Negotiable Instruments Act, 1881 (26 of 1881) - Section 138,  Section 141 Explanation (b)  - Cheque was issued by the Sole Proprietorship firm that was not impleaded as an accused person in the complaint – There was no requirement to implead his sole proprietary concern as an accused person nor there was any need to additionally implead the applicant by his trade name – Complaint maintainable. Click here

Negotiable Instruments Act, 1881 (26 of 1881), Section 138 – Compounding of offence without the consent of the complainant  -  Court can order compounding unilaterally. Click Here


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Negotiable Instruments Act, 1881

   

Admitted issuance of cheque - Negotiable Instruments Act, 1881 (26 of 1881) S. 138, 139 - High Court erred in holding that based on the alleged forged receipts, criminal case (FIR) has been filed and the cheque case under Section 138 of N.I. Act cannot be proceeded with and accordingly, quashed the criminal case filed under Section 138 of N.I. Act. - Accused has admitted the issuance of cheques - When once the issuance of cheque is admitted/established, the presumption would arise under Section 139 of the N.I. Act in favour of the holder of cheque that is the complainant - The nature of presumptions under Section 139 of the N.I. Act and Section 118(a) of the Indian Evidence Act are rebuttable -  The burden lies upon the accused to rebut the presumption by adducing evidence - Until the accused discharges his burden, the presumption under Section 139 of N.I. Act will continue to remain - It is for accused to adduce evidence to rebut the statutory presumption – Without keeping in view the statutory presumption raised under Section 139 of the N.I. Act, the High Court, in our view, committed a serious error in quashing the criminal complaint filed under Section 138 of N.I. Act. - Criminal Procedure Code, 1974 (II of 1974), Section 482.  . (Supreme Court) (2020-1)197 PLR

Blank signed cheque    - 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

Blank signed cheque  - 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

Company not made a party - Negotiable Instruments Act, 1881, Section 138, 141 - Cheque was drawn for and on behalf of the company as its Director - Notice of demand was served only on the Director  - The complaint was lodged only against the Director without arraigning the company as an accused - In the absence of the company being arraigned as an accused, a complaint against the Director was not maintainable. (2019-2)194 PLR 006 

Company not made a party - Negotiable Instruments Act, 1881, Section 138, 141 – Impleadment of company as accused during course of proceedings when no notice under section 138 was issued to it - The Director had signed the cheque as a Director of the company and for and on its behalf -  Notice of demand was served only on the Director and not against the company  - In the absence of a notice of demand being served on the company and without compliance with the proviso to Section 138, the High Court was in error in holding that the company could now be arraigned as an accused - In absence of compliance with the requirements of Section 138, the direction of the High Court that the company could be impleaded/arraigned at this stage is erroneous. (2019-2)194 PLR 006 

Compounding without consent  - Negotiable Instruments Act, 1881 (26 of 1881), Section 138 – Compounding of offence without the consent of the complainant  -  Court can order compounding unilaterally. Click Here

Compromise - Negotiable Instruments Act, 1881 (26 of 1881) S. 138 – Sentence under – Matter has been compromised between the parties and as per the compromise the amount in question has been paid to the complainant – Complaint under Section 138 of the Act is dismissed and the petitioners are acquitted of the accusation of charge – Criminal Procedure Code, (II of 1974) S. 313. . (2020-1)197 PLR
Director  - Complaint only against company - 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.  2018 PLR Important Judgements  65 (Del.)

  Director  - Negotiable Instruments Act, 1881 (26 of 1881) S. 138, 141 – Petitioner was not the Director of the Company, when the cheque in question was issued nor the petitioner was, thus, responsible for the conduct of the business of respondent company at the relevant time - Therefore, no vicarious liability can be fastened upon her in the context of Section 141 of the Act for the offence under Section 138 of the Act - There is no specific averment in the complaint regarding the role of the petitioner as a Director and/or one of the Directors of the accused-company. . (2020-1)197 PLR

Director - Negotiable Instruments Act, 1881 (26 of 1881) S. 141 – There should be a clear and unambiguous allegation as to how the concerned Director i.e. petitioner was in-charge of and was responsible for the conduct and affairs of respondent company – No specific notice has been issued to the petitioner, which is the requirement of the mandate of the law – To make a Director responsible or liable for the vicarious liability, strict compliance of the statutory requirements would be insisted. . (2020-1)197 PLR

Fiduciary relationship  - 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

Fine  - 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

 Firm not made party - Negotiable Instruments Act, 1881 (26 of 1881) S. 141 – Firm is the principal offender as per Section 141 of the Act and even after impleading the firm one of the accused in the complaint, finding cannot be recorded unless firm is tried and prosecuted with other partners and that apart, the liability of the individual as per the provision is vicarious and such culpability arises, ipso facto and ipso jure, from the fact that the individual occupies a decision making position in the corporate entity - It is patent that unless the firm, the principal entity, is prosecuted as accused, the subsidiary entity, the individual, cannot be held liable, for the language used in the provision makes the firm the principal offender whereas neither the firm nor another partner have been tried or prosecuted by the trial Court. . (2020-1)197 PLR

Liability -  Negotiable Instruments Act, 1881 S. 138, 139  - Complaint alleging that accused, who is running an institution appointed the complainant and other persons on agreement basis - Complainant and other persons deposited some amount as per the agreement, with the institution -  In the agreement it was mentioned that the amount so deposited would be refunded after completion of probation period of one year -  After completion of probation period, they have not been regularized therefore, the complainant and others demanded for refund of the amount from the applicant/institution – Accused issued a cheque which bounced  - Signing of cheque indicate that he admitted his liability, and he has not rebutted the presumption of 139 Negotiable Instruments Act, therefore not only debt but the liability also call for criminal proceedings under the act - Conviction under Section 138 of NI Act upheld. 2019 PLR IJ e@journal 104 (Chatt.)

Liability not proved  -Negotiable Instruments Act, 1881 (26 of 1881) S. 138 – Dishonour of Cheque – Does not stand prima facie proved by the complainant that accused applicant had issued a cheque nor that he had anything to do with the business transactions in which the alleged amount was paid – No offence made out – Proceedings qua applicant quashed. . (2020-1)197 PLR 024 (IJ)

Loan  - 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

Post dated cheque  - 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

Presentation  of cheque Multiple times - 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

Presentation  of cheque twice  - 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

Preseumption - 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

Presumption - Negotiable Instruments Act, 1881 (26 of 1881) S. 138, 139 - Accused has admitted issuance of the cheques and his signature on the cheque and that the cheque in question was issued for the second time, after the earlier cheques were dishonoured and that even according to the accused some amount was due and payable - Presumption under Section 139 of the N.I. Act that there exists a legally enforceable debt or liability is rebuttable in nature - However, to rebut the presumption the accused was required to lead the evidence that full amount due and payable to the complainant has been paid -  No such evidence has been led by accused - Story put forward by the accused that the cheques were given by way of security is not believable in absence of further evidence to rebut the presumption and more particularly the cheque in question was issued for the second time, after the earlier cheques were dishonoured - Both the courts below have materially erred in not properly appreciating and considering the presumption in favour of the complainant that there exists legally enforceable debt or liability as per Section 139 of the N.I. Act.  – Courts below have committed error in shifting the burden upon the complainant to prove the debt or liability, without appreciating the presumption under Section 139 of N.I. Act. – Accused convicted. . (Supreme Court) (2020-1)197 PLR

Presumption - 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.(2018-2) SCeJ 1224

Proof  -  Reverse onus  - Negotiable Instruments Act, 1881 (26 of 1881) S. 139  - Section 139 of the Act is an example of reverse onus clause and therefore once the issuance of the cheque has been admitted and even the signature on the cheque has been admitted, there is always a presumption in favour of the complainant that there exists legally enforceable debt or liability and thereafter it is for the accused to rebut such presumption by leading evidence. . (Supreme Court) (2020-1)197 PLR

Quashed  - Negotiable Instruments Act, 1881  , Section 138, 142 -  Cheque – 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) PLR IJ 43 (Ker.)

Quashed  - Suppression of facts - 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) PLR IJ 43 (Ker.)

Quashed - Suppression of facts - 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) PLR IJ 43 (Ker.)

Security - Post dated cheque  - Negotiable Instruments Act, 1881 (26 of 1881) S. 138 – Cheque given as Security - Post dated cheque – Loan of Rs. 7,00,000/- was to be paid in 30 installments, starting from 18.1.2012 – Agreement provided that if till said date, entire amount is not returned, complainant will have right to present cheque given as security, before bank – 30 months were to lapse on 18.7.2014 – Complainant presented cheque before bank on 25.10.2012 i.e. before he was entitled to present cheque as per agreement –  At the time of presentation of cheque, there was no legally enforcement debt or liability, in view of mortgage agreement executed between parties, in which cheque was to be presented before bank after 30 months – Complainant has not mentioned that he received certain amounts in his complainant and neither stated how much payment he has received and what is balance -  Also concealed that he presented cheque in question for balance amount -  Infact, cheque in question was for entire Rs. 7,00,000/-, which was not legally enforceable debt or liability - Offence not made out - Application filed under Section 378 (4) Cr.P.C. for leave to appeal against acquittal, dismissed. . (2020-1)197 PLR

Security cheque  - Negotiable Instruments Act, 1881 S. 138, 139  - The word "security"  used in the agreement, refers to the cheques being towards repayment of installments - The repayment becomes due under the agreement, the moment the loan is advanced and the installment falls due - It is undisputed that the loan was duly disbursed on 28.02.2002 which was prior to the date of the cheques - Once the loan was disbursed and installments have fallen due on the date of the cheque as per the agreement, dishonour of such cheques would fall under Section 138 of the Act - The cheques undoubtedly represent the outstanding liability.  Sampelly Satyanarayana Rao Vs. Indian Renewable Energy Development Agency Limited (2016)10 SCC 458 referred in 2019 PLR IJ e@journal 104 (Chatt.)

Stolen cheque  - Negotiable Instruments Act, 1881, Section 138  - 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. .(2018-2) SCeJ 1224

Vicarious liability  - Negotiable Instruments Act, 1881 (26 of 1881) S. 141 – Even to fix any partner for vicarious liability, it is to be pointed out in the complaint and to prove that the said partner is involved in the day-to-day function of the firm as it is a juristic person. . (2020-1)197 PLR 

 

 



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