S. 138 NI Act | Cheque Bounce Case Not Maintainable If Complainant Is Party To Illegal Transaction: Orissa High Court

In an important decision, the Orissa High Court has held that a complainant cannot maintain a case for cheque bounce against the accused under Section 138 of the Negotiable Instruments Act, 1881 ('NI Act') if she herself is a party to illegal transaction, or in other words, if initially credit was given by the complainant for achieving an illegal purpose.

While quashing the charge under Section 138 of the NI Act against the accused, the Single Bench of Justice Sibo Sankar Mishra observed –

“The doctrine of in pari delicto is clearly applicable in the present case. The Court should refuse to enforce illegal debt. The complainant, being a party to the illegal transaction out of which the present dispute has arisen, cannot encash from her own guilt. He has been equal partners in the illegal conduct indulged by the son of the petitioner.”

Case Background

The complaint (Opposite Party No. 2 herein) alleged that on the basis of the assurance given by the son of the petitioner to facilitate admission of her son in a Government Medical College, she had given cash to the son of the petitioner. However, the son of the petitioner could not arrange the seat in the said Government Medical College for her son, as promised by him.

Therefore, a criminal case was initiated against the son of the petitioner for various offences, which is pending for trial. At this juncture, the complainant demanded the money back from the son of the petitioner. To discharge the said liability, the petitioner issued two cheques from her account in favour of the complainant.

On being presented in the bank, the said cheques issued by the petitioner got dishonoured. The statutory demand notice was issued by the complainant to the petitioner. Since the demand notice was not responded, a complaint case was initiated. Being aggrieved by the registration of complaint case, the petitioner approched the High Court seeking to quash the same.

Contentions of Parties

Advocate Dipti Ranjan Mohapatra appearing for the petitioner argued that the cheque issued by the petitioner is not against any legally recoverable debt. Therefore, the criminal complaint under Section 138 of the NI Act is not maintainable. He submitted that the cheque was issued to discharge the so-called liability of the son of the petitioner, who had taken the cash from the complainant to arrange a seat for her son in the Government Medical College, which apparently is an immoral conduct. Therefore, the debt emanating from the aforesaid transaction is an immoral debt, which is not recoverable under Section 138 of the NI Act.

On the other hand, the counsel appearing for the complainant submitted that whether the money is legally recoverable, against which the cheque was issued, could only be ascertained by undertaking a complete trial. The complaint has been pending since more than one year and much has taken place before the trial Court and thus, at this belated stage, no plea for interference should be entertained.

Whether case U/S 138 NI Act maintainable?

The Court examined the ingredients of the offence under Section 138, NI Act and relied upon the judgments of the Madras, Delhi, Karnataka and Bombay High Courts in N.V.P. Pandian v. M.M. Roy (1978), Virender Singh v. Laxmi Narain & Ors. (2006), R. Parimala Bai v. Bhaskar Narasimhaiah (2018) and Nanda v. Nandkishor (2010) respectively to hold that –

“Relying upon the aforementioned judgments, this Court has obtained the view that the cheques issued by the petitioner in favour of the complainant is not legally enforceable debt being immoral debt. One of the ingredients to initiate a proceeding under Section 138 of the N.I. Act is essentially the cheques issued should be towards a debt or other liability, which is legally enforceable debt or the liability.”

It took note of the undisputed fact that the petitioner issued cheques to the complainant to clear the amount illegally accepted by her son for arranging a seat in a Government Medial College for the son of the complainant. The son of the complainant has also participated in the illegal act. Therefore, it held, the cheques issued by the petitioner to discharge the 'immoral debt' created by her son is not enforceable under the law.

Parents shouldn't impose career choices upon children

Against the backdrop of this dispute, Justice Mishra lamented the regressive approach often adopted by the parents in Indian society where they impose certain career choices upon their children. He criticised the shortcut/illegal routes taken by parents to facilitate the education of their children in government/reputed educational institutions, which not only deprive deserving candidates of their rightful opportunities but also create an environment of dishonesty and corruption.

“Parents must evolve beyond a regressive mind-set that imposes career choices upon their children, driven by unfulfilled personal aspirations. While it is natural for parents to dream of a successful future for their children, such aspirations must be nurtured through ethical means rather than unlawful shortcuts. Parents must act as facilitators in their child's educational and career journey—offering guidance and motivation while respecting their individuality. They should aid, but not dictate the decision-making process, support their child's choices, provide them with the freedom to explore their skills and encourage them to develop and achieve through merit and perseverance.”

The Bench was taken aback by the fact that the complainant despite working in the police department did an act that contradicts the very ethos of society, which is highly condemnable.

“Ambitious parents indulging in the illegal methods to secure admission of their wards to a good college at the cost of meritocracy and fairness in education, is indeed a crime. Such actions not only deprive deserving candidates of their rightful opportunities but also foster an environment of dishonesty and corruption, ultimately harming the future of education and society at large,” it said.

Findings as to quashment of case

The Court said that in the given factual scenario, even if the petitioner is put to trial, it would not result in her conviction. Therefore, subjecting her to the rigors of trial would be a futile exercise and lead to abuse of process of the Court because the cheques were admittedly issued by the petitioner towards a debt created by her son by indulging in criminal act.

“The complainant herself is also a party to the immoral and illegal transaction made with the son of the petitioner. The principle of 'Ex turpi causa non oritur actio' applies to the fact of this case. No action arises from an immoral or illegal cause. Therefore, the court will not assist a party in recovering money if debt arises from illegal or immoral activity,” it added.

Resultantly, the charge under Section 138, NI Act against the petitioner was quashed. But before parting with the judgment, the Court clarified –

“The view expressed by this Court is only regarding the prosecution initiated by the complainant under Section 138 of the N.I. Act and the same shall not be construed as if the expression of opinion regarding the other cases pending relating to the transaction between the son of the petitioner for which he is facing the trial or regarding any other offence made out against the petitioner.”

Case Title: Smt. Anupama Biswal v. State of Odisha & Anr.

Case No: CRLMC No. 3881 of 2023

Date of Judgment: March 04, 2025

Counsel for the Petitioner: Mr. Dipti Ranjan Mohapatra, Advocate

Counsel for the Respondents: Mr. M.K. Mohanty, Addl. Standing Counsel for the State; Mr. Lalit Sahu, Advocate for the Opposite Party No. 2/Complainant

Citation: 2025 LiveLaw (Ori) 49

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