Supreme Court Annual Digest 2023- Negotiable Instruments Act

Negotiable Instruments Act 1881 - Section 138, 147 - The nature of offence under section 138 of the N.I Act is primarily related to a civil wrong and is a compoundable offence. (Para 10) 2023 LiveLaw (SC) 75

Negotiable Instruments Act 1881; Section 138 - Approval of resolution plan of corporate debtor will not extinguish the liability of erstwhile director for dishonour of cheque. (Para 17, 18 & 47, 52) 2023 LiveLaw (SC) 195

Negotiable Instruments Act 1881; Section 138 - In a proceeding under Section 138 of the N.I. Act, the accused cannot rely upon other bank accounts for the dishonoured cheque which relates to specific bank account of the accused. (Para 6) 2023 LiveLaw (SC) 1046

Negotiable Instruments Act 1881; Section 138 - Where the proceedings under Section 138 of the NI Act had already commenced and during the pendency the plan is approved or the company gets dissolved, the directors and the other accused cannot escape from their liability by citing its dissolution. (Para 52) 2023 LiveLaw (SC) 195

Negotiable Instruments Act 1881; Section 141 (1) - It is not averred anywhere in the complaint that the appellant was in charge of the conduct of the business of the company at the relevant time when the offence was committed. What is stated in the complaint is only that the accused being the partners are responsible for the day-to-day conduct and business of the company. It is also relevant to note that an overall reading of the complaint would not disclose any clear and specific role of the appellant. The appellant has also got a contention that he retired from the partnership firm much prior to the issuance of the cheque in question. Held, that the averments in the complaint filed by the respondent are not sufficient to satisfy the mandatory requirements under Section 141(1) of the NI Act. Since the averments in the complaint are insufficient to attract the provisions under Section 141(1) of the NI Act, to create vicarious liability upon the appellant, he is entitled to succeed in this appeal. The appellant has made out a case for quashing the criminal complaint in relation to him, in exercise of the jurisdiction under Section 482 of Cr.PC. (Para 17) 2023 LiveLaw (SC) 869

Negotiable Instruments Act 1881; Section 141 (1) - Only that person who, at the time the offence was committed, was in charge of and was responsible to the company for the conduct of the business of the company, as well as the company alone shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished. (Para 16) 2023 LiveLaw (SC) 869

Negotiable Instruments Act, 1881 - Once the accused adduces evidence to the satisfaction of the Court that on a preponderance of probabilities there exists no debt/liability in the manner pleaded in the complaint or the demand notice or the affidavit-evidence, the burden shifts to the complainant and the presumption 'disappears' and does not haunt the accused any longer. The onus having now shifted to the complainant, he will be obliged to prove the existence of a debt/liability as a matter of fact and his failure to prove would result in dismissal of his complaint case. Thereafter, the presumption under Section 139 does not again come to the complainant's rescue. Once both parties have adduced evidence, the Court has to consider the same and the burden of proof loses all its importance. (Para 45) 2023 LiveLaw (SC) 866

Negotiable Instruments Act, 1881 - Once the presumption under Section 139 was given effect to, the Courts ought to have proceeded on the premise that the cheque was, indeed, issued in discharge of a debt/liability. The entire focus would then necessarily have to shift on the case set up by the accused, since the activation of the presumption has the effect of shifting the evidential burden on the accused. The nature of inquiry would then be to see whether the accused has discharged his onus of rebutting the presumption. If he fails to do so, the Court can straightaway proceed to convict him, subject to satisfaction of the other ingredients of Section 138. If the Court finds that the evidential burden placed on the accused has been discharged, the complainant would be expected to prove the said fact independently, without taking aid of the presumption. The Court would then take an overall view based on the evidence on record and decide accordingly. (Para 55) 2023 LiveLaw (SC) 866

Negotiable Instruments Act, 1881 - The fundamental error in the approach lies in the fact that the High Court has questioned the want of evidence on part of the complainant in order to support his allegation of having extended loan to the accused, when it ought to have instead concerned itself with the case set up by the accused and whether he had discharged his evidential burden by proving that there existed no debt/liability at the time of issuance of cheque. (Para 62) 2023 LiveLaw (SC) 866

Negotiable Instruments Act, 1881 - When the Courts have concluded that the signature in the cheque has been admitted and its execution has been proved, then the Courts should inquire into either of the two questions: 1. Has the accused led any defense evidence to prove and conclusively establish that there existed no debt/liability at the time of issuance of cheque? 2. In the absence of rebuttal evidence being led the inquiry would entail: Has the accused proved the nonexistence of debt/liability by a preponderance of probabilities by referring to the 'particular circumstances of the case? (Para 56) 2023 LiveLaw (SC) 866

Negotiable Instruments Act, 1881; Section 138 - by operation of the provisions of the IBC, the criminal prosecution initiated against the natural persons under Section 138 read with 141 of the NI Act read with Section 200 of the CrPC would not stand terminated. (Para 47) 2023 LiveLaw (SC) 195

Negotiable Instruments Act, 1881; Section 138 - Conviction cannot be confirmed overriding the agreement between the parties to compound the offence - Terms and conditions of the settlement entered into by the parties binds them to settle the dispute amicably, or through an arbitration as has been stated in clause 8 of the Memorandum of Understanding. In such a circumstance, the Appellants cannot be convicted on the basis of the orders passed by the courts below, as the settlement is nothing but a compounding of the offence- This is a very clear case of the parties entering into an agreement and compounding the offence to save themselves from the process of litigation. When such a step has been taken by the parties, and the law very clearly allows them to do the same, the High Court then cannot override such compounding and impose its will. (Para 8, 9, 11) 2023 LiveLaw (SC) 75

Negotiable Instruments Act, 1881; Section 138 - Only when the conviction arise out of the single transaction, concurrent sentence would be merited - Where there were several transactions over a period of time for which the cheques tendered towards payment, were dishonoured, convict cannot take benefit out of the ratio in V.K. Bansal v. State of Haryana, (2013) 7 SCC 211. 2023 LiveLaw (SC) 584

Negotiable Instruments Act, 1881; Section 138 - The offence under Section 138 is complete upon dishonour of the cheque but prosecution in relation to such offence is postponed, by virtue of the provisos therein, till the failure of the drawer of the cheque to make the payment within 15 days of receiving the demand notice. (Para 5) 2023 LiveLaw (SC) 125

Negotiable Instruments Act, 1881; Section 138 and 142(2)(a) - Territorial Jurisdiction - When the case was fixed for final arguments, the Magistrate, on examining the records, came to the conclusion that the court did not have territorial jurisdiction. No opportunity was granted to the complainant to take remedial steps. The Magistrate passed the order without realizing the legal consequences as well as the fact that the trial had remained pending for more than four years and had proceeded without any objection to territorial jurisdiction, till the stage of final arguments. There was a lapse and proper legal guidance, which was not provided to the complainant. Held, that the complainant should not suffer on account of lack of proper legal assistance. Procedural defect / lapse, had a remedy, and was not substantial as to constitute lack of subject-matter jurisdiction. The Code is procedural in nature and technical defects and irregularities should not come in the way of substantial justice. 2023 LiveLaw (SC) 798

Negotiable Instruments Act, 1881; Section 138, 139 - Code of Criminal Procedure, 1973; Section 482 - If the question as to whether the debt or liability being barred by limitation was an issue to be considered in such proceedings, the same is to be decided based on the evidence to be adduced by the parties since the question of limitation is a mixed question of law and fact. It is only in cases wherein an amount which is out and out non-recoverable, towards which a cheque is issued, dishonoured and for recovery of which a criminal action is initiated, the question of threshold jurisdiction will arise. In such cases, the Court exercising jurisdiction under Section 482 CrPC will be justified in interfering but not otherwise. 2023 LiveLaw (SC) 752

Negotiable Instruments Act, 1881; Section 138, 142(2)(a) - Section 142(2)(a) vests jurisdiction for initiating proceedings for an offence under Section 138 in the Court where the cheque is delivered for collection, i.e., through an account in the branch of the bank where the payee or holder in due course maintains an account. (Para 12) 2023 LiveLaw (SC) 125

Negotiable Instruments Act, 1881; Section 139 - The standard of proof for rebutting the presumption is that of preponderance of probabilities - once the execution of cheque is admitted, Section 139 of the N.I. Act mandates a presumption that the cheque was for the discharge of any debt or other liability - The presumption under Section 139 is a rebuttable presumption and the onus is on the accused to raise the probable defence. The standard of proof for rebutting the presumption is that of preponderance of probabilities - To rebut the presumption, it is open for the accused to rely on evidence led by him or the accused can also rely on the materials submitted by the complainant in order to raise a probable defence - Inference of preponderance of probabilities can be drawn not only from the materials brought on record by the parties but also by reference to the circumstances upon which they rely. (Para 12-20) 2023 LiveLaw (SC) 46

Negotiable Instruments Act, 1881; Section 141 - Offences by Companies - A person will become vicariously liable when a company is accused of the offence under Section 138 (Dishonour of cheque for insufficiency of funds) of the Act, only if such a person was "in charge of" and was "responsible to the company for the conduct of the business of the company" at the time the offence was committed. Just because a person is managing a company and is involved in its day-to-day affairs, he does not automatically come under the ambit of Section 141 of the NI Act. (Para 19) 2023 LiveLaw (SC) 622

Negotiable Instruments Act, 1881; Section 143A(1) - Where a cheque is dishonoured, the interim compensation can be directed to be paid only after the accused has pleaded not guilty. 2023 LiveLaw (SC) 537

Negotiable Instruments Act, 1881; Section 148 - Normally, Appellate Court will be justified in imposing the condition of deposit as provided in Section 148. However, in a case where the Appellate Court is satisfied that the condition of deposit of 20% will be unjust or imposing such a condition will amount to deprivation of the right of appeal of the appellant, exception can be made for the reasons specifically recorded. (Para 5 - 6) 2023 LiveLaw (SC) 776