Blank Cheque Sufficient to attract Section 139 if Accused Admits to Signature: Apex Court

Key Takeaways

• Section 139 of the Negotiable Instruments Act 1881, grants a presumption in favour of the holder, providing that the holder received the cheque of the nature referred to in section 138 for the discharge of a debt or a liability.
• This implies that the onus to prove otherwise (that such a cheque was not for repayment of a debt) is on the payee.
• In an order dated 10^th February 2021, the Supreme Court held that a blank cheque is also sufficient to attract section 139 of the Negotiable Instruments Act, if an accused acknowledges his signatures on such a cheque.

Overview

Negotiable Instruments are not exactly cash, but can be called as 'money-equivalent'. A cheque is one of the most popular forms of Negotiable Instruments. Anyone who has ever made transactions by a cheque is aware that dishonouring of a cheque, colloquially known as a bounced-cheque, is currently a criminal offence under section 138 of the Negotiable Instruments Act (currently, because the Government has proposed a bill to decriminalize the said offence). This provision along with other provisions in this regard to dishonour of a cheque in the Negotiable Instruments Act (hereinafter referred to as the NI Act) formulate the legal crux of the case in point, M/s. Kalamani Tex vs. P. Balasubramanian [CRIMINAL APPEAL NO. 123 of 2021].

The Dispute

In the present case, the Respondent, Mr P. Balasubramanian was in a business with the Appellants M/s. Kalamani Tex, and in the course of business, the Appellants had to pay the Respondent a sum of Rs 11,20,000. A Cheque and a Deed of Undertaking in favour of the Respondent were consequently issued by the Appellants on the same day. The Respondent presented the cheque in the bank which was returned due to insufficiency of funds. When the Respondent sent a notice to the Appellants, they denied their liability to pay stating that the cheque was only to help the respondent in some other debt recovery proceedings, not pertaining to the present case. The Respondent took the appellants to the trial court, wherein the trail court refused the claims of the Respondent stating that he had 'failed to establish a legally enforceable liability on the date of issue of cheque”. The Respondent further appealed the order in High Court, wherein the HC held the Appellants liable, providing that, 'The signature of the accused has been put over the seal of the firm and therefore, the contention of the learned counsel appearing for the respondents that the accused put his signature alone without any seal in the blank stamp paper cannot be accepted.” Aggrieved by the order, the Appellants approached the Supreme Court for relief.

Supreme Court’s Observations

In the present case, the bench comprised of Justices NV Ramana, Surya Kant and Aniruddha Bose upheld the impugned order of the High Court, stating that 'the Trial Court completely overlooked the provisions and failed to appreciate the statutory presumption drawn under Section 118 and Section 139 of NIA.” The Bench further pointed out that as per the provisions of the Negotiable Instruments Act, once the accused admits to his signatures on any negotiable instrument, such an admission activate these 'reverse onus' clauses (namely Section 118 and Section 139 of the Act).

Additionally, a significant argument was raised that the presumption drawn against an accused under sections 118 and 139 of the NIA Act is 'rebuttable through a standard of ‘preponderance of probability’, which has been successfully met by the Appellants in the present case”. In response to this, the Bench pointed out that the disposition of the witness presented by the Appellants 'merely highlighted that the Respondent had an over­extended credit facility with the bank and his failure to update his account led to debt proceedings”. Therefore, such a disposition was not sufficient to liberate the appellants from liability.

Analysis

It is pertinent to note here that 'dishonour of a cheque” in itself is not an undemanding offence in itself, and has certain requisites to be fulfilled to constitute a criminal offence. In Rakesh Nemkumar Porwal v. Narayan Dhondu Joglekar 1994 (3) BomCR 355 the Bombay High Court held that: "A clear reading of Section 138 leaves no doubt in our mind that the circumstances under which such a dishonour takes place are required to be totally ignored. In such case, the law only takes cognizance of the fact that the payment has not been forthcoming and it matters little that any of the manifold reasons may have caused that situation."

Furthermore, It is also relevant that the Hon’ble Supreme Court has upheld previously that a blank cheque is sufficient to attract section 139 of the NI Act.

In Bir Singh v. Mukesh Kumar (2019) 4 SCC 197 in which the Supreme Court had held 'Even a blank cheque leaf, voluntarily signed and handed over by the accused, which is towards some payment, would attract presumption under Section 139 of the NI Act, in the absence of any cogent evidence to show that the cheque was not issued in discharge of a debt”.

The Final Order

The Hon’ble Supreme Court although dismissed the appeal of the Appellants, cancelled the sentence awarded in the impugned order, as the Appellants had paid up the amount in the Supreme Court’s registry and were only arguing the case for its merit.

It is submitted that through this order, a number of pertinent questions were answered by the Hon’ble Supreme Court with respect to dishonour of cheque, and the order will serve as a noteworthy precedent, even if section 138 of the NI Act is decriminalized.

Conclusion

To sum up everything that has been stated so far, the present order clearly demonstrates yet again that function of the Negotiable Instruments Act is to enable the process of debt recovery and prevent its possible misuse; and in that effect our Hon’ble judiciary is passing judgements which is making the escape from liability more and more difficult in the eyes of law. Although a number of presumptions are given in the NI Act in the favour of the holder, a defaulter may nevertheless try to escape liability, as seen in the present case. More precedents on this subject will positively aid a holder in getting back his dues in a fair manner.

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