dishonour of cheque

Case BriefsHigh Courts

Punjab and Haryana High Court: Gurvinder Singh Gill, J., observed that,

Right to appeal against conviction is an invaluable statutory right vested upon a convict by Criminal Procedure Code which cannot be allowed to be defeated by imposing any condition for availing such right.

“..depriving a convict of his right to appeal by imposing any pre-requisite for availing his statutory right to challenge conviction in a higher Court would amount to depriving his liberty without adhering to the established procedure of law.”

Petitioners were arrayed as accused in the complaint filed by the respondent under Section 138 of Negotiable Instruments Act, 1881.

It was alleged that the cheques drawn by the accused upon their presentation in the bank by the complainant for their encashment were dishonoured.

In light of the above background, accused were tried by the Judicial Magistrate and directed to pay compensation.

Accused, on being aggrieved by the above decision preferred appeals before the Sessions Court, wherein at the time of admission of appeals, impugned orders dated 28-2-2020 were passed, wherein following was stated:

“Criminal Appeal received by entrustment. As there are fairly arguable points involved in the adjudication of the present appeal, hence, the present appeal is admitted for hearing, subject to just exceptions and to deposit of 20% of the compensation amount in view of latest amendment in Section 148 of Negotiable Instruments Act (applicable w.e.f. 01.09.2018), within one month from today. It is registered as Criminal Appeal. Now notice of this appeal be issued to the respondent through ordinary process as well as speed post on furnishing of speed post charges and copies of grounds of appeal within a week for 02-07-2020. Trial Court Record be also called for that date.”

Counsel representing the complainant argued that the lower Appellate Court having passed the orders in question in exercise of jurisdiction under statutory provisions of Section 148 of the Act, the same cannot be called to question.

Analysis, Law and Decision

The language of Section 148 of the NI Act would show that the amended provisions vest the Appellate Court with a discretion to direct deposit of an amount not less than 20% of the compensation amount as awarded by the trial Court. Although the word ‘may’ has been used in the Section but the Supreme Court in Surinder Singh Deswal v. Virender Gandhi, (2019) 11 SCC 341 has interpreted the said provisions to mean that issuance of such a direction is more in the nature of a mandate.

In view of the above-stated Supreme Court decision, power of Appellate Court, though discretionary is supposed to be a ‘rule’ and said discretion should be exercised in all the cases unless there are some exceptional circumstances

In the instant case, there were no exceptional circumstances before the lower Appellate Court so as to justify non-deposit of an amount as provided under Section 148 of the Act.

Section 148(2) of the Act would show that it is provided in unambiguous terms that the amount is required to be deposited within a period of 60 days which may further be extended by another 30 days.

In the instant case, lower Appellate Court having granted only 1 month’s period for depositing the amount, the same is contrary to the above-stated provisions.

Right of Appeal

Section 374 CrPC does not prescribe any condition for admission of an appeal.

Provisions of the statute which vests a convict with a valuable right to challenge his conviction are not circumscribed by any conditions.

Nor does any provision of the Negotiable Instruments Act, 1881 refer to any pre-condition for availing a valuable right of the first appeal.

Further, the Bench expressed that Section 148 of the Act just vests the Appellate Court with the power to direct the appellant to deposit an amount not less than 20% of the compensation amount but under no circumstances the same can be interpreted to be a condition pre-requisite for availing the right of appeal.

Imposition of any condition at the time of suspending of sentence may be a different matter and the trial Court may in its wisdom, impose such a condition failing which the order suspending sentence may be vacated.

Supreme Court in Babu Rajirao Shinde v. State of Maharashtra, (1971) 3 SCC 337, observed that a convicted person must be held to be at least entitled to one appeal as a substantial right.

High Court also made another significant observation:

Even though the Negotiable Instruments Act, 1881 is a special Act and could override provisions of Cr.P.C., but there is no such specific provision in the Act which could be interpreted to mean that availing of right to appeal by a person convicted for an offence under the Act, has been made subject to some conditions.

While parting with the decision, Court held that:

(i) The condition made in the impugned orders wherein the admission of appeal has been made subject to deposit of 20% of the compensation amount is set aside and it is ordered that the appeals shall stand admitted before the lower Appellate Court. The petitioners are, however, directed to deposit an amount equivalent to 20% of the amount of compensation awarded by the trial Court within 60 days from today.

(ii)  In case the aforesaid amount is deposited within 60 days from today, the bail already granted vide order dated 28.2.2020 by lower Appellate Court shall continue subject to any such fresh conditions as may be imposed by lower Appellate Court.

(iii)  In case bail of any of the petitioner has been cancelled on account of non-deposit of the amount or has already been taken into custody, he shall be released forthwith on bail subject to any such conditions as may be imposed by the lower Appellate Court. He shall, however, deposit the amount of 20% within 60 days from today.

(iv) In case of failure to deposit the amount in question within a period of 60 days from today, it shall be open to the lower Appellate Court to cancel bail and to hear the appeal on merits, provided, however, subject to any such general directions issued by the High Court in the matter of hearing of cases, having regard to the present circumstances of spread of pandemic COVID-19.[Sudarshan Kumar v. Manish Manchanda, 2020 SCC OnLine P&H 2321, decided on 15-12-2020]

Advocates who appeared before the matter:

Vaibhav Sehgal, Advocate, counsel for the petitioner(s).

Nitin Thatai, Advocate for the respondent (s)

Case BriefsHigh Courts

And, that’s a wrap!

Here’s the list of our coverage on Negotiable Instruments Act in the year 2020.

 [Allahabad High Court]

All HC | Can a complaint filed in light of S. 138 NI Act be dismissed on ground of one day delay? Read Court’s reasoned order

[Pankaj Sharma v. State of U.P., 2020 SCC OnLine All 1339, decided on 22-09-2020]

All HC | Principle contained in S. 141 of NI Act is not applicable to a sole-proprietary concern, firm need not be arraigned as an accused while making a claim for recovery under S. 138 of the NI Act

[Dhirendra Singh v. State of U.P., 2020 SCC OnLine All 1130, decided on 13-10-2020]

All HC | Once the intention of the party is clear that he does not wish to make payment, should complainant wait for 15 days to file a complaint for dishonour of cheque? HC answers

[Ravi Dixit v. State of U.P., 2020 SCC OnLine All 1056, decided on 23-09-2020]

[Bombay High Court]

Bom HC | Does NI Act authorises a complainant to fill an incomplete cheque? Court discusses while reversing acquittal of accused under S. 138 NI Act

[Kiran Rameshlal Bhandari v. Narayan Purushottam Sarada, 2020 SCC OnLine Bom 3562, decided on 07-12-2020]

Bom HC | Appeal filed against conviction under S. 138 NI Act cannot be dismissed for non-payment of fine without going into merits of appeal

[Adesh Prakashchand Jain v. Harish Punamchand Une, 2020 SCC OnLine Bom 96, decided on 08-01-2020]

Bom HC | S. 139 NI Act imposes evidentiary burden and not a persuasive burden; acquittal upheld where complainant failed to prove capacity to give loan

[Tasneem Murshedkar Mazhar v. Ramesh, 2020 SCC OnLine Bom 20, decided on 02-01-2020]

[Delhi High Court]

Del HC | Can a director who has resigned from company be held liable for cheques subsequently issued and dishonoured? HC explains in light of S. 141 NI Act

[Alibaba Nabibasha v. Small Farmers Agri-Business Consortium, 2020 SCC OnLine Del 1250, decided on 23-09-2020]

Del HC | Proceedings under S. 138 NI Act quashed against Independent Non-executive Directors not involved in day-to-day affairs of Company

[Sunita Palta v. Kit Marketing (P) Ltd., Crl. MC No. 1410 of 2018, decided on 03-03-2020]

Del HC | Ss. 143-147 NI Act lay down Special Code for trial, recourse to S. 482 CrPC as a substitute for initiating second revision petition denied

[Tathagat Exports (P) Ltd. v. PEC Ltd., 2020 SCC OnLine Del 405, decided on 20-01-2020]

[Himachal Pradesh High Court]

HP HC | Legislative intent of NI Act, 1881 is not to send the people to suffer incarceration but to execute recovery of cheque amount by showing teeth of penalty loss; conviction set aside

[Gaurav Sharma v. Ishwari Nand, 2020 SCC OnLine HP 2464, decided on 13-11-2020]

HP HC | Whether the trial court can exercise any discretion while entertaining an application under S.145 of the NI Act; HC elucidates upon procedural nuances

[Vikas Sharma v. Vishant Bali,  2020 SCC OnLine HP 2876, decided on 08-12-2020]

HP HC | While exercising power under S. 147 of NI Act the Court can proceed to compound the offence even after recording of conviction

[Satish Kumar v. Rahul Kumar, 2020 SCC OnLine HP 338, decided by 03-03-2020]

[Jharkhand High Court]

 Jhar HC | Object of NI Act is primarily compensatory; Court can discharge accused on full payment and amicable settlement

[Alok Kumar v. State of Jharkhand, Cr. Revision No. 694 of 2019, decided on 06-03 2020]

[Kerala High Court]

[Negotiable Instruments Act] Ker HC | What determines commencement of period of presentation is date of cheque and not the date of delivery of cheque

[Subanamma Ninan v. George Veeran, 2020 SCC OnLine Ker 4151, decided on 18-09-2020]

[Karnataka High Court]

 Kar HC | In a case where both the complainant and the accused remained continuously absent, Court ought to have “dismissed the complaint for non-prosecution under S. 256 CrPC and not on merits”

[Karage Gowda v. S. Nagaraj, 2020 SCC OnLine Kar 2012, decided on 11-12-2020]

Kar HC | If the complainant produces evidence regarding the transaction as well as dishonour of cheque, is it still necessary to examine the banker to prove the endorsement issued by him? HC decides

[M. Narayanaswamy v. Nagaraj N.S., 2020 SCC OnLine Kar 2013, decided on 11-12-2020]

Kar HC | No legal basis for Family Courts insisting on personal presence of petitioners at the time of filing cases; Presence of complainant while filing S. 138 NI Act case not necessary

[High Court of Karnataka v. State of Karnataka, 2020 SCC OnLine Kar 543 , decided on 03-06-2020]

[Madras High Court]

Madras HC | Can a ‘Non-Executive Director’ who is not responsible for day-to-day affairs of company be made vicariously liable for offence committed by the company? Court’s interpretation in light of S. 141 NI Act

[Vijaya Arun v. New Link Overseas Finance Ltd., Crl. OP Nos. 5, 8 & 11 of 2020, decided on 18-08-2020]

[Malafide Litigation] Madras HC | Proceedings under S. 420 IPC quashed for being counterblast to complaint instituted under S. 138 NI Act

[M. Chandrasekar v. R. Rajamani, 2020 SCC OnLine Mad 4777, decided on 24-08-2020]

[Madhya Pradesh High Court]

[Dishonour of Cheque] MP HC | Director/MD/JD/other officers and employees of a company can not be prosecuted under S. 138 of NI Act unless the company is impleaded as an accused

[Bhupendra Suryawanshi v. Sai Traders, 2020 SCC OnLine MP 1277, decided on 09-06-2020]

[Punjab and Haryana High Court]

[S. 138 NI Act] P&H HC | Do sympathetic consideration have any role to play in the matter of sentencing? Court discusses

[Rakesh Kumar v. Jasbir Singh, 2020 SCC OnLine P&H 1197, decided on 11-08-2020]

[Tripura High Court]

Tri HC | What is the purpose of a serving a ‘Statutory Notice’ under Negotiable Instruments Act? Detailed analysis of significance of ‘Statutory Presumption’

[Nitai Majumder v. Tanmoy Krishna Das, 2020 SCC OnLine Tri 537, decided on 17-11-2020]

Also Read:

2020 Wrap Up — Flashback of Stories on Consumer Cases

2020 Wrap-Up — Family Law & Allied Provisions

Case BriefsHigh Courts

Karnataka High Court: John Michael Cunha J., allowed the appeal and sets aside the impugned order.

The case involves default under Section 138 Negotiable Instruments Act, 1881 for the discharge of hand loan of Rs 5,00,000 by the petitioner. The notice was issued by the appellant/ complainant demanding the payment of the cheque amount, which went unreplied by the respondent. In the course of the trial, evidence was produced like the original cheque, the dishonour memo and the refused postal cover in proof of service of the demand notice on the respondent. Trial Court found respondent guilty of the offence under Section 138 of NI Act, 1881 and sentenced him to pay fine. The Respondent filed an appeal being aggrieved by the said order which was reversed observing that no opportunity was provided to the respondent to present his case and hence the matter was remanded back top the Trial Court. The accused yet not produce about defence evidence nor did he controvert the evidence produced by the complainant. The Trial Court, this time acquitted the respondent on the ground that the complainant has not examined the concerned bank manager in proof of the endorsement given by him regarding the “payment stopped by the drawer”.

Counsel for the appellants submitted that the reasoning assigned by the Trial Court is completely perverse and irrelevant.

The Court observed that the complainant had initiated action for the offence of dishonor of cheque the Trial Court was only required to consider the proof of the ingredients of the offence namely the issuance of cheque by the respondent towards the discharge of the legally enforceable debt and the consequent dishonour thereof. It was further observed that it is not in dispute that the evidence given by him regarding the transaction as well as the dishonour of the cheque has remained uncontroverted and under the said circumstance, the complainant was not required to examine the banker to prove the endorsement issued by him.

In view of the above, the appeal was allowed and the impugned order was set aside.[M. Narayanaswamy v. Nagaraj N.S., 2020 SCC OnLine Kar 2013, decided on 11-12-2020]

Arunima Bose, Editorial Assistant has put this story together

Case BriefsHigh Courts

Bombay High Court: Vibha Kankanwadi, J., reversed the acquittal of the respondent-accused holding him guilty of having committed an offence under Section 138 (dishonour of cheque) of the Negotiable Instruments Act, 1881.

Facts on record

The complainant had come with a case wherein he stated he had friendly relations with the accused. Since the accused was in need of money to purchase immovable property, therefore he requested the complainant to extend the amount of Rs 15,00,000 and Rs 6,00,00 which was extended by the complainant.

In regard to the above legal enforceable debt or liability, two cheques were issued.

On depositing the above cheques, both were dishonoured for the reason “refer to drawer”.

In light of the above circumstances, the complainant filed two separate complaints and Magistrate on taking into consideration the above said facts, acquitted the accused.

In view of the above, the present appeal has been filed.

Advocate for the complainant relied on the decision of Vijay v. Laxman, 2013 STPL (DC) 679 SC, wherein it was held that:

“The burden of proving the consideration for dishonour of cheque is on the complainant, but the burden of proving that a cheque had not been issued for discharge of a legally enforceable debt or liability is on the accused. If he fails to discharge the said burden he is liable to be convicted.”

In view of the above decision, Complainant’s Counsel submitted that trial judge committed illegality and the decision was in view of the legal position and therefore the appeal deserved to be allowed.

Analysis, Law and Decision

Whether the complainant has discharged the initial burden to prove that he had advanced loan to the accused?

With regard to the amount of Rs 15,00,000, it was held that as regards the said amount, the complainant discharged the initial burden of proof that he has advanced loan to the accused.

In his statement under Section 313 of the CrPC, accused did not state that he was holding such account, on which the cheque was issued by the complainant and he did not specifically state that he had not received the amount through the said account.

Bench stated that the complainant had proved that it was legally enforceable debt or liability, which was to the extent of Rs 15,00,000 as against the accused.

As regards the other disputed cheque i.e. amount of Rs 6,00,000, complainant stated he had given the said amount by cash.

In this case, also it can be said that the complainant has discharged the initial burden of proof that he had advanced amount of Rs 6,00,000 as a loan to the accused.

In the instant case, the accused did not deny his signature on the disputed cheques. Though he came with a defence, as to how those cheques went into the possession of the complainant, but as aforesaid that defence is unbelievable.

Bench stated that even if for the sake of arguments we admit that the disputed cheques were blank cheques; yet, when accused admits his/her signatures on the disputed cheques, then the legal position on this point is also clear that the complainant would get an authority under Section 20 of Negotiable Instruments Act to complete the incomplete cheque.

When now the position stands that the complainant has discharged the initial burden, accused admits his signature on the disputed cheques; then presumption under Section 139 of the Negotiable Instruments Act definitely gets attracted in favour of the complainant.

The complainant was the ‘holder of cheques’ and therefore, was entitled to present the same for encashment. Both the cheques were dishonoured.

Statutory notices issued by the complainant were complied with, and therefore, Court held that the accused is guilty of committing the offence punishable under Section 138 of the Negotiable Instruments Act.

Magistrate did not scan the evidence properly with sound legal principles and therefore, interference of this Court was required.

Bench relied on the Supreme Court’s decision in Govindaraju v. State, (2012) 4 SCC 722, with regard to the powers of the Appellate Court, wherein it was observed that:

“The law is well-settled that an appeal against an order of acquittal is also an appeal under the Code of Criminal Procedure, 1973 and an appellate Court has every power to re-appreciate, review and reconsider the evidence before it, as a whole. It is no doubt true that there is presumption of innocence in favour of the accused and that presumption is reinforced by an order of acquittal recorded by the trial Court. But that is the end of the matter. It is for the Appellate Court to keep in view the relevant principles of law to re-appreciate and reweigh the evidence as a whole and to come to its own conclusion on such evidence, in consonance with the principles of criminal jurisprudence”.

Honest drawers’ interest who issue cheques is safeguarded in the Act itself.

In Dalmia Cement (Bharat) Ltd v. Galaxy Traders & Agencies Ltd., (2001) 6 SCC 463, the Supreme Court has explained the scope of offence under Section 138 of the NI Act.

In R. Vijayan v. Baby, (2012) 1 SCC 260, Supreme Court held that while awarding compensation in matters under Section 138 NI Act, interest can be awarded @9% p.a.

Court stated that in view of the above decisions, awarding jail sentence to the respondent/accused may not be in the interest of justice.

Bench also added to its decision that the appellant would also be interested in getting his amount back. Therefore, payment of compensation under Section 357 of the Code of Criminal Procedure to the complainant would be in the interest of justice.

The punishment that can be awarded for an offence under Section 138 of Negotiable Instruments Act is “ imprisonment for a term which may extend to two years, or with fine which may extend to twice the amount of the cheque, or both” (stress supplied by me).

Since the complaint was filed in 2013 after the statutory notice. The amount became due to complainant after the date of the notice.

Some amount needs to be given to complainant above the cheque amount towards interest.

Since the rate of interest in banks has gone down nowadays, and therefore, the said rate cannot be equal to the rate granted in R. Vijayan’s case.

After taking into consideration all the above pronouncements it would be in the interest of both the parties to impose fine of Rs 18,00,000 and Rs 8,00,000 in respective cases and to direct the amount of Rs 17,50,000 and Rs 7,50,000 to be paid to complainant as compensation under Section 357(1) of the Code of Criminal Procedure. Deposit time will not be extended. [Kiran Rameshlal Bhandari v. Narayan Purushottam Sarada, 2020 SCC OnLine Bom 3562, decided on 07-12-2020]

Advocates who appeared for the matter:

Shyam C. Arora, Advocate for the appellant
Amol Kakade, Advocate h/f C.D. Fernandes, Advocate for respondent

Case BriefsHigh Courts

Tripura High Court: S.G. Chattopadhyay, J., highlights the essence of the provisions of Negotiable Instruments Act, in light of the object of a statutory notice.

It has been stated that the Courts below have concurrently held that the respondent has already established his case under the provisions of Section 138 of Negotiable Instruments Act, 1981 against the accused, who is the present petitioner.

The present petitioner was convicted for committing an offence under Section 138 of the Negotiable Instruments Act and he/she was penalised for a sentence of 1 year along with a fine of Rs 7,00,000.

Session Judge had also affirmed the above decision of the Chief Judicial Magistrate while reducing the sentence to fine and directing the petitioner to pay only Rs 4,00,000.

Being aggrieved with the above, the present criminal revision petition was filed.

Facts

Since both the petitioner and respondent were on good terms and known to each other, the petitioner used to borrow money from the respondents and repay the same in time. On 15-01-2014, he took a loan of Rs 3,50,000 and promised to repay the money within 30-11-2014.

On being requested for the above-amount, past the said date, petitioner handed over a cheque to the respondent but the said cheque was returned with an endorsement “insufficient funds”.

Demand Notice was issued with 15 days of time given for the repayment of the said amount. Every time that the postman visited the house for the service of the demand notice, housemates of the petitioner refused to receive the said letter and said that the petitioner was out of station.

Hence, in view of the above circumstance, the notice was returned to the respondent.

Later the matter reached the trial and the petitioner was convicted under Section 138 NI Act.

Misutilization of the Cheque

Petitioner contended in regard to the cheque that the accused had never issued any cheque in discharge of any debt or liability, but only a blank cheque was issued as a security for the loan which was borrowed by him from the complainant and after the loan was repaid, the complainant, instead of returning the cheque, misutilized it against him.

Statutory Presumption

Respondent’s counsel submitted that the presumption under Section 139 read with the Rule of Evidence as provided under Section 118, NI Act with regard to the existence of debt or liability is not a discretionary presumption, it is a statutory presumption which is obligatory on the part of the Court. Hence, a heavy burden is cast on the accused to rebut such presumption.

Further, the counsel added that apart from making mere denial of the existence of debt or liability, the accused did not lead any evidence to prove that he had no legal liability to be discharged and as such the courts below had drawn the statutory presumptions against him.

Section 138 NI Act requires proof of the essential ingredients:

  • there is legally enforceable debt
  • a cheque is drawn on an account maintained by the accused with his banker for payment of any amount to another person from his account in the discharge in whole or in part of the debt or liability
  • the cheque is returned by the bank unpaid, either because of the insufficient fund in the account of the accused to honour the cheque or that the cheque amount exceeds the amount arranged to be paid from that account by an agreement made with the bank.

Bench noted that the petitioner in his defence merely offered an explanation throwing suggestion to the prosecution witnesses in their cross-examination that he gave a blank signed cheque as security and did not deny the fact that he borrowed loan from the complainant.

Question for consideration:

In the instant matter, whether such an explanation offered by the petitioner is enough to disprove the statutory presumptions under Sections 138 and 139, NI Act?

In the decision of Hiten P. Dalal v. Bratindranath Banerjee, (2001) 6 SCC 16, Supreme Court that the presumptions to be drawn by the court under Sections 138 and 139, NI Act are presumptions of law which cast the evidential burden on the accused to disprove the presumptions.

Further, in the case of Mallavarapu Kasivisweswara Rao v. Thavikonda Ramulu Firm, (2008) 7 SCC 655, it was held that it is a settled position that the initial burden lies if the accused to prove the non-existence of consideration.

Decision

Bench on perusal of the above held that the explanation offered by the accused petitioner is not founded on proof and it does not stand to reason.

The object of the statutory notice is to protect an honest drawer of the cheque by providing him with a chance to make the fund sufficient in his bank account and correct his mistake.

Accused had an opportunity to explain himself, he instead repeatedly avoided the service of demand notice and did not state that he already has the repayment of the loan.

Therefore, Court held that the prosecution successfully discharged its burden in proving the case against the petitioner with the help of the statutory presumptions under the NI Act, and the accused failed to rebut those presumptions and prove the contrary by offering provable explanation founded on the proof.

Adding to the above, Bench also observed that the overall conduct of the accused depicted that he wanted to avoid the service of the notice. Impugned judgment by the below courts does not require any interference and the conviction and sentence were upheld by the High Court.

Bench directed the fine of Rs 4,00,000 within a period of 2 months.[Nitai Majumder v. Tanmoy Krishna Das, 2020 SCC OnLine Tri 537, decided on 17-11-2020]

Case BriefsHigh Courts

Madras High Court: G.K. Ilathiraiyan, J., while addressing the instant matter, observed that, a person who is inducted as the Non-Executive Director of an accused company and not responsible for the day-to-day affairs of the company, he/she cannot be vicariously liable for the offence committed by the company.

Petitioners Counsel submitted that the petitioner was arrayed as Accused 3 on the complaint filed by the respondents for the offences punishable under Section 138 of Negotiable Instruments Act, 1881.

Magistrate took cognizance as against the petitioner when there was absolutely no specific allegation against the petitioner to attract the offences under Section 141 of NI Act and issued summon without application of mind.

Petitioner being merely Director of the company was not liable to be prosecuted for the offences under Section 141 of NI Act.

Further, it was stated that the respondent cannot presume every Director knows about the transaction while fastening criminal liability as against the Director of the Company.

To attract the offences under Section 141 of NI Act as against the petitioner, the complainant should have specifically averred in the complaint that at the time of offence the petitioner was in charge of and responsible for the conduct and the business of the company.

Adding to its contention, it was also stated that if a person who was in charge of the day to day management of the company or by stating that he / she was in charge of affairs of the company cannot be vicariously made liable under Section 141(1) of NI Act.

Counsel for the petitioner Nithyaesh Natraj and Counsel for the respondent R. Prasanna Vineeth Durai.

Dishonour of Cheque

On the Complaint lodged, in total there were 4 accused of the offences punishable under Sections 138 and 141 of NI Act. It was alleged that the accused persons had already availed term loan from the complainant to the tune of Rs 65 lakhs. Accused towards partial discharge of their liability issued eight cheques in favour of the respondent but the same were returned dishonoured on being presented for the reason “account closed”.

Respondent after serving statutory notice under Section 138 of NI Act, initiated proceedings for the offences punishable under Sections 138 and 141 of NI Act against the accused persons.

Respondent made allegation foisting liability on the petitioner in the complaint as follows:

“the second accused being the Managing Director and the third accused being one of the Director who are respectively in charge of the managing all such business activities of the first accused company and also running the day to day affairs naturally aware about their liability”.

Analysis and Decision

Bench stated that Section 141 of the NI Act does not make all the Directors liable for the offence. The person sought to be made liable should be in charge and responsible for the conduct of the business of the company at the relevant time.

Therefore, it was stated that there is no deemed liability of the Director in such case.

Several Supreme Court decisions have held that the complaint has to specifically say as to how and in what manner Director was responsible for the conduct of the business of the company.

Court held that unfortunately, in the impugned complaint, the allegation did not satisfy the requirements of Section 141 of the NI Act.

Further, on perusal of the complaint, Court observed that the petitioner was inducted as the Non-Executive Director of the first accused company, therefore the petitioner was not responsible for the day to day affairs of the company and hence cannot be made liable vicariously for the offence committed by the company.

Therefore, the Court, in order to secure ends of justice, opined to necessarily interfere with the proceedings in exercise of its jurisdiction under Section 482 of CrPC.

Hence, the Criminal Original Petitions were allowed and the proceedings on the file of Metropolitan Magistrate were ordered to be quashed as far as the petitioner was concerned, whereas, for other accused, the trial court has been directed to complete the trial. [Vijaya Arun v. New Link Overseas Finance Ltd., Crl. OP Nos. 5, 8 & 11 of 2020, decided on 18-08-2020]

Case BriefsHigh Courts

Madras High Court: G.K. Ilathiraiyan, J., addressed a petition wherein it was reiterated that Advocates are barred from having any business transaction or loan transaction with his client as the same amounts to professional misconduct.

Purpose of filing the present petition was to quash the proceedings taken place by the Judicial Magistrate for the offences punishable under Section 138 Negotiable Instruments Act against the petitioner.

Respondent who is an advocate appeared on behalf of the petitioner in a case cheated him along to the tune of Rs 7 lakhs and also misused the cheque issued by the petitioner and filed a false case against him.

Contentions

Lack of Jurisdiction

The alleged cheque was presented for collection before the Indian Bank, Madras High Court Branch whereas the complaint was lodged before the Judicial Magistrate, without any jurisdiction.

Hence, the complaint was liable to be quashed for lack of jurisdiction.

Further, the petitioner also relied upon the decision of Bridgestone India (P) Ltd. v. Inderpal Singh, (2016) 2 SCC 75.

Default in Notice

Another point raised by the petitioner was that the statutory notice by the respondent did not fulfil the procedures laid down under Section 138 NI Act and 15 days time is to be given for repayment under the provisions of NI Act which has not been given to the petitioner.

Fiduciary Relationship

Respondent misused the fiduciary relationship with his client and the continuation of the above complaint is harassment to the petitioner for choosing such a person for defending his case.

As per Rule 49(1) C of the Advocates Act, the Advocate is barred from having any business transaction or loan transaction with his client. Therefore the entire complaint is liable to be quashed.

Counsel for the petitioner, A. Edwin and Counsel R. Krishnakumar for the respondent.

Analysis and Decision

Complainant’s case is that the petitioner had borrowed a sum of Rs 24 lakhs for the development of his business and for personal expenditure. He also assured that he would pay interest on the borrowed amount. Thereafter in order to repay the part of the amount, he issued a cheque of Rs 9,45,000 and the same was presented for collection but the same was returned for the reason that “Exceeds Arrangement”.

Section 138 (c) of NI Act:

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.

Respondent issued a notice asking the petitioner to repay the cheque amount within a period of 7 days, whereas according to the above-stated Section, the notice period should have been 15 days.

Relying on the Supreme Court’s decision in B. Sunitha v. State of Telangana, (2018) 1 SCC 638, Bench held that when there is a specific bar for doing money lending business that too with his own client, the act of the respondents will amount to professional misconduct.

Hence the entire proceedings initiated against the petitioner is nothing but clear abuse of process of law.

Further, the Supreme Court decision in  Bridgestone India (P) Ltd. v. Inderpal Singh, (2016) 2 SCC 75, held that the place where the cheque is delivered for collection i.e., the branch of the payee or holder in due course, where the drawee maintains an account, would be determinative of the place of territorial jurisdiction.

Hence, in the instant case respondent ought to have filed the complaint within the jurisdiction of Indian Bank, High Court Branch. Therefore, the complaint cannot be sustained against the petitioner. [Ilakkia Raja v. T. Umamaheswaran, Crl. OP No. 1157 of 2020, decided on 29-07-2020]

Case BriefsHigh Courts

Kerala High Court: A Division Bench of A. Hariprasad and T.V. Anilkumar, JJ., while addressing a review petition,  reiterated that the relevant date which makes a postdated cheque payable is the date which the cheque bears.

In the appeal, the money decree in the respondent’s favour was confirmed rejecting the appellant’s plea that the suit was barred by limitation. It was held that the relevant article in the Limitation Act that applied to the suit was not Article 19 but Article 35 of the said Act.

Court had laid down the law that the appropriate Article which applied to the suit instituted on a dishonoured cheque is Article 35 of the Limitation Act, 1963.

It is trite law that a review is not an appeal in disguise.

Bench stated that it is true that the cheques were presented to the Bank for encashment after the passage of hardly seven years, since the date of delivery.

As per Section 84(2) of the Negotiable Instruments Act, the reasonableness of time to be taken for presentation from the date of issue of cheque, shall be determined with due regard to the nature of the instrument, the banking and trade usage and also the facts of each particular case.

In the opinion of the Court, the provision in Section 84(1) of the Negotiable Instruments Act, 1881 contemplating time of issue of the cheque as the starting point for determining the reasonable time required for the presentation of cheque, can be given effect to without having regard to the Scheme and purpose of Section 138 NI Act.

Date on which a cheque is drawn may not be confused with date of issue but must be understood as the date mentioned on the face of the document.

The reasonable period stipulated in Section 84(1) and (2) of the NI Act shall be read harmoniously with the time prescribed in proviso (a) to Section 138 NI Act.

“…what determines the time of commencement of period of presentation is the date of the cheque and not the date of delivery of the cheque.”

Bench further observed that the date of issue of cheque mentioned in Section 84(1) is not irrelevant and capable of rejection in cases where the date of cheque appearing on its face and the date of issue are one and the same.

In the instant case, cheques were postdated and they became payable only from the dates endorsed. Even though the dates of presentation and dishonour were not pleaded, the cheques were presented within the period of 2 months since they became payable.

The review fails in the instant matter as the issue of cheques was as early as in 2001, the presentation made in 2007 in accordance with Section 138(a) cannot be said to offend Section 84(2) of NI Act.

High Court partly allowed the review petition and ordered that the following sentence which was under review shall stand deleted.

“One of us (Justice A.Hariprasad) had occasion to hold in an unreported decision in Puthenveettil Malathy v. Kuttilakandy Balakrishnan [A.S.No.436 of 2002] that Article 35 is the appropriate provision applicable to a suit brought for recovery of money on dishonour of a cheque issued in discharge of liability of the debtor.”

[Subanamma Ninan v. George Veeran, 2020 SCC OnLine Ker 4151, decided on 18-09-2020]

Case BriefsHigh Courts

Madras High Court: G.K. Ilanthiraiyan, J., allowed a criminal original petition and quashed the proceedings in a criminal case filed against the petitioner.

Instant petition was filed to quash the proceedings pending on the file of Judicial Magistrate having been taken cognizance for the offences under Section 420 of Penal Code, 1860.

Respondent lodged a private complaint alleging that the complainant was running a proprietorship concern in the name and style of M/s RSR Egg Centre along with poultry farms at Namakkal District.

Respondent approached the petitioners for the supply of animal feeds and the same was agreed and animal feeds were supplied to the respondent. In the normal course of business transaction between the petitioners and the respondent, for the purpose of holding out security as against the feeds supplied by the petitioners, the respondent issued two cheques for security purpose.

Further, in the year 2017, feeds supplied by the petitioners were not standard one and therefore the respondent issued stop payment in respect of the cheques issued to the petitioners.

In order to take further action as against the petitioners, the respondent lodged complaint before the District Crime Branch, Namakkal and after the direction issued by the Judicial Magistrate under Section 156(3) CrPC, the case was registered for the offences under Sections 23, 409, 415 and 420 IPC as against the petitioners.

Towards liability of purchase, the respondent issued cheques for the said sum. Thereafter, the respondent stopped payment and as such both the cheques were returned dishonoured. After issuance of statutory notice, the petitioners initiated proceedings for the offences punishable under Section 138 NI Act.

Bench stated that the private complaint lodged by the respondent was nothing but counter blast to the proceedings initiated by the petitioners.

“…impugned complaint is manifestly attended with malafides and / or where the proceeding is maliciously instituted with an ulterior motive for wreaking vengeance on the accused and with a view to spite him due to private and personal grudge.”

Hence while allowing the present petition, Court held that  “the continuance of the impugned proceedings will be nothing but abuse of process of law and as such the petitioners need not go for the ordeal of the trial since the complaint itself cannot be sustained as against the petitioners.” [M. Chandrasekar v. R. Rajamani, 2020 SCC OnLine Mad 4777, decided on 24-08-2020]

Banking and Negotiable InstrumentsCase BriefsHigh Courts

Delhi High Court: V. Kameswar Rao, J., while addressing the present matter observed that a retired director of the company cannot be held liable for the day to day acts of company and cheques issued and dishonoured post his retirement.

Petitioner’s Counsel V.M. Kannan contended that the proceedings by respondent 1 have been initiated before the Metropolitan Magistrate under Section 138 of the Negotiable Instruments Act, 1881.

The ground of the above-stated proceedings:

The petitioner was a Director of respondent 2. The cheques in question were issued by respondent 2 and the same was dishonoured due to insufficient funds.

Cheques in question were issued by respondent 2 to discharge its liability towards respondent 1.

Petitioner’s Counsel added that he ceased to be the director of the respondent 2 at least 8 years prior to the issuance of the cheques. The resignation of the petitioner was also notified to the Registrar of Companies by the respondent 2 by filing Form 32, which is a public document

No application of Judicial Mind

Metropolitan Magistrate in a mechanical manner only by considering Company Master Data of the period when the petitioner was Director has entertained the complaint under Section 138 of the NI Act and without applying any judicial mind and without recording any satisfactory reasons as to whether the offence is made out against the petitioner has issued the summons.

Further, the essential ingredients for maintaining a complaint under Section 138 of the NI Act are absent with respect to the petitioner. The respondent 1 failed to show in what manner and how the petitioner was responsible for the affairs of the respondent 2. The issuance of summons was contrary to the settled position of law in terms of the judgments of the Supreme Court and this Court.

Crux of the matter

The crux of the present petition is with regard to the quashing of 5 complaint cases initiated by respondent 1 against the petitioner. Complaint cases were primarily grounded on the return of 5 cheques which were issued on behalf of respondent 2 for a total amount of Rs 45 lakhs.

Analysis 

It is also settled law that mere repetition of the phraseology of Section 141 of NI Act that the accused is In-charge and responsible for the conduct of the day-to-day affairs of the Company may not be sufficient and facts stating as to how the accused was so responsible must be averred.

Respondent 1 had submitted that respondent 1 was involved in the discussion and represented respondent 2 before the agreement was executed but that does not mean even after his resignation he continued to be responsible for the actions of the Company including the issuance of cheques and dishonour of same which then attracts proceedings under Section 138 of NI Act against him.

Further, the bench stated that if the Metropolitan Magistrate had called for the latest Company Master Data along with the complaint, the Metropolitan Magistrate would have issued the summons as it would have revealed that the name of the petitioner does not find mention and the petitioner was not In-charge of the Company. Hence the summons issued against the petitioner were not justified.

Court also added that, petitioner was justified in relying on the decision of the Coordinate Bench of this Court in J.N. Bhatia v. State 2006 SCC OnLine Del 1598.

Supreme Court’s decision in  Harshendra Kumar D. v. Rebatilata, (2011) 3 SCC 351, was also referred with other decisions of the Supreme Court.

Decision

In cases where the accused has resigned from the Company and Form 32 has also been submitted with the Registrar of Companies then in such cases if the cheques are subsequently issued and dishonoured, it cannot be said that such an accused is in-charge of and responsible for the conduct of the day-to-day affairs of the Company, as contemplated in Section 141 of NI Act for being proceeded against.

In view of the above-stated decisions, the present petition was allowed and all proceedings pending before the Metropolitan Magistrate including summons were quashed. [Alibaba Nabibasha v. Small Farmers Agri-Business Consortium, 2020 SCC OnLine Del 1250, decided on 23-09-2020]

Read More:

Section 141 NI Act: Offences of Companies

Section 138 NI Act: Dishonour of cheque for insufficiency, etc., of funds in the account

Dishonour of Cheque [S. 138 NI Act and allied sections]

Case BriefsHigh Courts

Allahabad High Court: In the instant case where the summoning order issued as per the requisites of Section 138 of Negotiable Instrument Act, 1881, was challenged as being ‘bad in law’ and the question arose that once the intention of the party is clear that he does not wish to make payment, should a complainant wait for 15 days to file the complaint; the Bench of Dr Kaushal Jayendra Thaker, J., answering the question in negative, dismissed the petition while observing that proviso (c) to Section 138 of the NI Act cannot be interpreted to mean that even if the accused refuses to make a payment, the complainant cannot file a complaint.

As per the facts of the case, two cheques of Rs 5,00,000 and Rs 5,98,000 were dishonoured on 28-05-2019. The complainant sent a notice on 11-06-2019. Upon not receiving any money, on 29.06.2019 the complainant filed the complaint under Section 138 of Negotiable Instrument Act, 1881. Consequently, a summoning order dated 03-09-2019 was issued whereby which the petitioner was supposed to present himself on 30-11-2019. The counsel for the petitioner Ajay Dubey upon being asked to explain that why the summoning order is bad, stated that as per the provisions of Section 138 the petitioner cannot be asked to answer the summons as he had already filed a reply and the complaint could have been filed only after 15 days of his reply and it was filed before the said date. The petitioner’s counsel further contended that summoning order was not in compliance with the provisions of Section 138 and that the application was falsely implicated due to enmity and financial dispute with the complainant.

Perusing the arguments and the Sections 138 and 142 of NI Act, the Court observed that the 15 days statutory period as per Section 138 proviso (c), is for making payment and does not constitute ingredients of offence punishable under Section 138. The proviso simply postpones the actual prosecution of the offender till such time he fails to pay the amount, then the statutory period prescribed begins for the lodging of complaint. The Court noted that, “In the case in hand, the petitioner herein replied to the notice which goes to show that the intention of the drawer is clear that he did not wish to make the payment. Once this is clarified, should the complainant wait for the minimum period of 15 days, the answer would be ‘no’”.[Ravi Dixit v. State of U.P., 2020 SCC OnLine All 1056, decided on 23-09-2020]

Sucheta Sarkar, Editorial Assistant has put this story together

Case BriefsHigh Courts

Punjab and Haryana High Court: Sudhir Mittal, J., while addressing an issue with regard to the dishonour of cheque held that,

“Offence under Section 138 NI Act is quasi-criminal in nature and it is not an offence against society, hence an accused can escape punishment by settling with the complainant.”

Revision petitioner issued a cheque to the complainant–respondent 1 which was dishonored. 

On the dishonour of cheque, the complainant sent a notice demanding payment of the cheque amount but no response was received.

In view of the above, he filed a complaint under Section 138 of the Negotiable Instruments Act, 1881.

Revision petitioner was acquitted and later he filed an appeal against the said Judgment and the case was remanded for a fresh decision.

Appeal against the aforementioned judgment of conviction was dismissed which lead to the filing of the present revision petition.

In the present appeal, the revision petitioner prayed for a reduction in the quantum of sentence.

Question for adjudication is — Whether the petitioner is entitled to reduction of his sentence?

When can a Revisional Court exercise its powers to alter the nature or the extent or the nature and extent of the sentence?

Do sympathetic consideration have any role to play in the matter of sentencing?

Sentencing is primarily a matter of discretion as there are no statutory provisions governing the matter.

Bench citing the decision of the Supreme Court in State of Himachal Pardesh v. Nirmala Devi, 2017 (2) RCR (Criminal) 613, stated that the sentence imposed must be commensurate with the crime committed and in accordance with jurisprudential justification such as deterrence, retribution or restoration. Mitigating and aggravating circumstances, both should be kept in mind.

Court added that the provisions inserted for inculcating greater faith in banking transactions needed more teeth so that cases involving dishonour of cheques reduced.

Therefore, it is apparent that deterrence and restoration are the principles to be kept in mind for sentencing.

In the present matter, the order of sentence for 2 years has been imposed on the grounds that the offence is a socio-economic offence.

Award of compensation is also justified and reflects a judicious exercise of mind.

In view of the above, the revision petition was dismissed and maintained. [Rakesh Kumar v. Jasbir Singh, 2020 SCC OnLine P&H 1197, decided on 11-08-2020]

Also Read:

Dishonour of Cheque [S. 138 NI Act and allied sections]

Case BriefsHigh Courts

Madhya Pradesh High Court: Rajendra Kumar Srivastava, J., while addressing a matter with regard to dishonour of cheque held that, Director/Managing Director/Joint Director/other officers and employees of company can not be prosecuted under Section 138 of NI Act unless the company is impleaded as an accused

Petitioner is aggrieved with the Order passed against him by JMFC framing a charge under Section 138 of Negotiable Instruments Act, 1881.

Complaint was filed by respondent-trade firm against the petitioner wherein it was mentioned that on account of business relations between the parties petitioner had borrowed an amount of Rs 2,00,000 from respondent, which was to be returned by within a period of four months.

In November 2017, petitioner handed over a cheque amounting to Rs 2,00,000 which when the respondent submitted in January, 2018 was dishonoured due to “stop payment” by the petitioner.

On the above-event’s occurrence respondent had sent a legal notice to the petitioner which was ignored by the petitioner and thus a complaint before JMFC was filed.

Petitioners Contention

Respondent had given the amount in question for business purpose and the petitioner had given the said cheque under the capacity of chairman of company namely ‘Well Built Industry India Ltd.’ but the respondent did not implead the company as a party in the complaint case.

The respondent/complainant also failed to specify the role of present petitioner on behalf of the company. Hence, in view of the provision of Section 141 NI Act, the proceedings under Section 138 NI Act are bad in law and deserves to be quashed. With the aforesaid, he prayed to allow this petition.

Section 138 NI Act: Dishonour of cheque for insufficiency, etc. of funds in the account.

Section 141 NI Act: Offences by Companies

“…if an offence is committed by a company under Section 138 of the Act, every person, at the time, the offence was committed, was in-charge and responsible to the company in the conduct of the business of the company, is liable along with the company to be proceeded against and punished accordingly.”

S.M.S Pharmaceuticals Ltd. v. Neeta Bhalla, (2005) 8 SCC 89, 

“…Necessary averments ought to be contained in a complaint before a person can be subjected to criminal process. A liability under Section 141 NI Act is sought to be fastened vicariously on a person connected with a company, principal accused being the company itself. It is a departure from the rule in criminal law against vicarious liability. A clear case should be spelled out in the complaint against the person sought to be made liable.”

Bench while referring to several decisions held that the person (Director/Managing Director/Joint Director/other officers and employees) of company can not be prosecuted under Section 138 of NI Act unless the company is impleaded as an accused.

Thus, in the present matter it is to be noted that a demand notice was served only on the petitioner/accused, there was no demand notice against company, therefore, without arraying the company as an accused in complaint case, the petitioner can not be prosecuted for the offence of Section 138 NI Act.

Hence the present petition was allowed.[Bhupendra Suryawanshi v. Sai Traders, 2020 SCC OnLine MP 1277 , decided on 09-06-2020]

Case BriefsHigh Courts

Kerala High Court: R. Narayana Pisharadi J., allowed a criminal revision petition in part in a matter relating to Section 138 of Negotiable Instruments Act, 1881.

In the present case, the accused had obtained an amount of Rs 5, 00,000 from the complainant on the promise that he would arrange a licence for the complainant for conducting petrol pump. Upon demanding the repayment of the amount the accused issued a cheque dated 05-02-2007 for Rs 5,00,000 in discharge of the liability. The cheque was dishonoured upon presenting it to the bank for the reason that there was no sufficient amount in the account of the accused. 

The trial court had found the petitioner guilty of offence punishable under Section 138 of Negotiable Instruments Act, 1881 and sentenced him to simple imprisonment for a period of four months and to pay a fine of Rs 5,00,000. The appellate court had also affirmed the conviction and the sentence imposed on the petitioner and dismissed the appeal. 

High Court upon perusal of the facts and circumstances allowed the revision petition in part. The Court affirmed the conviction passed by the trial court and affirmed by the appellate court thereafter but the sentence imposed upon the petitioner has been set aside. In supersession of the sentence, accused has been sentenced to pay a fine of Rs 5,10,000 and in default of payment of fine, to undergo simple imprisonment for a period of two months. [C.K. Mohini v. Varghese. M. Mathew, 2020 SCC OnLine Ker 492, decided on 05-02-2020]

Case BriefsHigh Courts

Delhi High Court: Rajnish Bhatnagar, J., dismissed a petition filed against the order of the Sessions Court whereby it had dismissed the review petition filed by the petitioners against the order of the Metropolitan Magistrate taking cognizance of offences under Section 138 and Section 141 of the Negotiable Instruments Act, 1881, against the petitioner.

The respondent company instituted a complaint under Section 138 read with Section 142 against the petitioners in respect of non-payment against the four dishonoured cheques for the total amount of Rs 16 crores issued on behalf of and/or by petitioner company in favour of the respondent’s company. The Metropolitan Magistrate had passed an order taking cognizance. Aggrieved, the petitioners filed a revision petition before the Sessions Court, which was dismissed. The petitioners now invoked the jurisdiction of the High Court under Sections 482 CrPC (inherent powers).

It was contended by the petitioners that the demand notice was defective as the demand had been made over and above the cheque amount and the legal demand notice was vague and ambiguous. Rejecting this point, the High Court held that the notice should be read as a whole. The perusal of the notice clearly set out the details of the cheque which had been dishonoured, so it could not be said that the demand made was ambiguous or in any way confusing the petitioners as there was no denial that the cheque in question were not issued or that they were not dishonoured for insufficient funds.

Besides the above point, a procedural issue arose as to whether the petitioners having availed of the remedy of revision should be allowed to take recourse to Section 482 CrPC as a substitute for virtually initiating a second revisional challenge or scrutiny which is clearly barred under Section 397(3) CrPC.

Perusing various provisions of the Negotiable Instruments Act, the High Court observed: “The provisions of Sections 142 to 147 lay down a Special Code for the trial of offences under Chapter 17 of the NI Act.” Reliance was placed on the Supreme Court decision in Mandvi Coop. Bank Ltd. v. Nimesh B. Thakore, (2010) 3 SCC 83, which held that the provisions of Sections 143, 144, 145 and 147 expressly depart from and override the provisions of CrPC, the main body of adjective law for criminal trials.

In the instant case, Court did not find any material which could be stated to be of sterling and impeccable quality warranting invocation of the jurisdiction of the High Court under Section 482 CrPC at this stage. More so, the defence as raised by the petitioners requires evidence, which could not be appreciated, evaluated or adjudged in the proceedings under Section 482. The petitioners, therefore, could not be allowed to take recourse to Section 482 as a substitute for initiating a second revision petition when there was nothing to show that there is a serious miscarriage of justice or abuse of the process of law.

Accordingly, the court found no infirmity in the order passed by the Session Judge and, therefore, dismissed the petition. [Tathagat Exports (P) Ltd. v. PEC Ltd., 2020 SCC OnLine Del 405, decided on 20-01-2020]

Case BriefsHigh Courts

Kerala High Court: R. Narayana Pisharadi, J., dismissed a revision petition which was filed against the judgment of the trial and the appellate court by the petitioner holding him guilty of the offence punishable under Section 138 of the Negotiable Instruments Act, 1881.

According to the complainant, the accused had borrowed an amount of Rs 2,50,000 from the complainant promising that he would repay the amount within three months which he failed to repay later the accused issued a cheque dated 17-08-2011 for Rs 2,50,000 to the complainant in discharge of the liability, the complainant presented the cheque in the bank but it was returned unpaid for the reason that there was no sufficient amount in the account of the accused further the complainant sent notice to the accused demanding payment of the amount of the cheque, the accused received the notice and replied to the complainant raising false contentions and did not pay the amount of the cheque. The accused contended that he was the manager of the petrol pump conducted by his brother-in-law and the complainant was the watchman in that petrol pump and that he had kept a signed blank cheque in the petrol pump and the complainant committed theft of the cheque and misused it and filed the case although no evidence was presented by the accessed to support his contentions.

The Court while dismissing the petition held that the courts above have properly analyzed the evidence in the case and come to the right conclusion. [T. Sunilkumar v. State of Kerela,  2020 SCC OnLine Ker 201, decided on 17-01-2020] 

Case BriefsHigh Courts

Bombay High Court: Vibha Kankanwadi, J., allowed a criminal revision application filed against the order of the Additional Sessions Judge whereby the appeal filed by the applicant against the decision of the trial court convicting him for dishonour of cheque punishable under Section 138 of the Negotiable Instruments Act, 1881, was dismissed for non-payment of fine. 

The applicant was convicted by the trial court under Section 138. He was sentenced to suffer simple imprisonment of 1 year and pay a fine of Rs 6.58 lakhs. The applicant filed an appeal against the decision of the trial court. The Additional Sessions Judge suspended his sentence pending the disposal of appeal subject to deposit of 20 percent of the fine amount as imposed by the trial court. However, the applicant failed to fulfill that condition within the prescribed limit and remained absent for a long time. In such circumstances, the Additional Sessions Judge dismissed the appeal in default for want of prosecution. Aggrieved thereby, the applicant file the instant revision application. 

The High Court gave due consideration to the submissions made by S.S. Bora, Advocate appearing for the applicant, and S.J. Salunke, Advocate representing the respondent. 

The Court relied on Bani Singh v. State of U.P., (1996) 4 SCC 720 and Vijay D. Salvi v. State of Maharashtra, (2007) 5 SCC 741, and reiterated that a criminal appeal cannot be dismissed for non-payment of fine, it will have to be disposed of on merits. 

In such view of the matter, the High Court held that the order passed by the Additional Sessions Judge was not a valid legal order and, therefore, quashed the said order. 

However, at the same time, the Court deprecated observed that the applicant cannot take the system for a ride. When the suspension of the sentence against him was conditional, then he was bound to obey those conditions. Deprecating the conduct of the applicant, the Court imposed costs of Rs 25,000 on him. [Adesh Prakashchand Jain v. Harish Punamchand Une, 2020 SCC OnLine Bom 96, decided on 08-01-2020]

Case BriefsHigh Courts

Bombay High Court: K.R. Shriram, J., dismissed a criminal appeal filed against the order of the trial court whereby it had acquitted the accused of charges under Section 138 (dishonour of cheque) of the Negotiable Instruments Act, 1881.

As per the complainant, she had given a loan of Rs 4.5 lakhs to the accused, for repayment of which, he had issued a cheque in favour of the complainant. However, on presenting the cheque for encashment, it was dishonoured. Per contra, the accused took the stand that the cheque in question was given to one Sanjay, who was a former business partner of the accused. The cheque was given to Sanjay to be handed over to a third party to connect with a mutually agreed transaction. However, subsequently, disputes arose between the accused and Sanjay. It was submitted that the Sanjay and complainant were very close friends and lived in the same house. The accused submitted that Sanjay dishonestly handed over the blank cheque in question to the complainant and fraud was being played upon him.

The High Court perused Section 138 (dishonour of cheque) along with its Explanation and noted that the keyword “legally enforceable debt or other liability”. Similarly, discussing Section 139 (presumption in favour of the holder), the Court noted that the presumption is rebuttable and the onus is on the accused to raise a probable defence.

The Court then reproduced the principles summarised and enumerated by the Supreme Court in Basalingappa v. Mudibasappa, (2019) 5 SCC 418, and observed that the standard of proof for rebutting the presumption is that of the preponderance of probabilities and not beyond a reasonable doubt. It was also noted as settled law that Section 139 imposes an evidentiary burden and not a persuasive burden.

On the factual score, it was found that there was no evidence as to when the amount in question was handed over to the accused. No receipts were produced. Also, there was no evidence to show that the complainant had Rs 4.5 lakhs to give to the accused, and it was also admitted that she was not even paying income tax. Moreover, the fact of the dispute between Sanjay and the accused was also admitted. All this, according to the High Court went on to prove that the accused had raised a probable defence that the complainant had not proved that there was a legally enforceable debt or other liability.

Accordingly, finding no fault with the order of the trial court, the High Court dismissed the present appeal and upheld the acquittal of the accused. [Tasneem Murshedkar Mazhar v. Ramesh, 2020 SCC OnLine Bom 20, decided on 02-01-2020]

Op EdsOP. ED.

Let’s have a look at the Most-Viewed Blog Posts of the SCC Online Blog in the Year 2019:

“Over the years there have been many important changes in the way cheques are issued/bounced/dealt with. Commercial globalisation has resulted in giving a big boost to our country. With the rapid increase in commerce and trade, use of cheque also increased and so did the cheque bouncing disputes.[1] The object of Sections 138-142 of the Negotiable Instruments Act, 1881  is to promote the efficacy of banking operations and to ensure credibility in transacting business through cheques.[2]”

Section 498-A was introduced in the year 1983 to protect married women from being subjected to cruelty by the husband or his relatives. A punishment extending to 3 years and fine has been prescribed. The expression “cruelty” has been defined in wide terms so as to include inflicting physical or mental harm to the body or health of the woman and indulging in acts of harassment with a view to coerce her or her relations to meet any unlawful demand for any property or valuable security. Harassment for dowry falls within the sweep of latter limb of the section. Creating a situation driving the woman to commit suicide is also one of the ingredients of “cruelty”.

  • Economically Weaker Section (EWS) | Reservation For EWSs In Direct Recruitment in Civil Posts And Services In Government of India

  • Adultery [S. 497 IPC and S. 198(2) CrPC]

    The word “adultery” derives its origin from the French word “avoutre”, which has evolved from the Latin verb “adulterium” which means “to corrupt”[1]. The dictionary meaning of adultery is that a married man commits adultery if he has sex with a woman with whom he has not entered into wedlock.

    Under Indian law, Section 497 IPC  makes adultery a criminal offence, and prescribes a punishment of imprisonment upto five years and fine. The offence of adultery under Section 497 is very limited in scope as compared to the misconduct of adultery as understood in divorce proceedings. The offence is committed only by a man who had sexual intercourse with the wife of another man without the latter’s consent or connivance. The wife is not punishable for being an adulteress, or even as an abettor of the offence[2]. Section 198 CrPC deals with a “person aggrieved”. Sub-section (2) treats the husband of the woman as deemed to be aggrieved by an offence committed under Section 497 IPC and in the absence of husband, some person who had care of the woman on his behalf at the time when such offence was committed, with the permission of the court. It does not consider the wife of the adulterer as an aggrieved person.

    Section 497 IPC and Section 198(2) CrPC together constitute a legislative packet to deal with the offence of adultery[3]which have been held unconstitutional and struck down by the Supreme Court in Joseph Shine v. Union of India, 2018 SCC OnLine SC 1676.

  • Maintenance – Wife

“Maintenance” is an amount payable by the husband to his wife who is unable to maintain herself either during the subsistence of marriage or upon separation or divorce. Various laws governing maintenance are as follows:

for Hindus – Hindu Marriage Act, 1955; Hindu Adoption and Maintenance Act, 1956

for Muslims – Muslim Women (Protection of Rights on Divorce) Act, 1986

for Parsis – Parsi Marriage and Divorce Act, 1936

for Christians – Divorce Act, 1869

secular laws – Criminal Procedure Code, 1973; Special Marriage Act,1954.

  • Live-In Relationship and Indian Judiciary

    It is being truly said that the only thing which is constant in this world is change. Indian society has observed a drastic change in its living pattern in the past few years. People are slowly and gradually opening their minds towards the idea of pre-marital sex and live-in relationships. However, this change has been continuously under criticism and highly discussed as such concepts lack legality and acceptance by society. Unlike marriage, in live-in relationships, couples are not married to each other but live together under the same roof that resembles a relation like marriage. In other words, we can say it is a cohabitation. In India, only those relations between a man and a woman is considered to be legitimate where marriage has taken place between the two based on existing marriage laws otherwise all other sort of relationships are deemed to be illegitimate.

    The reason behind people choosing to have a live-in relationship is to check the compatibility between couples before getting legally married. It also exempts partners from the chaos of family drama and lengthy court procedures in case the couple decides to break-up. Whatever the reason, it is very evident that in a conventional society like ours, where the institution of marriage is considered to be “sacred” an increasing number of couples choose to have a live-in relationship, even as a perpetual plan, over marriage. In such circumstances, many legal and social issues have arisen which have become the topic of debate. With time many incidents have been reported and seen where partners in live-in relationships or a child born out of such relationship have remained vulnerable for the very simple reason that such relationships have been kept outside the realm of law. There has been gross misuse by the partners in live-in relationships since they do not have any duties and responsibilities to perform. This article seeks to analyse the judicial response to the concept of live-in relationships so far. It also talks about the rights available to live-in partners in India and also, what is the status of children born out of such relationships.

  • Bom HC | Order of Maintenance under DV Act set aside in absence of any act of Domestic Violence committed by Husband

  • Maintenance – Children and Parents

In India, beneficial provisions for maintenance of children and parents are provided under various Acts. Objective of such provisions is to achieve a social purpose and to prevent vagrancy and destitution and to provide simple, inexpensive and speedy mechanism for providing support and maintenance to children and parents.

“the limited interest or Hindu Woman’s Estate [acquired under Section 3 of the Hindu Women’s Right Property Act] shall be held by the widow as full owner in terms of provisions of Section 14(1) of Hindu Succession Act, 1956?

“Section 23 of the DV Act does not provide a substantive right to parties but is a provision which empowers the trial court to pass an order granting interim maintenance in a petition filed under Section 12 of the DV Act. Merely because the trial court has not exercised the power under Section 23 of the DV Act, when a substantive petition under Section 12 of DV Act was filed and chose to pass an order only when a separate application under Section 23 of the DV Act was filed, does not mean that a Magistrate does not have the power to pass an order with effect from the date of filing of the substantive petition under Section 12.”

† Legal Editor, EBC Publishing Pvt. Ltd.

Case BriefsHigh Courts

Madras High Court: A Division Bench of A.P. Sahi, CJ and Subramonium Prasad, J., while deciding a petition filed in regard to declaring Section 142(2) of the Negotiable Instruments Act, 1881 as ultra vires Article 14 of Constitution, held by placing reliance on certain cases that,

“Parliament is competent to bring out the amendment under the Negotiable Instruments Act. The said amendment cannot be said to be ultra vires in view of the provisions of the Act or Part III of the Constitution of India.”

In the present petition, the challenge was placed upon Section 142(2) of NI Act on the ground that the said amendment is contrary to the Supreme Court case in, Dashrath Rupsingh Rathod v. State of Maharashtra, (2014) 9 SCC 129.

Counsel for the petitioner, K. Govindarajan, submitted that the above-said amendment amounts to setting at naught a judgment of the Supreme Court which is not permissible in law. Relying on the Supreme Court case in Prithvi Cotton Mills Ltd. v. Broach Borough Municipality, (1969) 2 SCC 283, it is well settled that,

“Legislation can take away the basis of a judgment.”

In Dashrath Rupsingh Rathod v. State of Maharashtra, (2014) 9 SCC 129, following was held with respect to the place of suing:

“…Once the cause of action accrues to the complainant, the jurisdiction of the Court to try the case will be determined by reference to the place where the cheque is dishonoured.

   (vii) The general rule stipulated under Section 177 of Cr.P.C applies to cases under Section 138 of the Negotiable Instruments Act. Prosecution in such cases can, therefore, be launched against the drawer of the cheque only before the Court within whose jurisdiction the dishonour takes place except in situations where the offence of dishonour of the cheque punishable under Section 138 is committed along with other offences in a single transaction within the meaning of Section 220(1) read with Section 184 of the Code of Criminal Procedure or is covered by the provisions of Section 182(1) read with Sections 184 and 220 thereof.”

Thus, the following was held in the above-said case by the Supreme Court,

a Complaint of dishonour of cheque can be filed only to the Court within whose local jurisdiction where the cheque is dishonoured by the bank on which it is drawn.

To resolve the concerns arising from the above-judgment, through the Negotiable Instruments (Amendment) Act, 2015, certain amendments in regard to challenged Section was made as follows:

“(2) The offence under section 138 shall be inquired into and tried only by a court within whose local jurisdiction,—

(a) if the cheque is delivered for collection through an account, the branch of the bank where the payee or holder in due course, as the case may be, maintains the account, is situated; or

(b) if the cheque is presented for payment by the payee or holder in due course, otherwise through an account, the branch of the drawee bank where the drawer maintains the account, is situated.

Explanation— For the purposes of clause (a), where a cheque is delivered for collection at any branch of the bank of the payee or holder in due course, then, the cheque shall be deemed to have been delivered to the branch of the bank in which the payee or holder in due course, as the case may be, maintains the account.”

Further Section 142(a) was also inserted through the Amendment Act, which is as follows:

“142A.(1) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 or any judgment, decree, order or direction of any court, all cases transferred to the court having jurisdiction under sub-section (2) of section 142, as amended by the Negotiable Instruments

(Amendment) Ordinance, 2015, shall be deemed to have been transferred under this Act, as if that subsection had been in force at all material times.

 (2) Notwithstanding anything contained in sub-section (2) of section 142 or sub-section (1), where the payee or the holder in due course, as the case may be, has filed a complaint against the drawer of a cheque in the court having jurisdiction under sub-section (2) of section 142 or the case has been transferred to that court under sub-section (1) and such complaint is pending in that court, all subsequent complaints arising out of section 138 against the same drawer shall be filed before the same court irrespective of whether those cheques were delivered for collection or presented for payment within the territorial jurisdiction of that court.

 (3) If, on the date of the commencement of the Negotiable Instruments (Amendment) Act,

2015, more than one prosecution filed by the same payee or holder in due course, as the case may be, against the same drawer of cheques is pending before different courts, upon the said fact having been brought to the notice of the court, such court shall transfer the case to the court having jurisdiction under sub-section (2) of section 142, as amended by the Negotiable Instruments (Amendment) Ordinance, 2015, before which the first case was filed and is pending, as if that subsection had been in force at all material times.”

Through the above Amendment Act, entire basis of the Supreme Court case in, Dashrath Rupsingh Rathod v. State of Maharashtra, (2014) 9 SCC 129, was removed.

By placing reliance on certain Supreme Court cases such as, State of Karnataka v. Karnataka Pawn Brokers Assn., (2018) 6 SCC 363; State of Karnataka v. Pro Lab, (2015) 8 SCC 557, Shri Prithvi Cotton Mills Ltd. v. Broach Borough Municipality, (1969) 2 SCC 283, following was laid down:

 “Legislature can take away the basis of the judgment of a judicial pronouncement by either Validating Act or passing amendments to the parent Act.”

Thus, on perusal of the above, no infirmity was found by the Court in the amendment. Therefore, said amendment cannot be said to be ultra vires in view of the provisions of the Act or Part III of the Constitution of India.

In view of the above, the writ petition stands dismissed. [Refex Energy Ltd. v. Union of India, 2019 SCC OnLine Mad 9941, decided on 18-12-2019]

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