Kerala High Court Digest 2023: Negotiable Instruments Act

Case Title: Razak Mether v. State of Kerala and Anr.

Citation: 2023 LiveLaw (Ker) 24

The Kerala High Court observed that a complaint filed under Section 138 of the Negotiable Instruments Act through power of attorney holder is perfectly legal and competent. However, the power of attorney holder can depose and verify on oath before the Court in order to prove the contents of a complaint, only when he has witnessed the transaction as an agent of the payee/ holder in due course or possess due knowledge regarding the said transactions.

Justice A. Badharudeen further observed that the complainant has to make specific assertions as to the knowledge of the power of attorney in the said transaction explicitly in the complaint.

It is true that as per the ratio in A.C Narayanan first case (A.C.Narayanan v. State of Maharashtra &anr), the complaint filed under Section 138 of the Negotiable Instruments Act through power of attorney holder is perfectly legal and competent. But the power of attorney holder could depose and verify on oath before the court in order to prove the contents of the complaint, only when the power of attorney holder must have witnessed the transaction as an agent of the payee/holder in due course or possess due knowledge regarding the said transactions and also it is required by the complainant to make specific assertion as to the knowledge of the power of attorney holder in the said transaction explicitly in the complaint and the power of attorney holder, who has no knowledge regarding the transactions. If the above stipulations are not satisfied, the power of attorney could not depose and verify on oath before the court."

Cheque Issued As Security Will Mature For Presentation On Default When Payment Becomes Due: Kerala High Court

Case Title: Ashok Kumar V. Sankarankutty Pillai

Citation: 2023 LiveLaw (Ker) 264

The Kerala High Court recently held that a cheque issued as security would mature for presentation on default when payment is due. In the event of non-payment of the amount, the recipient of the cheque would be compelled to present the cheque for payment, the Court observed.

A single bench of Justice Sathish Ninan observed

“The very fact that the cheque was issued as security by itself imply that, in the event of non-payment, the security is liable to be enforced. A cheque issued as security would mature for presentation on default when payment is due.”

Complainant U/S 138 NI Act Does Not Come Within Ambit Of 'Victim' U/S 2(wa) CrPC: Kerala High Court

Case Title: Paulose v. Baiju & Anr.

Citation: 2023 LiveLaw (Ker) 328

The Kerala High Court held that the complainant in a prosecution under Section 138 of the Negotiable Instruments Act would not fall within the ambit of the word 'victim', as defined under Section 2(wa) Cr.P.C.

Section 2(wa) Cr.P.C. defines victim as "a person who has suffered any loss or injury caused by reason of the act or omission for which the accused person has been charged and the expression “victim” includes his or her guardian or legal heir".

Justice V.G. Arun arrived at the said finding by relying upon the decision in Mallikarjun Kodagali (Dead) represented through Legal Representatives v. State of Karnataka & Ors. (2019). The Apex Court had held therein that Section 378(4) is to be confined to an order of acquittal passed in a case instituted upon a complaint, and had further went on to clarify that the word 'complainant' as defined in Section 2(d) of the Cr.P.C. refers to any allegation made orally or in writing to a Magistrate and has nothing to do with the lodging or registration of an FIR.

Court Where Cheque Is Presented For Collection Has Jurisdiction To Entertain Dishonour Complain U/S 138 NI Act: Kerala High Court

Case title: Alfa One Global Builders Pvt. Ltd v. Nirmala Padmanabhan

Citation: 2023 LiveLaw (Ker) 422

The Kerala High Court has held that the word 'delivered' used in Section 142(2)(a) of the Negotiable Instruments Act, 1881 ("NI Act") has no significance for the purpose of determining jurisdiction. Rather, significance must be given to the text 'for collection through an account'. That is to say, delivery of the cheque takes place where the cheque was issued and presentation of the cheque will be through the account of the payee or holder in due course, and the latter place is decisive to determine the question of jurisdiction.

The Bench comprising Justice A. Badharudeen while dismissing the writ petition has observed that when an issue of jurisdiction arises, the challenge upon jurisdiction has to be raised before the same court and it cannot be a subject matter of writ petition.

Mere Retention Of Blank Signed Cheques Without Misappropriation Does Not Attract Criminal Breach Of Trust: Kerala High Court

Case name: K.O. Antony V State of Kerala

Citation: 2023 LiveLaw (Ker) 423

The Kerala High Court recently held that mere retention of blank signed cheques by the entrusted person without any misappropriation cannot fall within the ambit of criminal breach of trust under Section 405 of the IPC.

Justice Raja Vijayaraghavan V held added that for attracting the offence of criminal breach of trust, the entrusted person must misappropriate or dishonestly use the property entrusted to him for his own use. The Court held thus:

“There is no case for the prosecution that the petitioner has dishonestly misappropriated property entrusted to him contrary to the terms of an obligation imposed. Admittedly, except for retaining blank cheques in his possession, the petitioner has neither dishonestly used nor disposed of the same.”

S.142 NI Act | Third Party Cannot Prosecute Drawer For Dishonour Of Cheque: Kerala High Court

Case Title: Arvind Singh Rajpoot v. M/S Intersight Holidays Pvt. Ltd. & Ors.

Citation: 2023 LiveLaw (Ker) 445

The Kerala High Court recently laid down that a third party cannot prosecute the drawer of cheque for the offence punishable under Section 138 of the Negotiable Instruments Act, 1881.

Section 138 of the NI Act stipulates the penalty for dishonour of cheque for insufficiency of funds in the account.

Perusing Section 142(a) of the Act which provides that no court shall take cognizance of any offence punishable under Section 138 except upon a complaint, in writing, made by the payee or, as the case may be, the holder in due course of the cheque, the Single Judge Bench of Justice A. Badharudeen proceeded to observe:

"...Therefore, a complaint alleging commission of offence punishable under Section 138 of the NI Act shall be filed either by the 'payee' or by the 'holder in due course' of the said cheque and no other person entitled to lodge a complaint and the court shall take cognizance acting on a complaint in writing filed by the 'payee' or 'holder in due course'".

Trust Is 'Juristic Person', Can Be Held Liable U/S 138 NI Act For Cheque Dishonour: Kerala High Court

Case Title: Prana Educational and Charitable Trust & Anr. v. State of Kerala & Anr.

Citation: 2023 LiveLaw (Ker) 516

The Kerala High Court laid down that a Trust, either public, private or charitable, is a juristic person and can be made liable for dishonour of cheques punishable under Section 138 of the Negotiable Instruments Act ('NI Act').

Justice A. Badharudeen, on taking note of a plethora of precedents, further observed in this regard that such Trust would also be a company in terms of Section 141 of the N.I. Act ('Offences by companies'), and every Trustee who was in charge of the day-to-day affairs of the Trust would also be liable for punishment.

S.138 NI Act | Courts Should Grant Compensation To Complainant "Commensurate To Cheque Amount" While Sentencing Accused: Kerala High Court

Case title: Sasikumar V Ushadevi

Citation: 2023 LiveLaw (Ker) 567

The Kerala High Court held that criminal courts while convicting an accused in a proceeding under Section 138 of Negotiable Instruments Act for dishonour of cheque should also consider the importance of compensating the complainant.

Justice C.S. Dias enhanced the fine imposed upon the accused, so as to provide compensation to the complainant under Section 357 of CrPC. The Court stated that the fine imposed under Section 138 of the Act should be proportional to the cheque amount, and it must not exceed twice the cheque amount.

S.138 NI Act | Authorized Representative Prosecuting On Behalf Of Company Must Have Knowledge Of Contents Of Complaint: Kerala High Court

Case Title: Popular Motor Corporation v. State of Kerala & Anr.

Citation: 2023 LiveLaw (Ker) 611

The Kerala High Court has reiterated that in a complaint filed under Section 138 of the Negotiable Instruments Act (NI Act), by a company/firm, a power of attorney holder or authorized representative can depose on behalf of the complainant, and that it would be sufficient to demonstrate before the Magistrate that the complaint has been filed in the name of the 'payee'/'complainant', and the authorization as well as the contents of the complaint, are within the knowledge of such power of attorney holder/authorized representative.

Justice C.S. Dias arrived at the above finding when faced with the question as to whether the directions issued in Narayanan. A.C v. State of Maharashtra (2013) would be strictly applicable in a complaint filed under Section 138 of the NI Act by a power of attorney of a company/firm in view of the subsequent decision in M/S TRL Krosaki Refractories Ltd. v. SMS Asia Pvt. Ltd. & Ors. (2022).

Even A Blank Cheque Leaf Attracts Presumption Under S.139 NI Act If Voluntarily Signed & Given Towards Payment : Kerala High Court

Case Title: P.K. Uthuppu v. N.J. Varghese & Anr.

Citation: 2023 LiveLaw (Ker) 662

The Kerala High Court laid down that the presumption under Section 139 of the Negotiable Instruments Act (NI Act) that cheque has been issued in discharge of a debt or liability, would be attracted, even if a blank cheque is voluntarily signed and handed over as payment.

Relying upon the decision in Bir Sing v. Mukesh Kumar (2019), Justice Sophy Thomas observed: "The onus to rebut the presumption under Section 139 of the N.I Act that the cheque has been issued in discharge of a debt or liability, is on the revision petitioner. Even if a blank cheque leaf is voluntarily signed and handed over by the accused, towards some payment, it would attract the presumption under Section 139 of the N.I Act, in the absence of any cogent evidence to show that the cheque was not issued in discharge of a debt".

Magistrate Should Pass Speaking Order While Fixing Quantum Of Interim Compensation Under Negotiable Instruments Act: Kerala High Court

Case Title: Faizal Abdul Samad v. A.N. Sasidharan & Anr.

Citation: 2023 LiveLaw (Ker) 691

The Kerala High Court has reiterated that Courts are required to pass a speaking order while fixing the quantum of interim compensation under the Negotiable Instruments Act ('NI Act').

Perusing Section 143A(2) which states that interim compensation, varying from 1% of the cheque amount, up to 20% of the cheque amount could be ordered by the Court while trying a case for dishonour of cheque, Justice P.V. Kunhikrishnan, noted that the Court would be duty-bound to state the reasons while fixing the quantum.

"If a court of law decided to order the maximum limit prescribed in Section 143A(2) of NI Act, as far as the interim compensation is concerned, it is the duty of the court to give reasons for the same. Similarly if the learned magistrate is giving interim compensation of 1% of the cheque amount or 2% or 3% of the cheque amount as the case may be, the reason should be mentioned. A discretion is given to the learned magistrate to determine the amount that is to be ordered as interim compensation. When discretion is given to a court of law, it should be judiciously decided. In such circumstances, a speaking order is necessary especially in a case where the maximum 20% of the interim compensation is ordered by the learned magistrate as prescribed under Section 143A of the NI Act. Similarly, if the interim compensation ordered is below 20%  of the cheque amount, then also a reason should be mentioned. Therefore, without giving reason for fixing 20% of the cheque amount as interim compensation, which is the maximum limit prescribed under Section 143A(2) of NI Act, that order cannot be treated as an order made after applying the mind and exercising the discretionary jurisdiction," the Court observed.

Cheque Dishonour | No Vicarious Liability On Directors If Company Acquitted Of Offence Under NI Act: Kerala High Court

Case Title: Afsal Hussain v. K.S. Muhammed Ismail & Anr.

Citation: 2023 LiveLaw (Ker) 693

The Kerala High Court recently held that the directors of a company are not liable to be convicted for an offence under Section 138 ('Dishonour of Cheque') of the Negotiable Instruments Act ('NI Act') when the company itself is not found to have committed the offence.

In setting aside an order of the trial court and acquitting the petitioner, a single bench of Justice Sophy Thomas observed:

"The liability of persons referred to in Section 141 of the N.I. Act ('Offences by Companies') is co-extensive with that of the company, firm or association of individuals, in a prosecution under Section 138 of the N.I Act. When it is found that the company has not committed the offence, and it is acquitted, its directors are not liable to be convicted, for the offence for which the company has been acquitted."

Issuing Cheque After Voluntarily Closing Bank Account Tantamounts To Offence Of Cheating Under IPC: Kerala High Court

Case Title: T.O.Souriyar v Muttom Abdulla Kanjirathinkal House

Citation: 2023 LiveLaw (Ker) 704

The Kerala High Court has held that a person commits the offence of cheating under Sections 415, 417 and 420 IPC when he issues a cheque to another person for discharging his pecuniary liabilities after the closure of his bank account.

The Court noted that issuance of the cheque with the knowledge that it would be dishonoured would show the presence of mens rea, that is, fraudulent or dishonest intention of the drawer to deceive the payee.

In allowing the present revision petition Justice G. Girish quashed the order of the appellate court exonerating the accused, and observed:

“It seems from the judgment of the appellate court that the learned Additional Sessions Judge was carried away by the impression that if a person issues a cheque after the closure of his account, in respect of an antecedent liability, and the said cheque happens to be dishonoured due to that reason, the above act of that person will not come within the purview of cheating as defined under Section 415 I.P.C. The above conclusion of the learned Additional Sessions Judge, in my view, is patently wrong.”

S. 148 NI Act - Appellate Court Must Pass A Speaking Order To Order Deposit Of Minimum 20 % Compensation/Fine Amount: Kerala High Court

Case Title: Baiju v. State of Kerala

Citation: 2023 LiveLaw (Ker) 712

The Kerala High Court observed that the appellate court has to pass a speaking order by applying its mind for ordering deposit of minimum 20% compensation/fine amount under Section 148 of Negotiable Instruments Act as a condition to suspend sentence.

On appeal against conviction for dishonor of cheque under Section 138 NI Act, the appellate court as per Section 148 NI Act has the power to grant suspension of sentence pending appeal with imposition of a condition for payment of minimum 20% of compensation/fine amount as ordered by the trial court.

Justice P.V.Kunhikrishnan, on relying upon the Apex Court decision in in Jamboo Bhandari v. M.P. State Industrial Development Corporation Ltd. (2023) observed that deposit of minimum 20% compensation/fine amount was not an absolute blanket rule while considering suspension of sentence. It held that the appellate court has the duty to decide whether it has to impose such a condition for payment of compensation/fine amount and pass a speaking order by recording its reasons.

“Therefore, the duty of the appellate court is firstly to decide whether such a deposit is to be Bhandari's case (supra), when an accused applies under S.389 of the CrPC for suspension of sentence, he normally applies for grant of relief of suspension of sentence without any condition. Therefore, when a blanket order is sought by the appellants, the Court has to consider whether the case falls within the exception or not. The appellate court while suspending a sentence cannot pass a blanket order in all cases to deposit 20% of the fine or compensation without assigning any reason.”

Blank Cheque Voluntarily Signed By Drawer Will Attract Presumption Of Liability U/S 139 N.I. Act: Kerala High Court

Case Title: Vibin Meleppuram v. Denny Thomas & Anr.

Citation: 2023 LiveLaw (Ker) 731

The Kerala High Court reiterated that even a blank cheque leaf which has been voluntarily signed by the drawer, towards payment, would attract presumption under Section 139 of the Negotiable Instruments Act ('NI Act'), in the absence of any cogent evidence to show that the cheque was not issued in discharge of a debt.

Section 139 of the NI Act raises a presumption that a drawer handing over a cheque signed by him is liable unless it is proved by adducing evidence at the trial that the cheque was not in discharge of a debt or liability.

Relying upon the decisions rendered by the Apex Court in Bir Singh v. Mukesh Kumar (2019), and Oriental Bank of Commerce v. Prabodh Kumar Tewari (2022), the Single Judge Bench of Justice P.G. Ajithkumar reiterated that in such an instance, it would be immaterial whether the cheque had been filled in by any person other than the drawer. It added that the evidence of a hand-writing expert on whether the drawer had filled in the details in the cheque would also be immaterial to determining the purpose for which the cheque was handed over.