Dishonour Of Cheques: 14 Latest Supreme Court Judgments

Section 148 NI Act Retrospective

[Surinder Singh Deswal @ Col. S.S. Deswal vs. Virender Gandhi]

In this case, the Supreme Court held that Section 148 of the Negotiable Instruments Act as amended, shall be applicable in respect of the appeals against the order of conviction and sentence for the offence under Section 138 of the N.I. Act, even in a case where the criminal complaints for the offence under Section 138 of the N.I. Act were filed prior to 2018 amendment Act i.e., prior to 01.09.2018.

Also Read – Sec.138 NI Act – Complaint Not Maintainable Against Trustees For Dishonour Of Cheque : Kerala HC [Read Judgment]

Section 148 of the NI Act, introduced vide an amendment in 2018, empowers the Appellate Court to direct the accused/appellant to ‘deposit’ minimum of 20% of ‘fine’ or ‘compensation’ awarded by the Trial Court.

The bench also held that Appellate court has power to direct deposit of minimum 20% fine/compensation awarded by trial court. it was also observed that not to direct to deposit by the appellate court is an exception for which special reasons are to be assigned.

Also Read – Section 138 NI Act: Omission To Mention Nature Of Debt Or Liability In Notice Does Not Render It Invalid: Kerala HC [Read Order]

Complainant Bound To Explain Financial Capacity When Questioned

[Basalingappa vs. Muudibasappa]

Here, the accused had questioned the financial capacity of the complainant, which was not explained. The Trial court, considering these aspects, had acquitted the accused. The High Court, however, reversed it and convicted him.

Complainant Need Not Prove Source Of Fund, Once Section 139 Presumption Is Drawn

[Rohitbhai Jivanlal Patel vs. State of Gujarat]

The Supreme Court has held that once the court has drawn presumption of existence of legally enforceable debt as per Section 139 of the Negotiable Instruments Act, factors like source of funds are not relevant if the accused has not been able to rebut the presumption. “When such a presumption is drawn, the factors relating to the want of documentary evidence in the form of receipts or accounts or want of evidence as regards source of funds were not of relevant consideration while examining if the accused has been able to rebut the presumption or not”, held the bench of Justices A M Sapre and Dinesh Maheswari while dismissing an appeal against a High Court judgment which had reversed the acquittal by trial court.

Subsequent Filling Of Unfilled Signed Cheque Not Alteration

[Bir Singh vs. Mukesh Kumar]

The Supreme Court has held that subsequent filling in of an unfilled signed cheque is not an alteration and 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.

The bench comprising Justice R. Banumathi and Justice Indira Banerjee also observed that existence of a fiduciary relationship between the payee of a cheque and its drawer, would not disentitle the payee to the benefit of the presumption under Section 139 of the Negotiable Instruments Act, in the absence of evidence of exercise of undue influence or coercion.

Cheque Issued In Pursuance Of Agreement To Sell-Section 138 Complaint Maintainable

[Ripudaman Singh vs. Balkrishna]

The Supreme Court has observed that a complaint under Section 138 of the Negotiable Instruments Act is maintainable when there is dishonour of cheques issued under and in pursuance of the agreement to sell.

hat admittedly the cheques were issued under and in pursuance of the agreement to sell. Though an agreement to sell does not create any interest in immovable property, it nonetheless constitutes a legally enforceable contract between the parties to it, the court added.

Cheque-Bounce-Complaint Based On Second Notice Maintainable

[Sicagen India Ltd vs. Mahindra Vadineni]

In this case the three cheques issued by the accused were presented by the complainant, and after they were dishonoured, a notice was issued to the accused on 31.08.2009 demanding the repayment of the amount. Thereafter, these cheques were again presented, which were dishonoured again. The complainant issued a statutory notice on 25.01.2010 and later filed the complaint under Section 138 of the Negotiable Instruments Act based on the second statutory notice.

The Apex Court held that a ‘cheque bounce’ complaint filed based on the second statutory notice issued after re-presentation of cheques, is maintainable

The bench referred to a three-Judge Bench judgment in MSR Leathers vs. S. Palaniappan and Another which had held that there is nothing in the provisions of Section 138 of the Act that forbids the holder of the Cheque to make successive presentation of the cheque and institute the criminal complaint based on the second or successive dishonour of the cheque on its presentation.

Test of Proportionality Must Guide Determination Of Whether Presumption Was Rebutted

[ANSS Rajashekar vs. Augustus Jeba Ananth]

Finding that the presumption under Section 139 of the Negotiable Instruments Act regarding the existence of legally enforceable debt was rebutted, the Supreme Court acquitted an accused in a case filed under Section 138 NI Act. “…in determining whether the presumption has been rebutted, the test of proportionality must guide the determination. The standard of proof for rebuttal of the presumption under Section 139 of the Act is guided by a preponderance of probabilities”, observed the bench of Justices D Y Chandrachud and M R Shah while setting aside the High Court judgment, which had reversed the acquittal by the first appellate court.

Quashing of Cheque Bounce Complaint Against Company Director

[AR Radha Krishna vs. Dasari Deepthi]

The Supreme Court has reiterated that, a ‘cheque bounce’ complaint against a Company and its Director, must contain a specific averment that the Director was in charge of, and responsible for, the conduct of the company’s business at the time when the offence under Section 138/141 of Negotiable Instruments Act was committed.

Mere Denial Of Debt/Liability Cannot Shift Burden of Proof

Kishan Rao vs. Shankar Gouda

The Supreme Court on Monday reiterated that mere denial of a debt or liability cannot shift the burden of proof from the accused in a case of dishounor of the cheque. A bench of Justice A K Sikri and Justice Ashok Bhushan once again made it clear that Section 139 of the Negotiable Instruments Act, 1881, provides for drawing the presumption in favour of holder and a bare denial of the passing of the consideration and existence of debt, apparently would not serve the purpose of the accused.

Lawyer’s Claim For Fee Based On Percentage Of The Decretal Amount Cannot Be The Basis Of A Complaint Under Section 138 NI Act

[B. Sunitha vs. State of Telengana]

The Supreme Court, in this case held that, that a fee amount claim by a lawyer based on percentage of subject matter in litigation cannot be the basis of a complaint under Section 138 of the Negotiable Instruments Act.

It said that such a claim made by lawyer based on a share in the subject matter is a professional misconduct and the proceedings in the complaint filed by him have to be held to be abuse of the process of law and have to be quashed.

Compensation’ Recoverable From Accused Even If ‘Default Sentence’ Has Been Suffered

[Kumaran vs. State of Kerala]

The Supreme Court held that compensation ordered by the court would be recoverable even though a default sentence has been suffered. A bench comprising Justice RF Nariman and Justice Navin Sinha upheld a Kerala High Court decision that had approved the order of magistrate by invoking Section 421 CrPC issuing a distress warrant against the accused for realising compensation ordered in a cheque bounce case but for different reasoning.

[N Parameswaran Unni vs G Kannan]

The Supreme Court, held that a reminder notice to the drawer of the cheque cannot be construed as an admission of non-service of the first notice by the complainant. In the instant case, the complainant had issued a notice to the complainant within15 days of the cheque bouncing, but it was returned with an endorsement ‘intimation served, addressee absent’. He again sent a notice, wherein it was returned with postal endorsement “Refused, returned to sender”. The Apex court bench held that it is settled law that when a notice is sent by registered post and is returned with postal endorsement “refused” or “not available in the house” or “house locked” or “shop closed” or “addressee not in station”, due service has to be presumed.

Offence U/s 138 NI Act is Person Specific

[N. Harihara Krishnan vs. J. Thomas]

The Supreme Court held that the offence under Section 138 of Negotiable Instruments Act is person specific. It was also clarified that the general concept under Cr.P.C that cognizance was taken against the offence and not against the offender was not appropriate in prosecution under NI Act. The complainant in the case was issued a cheque, which was signed by one Harihara Krishnan. The cheque was drawn allegedly in discharge of balance sale consideration payable by M/s Norton Granites Pvt. Ltd. However, the cheque was in fact drawn on account of another private limited company, M/s Dakshin Granites Pvt.Ltd., in which also Harihara Krishnan was a director.

Complaint Not Maintainable Before Expiry of 15 Days Notice Period

[Yogendra Pratap Singh Vs. Savitri Pandey]

The Supreme Court held that cognizance of an offence punishable under Section 138 of the Negotiable Instruments Act 1881 cannot be taken on the basis of a complaint filed before the expiry of the period of 15 days stipulated in the notice required to be served upon the drawer of the cheque in terms of Section 138 (c) of Negotiable Instruments Act 1881. It ws also held that the payee or the holder in due course of the cheque may file a fresh complaint within one month from the date of decision in the criminal case and, in that event, delay in filing the complaint will be treated as having been condoned under the proviso to clause (b) of Section 142 of the NI Act.

Reference Link: https://www.livelaw.in/top-stories/dishonour-of-cheques-case-laws-145699