Facts in brief
A complaint for the offence punishable under Section 138 of the Negotiable Instrument Act was filed by the Complainant as a Partner on behalf of the Firm. There was relationship of Financer and Developer in between the Appellant and the Respondent No. 1 (hereinafter they will be described as per their original status before the trial Court). The complainant have given loan of Rs. 1 Crore to the accused. They have entered into a Memorandum of Understanding on 09/05/2003. The complainant was given various options of re-payment.
The amount was advanced as accused wants to pay the consideration to owner of the property. Owner of the property situated at Bahadur S. K. Bole Marg, Dadar, Mumbai and owned by one Kishorebhai Karamsey Vikamsey. The said Kishorebhai has agreed to entrust that property for development to the accused. For some reason or other, the accused could not complete the construction of the building on the said plot.
Amongst various modes available as per the Memorandum of Understanding, the complainant has opted for refund of the amount of Rs. 1 Crore along with interest. When the Memorandum of Understanding was executed, the accused has issued two cheques to the complainant. Their details are given in para no. 11 of the Memorandum of Understanding. Those two cheques were not completed in all respect. The complainant deposited both these two cheques in their bank account Jankalayan Sahakari Bank Ltd., Sion (W). However, they were returned unpaid by the drawee bank, the Cosmos Co-op. Bank Ltd. Dadar (West) for the reason ‘Refer to Drawer’.
The complainant called upon the accused to pay the amount of those two cheques within 15 days on the receipt of the notice. The accused denied the averments in the notice by sending reply. As such there was failure to pay the amount and hence two complaints were filed before the Court of Metropolitan Magistrate.
In both these cases, the accused was acquitted by separate judgments dated 18/06/2007.
VERDICT OF HC
Bombay High Court upheld the Acquittal given by Ld. Trial Court on the basis of only one ground i.e. a civil suit is pending between Accused and Complainant hence accused couldn’t have agreed or given his consent to complainant to write date on the cheques hence is hit by section 87(1).
MY OPINION
In my opinion the judgment of Hon’ble High Court is bad in law since it rests upon a condition which is completely immaterial to the situation in hand.
For an offence to be constituted in terms of section 138, the conditions as laid down in Kusum Ingots & Alloys Ltd. v. Pennar Peterson Securities Ltd., [(2000) 2 SCC 745] :
(i) a person must have drawn a cheque on an account maintained by him in a bank for payment of a certain amount of money to another person from out of that account for the discharge of any debt or other liability;
(ii) that cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier;
(iii) that cheque is returned by the bank unpaid, either because the amount of money standing to the credit of the account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with the bank;
(iv) the payee or the holder in due course of the cheque makes a demand for the payment of the said amount of money by giving a notice in writing, to the drawer of the cheque, within 15 days of the receipt of information by him from the bank regarding the return of the cheque as unpaid;
(v) the drawer of such cheque fails to make payment of the said amount of money to the payee or the holder in due course of the cheque within 15 days of the receipt of the said notice.
In the present case, all the ingredients have been fulfilled i.e.
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Drawing and delivery of cheque from accused to complainant;
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Delivery of cheque from accused to complainant, with noting in their MoU.
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Existence of legally enforceable debt;
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Dishonour of cheque;
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Sending and receiving of statutory notice;
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Admission of liability;
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Filing of complaint within time prescribed.
Also, the aforementioned facts have been duly noted in the order by Hon’ble High Court, in following terms:
“18. So, I am not inclined to agree with the observations of the trial Court that cheques were issued by way of security. Even when second cheque for Rs. 68,6=51,590/- was deposited, the liability towards interest has accrued.
19. There is much emphasis on payment of Rs. 19,00,000/- by accused to the complainant. It is not disputed by the complainant. Only issue was on her own she has not brought it on record but it is by way of cross examination. According to learned advocate for the Respondents this payment is towards repayment of the principal. Whereas according to the learned Advocate Khandeparkar, it is for the payment of the interest.
20. In order to ascertain the intention of the parties, this Court can also peruse the contents of the mandatory notice and the reply. They are dated 22/05/2007 and 07/06/2007. The accused has disputed the right of the complainant to deposit the cheques which were given as a security. He has clarified that the suit is pending and complainant is aware about the same. He has criticized the act of the complainant in depositing the cheques without informing him. So, it is pertinent to note that in his reply, the accused has not clarified that an amount of Rs. 19,00,000/- paid in instalments in the year 2005 was towards the principal. To that extent, the learned Metropolitan Magistrate was not correct in observing that there was no liability of Rs. 1 Crore. The correspondence referred above do suggest that accused has admitted the liabilities and even not said that Rs. 19,00,000/- is to be appropriated towards the principal. I do not agree those findings.”
Aforementioned being the situation, with all due respect, I believe the Hon’ble High Court has erred in upholding the acquittal of accused on the ground that there have been material alterations of the Negotiable Instrument as date has been filled by the complainant.
The fact that the Hon’ble High Court placed reliance upon Section 87(1) of Negotiable Instruments Act, to hold that material alteration has been done when complainant filled the date on the cheque without consent of the accused, as accused couldn’t have given consent to same because of an ongoing civil dispute between the them, is ill founded and misplaced.
The fact that there was a civil suit pending between the parties is immaterial in prosecution u/s 138 Negotiable Instruments Act so long as the ingredients of Section 138 Negotiable Instruments Act are fulfilled.
Once the execution of cheque is admitted, Section 139 creates a presumption that the holder of a cheque receives the cheque in discharge, in whole or in part, of any debt or other liability, Basalingappa v. Mudibassapa [2019 SCC OnLine SC 491].
Many times, cheques are issued bearing no date or post-dated cheques. The Supreme Court in the matter of Bir Singh v. Mukesh Kumar [(2019) 4 SCC 197] held that if a signed blank cheque is voluntarily handed over 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 Hon’ble Bombay High Court in case of Purushottamdas Gandhi vs. Manohar Deshmukh [2007 (1) Mh.L.J. 210] observed that inserting such date does not amount to tampering or alteration.
Given the situation at hand and position of law being clear, I feel, there was no need for the Hon’ble Court to advert to the provisions of Section 87 Negotiable Instruments Act at all however, even if section 87 is to be applied to the present case, I believe, it is Section 87(2) which will govern the present situation and not Section 87(1).