "legally enforceable", once a debt or other liability is presumed and not properly rebutted, it would be legally enforceable, unless and until it is shown to be legally unenforceable - On facts, held, complainant produced total proof of debit balance and liability of the cheque amount - Accused only disputed the liability by showing that the goods were returned after 75 days - Legal presumptions in favour of complainant which the accused could not rebut and disprove the same by any credible preponderance of probabilities -Conviction recorded - However, as the accused was a lady, instead of sentence of imprisonment, fine of double the amount of cheque imposed - Acquittal appeal allowed.
It was clear from perusal of the original record and proceedings which were called for, and fairly conceded by learned Counsel appearing on both sides, that the documents produced by the complainant at the instance of the accused and exhibited in evidence included the original invoice (Exh.38), with the condition that the material sold by the bill will not be taken back after seven days and that interest will be charged @24% per annum after due date; the debit notes for the amounts of Rs.750/- and Rs.58,656/-(Exhs.16/4 and 16/3) as also the other debit notes exchanged between the parties. The important documents so exhibited at Exh.23/i, being copies of ledger for the period from 01.4.2002 to 31.3.2003, 01.4.2003 to 31.3.2004 and 01.4.2004 and 31.4.2004, clearly showed in the account of the respondent the debit balance of Rs.2,08,074/- with the details of all the financial transactions taking place between the parties during that period. Therefore, it appears to be absolutely incorrect and perverse for the appellate Court to conclude that the complainant had miserably failed to produce cogent proof, such as books of account, income-tax return/report etc., to prove that there was legally enforceable debt. (Para 4.1)
Consequently, in all given fact-situations, the Court is required to examine whether the presumptions regarding consideration and there being any debt or other liability are rebutted by the accused person by preponderance of probabilities and whether the complainant has proved that the debt or other liability, presumed or proved by overwhelming evidence, was legally enforceable. Although there is no presumption as regards any debt or other liability being legally enforceable, it would be found that once a debt or other liability is presumed and not properly rebutted, it would be legally enforceable, unless and until it is shown to be legally unenforceable. Such scheme of the provisions of law clearly indicates the object of serving the purpose of realization of the promise apparently contained in a negotiable instrument, which is that the amount for payment of which the bill of exchange was intended to be made will be paid to the payee or the holder in due course. (Para 9)
Thus, as against the proof of total debit balance and liability of the cheque amount, the respondent-accused person had only disputed liability by stating and proving that the goods sold by the aforesaid invoice was sought to be returned after nearly 75 days. Therefore, on the one hand, the complainant had adduced sufficient evidence proving legally enforceable debt in terms of the amount due on sale of goods, with express stipulations, the debit notes issued and the accounts maintained in the regular course of business and, on the other hand, the accused person had only proved an attempt to return the goods. Thus, the legal presumptions in favour of the complainant and the proof of legal liability of the accused were not rebutted or disproved by any credible preponderance of probabilities. Under such circumstances, not only all the ingredients and circumstances for constituting the offence of dishonour of. cheque were fulfilled, but the accused person appeared to have relied upon irrelevant facts for setting up a dishonest defence by denying any liability. Therefore, it is a fit case for convicting the respondent for the offence punishable under Section 138 of the Act and sentencing her to proper punishment.(Para 11)
[B] CRIMINAL LAWS DISHONOUR OF CHEQUE - Negotiable Instruments Act, 1881 - S.5, S.6, S.20, S.87, S.118 and S.139 -Accused taking a defence that the cheque was "blank" when it was delivered and the complainant filled in the amount, etc. subsequently - Further defence that a "blank cheque" is not a "cheque" and no penal proceedings can be initiated due to its dishonor - Held, bills of exchange in general and cheques in particular represent money with the characteristics of contract in the form of either an order or promise to pay money - If its is made, drawn, accepted, indorsed or transferred without consideration or for a consideration which fails, it creates no obligation - Payee is not entitled to recover to the extent of which the consideration has failed or is absent, but in case of partial absence or failure of consideration, if such part is not ascertainable in money, it will be no bar for recovery of the whole amount -Harmonious reading of the provisions indicate that a cheque could be drawn, delivered and received by the payee or the holder in due course could be legally completed and until contrary is proved, such an instrument would be presumed to be drawn for consideration - Legally permissible completion of an inchohate instrument cannot be construed as material alteration - Thus, when a cheque bearing signature of the drawer is delivered, there is an implied authority for the person receiving such cheque to complete it by filling the blanks -Whether the amount in cheque was not mentioned at the time of drawing or the blanks being filled in later on becomes immaterial - Contentions of the accused negative - Case law discussed.
Against the above backdrop of facts, the respondent, accused person, appears to have taken shifting stands in defence to contend firstly that the cheque was misused, then that enforceable debt was not proved and, then before this Court, that a "blank cheque" was not a "cheque" at all. Issues regarding the burden of proving enforceable debt or other liability, the application of presumptions and the definition of "cheque" having been raised in this appeal, (Para 5)
The plain and simple statutory language of the age-old law, as applied in myriad different factual situations, would clearly indicate that bills of exchange in general and cheques in particular represent money with the characteristics of contract in the form of either an order or a promise to pay money. The paper on which it is written possesses the quality of being negotiable. The Negotiable Instruments Act in most respects is a modification of the Common Law on the subject and its provisions are in many respects declaratory of the Common Law.(Para 8)
No contract gives rise to any liability, unless the transaction is supported by consideration. However, an important distinction in the case of negotiable instruments is to be noticed. These instruments being mercantile instruments intended for free circulation like cash, the Law Merchant lays down restrictions as to the defence of want of consideration. If a negotiable instrument is made, drawn, accepted, indorsed ortransferred without consideration or for a consideration which fails, it creates no obligation between the parties to the transaction. Partial absence or partial failure of consideration consisting of money stands on the same footing as its total absence or failure. Hence, the payee is not entitled to recover to the extent to which the consideration has failed or is absent, but in case of partial absence or failure of consideration not consisting of money, such part of the consideration must be ascertainable in money without collateral Inquiry; otherwise rt will not bar the recovery of the whole amount. (Para 8.1)
The presumption under Section 139 is mandatory but rebuttable by proof of facts contrary to the receipt of cheque for discharge of any debt or other liability. The initial burden, however, of proving that the cheque was drawn by the drawee for payment of any amount of money and it being returned by the bank unpaid remains with the complainant. The presumptions under Section 118 are also mandatory but rebuttable and could be availed only until the contrary is proved. Even as a bill of exchange, by definition, requires signature of the maker as also direction to pay a certain sum of money only to or to the order of a certain person or to the bearer of the instrument, the provisions of Section 20 permits signature and delivery of an incomplete negotiable instrument and provides that the maker thereby gives prima facie authority to the holder thereof to make or complete it into a negotiable instrument and makes the signatory of such instrument liable to any holder in due course to the extent of the amount intended to be paid thereunder. Therefore, harmonious reading of the provisions of Sections 5, 6, 20, 118 and 139 would clearly indicate that a cheque could be drawn, delivered and received by the payee or holder in due course and could legally be completed under a legal authority and when such inchoate instrument is completed to make it a negotiable instrument, it would fall within the definition of "bill of exchange" and would render the signatory liable upon such instrument to the extent the amount mentioned therein is intended by him to be paid thereunder. Unless and until contrary is proved, such negotiable instrument would be presumed to be made or drawn for Consideration and receipt thereof would be presumed to be for discharge, in whole or in part, of any debt or other liability. However, such debt or other liability is not by any legal presumption presumed to be a legally enforceable debt or other liability. (Para 9)
Any material alteration of a negotiable instrument, however, lenders it void as against any one who is a party thereto at the time of making such alteration and does not consent thereto, unless the alteration was made in order to carry out the common intention' of the original parties. The provision to that effect contained in Section 87 has to be read in harmony with Section 20 which permits and authorizes the holder of a negotiable instrument to complete the instrument for any amount and renders the drawer liable to the holder in due course to the extent of the amount intended by the drawer to be paid under such instrument. It is clear from plain reading of provisions of Section 20 and 87 that the injunction, under the pain of invalidating a negotiable instrument, against alteration operates only after an inchoate instrument is completed or a complete instrument falls within the definition of "negotiable instrument". Therefore, the legally permissible completion of an inchoate instrument cannot be construed as material alteration of a negotiable instrument.(Para 9.1)
The above analysis of the statutory provisions leads to the conclusion that, when a cheque bearing only signature of the drawer is delivered and received by a payee for the discharge, in whole or in pan, of any debt or liability, there is an implied authority for the person receiving such cheque to complete it by filling the blanks and the amount having been filled up under such implied authority would be the amount intended by him to be paid thereunder. The focus in such cases would shift to the aspect of such amount being for the discharge, in whole or in part, of any legally enforceable debt or other liability. Therefore, even with the props of legal presumptions, the onus of proving legally enforceable debt or other liability for the discharge of which a cheque must have been drawn has to be discharged by the prosecution for bringing home the charge of dishonour of cheque. It may, however, be facetious to hold that a blank cheque, drawn by a person on an account maintained by him with a banker, for payment of any amount of money to another person, by merely putting his signature on it, would not be a "cheque" in the first place, because of not being a "bill of exchange" as it did not contain direction to a certain person to pay a certain sum of money to or to the order of a certain person or to the bearer of the instrument. When the Negotiable Instruments Act expressly permits and authorizes by a substantive provision the completion of an inchoate instrument by Section 20 with the safeguard provided in Section 87, provisions of Sections 5 and 6 defining "bill of exchange" and "cheque" have to be harmoniously read to mean that an instrument which was initially not a "cheque" falling within the definition of Section 6 would become a "cheque" when it was completed by filling the blanks and its dishonour shall have all the legal consequences of dishonour of a cheque proper. (Para 10)
Applying the above construction of the relevant provisions in light of the overall scheme of the Act, it would appear that, in the facts of the present case, whether the amount in the cheque in question was not mentioned at the time of drawing it and whether it was filled up afterwards by the payee becomes immaterial and pales into insignificance. (Para 11)
Cases Referred :
1. Nagisetty Nagaiah v. State of A.P. [2004 Cr.LJ. 4107] Relied (Para 3)
2. Capital Syndicate v. Jameela [2003 (2) Crimes 122] Relied (Para 6)
3. Joseph Sartho v. Gopinathan Nair [2009 (2) Crimes 463) Relied (Para 6)
4. Kumar Exports v. Sharma Carpets [(2009) 2 SCC 533] (Para 6)
5. Krishna Janardhan Bhat v. Datta raya G. Hegde [ 1 (2008) CCR 199] (Para 6)
6. M.S.Naranaya Menon v. State of Kerala [(2006) 6 SCC 39], (Para 6)
7. Shreyas Agro Services Pvt. Ltd. v. Chandrakumar S.B. [2006 Cr.LJ. 3140], (Para 6.1)
8. Uppinangady Grama Panchayath, Puttur v. P. Narayana Prabhu [[2006 CrX.J. 3141] (Para 6.1)
9. Keygien Global Ltd. v. Madhav Impex [2006 Cr.LJ. 3413] (Para 6.1)
10. Taher N. Khambati v. Vinayak Enterprises [Crimes (HC) 1995 (4) 204] (Para 6.1)
11. Kamalammal v. C.K.Mohanan [2007 Cr.LJ. 3124] (Para 6.1)
12. Kamala S. v. Vidhvadharan M.J. [2008 (1) GLR 423], (Para 6.2)
13. John K. John v. Tom Varghcse [(2007) 12 SCC 714] (Para 6.2)
14. Hiten P.Dalal v. Bratindranath Banerjee [(2001) 6 SCC 16], Relied (Para 7)
15. Lillykutty v. Lawrence [2003 (2) DCR 610] (Para 7)
16. Assoo Hajee v. K.I.Abdul Latheef [2005 Cr.L.J. 640] (Para 7)
17. Bhaskaran Chandrasekharan v. Radhakrishnan [1998 Cr.LJ. 3228(1)] (Para 7)
18. Bank of Baroda v. Punjab National Bank Ltd. [1944 PC 58], (Para 8)
Appearance
:
Mr. Hriday Buch For-Appellant : 1,
Ms. Trusha Patel Addl. Public Prosecutor For Opponent : 1,
Mr. S.P.Majmudar For Opponent : 2,
Mr. P.P.Majmudar For Opponent : 2,
PER : MR. D.H.WAGHELA, J.
:-
1.
The appellant has challenged the judgment and order dated 12.01.2009 in Criminal Appeal No.48 of 2008 whereby learned Additional Sessions Judge set aside the judgment and order dated 09.01.2008 of learned Chief Judicial Magistrate, Ahmedabad in Criminal Case No.3243 of 2004 and acquitted the respondent of the offence under Section 138 of the Negotiable Instruments Act, 1881 (for short, 'the Act') for which she was convicted by the trial Court.
2.
The indisputable facts emerging from the record are that the complainant, present appellant, and the accused person had business relations in which pharmaceutical raw materials was supplied by the appellant between 11.6.2003 and 23.01.2004 and a cheque dated 03.02.2004 was given by the respondent which was dishonoured by the bank for insufficient fund, on 06.02.2004. Therefore, notice under Section 138 of the Act was issued and served; and upon noncompliance with the demand, the complaint was lodged. The defence of the accused in reply to the statutory notice consisted of denial of issuance of the cheque and misuse of the cheque, besides the contention that the goods sold and supplied to her firm was returned and that there were other disputes. During the course of trial, even as no witness was examined in defence, the accused relied upon the delivery challan under which the goods was sent back through a transporter to the complainant. The accused also relied upon the statements made in cross-examination of the complainant and put up the defence that the complainant had failed to prove enforceable debt against her. The trial Court, relying upon the oral and documentary evidence produced by the complainant, came to the conclusion that the cheque was issued against the invoice for the supply of goods worth Rs.1,48,668/- to which other amounts debited to her account were added and the total amount of the cheque of Rs.2,08,074/ - was proved to be due by the invoice, debit notes and other charges. Thus, the trial Court recorded conviction and sentenced the respondent to two years of simple imprisonment and fine of Rs.25,000/-, in default, to two months of simple imprisonment.
3. Carrying the above judgment of the trial Court in appeal, the respondent, inter alia, contended that no amount was outstanding against her since the goods sold to her by the invoice, as aforesaid, was returned and the cheque which was given as advance towards settlement of account was misused. The appellate Court adopted the view that the complainant had totally failed in discharging the initial burden of proving that there was legally enforceable debt, by producing cogent proof, such as books of account, account note book, income-tax report, income-tax return, audit report, audit books etc. and, therefore, in absence of proof of legally enforceable debt on the part of the complainant, the accused could not be asked to discharge her burden of rebutting the presumptions arising under Section 139 of the Act. The appellate Court noted that the complainant had not examined any independent witness in support of his case and it relied upon judgment of Andhra Pradesh High Court in case of Nagisetty Nagaiah v. State of A.P. [2004 Cr.L.J. 4107]. The approach of the appellate Court is practically summarised in para 21 of the impugned judgment which reads as under:
"21. Here in this case, though the accused has not complied with the demands of the statutory notice of the complainant, the complainant has also miserably failed to produce cogent proof such as books of account, income-tax return/report, audit report etc. to prove that there was legally enforceable debt by the accused. It is also clear that the complainant has himself failed to discharged the initial burden that there was legally enforceable debt. Therefore, the complainant, respondent No. 1 herein, cannot seek the plea and take advantage merely on return of the cheque unpaid on the ground of insufficient funds. Even otherwise, he has not examined any independent witness in support of his case."
The accused having thus succeeded in the first appeal, the complainant has approached this Court with the plea that legally enforceable debt was duly proved by sufficient evidence and the impugned judgment was perverse and illegal.
4. Before embarking upon re-appreciation of the evidence and application of relevant legal provisions and precedents, it may be pertinent to note the relevant dates and statements of the complainant in his cross-examination. The invoice for sale of goods worth Rs. 1,48,668/- was dated 05.07.2003. While the business transactions between the parties was continuing between 11.06.2003 to 23.01.2004, the cheque was dated 03.02.2004 for Rs.2,08,074/-. Before that, the goods was sought to be returned through a transporter on 24.09.2003 and it was lying with the transporter till 03.03.2004. The cheque was dishonoured by the bank on 06.02.2004. The complainant had, by producing documentary evidence at Exh.24, sought to prove and justify the other debit entires for Rs.750/- and Rs.58,656/- for which debit notes were issued. As against that, there was no evidence of receipt or acceptance by him of the goods sought to be returned by the accused. These facts lead to the conclusion that the amount in the cheque in question was filled up afterwards by the complainant and the dispute had arisen because the accused tried to return the goods after more than four months of the invoice therefor. It was categorically stated by the complainant in his deposition that there was no separate contract for recovering late payment charges, but the invoice contained a clause in that regard.
4.1 It was clear from perusal of the original record and proceedings which were called for, and fairly conceded by learned Counsel appearing on both sides, that the documents produced by the complainant at the instance of the accused and exhibited in evidence included the original invoice (Exh.38), with the condition that the material sold by the bill will not be taken back after seven days and that interest will be charged @24% per annum after due date; the debit notes for the amounts of Rs.750/- and Rs.58,656/- (Exhs.16/4 and 16/3) as also the other debit notes exchanged between the parties. The important documents so exhibited at Exh.23/1, being copies of ledger for the period from 01.4.2002 to 31.3.2003, 01.4.2003 to 31.3.2004 and 01.4.2004 and 31.4.2004. clearly showed in the account of the respondent the debit balance of Rs.2.08.074/- with the details of all the financial transactions taking place between the parties during that period. Therefore, it appears to be absolutely incorrect and perverse for the appellate Court to conclude that the complainant had miserably failed to produce cogent proof, such as books of account, income-tax return/report etc., to prove that there was legally enforceable debt.
5. Against the above backdrop of facts, the respondent, accused person, appears to have taken shifting stands in defence to contend firstly that the cheque was misused, then that enforceable debt was not proved and. then before this Court, that a "blank cheque" was not a "cheque" at all. Issues regarding the burden of proving enforceable debt or other liability, the application of presumptions and the definition of "cheque" having been raised in this appeal, it would be necessary to first set out, as under, the relevant statutory provisions:
"S.5 Bill of exchange -
A "bill of exchange" is an instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay a certain sum of money only to, or to the order of, a certain person or to the bearer of the instrument.
A promise or order to pay is not "conditional", within the meaning of this Section and Section 4, by reason of the time for payment of the amount or any installment thereof being expressed to be on the lapse of a certain period after the occurrence of a specified event which. according to the ordinary expectation of mankind, is certain to happen, although the time of its happening may be uncertain.
The sum payable may be "certain", within the meaning of this Section and Section 4, although it includes future interest or is payable at an indicated rate of exchange, or is according to the course of exchange, and although the instrument provides that, on default of payment of an installment, the balance unpaid shall become due.
The person to whom it is clear that the direction is given or that payment is to be made may be a "certain person", within the meaning of this Section and Section 4, although he is mis-named or designated by descripttion only.
S.6 "Cheque"-
A cheque is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand and it includes the electronic image of a truncated cheque and a cheque in the electronic form.
Explanation I- For the purposes of this Section, the expressions-
(a) "a cheque in the electronic form" means........
(b) "a truncated cheque" means ..........
Explanation -II For the purposes of this Section, the expression "clearing house" means ........
S.13 "Negotiable instrument"-
(1)
A "negotiable instrument" means a promissory note, bill of exchange or cheque payable either to order or to bearer. S.20 Inchoate stamped instruments-
Where one person signs and delivers to another a paper stamped in accordance with the law relating to negotiable instruments then in force in India and either wholly blank or having written thereon an incomplete negotiable instrument, he thereby gives prima facie authority to the holder thereof to make or complete, as the ease may be, upon it a negotiable instrument, for any amount specified therein and not exceeding the amount covered by the stamp. The person so signing shall be liable upon such instrument, in the capacity in which he signed the same, to any holder in due course for such amount; provided that no person other than a holder in due course shall recover from the person delivering the instrument anything in excess of the amount intended by him to be paid thereunder.
S.87 Effect of material alteration-
Any material alteration of a negotiable instrument renders the same void as against any one who is a party thereto at the time of making such alteration and does not consent thereto, unless it was made in order to carry out the common intention of the original parties;
Alteration by indorsee
-
And any such alteration, if made by an indorsee, discharges his indorser from all liability to him in respect of the consideration thereof.
The provisions of this Section are subject to those of Sections 20, 49, 86 and 125.
S.118 Presumptions as to negotiable instruments-
Until the contrary is proved, the following presumptions shall be made:-
(a) of consideration - that every negotiable instrument was made or drawn for consideration, and that every such instrument, when it has been accepted. indorsed, negotiated or transferred, was accepted, indorsed, negotiated or transferred for consideration;
(b) as to date - that every negotiable instrument bearing a dale was made or drawn on such date;
(c) as to time of acceptance - that every accepted bill of exchange was accepted within a reasonable time after its date and before its maturity;
(d) as to time of transfer - that every transfer of a negotiable instrument was made before its maturity;
(e) as to order of indorsements - that the indorsements appearing upon a negotiable instrument were made in the order in which they appear thereon;
(f) as to stamps - that a lost promissory note, bill or exchange or cheque was duly stamped;
(g) that holder is a holder in due course - that the holder of a negotiable instrument is a holder in due course: provided that, where the instrument has been obtained from its lawful owner, or from any person in lawful custody thereof, by means of an offence or fraud, or has been obtained from the maker or acceptor thereof by means of an offence or fraud, or for unlawful consideration, the burden of proving that the holder is a holder in due course lies upon him.
S.138 Dishonour of cheque for insufficiency etc. of funds in the account-
Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provisions of this Act, be punished with imprisonment for a term which may be extended to two years, or with fine which may extend to twice the amount of the cheque, or with both:
Provided that nothing contained in this Section shall apply unless-
(a) the cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier;
(b) the payee or the holder in due course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving a notice in writing, lo the drawer of the cheque, within thirty days of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and
(c) the drawer of such cheque fails to make the payment of the said amount of money to the payee or. as the case may be to the holder in due course of the cheque, within fifteen days of the receipt of the said notice
Explanation- For the purposes of this Section, "debt or other liability" means a legally enforceable debt or other liability.
S.139 Presumption in favour of holder-
It shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque of the nature referred to in Section 138 for the discharge, in whole or in part, of any debt or other liability".
6. Learned Counsel for the respondent-accused relied upon judgment of Kerala High Court in Capital Syndicate v. Jameela [2003 (2) Crimes 122] and the observations that cheque to be valid, should certainly specify the amount and details regarding payee. If at the time of issue, amount is not specified and payee is uncertain, then cheque does not become a valid negotiable instrument as defined in the Act. Though the subsequent putting of the date in an undated cheque would not always amount to material alteration rendering the instrument void under Section 87 of the Act, the subsequent insertion of the amount and the name ofthe payee without the consent of the drawer would amount lo material alteration rendering the instrument void under Section 87 of the Act. Another judgment of Kerala High Court in Joseph Sartho v. Gopinathan Nair [2009 (2) Crimes 463] was relied upon for the proposition that, when cheque did not represent the amount or part of the amount due. the accused cannot be made liable for dishonour of such cheque. In Kumar Exports v. Sharma Carpets [(2009) 2 SCC 513] where the defence that blank cheques were obtained as advance payment was found to be probable, it was held by the Supreme Court that the burden of proof would shift on the complainant; and since the complainant did not produce any books of account or stock register maintained by him in the course of his regular business to establish as a matter of fact that the goods were sold by him, presumptions were held to have been rebutted. It was observed that, a presumption is not in itself evidence, but only makes a prima facie case for a party for whose benefit it exists. When a presumption is rebuttable, it only points out that the party on whom lies the duty of going forward with evidence on the fact presumed, and when that party has produced evidence fairly and reasonably tending to show that the real fact is not as presumed, the purpose of the presumption is over. It is also observed by the Supreme Court in Krishna Janardhan Bhat v. Datta raya G. Hegde [ 1 (2008) CCR 199] that existence of legally recoverable debt is not a matter of presumption under Section 139 of the Act, It merely raises a presumption in favour of the holder of a cheque that the same has been issued for discharge of any debt or other liability. The Court went on to observe in para 34 that the statute mandates raising of presumption but it stops at that. It does not say how presumption drawn should be held to have been rebutted. Other important principles of legal jurisprudence, namely presumption of innocence as a human right and the doctrine of reverse burden introduced by Section 139 should be delicately balanced. Such balancing acts, indisputably would largely depend upon the. factual matrix of each case, the materials brought on record and having regard to legal principles Governing the same. In M. S. Naranaya Menon v. State of Kerala [(2006) 6 SCC 39], the Supreme Court observed that, for rebutting the presumption of consideration, what is needed is to raise a probable defence. Even for that purpose, the evidence adduced on behalf of the complainant could be relied upon. It is not necessary for the Defendant to disprove the existence of consideration by way of direct evidence. The standard or proof evidently is preponderance of probabilities. Inference of preponderance of probabilities can be drawn not only from the materials on record but also by reference to the circumstances upon which the accused relies. The accused need not disprove the prosecution case in its entirety. Moreover, the onus on an accused is not as heavy as that of the prosecution. It may be compared with that on a Defendant in a civil proceeding.
6.1 In Shreyas Agro Services Pvt. Ltd. v. Chandrakumar S.B. [2006 Cr.L.J. 3140], the Karnataka High Court held that, if the drawee were to dishonestly fill up any excess liability and if the extent of liability becomes a bona fide matter of civil dispute, the drawer has no obligation to facilitate the encashment of cheque. And the same High Court also held in Uppinangady Grama Panchayath, Puttur v. P. Narayana Prabhu [2006 Cr.L.J. 3141] that, to warrant prosecution under Section 138 of the Act, it is necessary that the cheque should have been issued in respect of either past or current existing debt or other legal liability. Where the cheque was obviously not issued towards payment of damages, there was no legal obligation on part of the accused to effect clearance of the cheques issued towards the rental liabilities for the period during which he was not in occupation of the premises. Again the same High Court in Keygien Global Ltd. v. Madhav Impex [2006 Cr.L.J. 3413] held, where admittedly the accused had not appropriated the goods supplied by the complainant, that the complainant had no right to seek value of the rejected and returned goods and if the rejection of goods were illegal, the complainant had remedy to sue for damages. The Andhra Pradesh High Court in Taher N. Khambati v. Vinayak Enterprises [Crimes (HC) 1995 (4) 204] held that, where the complainant had obtained a blank signed cheque with a view to use it as a threat for realization of an amount, it could not be construed that the accused had issued the cheque voluntarily for discharge of any debt or legal liability as envisaged under Section 138 of the Act. In Kamalammal v. C.K.Mohanan [2007 Cr.LJ. 3124], the Kerala High Court held that there is no presumption under Section 139 or any other provision of the Act that if a blank cheque is issued, it can be presumed that an implied authority is given to the holder of the cheque to fill it up towards discharge of a debt etc. It further held that the presumption available in Section 139 is only in respect of the purpose for which the cheque is received by the holder-complainant, i.e. for discharge of a debt or liability. In the facts of that case, there was no evidence to show that the holder/ complainant "received the cheque". The receipt of cheque by the complainant was held to be a very crucial factor in the peculiar facts and circumstances where the accused had a definite case that a blank signed cheque was handed over to PW.I (the power of attorney-holder) in connection with another transaction and it was misused by her to file the complaint. In Joseph Sartho v. Gopinathan Nair [2009 (2) Crimes 463 (Ker.), it was held that, where the amount of cheque was larger than the amount of debt or liability, dishoner of the cheque would not amount to an offence under Section 138 of the Act. In Avon Organics Ltd. v. Pioneer Products Ltd. (2004 (1) Crimes 567), the Andhra Pradesh High Court held as under:
"6.......If the cheque is not drawn for a specified amount, it does not fall under the definition of a "Bill of Exchange". It cannot be called a "Cheque" within the meaning of Sections 5 and 6 of the Act...."
"7.......The cheque is a kind of bill of exchange, which means the amount payable must be mentioned in the cheque. At the time of issuing the cheque, the amount payable under the cheque is not mentioned. Consent is not given for which the amount was being drawn. It was virtually committed to alteration of the cheque, which is not permissible. The letters do not make a specific mention that they can put the amount therein and they can draw. The act of the complainant in filling up the amount portion in words and figures and put the date as per his own choice is certainly a material alteration. A blank cheque cannot be enforced even though it is issued for legal liability........"
"10......I am of considered view that the cheque issued without mentioning the amount for which it is drawn is not a cheque at all. It is not a bill of exchange at all as it is not drawn for a certain amount. When such is the thing, the question of invoking Section 138 of the Act does not arise. May be there is lacunae in Section 138 of the Act, it cannot be said that it covers invalid cheques also. Such an interpretation cannot be put on to it. It is for the Legislature to look at the lacunae found........"
6.2 In Kamala S. v. Vidhyadharan M.J. [2008 (1) GLR 423], the Supreme Court held it to be well-settled that when two views were possible, the High Court exercising its appellate power against a judgment of acquittal shall not ordinarily interfere. In John K. John v. Tom Varghese [(2007) 12 SCC 714], the Supreme Court held that the High Court was entitled to take notice of the conduct of the parties and draw its own conclusion. If, upon analysis of the evidence brought on record by the parties, a finding of fact has been arrived at that the cheque had not been issued by the respondent in discharge of any debt, it could not be said to be perverse.
7. As against the above judgments relied upon for the respondent-accused person, the appellant-complainant relied upon Three-Judge bench decision of the Supreme Court in Hiten P.Dalal v. Bratindranath Banerjee [(2001) 6 SCC 16], for the proposition that it is obligatory on the Court to raise the presumption under Section 139 in every case where the factual basis therefor had been established and it does not conflict with the presumption of innocence. It was necessary for the accused to show on the basis of acceptable evidence either that his explanation in the written statement was so probable that a prudent man ought to accept it or to establish that the effect of the material brought on the record, in its totality, rendered the existence of the fact presumed, improbable. A Division Bench of Kerala Kigh Court in Lillykutty v. Lawrence [2003 (2) OCR 610] held that by putting the amount and the name in the cheque, there is no material alteration under Section 87 of the Act. There is no rule in the banking business that payee's name as well as the amount should be written by the drawer himself. No law provides that, in case of cheques, the entire body of the cheque should be written by the drawer only. What is material is the signature of the drawer and not the body of instrument. In the facts of that case, apart from interested testimony of the drawer, no independent evidence was adduced to discharge the burden; and the story put up by the drawer that the cheques were stolen was not supported by any independent evidence. Again, the Kerala High Court in Assoo Hajee v. K.I.Abdul Latheef [2005 Cr.L.J.640] where entries in the cheque were made in presence of the son of the accused after verifying the accounts with respect to the outstanding liability, the Court held that it became a "cheque" when the liability was acknowledged and entries were made in the cheque. Again, a Division Bench of the Kerala High Court in Bhaskaran Chandrasekharan v. Radhakrishnan [1998 Cr.L.J. 3228(1)] wherein the accused had admitted issuance of a cheque and there was no dispute regarding signature, amount or the payee's name, but the cheque was issued in connection with another business, the Court held that merely because there was some transactions between the plaintiff and the Defendant, it could not lead to the conclusion that the cheque was not supported by consideration. In India, the legal position is that an undated cheque may be invalid but not void. When a cheque is issued for valid consideration, with no dispute regarding signature, amount and name, it cannot be said that putting a date on the cheque by the payee, who is the holder of cheque in due course, would amount to material alteration rendering the instrument void. When date was put by payee or drawer, on the cheque, presumptions under Section 118 of the Act would arise; and the burden would be on the drawer of the cheque to establish that the payee had no authority to put the date and encash the cheque.
8. The plain and simple statutory language of the age-old law. as applied in myriad different factual situations, would clearly indicate that bills of exchange in general and cheques in particular represent money with the characteristics of contract in the form of either an order or a promise to pay money. The paper on which it is written possesses the quality of being negotiable. The Negotiable Instruments Act in most respects is a modification of the Common Law on the subject and its provisions are in many respects declaratory of the Common Law. The Law Commission of India has, in its report dated 26.9.1958, suggested re-arrangement of the Sections as the Act is defective in some respects. There are ambiguous provisions relating to the right of recourse of the holder against the drawer on dishonour and omission to deal with the effect of forgery of negotiable instruments. In the judgment of the Judicial Committee in The Bank of Baroda v. Punjab National Bank Ltd. [1944 PC 58], Lord Wright said:
"There is no provision in the Negotiable Instruments Act as to a post-dated instrument such as there is in the English Bills of Exchange Act, 1882, Section 13 (2), which says that a bill is not invalid by reason only that it is ante-dated or post-dated. There are certain differences between the English Act and the Indian Act which preceded the former by a year. But substantially the two Acts correspond. Both have been based on the law developed by the English Courts as a part of the Law Merchant, which the Common Law originally received on the basis of what was proved to the Court to be the custom of European businessmen in their dealings but which eventually, under the name of the Law Merchant, was integrated with and became a part of the Common Law. The law of negotiable instruments was peculiarly adapted to codification, because it was so largely precise and formal. Hence, the English Act was described as a codifying Act, and so was in fact the Indian Act. Both were based on the English decisions and hence these and later decisions of either country are commonly cited and relied upon. And in addition, decision from other common law jurisdiction are frequently cited as in the present case is done by the Chief Justice. But the Law Merchant is not a closed book nor is it fixed or stereotyped...."
Upon the authority of various judgments of the British Courts, it is culled out in Bhashyam & Adiga's "The Negotiable Instruments Act" 17th Edition at page 204, as under:
"The authority implied by a signature to a blank instrument is so wide that the party so signing is bound to a holder in due course even though the holder was authorized to fill for a certain amount, and he in fact inserts a greater amount; but it is necessary that the sum ought not to exceed the amount covered by the stamp. Swan v. North British Australasian Co. [(19863)2 H&C 175 Llyods Bank v. Cooke [(1907) 1 KB 794 Garrard v. Lewis [(11882) 10 QBD 30 Herdman v. Wheeleer [(1902) 1 KB 361."
8.1 No contract gives rise to any liability, unless the transaction is supported by consideration. However, an important distinction in the case of negotiable instruments is to be noticed. These instruments being mercantile instruments intended for free circulation like cash, the Law Merchant lays down restrictions as to the defence of want of consideration. If a negotiable instrument is made, drawn, accepted, indorsed or transferred without consideration or for a consideration which fails, it creates no obligation between the parties to the transaction. Partial absence or partial failure of consideration consisting of money stands on the same footing as its total absence or failure. Hence, the payee is not entitled to recover to the extent to which the consideration has failed or is absent, but in case of partial absence or failure of consideration not consisting of money, such part of the consideration must be ascertainable in money without collateral Inquiry; otherwise it will not bar the recovery of the whole amount. The general rules of evidence relating to negotiable instruments are those contained in the Indian Evidence Act, but some special presumptions arising out of the peculiar incidents attached to negotiable instrument are set out in the Act.
9. The presumption under Section 139 is mandatory but rebuttable by proof of facts contrary to the receipt of cheque for discharge of any debt or other liability. The initial burden, however, of proving that the cheque was drawn by the drawee for payment of any amount of money and it being returned by the bank unpaid remains with the complainant. The presumptions under Section 118 are also mandatory but rebuttable and could be availed only until the contrary is proved. Even as a bill of exchange, by definition, requires signature of the maker as also direction to pay a certain sum of money only to or to the order of a certain person or to the bearer of the instrument, the provisions of Section 20 permits signature and delivery of an incomplete negotiable instrument and provides that the maker thereby gives prima facie authority to the holder thereof to make or complete it into a negotiable instrument and makes the signatory of such instrument liable to any holder in due course to the extent of the amount intended to be paid thereunder. Therefore, harmonious reading of the provisions of Sections 5, 6, 20, 118 and 139 would clearly indicate that a cheque could be drawn, delivered and received by the payee or holder in due course and could legally be completed under a legal authority and when such inchoate instrument is completed to make it a negotiable instrument, it would fall within the definition of "bill of exchange" and would render the signatory liable upon such instrument to the extent the amount mentioned therein is intended by him to be paid thereunder. Unless and until contrary is proved, such negotiable instrument would be presumed to be made or drawn for consideration and receipt thereof would be presumed to be for discharge, in whole or in part, of any debt or other liability. However, such debt or other liability is not by any legal presumption presumed to be a legally enforceable debt or other liability. Therefore, the onus of proving that the presumed or proved debt or legal liability was legally enforceable remains with the Complainant. Consequently, in all given fact-situations, the Court is required to examine whether the presumptions regarding consideration and there being any debt or other liability are rebutted by the accused person by preponderance of probabilities and whether the complainant has proved that the debt or other liability, presumed or proved by overwhelming evidence, was legally enforceable. Although there is no presumption as regards any debt or other liability being legally enforceable, it would be found that once a debt or other liability is presumed and not properly rebutted, it would be legally enforceable, unless and until it is shown to be legally unenforceable. Such scheme of the provisions of law clearly indicates the object of serving the purpose of realization of the promise apparently contained in a negotiable instrument, which is that the amount for payment of which the bill of exchange was intended to be made will be paid to the payee or the holder in due course.
9.1 Any material alteration of a negotiable instrument, however, renders it void as against any one who is a party thereto at the time of making such alteration and does not consent thereto, unless the alteration was made in order to carry out the common intention of the original parties. The provision to that effect contained in Section 87 has to be read in harmony with Section 20 which permits and authorizes the holder of a negotiable instrument to complete the instrument for any amount and renders the drawer liable to the holder in due course to the extent of the amount intended by the drawer to be paid under such instrument. It is clear from plain reading of provisions of Section 20 and 87 that the injunction, under the pain of invalidating a negotiable instrument, against alteration operates only after an inchoate instrument is completed or a complete instrument falls within the definition of "negotiable instrument". Therefore, the legally permissible completion of an inchoate instrument cannot be construed as material alteration of a negotiable instrument.
10. The above analysis of the statutory provisions leads to the conclusion that, when a cheque bearing only signature of the drawer is delivered and received by a payee for the discharge, in whole or in part, of any debt or liability, there is an implied authority for the person receiving such cheque to complete it by filling the blanks and the amount having been filled up under such implied authority would be the amount intended by him to be paid thereunder. The focus in such cases would shift to the aspect of such amount being for the discharge, in whole or in part, of any legally enforceable debt or other liability. Therefore, even with the props of legal presumptions, the onus of proving legally enforceable debt or other liability for the discharge of which a cheque must have been drawn has to be discharged by the prosecution for bringing home the charge of dishonour of cheque. It may, however, be facetious to hold that a blank cheque, drawn by a person on an account maintained by him with a banker, for payment of any amount of money to another person, by merely putting his signature on it, would not be a "cheque" in the first place, because of not being a "bill of exchange" as it did not contain direction to a certain person to pay a certain sum of money to or to the order of a certain person or to the bearer of the instrument. When the Negotiable Instruments Act expressly permits and authorizes by a substantive provision the completion of an inchoate instrument by Section 20 with the safeguard provided in Section 87, provisions of Sections 5 and 6 defining "bill of exchange" and "cheque" have to be harmoniously read to mean that an instrument which was initially not a "cheque" falling within the definition of Section 6 would become a "cheque" when it was completed by filling the blanks and its dishonour shall have all the legal consequences of dishonour of a cheque proper.
11. Applying the above construction of the relevant provisions in light of the overall scheme of the Act, it would appear that, in the facts of the present case, whether the amount in the cheque in question was not mentioned at the time of drawing it and whether it was filled up afterwards by the payee becomes immaterial and pales into insignificance. Therefore, the sole issue requiring consideration in this appeal is as to whether the cheque was drawn, delivered and received for payment of any amount to the payee for the discharge, in whole or in part, of any legally enforceable debt or other liability. As seen earlier, the complainant, appellant herein, had proved by oral and documentary evidence that there was sale of goods worth Rs. 1,48,668/- as per the invoice dated 05.7.2003 containing conditions stipulating return of goods within seven days and payment of interest @ 24% per annum after due dale and the statement of accounts for the financial years 2002-2003 and 2003-2004 and debit notes proved the debt. Thus, as against the proof of total debit balance and liability of the cheque amount, the respondent-accused person had only disputed liability by stating and proving that the goods sold by the aforesaid invoice was sought to be returned after nearly 75 days. Therefore, on the one hand, the complainant had adduced sufficient evidence proving legally enforceable debt in terms of the amount due on sale of goods, with express stipulations, the debit notes issued and the accounts maintained in the regular course of business and. on the other hand, the accused person had only proved an attempt to return the goods. Thus, the legal presumptions in favour of the complainant and the proof of legal liability of the accused were not rebutted or disproved by any credible preponderance of probabilities. Under such circumstances, not only all the ingredients and circumstances for constituting the offence of dishonour of cheque were fulfilled, but the accused person appeared to have relied upon irrelevant facts for setting up a dishonest defence by denying any liability. Therefore, it is a fit case for convicting the respondent for the offence punishable under Section 138 of the Act and sentencing her to proper punishment.
12. In view of the submissions made on behalf of the respondent that she was a woman in whose name the actual business might have been carried by other persons, it is deemed proper that the punishment is restricted to fine. Accordingly, the appeal is allowed, the impugned judgment dated 12.01.2009 in Criminal Appeal No.48 of 2008 of learned Sessions Judge, is set aside and convicting the accused and modifying the punishment, she is sentenced to pay fine of Rs.4,15,000/- and, in case of default in making payment thereof within one month, she shall undergo simple imprisonment for two years. In case the fine is paid as aforesaid, the amount of Rs.4.00,000 therefrom shall be paid to the appellant under the provisions of Section 357 of Cr.P.C.
(MCB)(Appeal allowed)
Nitish Banka (lawyer) 25 March 2018
Security cheque and offence under 138 NI act
How your Security cheque can save you from cheque bouncing offence under NI 138
Is it cheating?
READ ALSO Cheque as a security and Offence under NI 138
How your Security cheque can save you from cheque bouncing offence under NI 138
How your Security cheque can save you from cheque bouncing offence under NI 138April 27, 2016Similar post
Cheque as a security and Offence under NI 138May 20, 2016Similar post
How to defend Ni-138-Part-1January 18, 2014In "NI 138"
ADVOCATE TRILOK (CRIMINAL family PROPERTY topfreind@gmail.com ) 25 March 2018
© 2024 LAWyersclubindia.com. Let us grow stronger by mutual exchange of knowledge.
