Supreme Court Yearly Digest 2024: Negotiable Instruments Act, 1881

Director of the company not responsible for its day-to-day affairs cannot be held liable for dishonour of cheque. (Para 10) Susela Padmavathy Amma v. Bharti Airtel Ltd., 2024 LiveLaw (SC) 237

Section 138 – Maintainability of suit – Criminal law can be set in motion by anyone, even by a stranger or legal heir. A complaint under Section 138, preferred by the Power of Attorney Holder is held maintainable and also that such Power of Attorney Holder can depose as complainant. (Para 11) Rajesh Kumar v. Anand Kumar, 2024 LiveLaw (SC) 407

Section 138 – Civil and Criminal course adopted on same issue – Whether, a criminal proceeding can be initiated and the accused therein held guilty, in connection with a transaction, in respect of which a decree by a competent Court of civil jurisdiction, already stands passed? Held, civil court judgments are not binding on criminal courts, but the ratio of the civil proceedings would be binding on criminal proceedings for certain limited purposes such as sentence or damages imposed by the criminal court. The Court in criminal jurisdiction would be bound by the civil Court having declared the cheque to be only for the purposes of security. The civil Court having declared the cheque (subject matter of dispute) to be only for the purposes of security, the criminal proceedings for cheque dishonour under Section 138 of the Negotiable Instruments Act would be unsustainable in law and, therefore liable to be quashed and set aside. The damages as imposed by the Courts must be returned to the appellant. (Para 8, 11 & 12) Prem Raj v. Poonamma Menon, 2024 LiveLaw (SC) 272 : (2024) 6 SCC 143

Section 138 – Dishonouring of cheque – Held, existence of any “enforceable debt or other liability” not found. Petitioner's case not made out. (Para 11) Rajco Steel Enterprises v. Kavita Saraff, 2024 LiveLaw (SC) 306 : AIR 2024 SC 2105

Section 138 - Amendment of Complaint - Cheque Date - Typographical Error - The appellant challenged the High Court's decision permitting the respondent to amend the complaint to correct the date on a cheque from 22.07.2010 to 22.07.2012. The application for amendment was filed after evidence had been tendered, and the learned Magistrate rejected the amendment on the grounds that the date had been consistently recorded as 22.07.2010 in both the complaint and the evidence. The legal notice issued before the complaint also mentioned the date 22.07.2010. The High Court allowed the amendment, but the Supreme Court found that the amendment was not justified since the original date was crucial for compliance with the statutory time frame and the financial status of the account. The High Court's order permitting the amendment was set aside, and the appeal was allowed. Munish Kumar Gupta v. Mittal Trading Company, 2024 LiveLaw (SC) 339

Section 138 – Requirement of 'consent' in compounding of offence under section 138 – Even though compensation is duly paid by the accused, yet if the complainant does not agree for the compounding of the offence, the courts cannot compel the complainant to give 'consent' for compounding of the matter. Held, as the complainant has compensated the complainant and has already been in jail for more than 1 year, even though the complainant is unwilling to compound the case, the proceedings must come to an end. (Para 12 & 14) Raj Reddy Kallem v. State of Haryana, 2024 LiveLaw (SC) 336

Section 147 & 138 – Compoundable offence – All offences punishable under the Negotiable Instruments Act are compoundable – In cases of section 138 the accused must try for compounding at the initial stages instead of the later stage, however, there is no bar to seek the compounding of the offence at later stages of criminal proceedings including after conviction. (Para 12) Raj Reddy Kallem v. State of Haryana, 2024 LiveLaw (SC) 336

Section 143A - Mere filing of the cheque dishonor complaint under the Negotiable Instruments Act would not grant a right to a complainant to seek interim compensation under Section 143A (1) of the N.I. Act, as the power of the court to grant interim compensation, isn't mandatory but discretionary and needs to be decided after prima facie evaluating the merits of the case. (Para 14) Rakesh Ranjan Shrivastava v. State of Jharkhand, 2024 LiveLaw (SC) 235 : (2024) 4 SCC 419

Section 118 r/w. 139 - Even if a blank cheque leaf is voluntarily signed and handed over by the accused towards some payment would attract the presumption under Section 139 of the Act and in the absence of any cogent evidence to show that the cheque was not issued in discharge of the debt, the presumption would hold good. (Para 5) K. Ramesh v. K. Kothandaraman, 2024 LiveLaw (SC) 145

Section 118 r/w. 139 - Accused has signed the cheque. The only dispute is with regard to the age of the ink used in making the signature on the cheque and the age of the signature and contents of the cheque. 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. 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. (Para 5 & 6) K. Ramesh v. K. Kothandaraman, 2024 LiveLaw (SC) 145

Sections 138 and 141 - The Director of the company wouldn't be held liable for the dishonor of a cheque issued by the company pursuant to the retirement of the Director unless some credible evidence is brought on record proving the guilt of the director. The director could be held liable for the dishonor of the cheque after his retirement only when it is proved that any act of a company is proved to have been done with the connivance or consent or may be attributable to a director. (Para 10) Rajesh Viren Shah v. Redington (India) Ltd; 2024 LiveLaw (SC) 119 : AIR 2024 SC 1047

Section 118(e) and 138 - If the accused is disputing the signature on the cheque, then the certified copies of the signatures from the bank could be summoned from the bank to compare the same with the signature appearing on the cheque. The indorsements on a cheque carry a presumption of genuineness as per Section 118(e) of the Act. Hence, it is incumbent upon the accused to lead evidence to rebut the presumption of genuineness of signatures. (Para 16) Ajitsinh Chehuji Rathod v. State of Gujarat, 2024 LiveLaw (SC) 64 : AIR 2024 SC 787

Section 118(e) and 138 - The accused had not taken any efforts to disprove his signature at the trial stage. No question was put to the witness from the bank regarding the genuineness of the signature. Also, the cheque was returned not on the grounds of any discrepancy in the signatures. If at all, the accused was desirous of proving that the signatures as appearing on the cheque issued from his account were not genuine, then he could have procured a certified copy of his specimen signatures from the Bank and a request could have been made to summon the concerned Bank official in defence for giving evidence regarding the genuineness or otherwise of the signature on the cheque. (Para 16) Ajitsinh Chehuji Rathod v. State of Gujarat, 2024 LiveLaw (SC) 64 : AIR 2024 SC 787

Section 138 - Accused persons filed an undertaking based on a settlement. Since the amount agreed was not paid, the interim protection, granted via suspension of sentence and bail, was withdrawn. Appeal dismissed with cost of Rs 5 lakhs and directed to surrender within a period of four weeks. Satish P. Bhatt v. State of Maharashtra, 2024 LiveLaw (SC) 16

Section 138 - Once the settlement has been arrived at and the complainant has signed the deed accepting a particular amount in full and final settlement of the default amount and the fine amount awarded by the Trial Court, the proceedings under Section 138 of the NI Act need to be quashed. (Para 4) Ghanshyam Gautam v. Usha Rani, 2024 LiveLaw (SC) 23

Section 138 - Question regarding the time-barred nature of an underlying debt or liability in proceedings under Section 138 of the NI Act is a mixed question of law and fact which ought not to be decided by the High Court exercising jurisdiction under Section 482 of the CrPC. (Para 7) Atamjit Singh v. State (NCT of Delhi), 2024 LiveLaw (SC) 76

Principles of compounding of offences - It is to be remembered that dishonour of cheques is a regulatory offence which was made an offence only in view of public interest so that the reliability of these instruments can be ensured. A large number of cases involving dishonour of cheques are pending before courts which is a serious concern for our judicial system. Keeping in mind that the 'compensatory aspect' of remedy shall have priority over the 'punitive aspect', courts should encourage compounding of offences under the NI Act if parties are willing to do so. (Para 6) New Win Export v. A. Subramaniam, 2024 LiveLaw (SC) 490

Section 143A - An authorized signatory of the company could not be considered as a 'drawer' of cheque, and therefore, could not be directed to pay the interim compensation to the complainant. (Para 30) Shri Gurudatta Sugars Marketing Pvt. Ltd. v. Prithviraj Sayajirao Deshmukh, 2024 LiveLaw (SC) 513

Section 138—Discrepancies in the interest rate were insufficient to discredit the principal amount due, especially when the respondent admitted to issuing the cheque. (Para 17 & 18) Sri Sujies Benefit Funds Ltd. v. M. Jaganathuan, 2024 LiveLaw (SC) 581

Sections 138, 139, 118(a); Code of Criminal Procedure, Section 391; Prohibition of Charging Exorbitant Interest Act, 2003 (Tamil Nadu) — Discrepancies in interest rates and the partial repayments did not sufficiently rebut the statutory presumption of liability—Respondent failed to demonstrate that the cheque was not for a legally enforceable debt—Even if the interest charged exceeded the rate allowed under the Tamil Nadu Act, this was not a ground to invalidate the entire debt. (Para 17 & 18) Sri Sujies Benefit Funds Ltd. v. M. Jaganathuan, 2024 LiveLaw (SC) 581

Sections 138 and 147 – Code of Criminal Procedure, 1973 - Section 320 and 482 – Compounding of Offence – Consent of Complainant – Mandatory Requirement. A.S. Pharma Pvt. Ltd. v. Nayati Medical Pvt. Ltd., 2024 LiveLaw (SC) 608

Section 138 and 139 – Acquittal upheld due to contradictions in the statements of the complainant, inability to show the financial capacity to advance the loan as well as the lack of acknowledgement of the loan in the Income Tax returns. Although the signature of the accused in the cheque was established, the presumption under Section 139 of the Negotiable Instruments Act 1881 is not attracted. “The liability of the defence in cases under Section 138 of the NI Act 1881 is not that of proving its case beyond reasonable doubt. An accused may establish non-existence of a debt or liability either through conclusive evidence that the concerned cheque was not issued towards the presumed debt or liability, or through adduction of circumstantial evidence vide standard of preponderance of probabilities. Since a presumption only enables the holder to show a prima facie case, it can only survive before a court of law subject to contrary not having been proved to the effect that a cheque or negotiable instrument was not issued for a consideration or for discharge of any existing or future debt or liability.” Sri Dattatraya v. Sharanappa, Criminal Appeal No. 3257 of 2024, Citation: 2024 LiveLaw (SC) 890

Section 148 – The official signatory of the company does not assume the status of a 'drawer of a cheque' to attract the liability for payment of compensation under Section 148 of the NI Act. Liability for payment of compensation as well as deposit to suspend the sentence pending the appeal could only be fastened upon the drawer of the cheque, and not on the company's official who acted as an authorized signatory of the company. Bijay Agarwal v. M/s Medilines, 2024 LiveLaw (SC) 948

Sections 138 and 141 – Director of a company cannot be held liable under Section 138 for dishonour of a cheque drawn on the company's account unless the company is arraigned as the principal accused, even if the cheque is issued by the director in discharge of personal debt. Bijoy Kumar Moni v. Paresh Manna & Anr., 2024 LiveLaw (SC) 1035

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