On 10 Feb 2021, the Supreme Court of India in the acse of M/s Kalamani Tex & Anr v. Balasubramanian comprising of 3 Judge Bench Justice N.V. Ramana, Justice Surya Kant and Justice Aniruddha Bose  stated that the blank cheque would attract presumption u/s 139 of Negotiable Instrument Act if signatures are admitted and the Statute mandates that once the signatures of an accused on the cheque/negotiable instrument are established, then there ‘reverse onus’ clause becomes operative.

Factual Background of the Case

The respondent is the  proprietor of a garment company Named and styled as ‘Growell International’, which along with Appellant No. 1 was engaged in a business arrangement, whereby they agreed to jointly export garments in france. Certain issues arose regarding delays in shipment and payment from the buyer, due to which certain issues arose regarding delays in shipment and payment from the buyer, due to which, the appellants had to pay the respondent sum of Rs 11.20 lakhs. To that end, Appellant No.2 issued a Cheque on behalf of the Appelant No.1 in favour of the respondent and also excuted a deed of undertaking on the same day.

The Respondent presented the said cheque to the bank on 29-12-2020 for collection but it was returned with an endorsement that there were insufficient funds in the account of appellants  

The Cheque being dishonoured, the respondent issued a notice asking the appellants to pay the amounts within 15 days. The appellants in their reply denied their liability and claimed that blank cheques and signed blank stamp papers were issued to help the respondent in some debt recovery proceedings and not because of any legally enforceable debt.

Trial Court- Judicial Magistrate

The Respondent lodged a private Complaint u/s 138 and 142 of Negotiable Instrument Act (NIA) r/w Sec. 200 of the Cr.PC before the Judicial Magistrate

Appellant No.2 in his statement under Section 313 CrPC plainly denied   the   allegations   and   disputed the   existence   of   any   liability towards   the   respondent.

The trial Court disbelieved the respondent’s claim and observed that he had failed to establish a legally enforceable liability on the date of issue of cheque. The Court held that since the basic ingredients of an offence u/s 138 of the NIA were not satisfied, the complaint was liable to be dismissed.

Criminal Appeal- High Court

The High Court in its findings noted that the Appellant No.2 had admitted his signatures on both the cheque and the deed of undertaking and had thus acknowledged the appellant’s liability.

The High Court allowed the criminal appeal and convicted both the appellants u/s 138 of NIA. Appellant No. 2 was awarded a sentence of three months simple imprisonment with a fine of Rs 5,000/ (or 20 days simple imprisonment in lieu thereof).

SLP- SUPREME COURT

Appellant’s Contention

The Appellant in its contention submits before the Court that:

  1. there was no legally enforceable liability on the date of issuance of the cheque and that blank stamp papers signed by Appellant No.2 were misused by the respondent to forge the deed of undertaking.
  2. High Court did not take notice of the defence raised by the appellants which has caused serious prejudice to them.
  3. the presumption drawn against an accused u/s 118 and u/s 139 of the NIA is rebuttable through a standard of “preponderance of probability”.

Respondent’s Contention

The respondent in its contentions submits before the Court that,

  1. the decision of the High Court is well reasoned and founded upon due consideration and of all relevant factors of the case.
  2. the appellants have admitted their existing liability of Rs 11.20 Lakhs.
  3. the financial loss suffered by the respondent and the adverse impact on his business and suitable compensation to be granted.

Court Analysis

  1. Whether the High Court erred in reversing the findings of the Trial Court in exercise of its power u/s 378 of CrPC?

The High Court would not reverse an order of acquittal merely on formation of an opinion different than that of the trial Court. It is also trite in law that the high Court ought to have compelling reasons to tinker with an order of acquittal  and no such interference would be warranted when there were to be two possible conclusions.

On a similar analogy, the powers of the Supreme Court u/A 136 of the Constitution also do not encompass the reappreciation of entirety of record merely on the premise that the High Court has convicted the appellants for the first time in exercise of its appellate jurisdiction.

Further, the Court stated that the trial Court completely overlooked the provisions and   failed   to   appreciate   the   statutory   presumption   drawn   under Section 118 and Section 139 of NIA. The Statute mandates that once the signatures of an accused on the cheque/negotiable instrument are established, then there ‘reverse onus’ clause becomes operative.

The fact that there has been an admitted business relationship   between   the   parties,   we   are   of the opinion that the defence raised by the appellants does not inspire confidence or meet the standard of ‘preponderance of probability’. In the absence of any other relevant material, it appears to us that the High Court did not err in discarding the  appellants defence and upholding the onus imposed upon them in terms of Section 118 and Section 139 of NIA.

Claim of Compensation

The Supreme Court regarding the Claim of Compensation stated that,

“As regard to the claim of compensation raised on behalf of the respondent, we are conscious of the settled principles that the object of the Chapter XVII of the NIA is not only punitive but also compensatory and restitutive. The provisions of NIA envision a single window for criminal liability for dishonor of cheque as well as civil liability for realization of the cheque amount. It is also well settled that there needs to be a consistent approach towards awarding compensation and unless there exist special circumstances, the Courts should uniformly levy fine up to twice the cheque amount along with simple interest at the rate of 9% per annum.”

The record indicates that neither did the respondent ask for compensation before the High Court nor has he chosen to challenge the High Court’s Judgment. Since, he has accepted the High Court’s verdict, his claim for compensation stands impliedly overturned.

Court Judgment

The Supreme Court dismissed the appeal. Further, stated that Appellant No. 2 would be liable to undergo the sentence of simple imprisonment as awarded by the High Court.

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