Skip to main content

NI Act - Burden of proof on the drawer even for blank cheques

In CRIMINAL APPEAL NOS.230-231 OF 2019 before the Supreme Court, Bir Singh vs Mukesh Kumar, a friendly loan was given to the respondent-accused by the appellant-complainant who is also an income-tax practitioner and the respondent-accused is his client. When the cheque issued by respondent-accused for repayment of the loan was returned by the bank due to insufficiency of funds for the second time even after assurances received from the respondent-accused, the appellant-complainant filed the criminal complaint. The Trial court convicted the respondent-accused and the Appellant Court upheld the trial court order. The respondent-accused filed a Criminal Revision Petition before the High Court which reversed the concurrent factual findings of the Trial Court and the Appellate court and acquitted the respondent of the charge under Section 138 of the Negotiable Instruments Act, observing, inter alia, that there was fiduciary relationship between the appellant-complainant, an Income Tax practitioner, and the respondent-accused who was his client.

On appeal, the Supreme Court looked into the several objections raised by the respondent-accused :-
a) That a fiduciary relationship existed between the respondent-accused and the appellant-complainant
b) The cheque under consideration was a blank cheque issued for some other matter like tax payment
c) The blank cheque was post-dated.

Allowing the appeal, the Supreme Court made the following observations:-

1) Firstly the High Court could not have re-analyse and re-interpret the reversed evidence on record, in its role as Revisional Court as there was no error in the facts of the matter as decided by the lower courts. The High Court mis-construed Section 139 of Negotiable Instruments Act, which mandates that unless the contrary is proved, it is to be presumed that the holder of a cheque received the cheque of the nature referred to in Section 138, for the discharge, in whole or in part, of any debt or other liability and the onus of proving that the cheque was not in discharge of any debt or other liability is on the accused drawer of the cheque.

2) The proposition of law which emerges from the previous judgments is that the onus to rebut the presumption under Section 139 that the cheque has been issued in discharge of a debt or liability is on the accused and the fact that the cheque might be post dated does not absolve the drawer of a cheque of the penal consequences of Section 138 of the Negotiable Instruments Act.

3) As per Sections 20, 87 and 139, of the Negotiable Instruments Act, makes it amply clear that a person who signs a cheque and makes it over to the payee remains liable unless he adduces evidence to rebut the presumption that the cheque had been issued for payment of a debt or in discharge of a liability. 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.

4) 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.

5) The existence of a fiduciary relationship between the payee of a cheque and its drawer, would
not disentitle the payee to the benefit of the presumption under Section 139 of the Negotiable Instruments Act, in the absence of evidence of exercise of undue influence or coercion.

6) Even a blank cheque leaf, voluntarily signed and handed over by the accused, which is towards some payment, would attract presumption under Section 139 of the Negotiable Instruments Act,
in the absence of any cogent evidence to show that the cheque was not issued in discharge of a debt.

7) The fact that the loan may not have been advanced by a cheque or demand draft or a receipt might not have been obtained would make no difference.

8) The subsequent filling in of an unfilled signed cheque is not an alteration. There was no change in the amount of the cheque, its date or the name of the payee.

Comments

Post a Comment

Most viewed this month

Appellate authorities under Special Statutes cannot be asked to condone delay

Madras High Court in R.Gowrishankar vs. The Commissioner of Service Tax has held that Appellate authorities cannot be asked to condone the delay, beyond the extended period of limitation A Division Bench comprising of Justices S. Manikumar and D. Krishnakumar, made this observation while considering an appeal filed against Single Bench order declining to set aside the order made in the condone delay petition filed by the petitioner to condone 223 days in filing the appeal before the Commissioner of Service Tax (Appeals). Article referred: http://www.livelaw.in/appellate-authorities-special-statutes-cannot-asked-condone-delay-beyond-extended-period-limitation-madras-hc/
Post a Comment
Read more

'Seize assets to pay damages to accident victim'

Her story might be an inspiration for the physically challenged but justice has remained elusive for her. In 2008, a bus accident left research engineer S Thenmozhi, 30, paraplegic. In April 2013, the motor accident claims tribunal directed the Tamil Nadu State Transport Corporation (TNSTC) to provide her a compensation of 57.9 lakh. However, TNSTC refused to budge and on Tuesday a city court ordered attaching of movable assets of the transport corporation. Thenmozhi was employed in C-DOT, a telecom technology development centre in Bangalore. On July 21, 2008, she was coming to Chennai in a private bus. Around 2am, the bus had a flat tyre and the driver parked it on the left side of the road near Pallikonda in Vellore district on the Bangalore-Chennai highway. While the tyre was being changed, a TNSTC bus of Dharmapuri division hit the stationary bus. The rear part of the bus was smashed and passengers were injured. Thenmozhi who had a seat at the back of the bus suffered...
Post a Comment
Read more

Mumbai ITAT rules income of offshore discretionary trust is subject to tax in India

The Mumbai Income Tax Appellate Tribunal (ITAT) has recently determined the following issue in the affirmative in the case of Manoj Dhupelia: Should the income of an offshore discretionary trust be subject to tax in India, if no distributions have been made to beneficiaries in India? The question arose from appeals filed by individual beneficiaries in relation to a Lichtenstein-based trust, the Ambrunova Trust and Merlyn Management SA (the Trust) with the ITAT. It is important to note that the individuals in this case were amongst those first identified by the Government of India (GOI) as holding undeclared bank accounts in Lichtenstein. The ITAT ruling raises the following issues: Taxation of Trust Corpus: ITAT classified the corpus of the trust as "undisclosed income" and declared it taxable in the hands of the beneficiaries. Taxation of Undistributed Income: ITAT refused to draw a distinction between the corpus and undistributed income from the trust and declared i...
Post a Comment
Read more