Legal Reference Library

The Gujarat High Court, in Harshad Manubhai Malavaiya vs State Of Gujarat, held that husband is not liable for a cheque issued by the wife in her personal capacity. In the instant matter, Justice JB Pardiwala examined the question whether the petitioner can be made vicariously liable under Section 138 for the cheque dishonoured which were issued by his wife in personal capacity. Relying on the Supreme Court’s judgment in the matter of M/s Aparna A Shah vs M/s Sheth Developers Pvt Ltd  and considering the language used in Section 138 and taking note of background agreement pursuant to which a cheque is issued by more than one person, this court held that it is only the “drawer” of the cheque who can be made liable for the penal action under the provisions of the NI Act. The normal rule in the cases involving criminal liability is against vicarious liability. To put it clear, no one is to be held criminally liable for an act of another. In the above judgment, the Supreme Court ...

The Calcutta High Court, in PS Mitra vs Manor Travels Private Limited, has held that a judgment and order of conviction and sentence of imprisonment till the rising of the Court and an order of compensation imposed under Section 357(3) of the Code of Criminal Procedure with a direction to undergo imprisonment in default of payment of such compensation is appealable. The petitioner was convicted for commission of offence punishable under Section 138 of the Negotiable Instruments Act and sentenced to suffer imprisonment till the rising of the Court and directed to pay compensation to the tune of Rs.4 lakhs within one month in default to suffer simple imprisonment for two years. Initially, the petitioner preferred a revision petition before the Additional Sessions Judge, Fast Track Court, Calcutta and thereafter made an application for converting such revision into an appeal on the premise that the imprisonment for two years prescribed in default of payment of compensation is appealab...

Cheque; Sarafudheen Vs. T. Muhammed Ashraf [Kerala High Court, 15-07-2016]  Case Law Section 138 of the Negotiable Instruments Act Michael Kuruvilla v. Joseph J. Kondody, 1998 (1) KLT 384 Babu Lal v. Kewal Chand, 2008 (1) Crimes 147 (MP) Negotiable Instruments Act, 1881 – Ss. 9 & 138 – ‘self cheque’ – holder in due course – cheque was issued in the form of a “self cheque” – at the same time, it is a bearer cheque also, since the terms “or bearer” has not been scored off – therefore, cheque could be treated as a “bearer cheque” – therefore, when cheque is a “bearer cheque”, the possessor of the cheque for consideration can be termed as a “holder in due course”. Negotiable Instruments Act, 1881 – Ss. 9 & 118 (g) – holder of the cheque – when it is admitted that the complainant is the holder of the cheque, the presumption under Section 118(g) of the N.I.Act is available to the complainant. It shall be presumed that the complainant being the holder of the cheque is the ...

The Supreme Court, in N Paraeswaran Unni vs G Kannan, has held that a reminder notice to the drawer of the cheque cannot be construed as an admission of non-service of the first notice by the complainant. In the instant case, the complainant had issued a notice to the complainant within15 days of the cheque bouncing, but it was returned with an endorsement ‘intimation served, addressee absent’. He again sent a notice, wherein it was returned with postal endorsement “Refused, returned to sender”. The trial court allowed his complaint, which was later upheld by the first appellate court. However, the high court set aside these concurrent findings on the ground that that the statutory notice was beyond the prescribed limitation period as mentioned under Section 138 of the NI Act. On appeal, the apex court bench comprising Justice NV Ramana and Justice Prafulla C Pant observed that it is settled law that when a notice is sent by registered post and is returned with postal endorseme...

In RITVI VIRAT SHAH Versus STATE OF GUJARAT, the Hon'ble Gujarat High Court held that "under Section 138 of the Act, it is only the drawer of the cheque who can be prosecuted. In the case on hand, admittedly, the appellant is not a drawer of the cheque and she has not signed the same. A copy of the cheque was brought to our notice, though it contains name of the appellant and her husband, the fact remains that her husband alone put his signature. In addition to the same, a bare reading of the complaint as also the affidavit of examination-in-chief of the complainant and a bare look at the cheque would show that the appellant has not signed the cheque. 23. We also hold that under Section 138 of the N.I. Act, in case of issuance of cheque from joint accounts, a joint account holder cannot be prosecuted unless the cheque has been signed by each and every person who is a joint account holder. The said principle is an exception to Section 141 of the N.I. Act which would have no a...

The Supreme Court  in HDFC Securities Ltd. & Ors vs State of Maharashtra & Anr. has recently held that the Indian Penal Code, 1860, does not provide for vicarious liability for any offence alleged to be committed by a company. A division bench of Justice PC Ghose and Justice Amitava Roy also held that if and when a statute contemplates creation of such a legal fiction, it provides specifically therefore, e.g. Negotiable Instruments Act, 1881. The Bench has relied on a previous judgment of Supreme Court in S.K. Alagh Vs. State of Uttar Pradesh & Ors, in which it is held that the Indian Penal Code, save and except some provisions specifically providing therefore, does not contemplate any vicarious liability on the part of a party who is not charged directly for commission of an offence. The court has also relied on another judgment in Maksud Saiyed Vs. State of Gujarat, wherein it is held as follows: “The Indian Penal Code does not contain any provision for attaching vica...

In Hazi Jahangir Molla Vs. Md. Alim Mallick, the Hon'ble Calcutta High Court decided that Part payment cannot defeat the entire cause of action. Further Even if one person who has no money lending licence cannot be debarred from granting any accommodation loan to his friend or other person on him he has confidence. The opposite party took the accommodation loan and he cannot take the shelter of the money lenders’ act to defraud the person who accommodated him. Taking into consideration the factual aspects of this case this revisional application is to be decided on the following points. (1) Whether the demand notice was defective as because a part payment to the tune of Rs. 1,00,000/- was accepted and that is the departure from the cause of action itself? (2) Whether the complaint is barred by limitation? (3) Whether the cheque was issued in discharge of existing liability? (4) Whether the part payment of cheque is enough to defeat the entire cause of action? (5) W...

The Supreme Court in Shyam Pal vs. Dayawati Besoya, has reiterated that courts can exercise discretion under Section 427 of the Indian Penal Code to the benefit of prisoners in cases where the prosecution is based on a single transaction, no matter even if different complaints in relation thereto might have been filed. The Bench comprising Justice Dipak Mishra and Justice Amitava Roy reiterated the dictum laid down in V.K. Bansal vs. State of Haryana and Another and a recent decision in Benson vs. State of Kerala The court also observed that such a concession cannot be extended to transactions which are distinctly different, separate and independent of each other and amongst others where the parties are not the same. In the facts of the case, the court ordered that substantive sentences of 10-month simple imprisonment awarded to the appellant for his conviction under Section 138 of the Negotiable Instruments Act in the two complaint cases would run concurrently. “In arriving at t...

Rambhool Singh Versus State & Anr. Dishonoring of cheques - Negotiable Instruments Act, 1881 - Held that:- Section 139 of the N.I. Act provides for raising of presumption to the effect that the holder of the cheque has received it in discharge of liability. The Hon’ble Apex Court in the case of Vijay v. Laxman and Anr. (2013 (5) TMI 40 - SUPREME COURT OF INDIA) has observed that once the cheque has been issued and the signatures thereon has been admitted by the accused, then it is not available to the accused to take the defence that the cheque was not issued by him. The present revision petition has been filed assailing the judgments/orders passed by the Courts below. After going through the record and the submissions made by the parties, this Court is of the considered opinion that there is no apparent illegality or infirmity in the judgments/orders passed by the Courts below. This Court is not sitting in appeal and is dealing with the revision petition. It is a settled l...

The Supreme Court on Monday held the dishonour of a post-dated cheque given for repayment of loan installment, which is also described as “security” in the loan agreement, is covered by Section 138 of the Negotiable Instruments Act, 1881. The Division Bench of Justice Dipak Mishra and Justice A.K. Goel has dismissed an appeal filed by the director of a company against the order of the Delhi High Court by which the court dismissed his petition to quash criminal complaints filed under Section 138 of the Negotiable Instrument Act, against him and the company. Vide the loan agreement dated 15th March, 2001, the respondent agreed to advance loan of Rs 11.50 crore for setting up of 4.00-MW biomass-based power project in Andhra Pradesh. The agreement recorded that post-dated cheque leaves towards payment of installment of loan (principal and interest) were given by way of security. The cheque leaves carried different dates depending on the dates when the installments were due and upon dishono...

Gujarat High Court has recently held that the contention that when a signed blank cheque leaf  is handed over, it can never be filled up and that if it is filled up it would  amount to a material alteration within the meaning of using Section 87 of the   N.I.  Act, does not stand to rhyme or reason. The Court said that it would depend upon the facts of each case. Justice J.B.Pardiwala has allowed a batch of Petitions seeking quashment of Criminal Proceedings under Section 138 of NI Act. He has framed the following questions relating to blank cheques (i) Whether Section 20 of the Negotiable Instruments Act applies to a cheque as well? (ii) Whether filling up of a signed blank cheque leaf would amount to a material alteration within the meaning of Section 87 of the N.I. Act? (iii) Is there an implied authority to a person who receives a signed blank cheque leaf to fill up the same showing any amount  as he likes? Answering the questions, the Court held as follows;...

A Division Bench of Bombay High Court has held that the expression “suit or other proceedings” in Section 446(1) under chapter II of Part VII of Companies Act, 1956, does not include criminal complaints filed under Section 138 of the Negotiable Instruments Act, 1881 The Bench comprising of Justices Dr.Shalini Phansalkar Joshi and Dharmadhikari was answering a reference from a Single Judge to resolve a conflict between two views recorded in two Single Judges’ Judgments of Bombay High Court. Before the Single Judge, two decisions of Coordinate Benches of High Court were placed taking divergent views on the application of Section 446(1) of the Act to the proceedings under Section 138 of the N.I. Act, viz. (i) in the matter of Firth (India) Vs. Steel Co. Ltd. (In Liqn.), decided on 4th September 1998 [Coram : F.I. Rebello, J.], reported in AIR 1999 Bombay 75, taking a view that Section 446(1) of the Companies Act is not applicable to proceeding under Section 138 of N.I. Act; and (ii) unrep...

A 3 Judge Bench of the Supreme Court in Econ Antri Ltd. Vs. Rom Industries Ltd. & Anr. has recently answered a reference whether for calculating the period of one month which is prescribed under Section 142(b) of the Negotiable Instruments Act, the period has to be reckoned by excluding the date on which the cause of action arose?. While answering the reference, the Supreme Court held as under: On 13/10/2006, while granting leave in Special Leave Petition (Criminal) No.211 of 2005, this Court passed the following order: “In our view, the judgment relied upon by the counsel for the appellant in the case of Saketh India Ltd. & Ors. v. India Securities Ltd. (1999) 3 SCC 1 requires reconsideration. Orders of the Hon’ble the Chief Justice may be obtained for placing this matter before a larger Bench.” Pursuant to the above order, this appeal is placed before us. 2. Since the referral order states that the judgment of this Court in Saketh India Ltd. & Ors. v. India Securiti...

The Supreme Court in  MSR Leathers Vs. S. Palaniappan  has  held that prosecution based upon second or successive dishonour of the cheque is also permissible so long as the same satisfies the requirements stipulated in the proviso to Section 138 of the Negotiable Instruments Act. The present case overrules  Sadanandan Bhadran v. Madhavan Sunil Kumar (1998) 6 SCC 514  which laid down that cause of action under Section 138 arose only once and  if the concept of successive causes of action were to be accepted the same would make the limitation under Section 142(b) otiose. In  Sadanandan Bhadran v. Madhavan Sunil Kumar  (1998) 6 SCC 514, this Court was dealing with a case under Section 138 of the Negotiable Instrument Act, 1881 (hereinafter referred to as ‘the Act’) in which the complainant had, after dishonour of a cheque issued in his favour, taken steps to serve upon the accused-drawer of the cheque a notice under clause (b) of proviso to...