Recently, the Supreme Court of India in its judgment dated 6th February, 2019 in the matter Bir Singh v. Mukesh Kumar [Criminal Appeal Nos. 230-231 of 2019 in SLP (Criminal) Nos. 9334-35 of 2018] whilst discussing the object of Section 138 of the Negotiable Instruments Act, 1881 ("NI Act") and the presumption in favour of the holder of cheque provided under Section 139 of the NI Act held that the existence of 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 NI Act, in the absence of evidence of exercise of undue influence or coercion. The court further discussed the applicability of Section 139 of the NI Act to blank cheques voluntarily presented to a payee and the subsequent filling up of amount and other particulars by a payee. Besides, the court reiterated the well established principle that a court in its revisional jurisdiction cannot upset the concurrent factual findings of criminal courts below.
It was the case of the Appellant - Complainant that a cheque dated 4th March, 2012 drawn on Axis Bank, Palwal ("said cheque") was issued by the Respondent - Accused to the Appellant – Complainant towards repayment of a "friendly loan" for an amount of Rs. 15 lakhs advanced by the Appellant – Complainant to the Respondent – Accused. On 11th April, 2012, the Appellant deposited the said cheque in his Bank which was returned unpaid with the endorsement "Insufficient Funds." Thereafter, the Appellant once again presented the said cheque to his Bank on 23rd May, 2012 which was returned once again with the remark "Insufficient Funds."
On 15th June, 2012, a legal notice was issued by the advocate of the Appellant to the Respondent calling upon him to pay the cheque amount. However, neither any reply was received to the said notice nor any payment was made to the Appellant. The Appellant then filed a Criminal Complaint under Section 138 of the NI Act against the Respondent before the Judicial Magistrate First Class, Palwal ("JMFC").
By a judgment and order dated 9th February, 2015, the JMFC convicted the Respondent under Section 138 of the NI Act and sentenced him to simple imprisonment for a period of 1 (one) year along with fine of Rs. 15 Lakhs to be paid within 1 (one) month from the date of the said judgment and order.
Aggrieved, the Respondent filed a criminal appeal before the Additional Sessions Judge, Palwal challenging the JMFC's order dated 9th February, 2015. The Appellate court upheld the conviction of the Respondent by its judgment and order dated 20th February, 2016. The sentence of imprisonment was however reduced to six months from one year.
The Respondent then filed a Criminal Revision Petition before the High Court of Punjab and Haryana challenging the judgment and order of the Appellate Court. The Appellant also filed a Criminal Revision Petition challenging the reduction of sentence of the Respondent.
The High Court reversed the concurrent findings of the courts below vide its common judgment and order dated 21st November, 2017 ("the Impugned Order") and acquitted the Respondent. The High Court observed inter alia, that there was fiduciary relationship between the Appellant and the Respondent with the Appellant being a tax practitioner and the Respondent being his client.
Aggrieved by the Impugned Order, the Appellant filed an appeal before the Hon'ble Supreme Court.
The apex Court considered the following questions of law:
- Whether a revisional court can in exercise of its discretionary jurisdiction interfere with an order of conviction in the absence of any jurisdictional error or error of law.
- Whether the payee of a cheque is disentitled to the benefit of the presumption under Section 139 of the NI Act of a cheque duly drawn having been issued in discharge of a debt or other liability only because he is in a fiduciary relationship with the person who has drawn the cheque.
The apex court noted that the courts subordinate to the High Court had arrived at concurrent factual findings that the said cheque was issued in discharge of a debt or liability, signed by the Respondent and returned unpaid for want of sufficient funds.
The court reiterated the well settled principle that the High Court does not upset concurrent factual findings in the absence of perversity and referred to its decision in Southern Sales and Services and Others v. Sauermilch Design and Handels GMBH1 wherein it was held that a revisional court does not interfere with an order in the absence of a jurisdictional error. Accordingly, the first issue was answered in the negative.
On the presumption in favour of the holder of cheque provided under Section 139 of the NI Act, the court held that the High Court misconstrued the provisions of Section 139 which mandates that unless the contrary is proved, it is to be presumed that the holder of a cheque received the cheque of the nature referred in Section 138 of the NI Act. The presumption under Section 139 is a presumption of law. Relying on the decisions in Hiten P. Dalal v. Bratindranath Banerjee2, Laxmi Dyechem v. State of Gujarat & Ors.3, Kumar Exports v. Sharma Carpets4 and K. N. Beena v. Muniyappan and Anr.5 the court revisited the settled law that the onus of proving that the cheque issued was not in discharge of any debt or other liability is on the accused drawer of the cheque. It is obligatory on the courts to raise the presumption provided under Section 139 of the NI Act. The said presumption is rebuttable and can be rebutted by the accused by proving the contrary by leading cogent evidence that there was no debt or liability.
The apex court further discussed the object of Chapter XVII of the NI Act which is to infuse credibility to negotiable instruments including cheques. Besides, the court observed that a prosecution based on a second or successive default in payment of the cheque amount is not impermissible simply because a statutory notice was not issued after the first default.
Interestingly, the Supreme Court observed that it is immaterial that the cheque is filled by any person other than the drawer provided it is duly signed by the drawer. The same would not invalidate the cheque and shall attract the presumption under Section 139 of the NI Act.
The apex court observed as follows:
"37. A meaningful reading of the provisions of the Negotiable Instruments Act including in particular, Sections 20, 87 and 139, makes it amply clear that 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. 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.
38. 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."
Accordingly, on the second issue, the court held that the existence of a fiduciary relationship between the payee and the drawer of a cheque would not disentitle the payee to the benefit of the presumption under Section 139 of the NI Act in the absence of the evidence of exercise of undue influence or coercion.
Consequently, while allowing the appeals, the Impugned Order was set aside by the Supreme Court and the conviction of the Respondent-Accused under Section 138 of the NI Act was confirmed. However, only an amount of Rs. 16 lakhs was imposed upon the Respondent as fine which was to be deposited with the trial court within 8 weeks from the date of the order, failing which the sentence of imprisonment of one year was ordered to be revived.
The judgment furthers the object of the NI Act to infuse credibility to negotiable instruments including cheques and to encourage and promote the use of negotiable instruments in financial transactions.
1. (2008) 14 SCC 457
2. (2001) 6 SCC 16
3. (2012) 13 SCC 375
4. (2009) 2 SCC 513
5. (2001) 8 SCC 458
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