Conviction U/S 138 NI Act Will Not Sustain If Civil Court Finds Dishonoured Cheque Not Supported By Valid Consideration: Kerala High Court

The Kerala High Court recently held that when a competent civil court finds that a dishonoured cheque, which was the subject matter for initiation of criminal proceedings under Section 138 of the Negotiable Instruments Act ('NI Act') was not supported by valid consideration, the conviction and sentence of the criminal court for the offence would not legally sustain. 

"The presumption under Sections 118 ('Presumptions as to negotiable instruments') and 139 ('Presumption in favour of holder') of the NI Act is of no avail, when the cheques are proved to be not issued towards discharge of any legally enforceable debt," Justice Sophy Thomas observed. 

The complainant alleged that the revision petitioner had borrowed an amount of Rs.10,00,000/- each on three occasions, and that he had issued three cheques on different dates towards discharge of the same, all of which were dishonoured due to insufficient funds.

The revision petitioner was thus alleged to have committed the offence under Section 138 NI Act ('Dishonour of cheque for insufficiency, etc., of funds in the account').

The trial court found the revision petitioner guilty under Section 138 of the NI Act in all the three cases, and convicted and sentenced him for the offence. The appellate court also upheld his conviction. It is thus challenging the propriety and correctness of the conviction and sentence imposed by the courts below that the present revision petitions have been filed. 

It was contended by the counsel for the revision petitioner that a suit had been filed before the Additional Sub Court, Kottayam, for recovery of money based on the dishonoured cheques, which had been dismissed by the Court on finding that no amounts were actually due to the complainant based on those cheques. It was thus argued that since the complainant had failed to prove that the cheques were supported by consideration, there was no legally enforceable debt ensuing from the same, and hence, the offence under Sectio 138 NI Act would not sustain. 

The court noted that since the complainant had not appealed against the afore decision of the civil court, that decision had become final. It further observed that the said civil suit had been filed during pendency of the proceedings under Section 138 of the NI Act before the trial court, and that the revision petitioner was convict during the pendency of the civil suit. 

It took note that the Additional Sub Judge had concluded that the cheques were not supported by any consideration even after taking into account the conviction of the revision petitioner under Section 138 of the NI Act, based on the very same cheques, on the basis of which the suit had been filed. 

Perusing Sections 11 ('When facts not otherwise relevant become relevant') and 43 ('Judgments, etc., other than those mentioned in sections 40 to 42, when relevant') of the Indian Evidence Act to ascertain as to whether the criminal court would be bound by the decree and judgment passed by the competent civil court, the Court observed,

"...a competent civil court found that the cheques in question which were the subject matter of the criminal proceedings under Section 138 of the NI Act were not supported by valid consideration. That judgment was delivered even after taking into account the conviction of the revision petitioner under Section 138 of the NI Act and the judgment of the civil court has become final also. Since those cheques were found to be not supported by valid consideration, the essential ingredient of Section 138 of the NI Act, that the cheque should have been issued towards a legally enforceable debt, is given a go by, and so the judgment of the civil court becomes relevant under Section 43 of the Indian Evidence Act and hence the conviction and the sentence passed by the courts below cannot sustain in the eye of law".

The revision petitions were thus allowed, and the revision petitioner was acquitted of the offence under Section 138 of the NI Act. 

Counsel for the Revision Petitioner: Advocates Adithya Rajeev, and Sreedev U. 

Counsel for the Respondents: Advocates Elvin Peter P.J., K.R. Ganesh, and T.G. Sunil Pranavam

Citation: 2024 LiveLaw (Ker) 13

Case Title: Mathew Kunju Mathew v. K.V. Kuriakose & Anr. and connected matters

Case Number: Crl. Rev. Pet. No. 1799 of 2013

Click Here To Read/Download The Order