2021 Supreme Court Digest On Negotiable Instruments Act

1. Moratorium Under Section 14 IBC Covers Section 138 NI Act Proceedings Against Corporate Debtor For Cheque DishonourIn P Mohanraj and others v M/s Shah Brothers Ispat Ltd, the Supreme Court held that the declaration of moratorium under Section 14 of the Insolvency and Bankruptcy Code(IBC) covers criminal proceedings for dishonour of cheque under Section 138 of the Negotiable Instruments Act against the corporate debtor.The bench of Justices RF Nariman, Navin Sinha and KM Joseph also observed that moratorium was applicable only to the corporate debtor and that the cheque case proceedings can continue against natural persons in-charge of the corporate debtor, such as directors of the company."...for the period of moratorium, since no Section 138/141 proceeding can continue or be initiated against the corporate debtor because of a statutory bar, such proceedings can be initiated or continued against the persons mentioned in Section 141(1) and (2) of the Negotiable Instruments Act. This being the case, it is clear that the moratorium provision contained in Section 14 of the IBC would apply only to the corporate debtor, the natural persons mentioned in Section 141continuing to be statutorily liable under Chapter XVII of the Negotiable Instruments Act," the Top Court observed.2. Section 138 NI Act A 'Civil Sheep' In A 'Criminal Wolf's Clothing'; Quasi-Criminal In NatureIn P Mohanraj and others v M/s Shah Brothers Ispat Ltd the Supreme Court has observed that criminal proceedings for the dishonour of cheque under Section 138 of the Negotiable Instruments Act, 1881, are "quasi-criminal" in nature.The bench comprising Justices RF Nariman, Navin Sinha and KM Joseph also made an interesting comment that Section 138 proceedings can be called a "civil sheep" in a "criminal wolf's clothing."3. Person Who Has Not Drawn The Cheque Cannot Be Prosecuted U/s 138 NI Act Even In Case Of Joint Liability In Alka Khandu Avhad vs. Amar Syamprasad Mishra the Supreme Court observed that, even in case of a joint liability, in case of individual persons, a person other than a person who has drawn the cheque on an account maintained by him, cannot be prosecuted for the offence under Section 138 of the Negotiable Instruments Act."A person might have been jointly liable to pay the debt, but if such a person who might have been liable to pay the debt jointly, cannot be prosecuted unless the bank account is jointly maintained and that he was a signatory to the cheque," the bench comprising Justices DY Chandrachud and MR Shah observed.4. Section 313 CrPC Statement By Accused Is Not A Substantive Evidence To Rebut Presumption Under Section 139 NI Act In Sumeti Vij Vs. Paramount Tech Fab Industries, the bench of Justices Indu Malhotra and Ajay Rastogi had observed that the statement of the accused recorded u/s313 of the Code of Criminal Procedure was not a substantive evidence of defence to rebut the presumption under Section 139 of the Negotiable Instruments Act that the cheques were issued for consideration.5. Section 138 NI Act - Magistrates Should Record Reasons Before Converting Summary Trial To Summons TrialIn Re Expeditious Trial Of Cases Under Section 138 of N.I Act, the Supreme Court had directed the Magistrates to record reasons before converting trial of complaints under Section 138 of Negotiable Instruments Act from summary trial to summons trial in exercise of power under the second proviso to Section 143 of the Act."The High Courts are requested to issue practice directions to the Magistrates to record reasons before converting trial of complaints under Section 138 of the Act from summary trial to summons trial," a Constitution Bench headed by Chief Justice of India SA Bobde also comprising Justices L Nageswara Rao, BR Gavai, AS Bopanna and S Ravindra Bhat stated.6. Amend Section 138 NI Act To Allow One Trial For Multiple Cases From Single Transaction: Supreme Court Issues Directions For Expeditious Trial Of Cheque Cases In Re Expeditious Trial Of Cases Under Section 138 of N.I Act, a Constitution Bench headed by Chief Justice of India SA Bobde also comprising Justices L Nageswara Rao, BR Gavai, AS Bopanna and S Ravindra Bhat had issued a set of directions to expedite the trial of cheque dishonour cases under Section 138 of the Negotiable Instruments Act.The directions are as follows :The High Courts are requested to issue practice directions to the Magistrates to record reasons before converting trial of complaints under Section 138 of the Act from summary trial to summons trial.Inquiry shall be conducted on receipt of complaints under Section 138 of the Act to arrive at sufficient grounds to proceed against the accused, when such accused resides beyond the territorial jurisdiction of the court.For the conduct of inquiry under Section 202 of the Code,evidence of witnesses on behalf of the complainant shall be permitted to be taken on affidavit. In suitable cases, the Magistrate can restrict the inquiry to examination of...

2021 Supreme Court Digest On Negotiable Instruments Act

Shruti Kakkar

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