Dishonour of Blank Cheque Attracts Presumption under S/139 of Negotiable Instruments Act, 1881

This appeal was filed by the Appellant against the judgment dated 09.11.2017 of the Madras High court where the High Court has reversed the order of acquittal passed by the judicial magistrate, Tirupur court.

The brief fact of the case is that the Appellant in the above case issued a blank signed cheque bearing no. 897993 date 07.11.2000 and blank stamp papers (Deed of Undertaking) in furtherance of some payment, the respondent presented the cheque before the bank, and it was dishonored due to insufficient funds, the Respondent send notice to the plaintiff to make the due payment within 15 days, but the plaintiffs denied their liability and claimed that blank cheques and signed blank stamp papers were issued to help the respondent in some debt recovery proceedings, and not because of any legally enforceable debt.

The Respondents filed a complaint against the plaintiff under section 138 and 142 of the Negotiable instruments act, read with S/ 200 of Code of criminal procedure. The trial court held in favor of the plaintiff and disregarded the claim of the respondent and observed that the respondent failed to establish legally enforceable liability and thus basic ingredient of 138 are not fulfilled and dismissed the complaint.

Aggrieved by the order of the judicial magistrate, Tirupur, the respondent moved to High Court. The High court noted that the Appellant (in the present case) had admitted his signature on the blank cheque and on the deed as well, the High court convicted the Appellants under section 138 of the negotiable instruments act and awarded the punishment of 3 months imprisonment and fine of 5000/-.

Aggrieved by the judgment of the High court the present SLP was filed before the Supreme Court.

Issue 

Whether the High Court erred in reversing the findings of the trial Court in exercise of its powers under Section 378 of CrPC?

Decision

The Supreme Court dismissed the appeal, and made the following decision –

  1. That the decision of the High court was correct.
  2. 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 Statute mandates that once the signature(s) of an accused on the cheque/negotiable instrument is established, then these ‘reverse onus’ clauses become operative.
  3. The Apex court referred to the decision of Rohitbhai Jivanlal Patel v. the State of Gujarat. And held that once the Appellant had admitted his signatures on the cheque and the Deed, the trial Court ought to have presumed that the cheque was issued as consideration for a legally enforceable debt.
  4. The Apex court cited the case of Bir Singh v. Mukesh Kumar wherein it was held that – “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 Negotiable Instruments Act, in the absence of any cogent evidence to show that the cheque was not issued in discharge of a debt.”
  5. While dealing with the claim of compensation the Apex court held that the respondents cannot seek compensation because the respondent did not ask for compensation before the High Court neither he challenged the High Court’s judgment. Since he has accepted the High Court’s verdict, his claim for compensation stands impliedly overturned.

Conclusion

In the present case the judicial magistrate, Tirupur made a patent error of law by completely ignoring the provisions and failed to appreciate the statutory presumption drawn under Section 118 and Section 139 of the negotiable instruments act. The Trial Court made a gross mistake of law when it called the Complainant-Respondent to explain the circumstances under which the appellants were liable to pay.

Due to the gross error of the trial court, the respondents had to suffer, and they were entitled to get compensation but there was a mistake on the part of respondents as well because if they wanted compensation they should have prayed for it before the High Court or they should have appealed against the order, but instead of going for appeal, they welcomed the order of High-court. At this stage of appeal if the Supreme Court would have allowed the compensation in favor of the respondent then it would have amounted to gross injustice against the appellants. Thus the decision of the Supreme Court is just and fair.

Author: Pranav Dixit, an intern at Khurana & Khurana, Advocates and IP Attorneys.  In case of any queries please contact/write back to us at aishani@khuranaandkhurana.com.

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