India: Supreme Court: If A Signed Blank Cheque Is

Voluntarily Presented To A Payee, Towards Some Payment,

INTRODUCTION

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.

FACTS

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.

ISSUES

The apex Court considered the following questions of law:

i. 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.
ii. 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.

JUDGMENT

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.

CONCLUDING REMARKS

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.
Footnotes

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