S.138 NI Act Not Attracted On Dishonour Of Cheque Issued To Return Bribe Amount: Madras High Court

The Madras High Court recently observed that dishonour of a cheque issued for returning a bribe amount could not be prosecuted under Section 138 of the Negotiable Instruments Act as it was not towards repayment of a legally enforceable debt. Justice K Murali Shankar observed that the agreement to secure a job in exchange of money is an agreement that is void ab initio and would fall under the Illustration to Section 23 of the Indian Contract Act. The court thus noted that when a cheque is issued for discharging a debt which was not legally enforceable, the offence under Section 138 would not be attracted. “In light of the legal position, since the complainant's case is based on a specific claim that the money was given for securing a TNSTC job and the cheque was issued to repay this amount, this Court holds that there is no legally enforceable debt or liability. Consequently, Section 138 of the NI Act is not applicable,” the court observed. The court was hearing an appeal against the order of the Fast Track Judicial Magistrate Court, acquitting a man in a case under Section 138 of the Negotiable Instruments Act. The complainant, who filed the appeal, argued that the accused was working in the mechanical section of Tamil Nadu State Transport Corporation (TNSTC) depot at Virudhunagar and had promised that he would arrange a job for the complainant using his influence in the labour Union. The complainant argued that the accused had demanded Rs. 3 Lakh for arranging a job, which was paid on February 10, 2016. Thereafter, when the accused failed to arrange a job, the complainant approached him and demanded the return of the money. Agreeing to return the money, the accused issued a cheque drawn on the State Bank of India for discharging the amount. However, this cheque was returned upon presentation, stating that it was old and invalid. The accused issued another cheque, which was again returned dishonoured for want of a sufficient amount in the account. The complainant was constrained to lodge a complaint for the offence under Section 138, read with Section 142 of the Negotiable Instruments Act, after the legal notice remained unanswered. The Magistrate held that the cheque was not issued for discharging a legally enforceable debt or liability. Thus, holding that Section 138 will not be attracted, the trial court acquitted the accused. The complainant submitted that the accused had admitted his liability during cross-examination. It was argued that the complaint was not filed on the basis of the agreement promising employment, but on the basis of the cheque subsequently issued, which gives a different cause of action. The accused, however, argued that the cheque was not issued towards the discharge of a legally enforceable debt but for repaying the money obtained for securing a job, which was opposed to public policy. The court analysed the legal maxim “in pari delicto potior est conditio possidentis” (in equal fault, the condition of the possessor is better) and noted that when parties in the dispute are equally at fault or equally favour an immoral act, the court will not assist either and the one who possessed the property or benefits of the transaction would retain it. The court also noted that the agreement between the parties in the present case, was a void contract since it was in the nature of illegal gratification and was unlawful. The court added that the doctrine of restitution under Section 65 of the Contracts Act would not apply in this case, as it was in respect of agreements, which are discovered to be void at a subsequent stage by either party. The court added that the doctrine could not be invoked when the contract was void ab initio, like in the present case. Thus, finding no illegality in the trial court's order, the court dismissed the appeal. Counsel for Appellant: Mrs. M. Mariya Vinola Counsel for Respondents: Mr. K. Sudalaiyandi, Mr. B. Thanga Aravindh Government Advocate (Crl. Side) Case Title: P Kulanthaisamy v. K Murugan and Another Citation: 2025 LiveLaw (Mad) 416 Case NO: Crl. A.(MD)No.758 of 2022Click Here To Read/Download The Judgment

S.138 NI Act Not Attracted On Dishonour Of Cheque Issued To Return Bribe Amount: Madras High Court

Upasana Sajeev

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