Negotiable Instruments Act, 1881, Section 138, 139 

See Complete note below

 

Excerpts 

a. *Post dated cheque* - Onus to rebut the presumption under Section 139 that the cheque has been issued in discharge of a debt or liability is on the accused and the fact that the cheque might be post dated does not absolve the drawer of a cheque of the penal consequences of Section 138 of the Negotiable Instruments Act. 2019 SCeJournal 222

b. *Cheque filled in later* - It is immaterial that the cheque may have been filled in by any person other than the drawer, if the cheque is duly signed by the drawer 2019 SCeJournal 222

c. *Blank signed cheque*  - If a signed blank cheque is voluntarily presented to a payee, towards some payment, the payee may fill up the amount and other particulars 2019 SCeJournal 222

d. *Fiduciary relationship*  - The 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. 2019 SCeJournal 222

e. *Against a Loan* - Loan may not have been advanced by a cheque or demand draft or a receipt might not have been obtained would make no difference. 2019 SCeJournal 222

f. *Second or successive default in payment of the cheque amount* is not impermissible simply because no statutory notice had been issued after the first default and no proceeding for prosecution had been initiated . 2019 SCeJournal 222

g. *Unless the contrary is proved*, it is to be presumed that the holder of a cheque received the cheque of the nature referred to in Section 138, for the discharge, in whole or in part, of any debt or other liability - Presumption is a rebuttable presumption . 2019 SCeJournal 222

 

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(i) Negotiable Instruments Act, 1881, Section 139 -  Post dated cheque - Onus to rebut the presumption under Section 139 that the cheque has been issued in discharge of a debt or liability is on the accused and the fact that the cheque might be post dated does not absolve the drawer of a cheque of the penal consequences of Section 138 of the Negotiable Instruments Act - A person who signs a cheque and makes it over to the payee remains liable unless he adduces evidence to rebut the presumption that the cheque had been issued for payment of a debt or in discharge of a liability.2019 SCeJournal 222

 

(ii) Negotiable Instruments Act, 1881, Section 139 -  Cheque filled in later - It is immaterial that the cheque may have been filled in by any person other than the drawer, if the cheque is duly signed by the drawer -  If the cheque is otherwise valid, the penal provisions of Section 138 would be attracted - A person who signs a cheque and makes it over to the payee remains liable unless he adduces evidence to rebut the presumption that the cheque had been issued for payment of a debt or in discharge of a liability.2019 SCeJournal 222

 

(iii) Negotiable Instruments Act, 1881, Section 139 -  Blank signed cheque  - If a signed blank cheque is voluntarily presented to a payee, towards some payment, the payee may fill up the amount and other particulars -  This in itself would not invalidate the cheque - The onus would still be on the accused to prove that the cheque was not in discharge of a debt or liability by adducing evidence - 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 subsequent filling in of an unfilled signed cheque is not an alteration - There was no change in the amount of the cheque, its date or the name of the payee - The High Court ought not to have acquitted the respondent-accused of the charge under Section 138 of the Negotiable Instruments Act.2019 SCeJournal 222

 

(iv) Negotiable Instruments Act, 1881, Section 138, 139 -   Fiduciary relationship  - The 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 - The fact that the loan may not have been advanced by a cheque or demand draft or a receipt might not have been obtained would make no difference       2019 SCeJournal 222   

Held,

The fact that the appellant-complainant might have been an Income Tax practitioner conversant with knowledge of law does not make any difference to the law relating to the dishonour of a cheque. The fact that the loan may not have been advanced by a cheque or demand draft or a receipt might not have been obtained would make no difference. In this context, it would, perhaps, not be out of context to note that the fact that the respondent-accused should have given or signed blank cheque to the appellant-complainant, as claimed by the respondent-accused, shows that initially there was mutual trust and faith between them. 2019 SCeJournal 222

 

(v) Negotiable Instruments Act, 1881, Section 138, 139 -  The fact that cheque has been issued against a loan and that the loan may not have been advanced by a cheque or demand draft or a receipt might not have been obtained would make no difference. 2019 SCeJournal 222

 

 

(v) Negotiable Instruments Act, 1881, Section 138 -  Prosecution based on a second or successive default in payment of the cheque amount is not impermissible simply because no statutory notice had been issued after the first default and no proceeding for prosecution had been initiated - There is no real or qualitative difference between a case where default is committed and prosecution immediately launched and another where the prosecution is deferred till the cheque presented again gets dishonoured for the second time or successive times.  MSR Leathers  v. S. Palaniappan & Anr, (2013) 1 SCC 177 , referred.2019 SCeJournal 222

 

8 January, 2019

Negotiable Instruments Act, 1881, S. 138 - Holder of the Cheque can make successive presentation of the cheque and institute the criminal complaint based on the second or successive dishonour of the cheque on its presentation  - Cheques were presented twice and notices were issued on 31.08.2009 and 25.01.2010 and complaint filed on the basis of the second notice - Complaint filed based on the second statutory notice is not barred. 2019 SCeJ 115

 

 


2018 PLR Important Judgements  65 (Del.)

16 November, 2018

(PLR Important Judgements   free with Supreme Court e@journal)

 

Negotiable Instruments Act  1881, Section 138 - Whether a complaint under section 138 Negotiable Instruments Act would be maintainable, against the company, if the statutory notice under section 138 Negotiable Instruments Act, is issued only to its Managing Director and is not issued to the company which is maintaining the account from which the subject cheque is issued - Complaint has been filed only against the company and not against the Managing Director -  The company has been arrayed through its Managing Director - Statutory notice is addressed and served on the Managing Director only and not on the company - Since the company is a legal en-tity and functioning only through its directors and Managing Director, service of notice on the Managing Director would be sufficient service of notice on the company -  Knowledge of the Managing Director is to be deemed to be the knowledge of the Company.

Held,

There could be no better way of serving a legal entity like a company than by serving a notice on the person who is in charge and in control of the company. The Managing Director is the key person who is in control of the affairs of the company. Statutory notice in the present case has been served on the Managing Director. It cannot lie in the mouth of the company to contend that it was not aware that the cheque issued by the company had dishonoured and that demand under section 138 N.I. Act had been made on the company. Since the company which acts through its Managing Director is aware that its cheque has dishonoured and the statutory notice has been received, it was obligatory on the company to have complied with the same. Since the company has failed to comply with the statutory notice, it became liable for prosecution under section 138 N.I. Act.

Held,

Company being an unnatural juristic entity functions through its directors. It cannot acquire knowledge as a human being can. Knowledge of a company actually means knowledge of the people who control the company. Knowledge of the working Director or Managing Director of a company would tantamount to knowledge of the company. Notice to a company is actually to bring it to the notice of its directors. 


*Negotiable Instruments Act, 1881 (26 of 1881)* Section 138 – Stand of complainant, i.e. that the cheque had been issued towards discharge of loans given by him to the petitioner at various points of time, along with interest thereupon – No evidence other than the complainants' own testimony having been led to prove any advancement of a loan to the accused, it was effectively held that the presumption raised under Section 139 of the Act of 1881, stood successfully rebutted. (2018-3) PUNJAB LAW REPORTER

 

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Negotiable Instruments Act, 1881, Section 139  - Accused may adduce evidence to rebut the presumption, but mere denial regarding existence of debt shall not serve any purpose - Trial court as well as the Appellate Court having found that cheque contained the signatures of the accused and it was given to the appellant to present in the Bank of the presumption under Section 139 was rightly raised which was not rebutted by the accused - The accused had not led any evidence to rebut the aforesaid presumption - The accused even did not come in the witness box to support his case - In the reply to the notice which was given by the appellant the accused took the defence that the cheque was stolen by the appellant - The said defence was rejected by the trial court after considering the evidence on record with regard to which no contrary view has also been expressed by the High Court - The defence taken in the reply to the notice that cheque was stolen having been rejected by the two courts below, we do not see any basis for the High court coming to the conclusion that the accused has been successful in creating doubt in the mind of the Court with regard to the existence of the debt or liability - How the presumption under Section 139 can be rebutted on the evidence of Plaintiff witness/complainant, himself has not been explained by the High court - High Court committed error in setting aside the order of conviction in exercise of revisional jurisdiction.

 

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Criminal Procedure Code, S. 482  -  Revisional jurisdiction  - High Court in exercise of revisional jurisdiction shall not interfere with the order of the Magistrate unless it is perverse or wholly unreasonable or there is non-consideration of any relevant material, the order cannot be set aside merely  on  the  ground  that  another  view  is  possible - High Court has not returned any finding that order of conviction based on evidence on record suffers from any perversity or based on no material or there is other valid ground for exercise of revisional jurisdiction -  There is no valid basis for the High Court to hold that the accused has been successful in creating doubt in the mind of the Court with regard to the existence of the debt or liability - The appellant has proved the issuance of cheque which contained signatures of the accused and on presentation of the cheque, the cheque was returned with endorsement “insufficient funds” - Bank official was produced who proved that the cheque was not returned on the ground that it did not contain signatures of the accused rather it was returned due to insufficient funds - Accused even did not come in the witness box to support his case - How the presumption under Section 139 can be rebutted on the evidence of Plaintiff witness/complainant, himself has not been explained by the High court - The defence taken in the reply to the notice that cheque was stolen having been rejected by the two courts below, we do not see any basis for the High court coming to the conclusion that the accused has been successful in creating doubt in the mind of the Court with regard to the existence of the debt or liability - Judgment of High Court is liable to be set aside on this ground alone. 

 

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Negotiable Instruments Act, Section 138 - When compensation is ordered as payable for an offence committed under Section 138 of the Negotiable Instruments Act, and in default thereof, a jail sentence is prescribed and undergone, is compensation still recoverable ? (Yes) – Cheque of Rs. 2.75 lacs dishonoured  - Trial court held accused guilty and ordered simple imprisonment for 4 months for the offence u/s 138 of the Negotiable Instruments Act and further directed to pay a compensation of Rs.2,75,000/- to the complainant u/s 357(3) of Cr.P.C. and in default of payment of compensation, to undergo simple imprisonment for 1 month - Appellate Court, confirmed the conviction, but reduced the sentence to imprisonment till rising of the Court - Order to pay compensation with the default clause was, however, sustained - Accused underwent imprisonment till the rising of the Court and also underwent the default sentence for non-payment of compensation – Application filed under Section 421 of the Criminal Procedure Code for realising compensation by issuing a distress warrant against the accused - Distress warrant for realisation of compensation issued - High Court, held that despite the fact that the default sentence was undergone, yet, under the provisions of the Code of Criminal Procedure, compensation was recoverable, and upheld the orders of the learned Judicial Magistrate – Order Upheld -  Criminal Procedure Code, 1908 Section 357(3), 421.(2017-1) SCeJ 120

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Negotiable Instruments Act, 1881, Section 138, 142 -  Suppression of crucial facts has to be viewed very seriously - That suppression of material facts relating to the alleged transaction in the notice issued before filing the suit or the complaint is an artifice used by certain litigants, the intention of which is very clear and they want to develop a story after knowing the defence that may be set up by the opposite party and the doors of the court should be closed to such fortune seekers -  Accused entitled to acquittal.

Held,

following K.K. Divakaran v. State of Kerala 2016 (4) KLT 233 : 2016 (4) KHC 901, that in a criminal case the accused should be informed before the trial not only of the nature of the offence but also the particulars of the transaction which are necessary for him to effectively meet the case against him. But unscrupulous complainants refuse to do so with the object of denying the accused a fair trial, which is a right guaranteed under Article 21 of the Constitution and an accused in a complaint case filed under Sec.142 of the N.I.Act also is entitled to know before the trial the particulars of the accusation against him and that suppression of these particulars in the complaint alone is sufficient to order his acquittal. (2017) PLRIJ 43 (Ker.)

 

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Negotiable Instruments Act, 1881  , Section 138, 142 -  Cheque – Set hold  - Issuance of cheque admitted - Accused could establish a strong case that she had a bonafide dispute regarding the passing of the cheque in favour of the complainant - These bonafide disputes raised by the accused had led to the issuance of the dishonour memo on account of the stop payment instructions - This should be seriously reckoned from point of view of the crucial fact that the complainant has suppressed even the details given in reply notice, in her complaint, Section 200 sworn affidavit as well as in her chief examination - The very act of the complainant is suppressing these crucial aspects, would lead to a serious inference that even the complainant was under the impression that the accused was having a truthful defence - Therefore, when the accused has raised a bonafide and substantial dispute regarding the very entitlement of the complainant to receive the cheque amount, to get cheque passed, the accused has been clearly able to prove her contra-case. (2017) PLRIJ 43 (Ker.)

 

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Negotiable Instruments Act, 1881, Section 138, 139 -  Complainant has suppressed even the details given in reply notice, in her complaint, Section 200 sworn affidavit as well as in her chief examination - The very act of the complainant is suppressing these crucial aspects, would lead to a serious inference that even the complainant was under the impression that the accused was having a truthful defence - Therefore, when the accused has raised a bonafide and substantial dispute regarding the very entitlement of the complainant to receive the cheque amount, to get cheque passed, the accused has been clearly able to prove her contra-case. (2017) PLRIJ 43 (Ker.)

 

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