Kerala High Court
K.J.Shaji vs Thodupuzha Primary Co-Operative ... on 8 August, 2017
Author: Alexander Thomas
Bench: Alexander Thomas
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT:
THE HONOURABLE MR. JUSTICE ALEXANDER THOMAS
TUESDAY, THE 8TH DAY OF AUGUST 2017/17TH SRAVANA, 1939
Crl.Rev.Pet.No. 893 of 2017 ()
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CRA 139/2015 of III ADDL. DISTRICT & SESSIONS COURT,
THODUPUZHA
ST 237/2013 of JUDICIAL FIRST CLASS MAGISTRATE COURT-II,
THODUPUZHA
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REVISION PETITIONER/APPELLANT/ACCUSED :
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K.J.SHAJI, AGED 42 YEARS,
S/O. JOSEPH,KAITHAKKAL HOUSE,
MANIPPARA P.O, IDUKKI.
BY ADVS.SRI.S.RENJITH
SRI.S.UNNIKRISHNAN (NELLAD)
RESPONDENTS/RESPONDENTS/COMPLAINANT AND STATE :
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1. THODUPUZHA PRIMARY CO-OPERATIVE AGRICULTURE
AND RURAL DEVELOPMENT BANK LTD.NO.4388
BANK LTD NO.4388, THODUPUZHA,
REP BY ITS SECRETARY - 685545.
2. STATE OF KERALA,
REPRESENTED BY PUBLIC PROSECUTOR,
HIGH COURT OF KERALA - 682 031.
R2 BY PUBLIC PROSECUTOR
SRI. SAIGI JACOB PALETTY
THIS CRIMINAL REVISION PETITION HAVING BEEN
FINALLY HEARD ON 08-08-2017, THE COURT ON THE
SAME DAY PASSED THE FOLLOWING:
bp
"CR"
ALEXANDER THOMAS, J.
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Crl.R.P. No. 893 of 2017
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Dated this the 8th day of August, 2017
ORDER
The petitioner is the accused for offence punishable under Section 138 of the Negotiable Instruments Act, in S.T.No.237/2013 on the file of the Judicial First Class Magistrate Court-II, Thodupuzha, instituted on the basis of a complaint filed by the 1st respondent herein.
2. The trial court as per the impugned judgment rendered on 17.08.2015 has convicted the petitioner for the aforesaid offence and sentenced him to undergo simple imprisonment for three months and to pay Rs.76,938/- as compensation to the complainant under Section 357 (3) of the Code of Criminal Procedure, and in default thereof to undergo simple imprisonment for a further period of one month. Aggrieved thereby the petitioner had preferred Crl.Appeal No.139/2015 before the III Additional Sessions Judge, Thodupuzha. The appellate Sessions Court as per the impugned judgment rendered on 30.06.2017 has confirmed the conviction and modified the substantive sentence of simple imprisonment for three months by reducing the same to Crl.R.P. No. 893 of 2017 2 imprisonment till rising of the court and to pay an amount of compensation of Rs.76,938/- has been imposed with a default sentence clause of one month. The fine amount so realised was directed to be disbursed to the complainant as compensation under Section 357(3) of Cr.P.C. It is aggrieved by these verdicts of both the courts below, the petitioner has preferred the instant revision petition by invoking the remedies under Section 397 and 401 of Cr.P.C.
3. Heard Sri.S.Renjith, learned counsel appearing for the revision petitioner/accused and Sri.Saigi Jacob Palatty, learned Public Prosecutor for R2/State. In the nature of the orders proposed to be passed in support of the revision, notice to R1/complainant will stand dispensed with.
4. The gist of the allegations in the complaint is that for discharging the defaulted arrears in a loan transaction entered into between the petitioner/accused with the 1st respondent/complainant, the accused has issued Ext.P7 cheque dated 15.12.2012 for Rs.76,938/- and that the cheque when presented resulted in a dishonor due to insufficiency of funds. Thereupon the complainant, after fulfilling the requisite formalities, had instituted the present complaint which resulted in Crl.R.P. No. 893 of 2017 3 the trial.
5. During the trial, the Secretary of the complainant Co- operative Bank was examined as PW1 and marked Exts.P1 to P13 documents. The defence has not adduced any oral or documentary evidence.
6. As per the case projected in the complaint, the accused had availed a loan of Rs.50,000/- from the complainant Co- operative Bank concerned (Thodupuzha Primary Co-operative Agricultural and Rural Development Bank Ltd.), for which they agreed interest at the rate of 12% per annum with penal interest of 2.5%. On availing of the loan, the accused and his sureties had executed a promissory note in favour of the complainant and the accused had also entrusted with the complainant/Co-operative Bank with three signed blank cheque leaves bearing Nos.437335, 437337 and 437338 drawn from the account of the accused maintained at Federal Bank Ltd., Karimban Branch. As per Ext.P4 loan agreement dated 27.02.2008, the accused has agreed that in case of default in repayment of instalments, the cheque leaves may be filled up and arrears may be realised by sending the cheques for collection. Since the petitioner had defaulted the arrears of the loan repayments, the complainant Co-operative Bank had duly Crl.R.P. No. 893 of 2017 4 sent a notice calling upon the accused demanding payment of arrears upto 30.11.2012 on or before 05.12.2012 and clearly notifying therein that incase the petitioner does not pay the said amount, then one of the above said three cheques will be filled up and presented for collection by the complainant Co-operative Bank. The accused did not pay the arrears, the complainant Co- operative Bank had filled up Ext.P7 cheque No.437335 dated 05.12.2012 for an amount of Rs.76,938/- and presented the same before the collection Bank of the complainant. The cheque resulted in dishonor on the ground of insufficiency of funds, after which the statutory formalities have been duly followed. There is not much objections by the accused regarding the findings by both the courts below that the complainant has meticulously followed the requisite formalities by issuance of the demand notice etc., for the initiation of the valid complaint as contemplated in the NI Act. Incidently it is to be noted that the accused had not send any reply to Ext.P10 statutory demand notice though it was duly served. In the proof affidavit filed in lieu of the examination, PW1 has averred in tune with the averments of the complaint. Ext.P1 is the bye laws of the above said Co-operative Bank and as per Clause 30(e) thereof, the Secretary shall be the competent officer to sue or be Crl.R.P. No. 893 of 2017 5 sued on behalf of the Co-operative Bank. Ext.P2 is the resolution by which PW1 has been appointed as Secretary of the Co-operative Bank and by Ext.P13, the Co-operative Bank had passed the resolution by which the Secretary is authorised to conduct prosecution for dishonour of cheques. Ext.P3 dated 22.07.2008 is the loan sanction order by which the loan was sanctioned to the petitioner and Ext.P4 dated 22.07.2008 is a loan agreement entered into between the parties. The condition No.13 of Ext.P3 loan sanction order envisages entrustment of blank signed cheques by the accused to the complainant and giving authority to the Bank to fill it up and present for payment, if the due amounts are not paid by the accused. Clause Nos.24 to 26 of Ext.P4 loan agreement dated 22.07.2008, seeks about the entrustment of blank signed cheques of the borrower and the sureties and the authority of the Bank to fill it up and present the same for payment. Clause No.27 thereof further authorises the Bank to realise the whole amount of principal remaining unpaid together with interest due in the case of default of payments and instalments and Clause No.26 thereof specifically mentions about the three signed blank cheque numbers including the present dishonoured cheque in question. Ext.P5 letter dated 30.11.2012, Crl.R.P. No. 893 of 2017 6 the complainant Co-operative Bank had intimated the petitioner about the arrear amounts and the resolution of the Bank to fill up the cheque and present for payment. It is not in dispute that Ext.P6 ledger extract would clearly show that the overdue amount to be paid by the petitioner on account of the default in the loan transaction is Rs.76,938/- as on 15.12.2012. Ext.P7 is the cheque bearing No.437335, which is one among the three cheques mentioned herein above and the same was filled up on 15.12.2012 for Rs.76,938/- in favour of the complainant. Both the courts below have found that the accused has admitted the transaction with the Bank, the entrustment of the signed blank cheques and the authority given to the accused to the Bank to fill up the cheques. It is in the light of these clinching evidence and materials that both the courts below have found that the accused has voluntarily given due authority to the Bank to fill up the blank signed cheques, and since the Bank has proved convincingly with documentary evidence regarding the defaulted arrears to be paid to the petitioner as on 15.12.2012, that the petitioner is liable to be convicted for the offence under Section 138 of NI Act.
7. Learned counsel for the petitioner accused would contend that since the cheques were entrusted in blank form, it Crl.R.P. No. 893 of 2017 7 does not give authority to the Bank to fill up the cheques of the amounts claimed by Bank as liability amount was not quantified at the time of entrustment of the blank signed cheques and that it cannot be considered that the cheque has been executed by the accused for the liability of Rs.76,938/- entered into by the Bank officials in Ext.P7 without the consent of the accused etc.
8. To examine this contention it will be relevant to note some of the important case laws on the subject. The Apex court in Sampelly Satyanarayana Rao v. Indian Renewable Energy Development Agency Limited (2016) 10 SCC 458, has dealt with a case where the post-dated cheque was described as 'security' towards the repayment of instalment of already disbursed loan amount. In that case, it was held that the dishonour of the said cheque would result in attracting the offence under Section 138 of NI Act. It was held therein that the crucial point is whether cheque represents the discharge of existing enforceable debt or liability or whether it represents the advance payment without there being any subsisting liability and that once loan amount was disbursed and as per the agreement, instalments had fallen due on the date of issuance of cheque, the dishonor of such cheque will attract offence under Section 138 of NI Act and such Crl.R.P. No. 893 of 2017 8 issuance of cheque undoubtedly represents outstanding liability. Some of the important case laws on the point has been extensively surveyed in the said judgment and it will be profitable to refer paragraph Nos.10 to 19 of the Sampelly Satyanarayana Rao's case (Supra)
9. We have given due consideration to the submission advanced on behalf of the appellant as well as the observations of this Court in Indus Airways (P) Ltd.v.Magnum Aviation (P) Ltd., (2014) 12 SCC 539 : (2014) 5 SCC (Civ) 138 : (2014) 6 SCC (Cri) 845 with reference to the explanation to Section 138 of the Act and the expression "for discharge of any debt or other liability" occurring in Section 138 of the Act. We are of the view that the question whether a post-dated cheque is for "discharge of debt or liability"
depends on the nature of the transaction. If on the date of the cheque, liability or debt exists or the amount has become legally recoverable the section is attracted and not otherwise.
10. Reference to the facts of the present case clearly shows that though the word "security" is used in Clause 3.1(iii) of the agreement, the said expression refers to the cheques being towards repayment of instalments. The repayment becomes due under the agreement, the moment the loan is advanced and the instalment falls due. It is undisputed that the loan was duly disbursed on 28-2-2002 which was prior to the date of the cheques. Once the loan was disbursed and installments have fallen due on the date of the cheque as per the agreement, dishonour of such cheques would fall under Section 138 of the Act. The cheques undoubtedly represent the outstanding liability.
11. The judgment in Indus Airways (P) Ltd.v.Magnum Aviation (P) Ltd., (2014) 12 SCC 539 : (2014) 5 SCC (Civ) 138 : (2014) 6 SCC (Cri) 845 is clearly distinguishable. As already noted, it was held therein that liability arising out of claim for breach of contract under Section 138, which arises on account of dishonour of cheque issued was not by itself on a par with criminal liability towards discharge of acknowledged and admitted debt under a loan transaction.Crl.R.P. No. 893 of 2017 9
Dishonour of cheque issued for discharge of later liability is clearly covered by the statute in question. Admittedly, on the date of the cheque there was a debt/liability in praesenti in terms of the loan agreement, as against Indus Airways (P) Ltd.v.Magnum Aviation (P) Ltd., (2014) 12 SCC 539 : (2014) 5 SCC (Civ) 138 : (2014) 6 SCC (Cri) 845 where the purchase order had been cancelled and cheque issued towards advance payment for the purchase order was dishonoured. In that case, it was found that the cheque had not been issued for discharge of liability but as advance for the purchase order which was cancelled. Keeping in mind this fine but real distinction, the said judgment cannot be applied to a case of present nature where the cheque was for repayment of loan instalment which had fallen due though such deposit of cheques towards repayment of instalments was also described as "security" in the loan agreement. In applying the judgment in Indus Airways (P) Ltd.v.Magnum Aviation (P) Ltd., (2014) 12 SCC 539 : (2014) 5 SCC (Civ) 138 : (2014) 6 SCC (Cri) 845, one cannot lose sight of the difference between a transaction of purchase order which is cancelled and that of a loan transaction where loan has actually been advanced and its repayment is due on the date of a cheque.
12. The crucial question to determine applicability of Section 138 of the Act is whether the cheque represents discharge of existing enforceable debt or liability or whether it represents advance payment without there being subsisting debt or liability. While approving the views of the different High courts noted earlier this is the underlying principle as can be discerned from discussion of the said cases in the judgment of this Court.
13. In Balaji Seafoods Exports (India) v.Mac Industries Ltd., (1999) 1 CTC 6 : 1998 SCC OnLine Mad 704, the High Court noted that the cheque was not handed over with the intention of discharging the subsisting liability or debt. There is, thus, no similarity in the facts of that case simply because in that case also loan was advanced. It was noticed specifically therein, as was the admitted case of the parties, that the cheque was issued as "security" for the advance was not intended to be in discharge of the liability, as in the present case
14. In HMT Watches Ltd. v. M.A. Abida (2015) 11 SCC 776 :
(2015) 4 SCC (Cri) 552, relied upon on behalf of the respondent, this Court dealt with the contention that the proceedings under Section 138 were liable to be quashed as Crl.R.P. No. 893 of 2017 10 the cheques were given as "security" as per defence of the accused. Negativing the contention, this Court held: (SCC pp.
779-80, paras 10-12)
10. Having heard the learned counsel for the parties, we are of the view that the accused (Respondent 1) challenged the proceedings of criminal complaint cases before the High Court, taking factual defences. Whether the cheques were given as security or not, or whether there was outstanding liability or not is a question of fact which could have been determined only by the trial court after recording evidence of the parties. In our opinion, the High Court should not have expressed its view10 M.A. Abida v.HMT Watches Ltd. 2014 SCC OnLine Ker 3842 : (2014) 2 KLJ 40 on the disputed questions of fact in a petition under Section 482 of the Code of Criminal Procedure, to come to a conclusion that the offence is not made out. The High Court has erred in law in going into the factual aspects of the matter which were not admitted between the parties. The High Court further erred in observing that Section 138(b) of the NI Act stood uncomplied with, even though Respondent 1 (accused) had admitted that he replied to the notice issued by the complainant. Also, the fact, as to whether the signatory of demand notice was authorised by the complainant company or not, could not have been examined by the High Court in its jurisdiction under Section 482 of the Code of Criminal Procedure when such plea was controverted by the complainant before it.
11.In Suryalakshmi Cotton Mills Ltd. v. Rajvir Industries Ltd. (2008) 13 SCC 678 : (2009) 3 SCC (Cri) 824 this Court has made the following observations explaining the parameters of jurisdiction of the High Court in exercising its jurisdiction under Section 482 of the Code of Criminal Procedure: (SCC pp.685-87, paras 17&22).
17. The parameters of jurisdiction of the High Court in exercising its jurisdiction under Section 482 of the Code of Criminal Procedure is now well settled. Although it is of wide amplitude, a great deal of caution is also required in its exercise. What is required is application of the well-known legal principles Crl.R.P. No. 893 of 2017 11 involved in the matter ** ** **
22. Ordinarily, a defence of an accused although appears to be plausible, should not be taken into consideration for exercise of the said jurisdiction. Yet again, the High Court at that stage would not ordinarily enter into a disputed question of fact. It, however, does not mean that documents of unimpeachable character should not be taken into consideration at any cost for the purpose of finding out as to whether continuance of the criminal proceedings would amount to an abuse of process of court or that the complaint petition is filed for causing mere harassment to the accused. While we are not oblivious of the fact that although a large number of disputes should ordinarily be determined only by the civil courts, but criminal cases are filed only for achieving the ultimate goal, namely, to force the accused to pay the amount due to the complainant immediately. The courts on the one hand should not encourage such a practice; but, on the other, cannot also travel beyond its jurisdiction to interfere with the proceeding which is otherwise genuine. The courts cannot also lose sight of the fact that in certain matters, both civil proceedings and criminal proceedings would be maintainable.
12. In Rallis India Ltd. v. Poduru Vidya Bhushan12 (2011) 13 SCC 88 : (2012) 3 SCC (Civ) 269 : (2012) 1 SCC (Cri) 778, this Court expressed its views on this point as under: (SCC p. 93, para 12) '12. At the threshold, the High Court should not have interfere with the cognizance of the complaints having been taken by the trial court. The High Court could not have discharged the respondents of the said liability at the threshold. Unless the parties are given opportunity to let the evidence, it is not possible to come to a definite conclusion as to what was the date when the earlier partnership was dissolved and since what date the respondents ceased to be the partners Crl.R.P. No. 893 of 2017 12 of the firm'.
15. We are in respectful agreement with the above observations. In the present case, reference to the complaint (a copy of which is Annexure P-7) shows that as per the case of the complainant, the cheques which were the subject- matter of the said complaint were towards the partial repayment of the dues under the loan agreement (Para 5 of the complaint).
16. As is clear from the above observations, of this Court, it is well settled that while dealing with a quashing petition, the court has ordinarily to proceed on the basis of averments in the complaint. The defence of the accused cannot be considered at the stage. The court considering the prayer quashing does not adjudicate upon a disputed question of fact.
17. In Rangappa v. Sri Mohan13 (2010) 11 SCC 441 : (2010) 4 SCC (Civ) 477 : (2011) 1 SCC (Cri) 184, this Court held that once issuance of a cheque and signature thereon are admitted, presumption of a legally enforceable debt in favour of the holder of the cheque arises. It is for the accused to rebut the said presumption, though accused need not adduce his own evidence and can rely upon the material submitted by the complainant. However, mere statement of the accused may not be sufficient to rebut the said presumption. A post-dated cheque is a well-recognised mode of payment14 Goaplast (P) Ltd. v. Chico Ursula D'Souza (2003) 3 SCC 232 : 2003 SCC (Cri) 603.
18. Thus, the question has to be answered in favour of the respondent and against the appellant. Dishonour of cheque in the present case being for discharge of existing liability is covered by Section 138 of the Act, as rightly held by the High Court.
19. Accordingly, we do not find any merit in this appeal and the same is dismissed. Since we have only gone into the question whether on admitted facts, case for quashing has not been made out, the appellant will be at liberty to contest the matter in trial court in accordance with law.
So it is to be noted that even if the liabilities had not arisen as on the date of entrustment of the cheque, so long as the amounts had fallen due as on the date shown in the post dated Crl.R.P. No. 893 of 2017 13 cheque, then dishonor of such a cheque would attract the offence under Section 138 of NI Act.
9. In the judgment in Asoo Hajee v. Abdul Latheef 2004 (3) KLT 387, this Court dealt with a case where a blank signed cheque was issued pursuant to an agreement whereunder the said cheque was to be used towards the liability that may fall due from the drawer of the cheque and the arrears were found due and cheque was filled up and presented and the dishonor of such a cheque would attract offence under Section 138 of NI Act. It will be profitable to refer Paragraph Nos.9,11 and 12 of the said decision of the Asoo Hajee's case (supra) which reads as follows:-
9. It is submitted by the counsel for the appellant that as revealed in Ext.P6 agreement, the cheque has been issued as security for repayment of the amount that may become due.
Later, when the respondent committed default, accounts were verified in the presence of the representative of the respondent and the respondent thereupon filled the cheque with the amount and date and the cheques was thereupon presented to the bank. The date of the cheque was 19.08.93. Though the cheque leaf was signed and given to the appellant earlier, the cheque got its life from 19.08.93, when the accounts were verified and the respondent filled up the cheque. This reveals that the accused accepted that much liability. This clothes the appellant with the presumption under S.139 in his favour. Necessarily, the finding contained in the impugned judgment has to be reversed, as the respondent did not rebut that presumption available on the cheque in question, Ext.P1.
xxxxxx
11. As rightly pointed out by the counsel for the respondent, there is no guarantee arrangement in this case. But Ext.P1 is Crl.R.P. No. 893 of 2017 14 an agreement undertaken by the respondent which refers to the cheque in question styling it as a blank cheque and the purpose of giving such blank cheque in terms of Ext.P6 agreement was that, in case any liability arises, it can be duly met by the cheque in question.
12. Then the crucial point is whether there was a verification of accounts as suggested by the appellant. PW1 is the complainant himself. He had deposed that representatives of the respondent had examined the accounts and mentioned the amount in Ext.P1 cheque endorsing the date thereon. It was further deposed that when the accounts was so examined, the son of the respondent was also present. There was no cross examination on this point on behalf of the respondent. That means this version of the complainant that the entries including the date were made in Ext.P1 by the representative of the respondent in the presence of his son after verifying the accounts remains unchallenged. That being the evidence on record, it is clear that the cheque had been drawn really on 19.08.93 when the necessary entries were made therein after verifying the accounts on behalf of the respondent with respect to the outstanding liability. It became a cheque only on 19.8.93 when the liability was acknowledged and entered in the cheque. Necessarily, there is evidence to show that the appellant has proved a liability outstanding from the respondent.
10. This Court in General Auto Sales v.
Vijayalakshmi 2005 (1) KLT 478 has held in Paragraph No.8 thereof, that even if a blank signed cheque has been given towards liability or even as security, then the liability subsists and quantified, if the cheque is filled up and presented to the Bank, the person who had drawn the cheque, cannot avoid the criminal liability under Section 138 of NI Act. Paragraph No.8 of the said judgment is reads as follows:-
Even if a blank signed cheque has been given towards liability or even as security, then the liability assessed and quantified, if the cheque is filled up and presented to the Bank, the person who had drawn the cheque, cannot avoid the criminal liability arising out of Section 138 of NI Act.Crl.R.P. No. 893 of 2017 15
11. Further this Court, has extensively considered the issues arising out of liability in respect of blank signed cheques, in Purushothaman Nair P. v. Sreekantan Nair 2013 (3) KHC 628. Before dealing with the facts of the case, it will be relevant to note the following provisions in the NI Act. Section 6 of the NI Act defines -
1[6."Cheque".-A "cheque" is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand and it includes the electronic image of a truncated cheque and a cheque in the electronic form (the explanations under Section 6 are not extracted herein above) Section 5 of NI Act defines -
5."Bill of exchange".-A "bill of exchange" is an instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay a certain sum of money only to, or to the order of, a certain person or to the bearer of the instrument.
A promise or order to pay is not "conditional", within the meaning of this section and section 4, by reason of the time for payment of the amount or any instalment thereof being expressed to be on the lapse of a certain period after the occurrence of a specified event which, according to the ordinary expectation of mankind, is certain to happen, although the time of its happening may be uncertain. The sum payable may be "certain", within the meaning of this section and section 4, although it includes future interest or is payable at an indicated rate of exchange, or is according to the course of exchange, and although the instrument provides that, on default of payment of an instalment, the balance unpaid shall become due. The person to whom it is clear that the direction is given or that payment is to be made may be a "certain person", within the meaning of this section and section 4, although he is mis-named or designated by description only. Crl.R.P. No. 893 of 2017 16 Section 13 of NI Act defines -
13."Negotiable instrument".-3[(1) A "negotiable instrument" means a promissory note, bill of exchange or cheque payable either to order or to bearer.
Explanation (i).-A promissory note, bill of exchange or cheque is payable to order which is expressed to be so payable or which is expressed to be payable to a particular person, and does not contain words prohibiting transfer or indicating an intention that it shall not be transferable.
Explanation (ii).-A promissory note, bill of exchange or cheque is payable to bearer which is expressed to be so payable or on which the only or last indorsement is an indorsement in blank.
Explanation (iii).-Where a promissory note, bill of exchange or cheque, either originally or by indorsement, is expressed to be payable to the order of a specified person, and not to him or his order, it is nevertheless payable to him or his order at his option] 1[(2) A negotiable instrument may be made payable to two or more payees jointly, or it may be made payable in the alternative to one of two, or one or some of several payees.] Section 20 of NI Act defines -
20.Inchoate stamped instruments.-Where one person signs and delivers to another a paper stamped in accordance with the law relating to negotiable instruments then in force in [India], and either wholly 4 blank or having written thereon an incomplete negotiable instrument, he thereby gives prima facie authority to the holder thereof to make or complete, as the case may be, upon it a negotiable instrument, for any amount specified therein and not exceeding the amount covered by the stamp. The person so signing shall be liable upon such instrument, in the capacity in which he signed the same, to any holder in due course for such amount; provided that no person other than a holder in due course shall recover from the person delivering the instrument anything in excess of the amount intended by him to be paid thereunder.
Section 87 of NI Act deals with effect of material alteration and Crl.R.P. No. 893 of 2017 17 the said provision reads as follows:-
87.Effect of material alteration.-Any material alteration of a negotiable instrument renders the same void as against any one who is a party thereto at the time of making such alteration and does not consent thereto, unless it was made in order to carry out the common intention of the original parties;
Alteration by indorsee.-And any such alteration, if made by an indorsee, discharges his indorser from all liability to him in respect of the consideration thereof. The provisions of this section are subject to those of sections 20, 49, 86 and 125.
12. A reading of Sections 5 and 6 make it clear that the instrument would be a cheque only if it contains the particulars as mentioned in those two sections and if the payee's name is not written in the instrument, that instrument cannot be termed to be a bill of exchange. So if the instrument is only a signed blank cheque, it cannot be said to be a cheque within the limit of Section 6 of NI Act. Dealing with these provisions, this Court in Purushothaman Nair's case (supra) was held that only if the instrument is a negotiable instrument within the meaning of Section 13 of NI Act, Section 87 would have any application. If it was only a signed blank cheque leaf, it cannot be termed as a 'negotiable instrument', and if so, the question of effecting material alteration of the paper (signed blank cheque), does not arise at all and that the filling up of signed blank cheque leaf will not attract Crl.R.P. No. 893 of 2017 18 the provisions of Section 87 of NI Act, as there was no complete of negotiable instrument within the meaning of Sections 5, 6 and 7 of NI Act in the case of blank signed cheque. It was held by the devision bench of this Court in Joseph C.T. v. I.V.Philip and others 2001 (1) KLJ 654 = AIR 2001 KER 300 = 2001 KHC 29 that as far as Section 20 of the NI act is concerned, it does not apply to cheques since Section 20 applies only with respect to inchoate stamped instruments and as far as cheques are concerned they do not require any stamp under the Stamp Act in force. Therefore it was held that the provisions contained in Section 20 of NI Act will not have any application in the case of cheque. Further this Court held in Paragraph No.39 of Purushothaman Nair's case (supra) that with regard to the instruments other than a cheque, an implied authority is given to the holder at the time of entrusting it to fill up the same and there my be instances where an implied authority is given to the person, at the time of entrusting a signed blank cheque containing signature of the drawer of the cheque, to fill the columns therein.
13. It was also held in Paragraph No.40 thereof that if a principal or employer deputes his agent or employee to purchase an article and if the dealer fills up that signed blank cheque leaf Crl.R.P. No. 893 of 2017 19 showing the exact amount covered by the bill showing the price of the article sold then it cannot be said that what was handed over by the drawer of the cheque is only a signed blank cheque leaf. In such cases an implied authority to the trader/seller of the article to fill up the cheque leaf can certainly be inferred and there may also be cases where at the time of settlement of accounts, a particular amount was found payable by the drawer of the cheque to the other party and if a signed blank cheque entrusted to be filled up later is filled up in tune with the accounts, showing the actual amount payable by the drawer of the cheque to the other party, then also it can be said that there was the implied authority to fill up the signed blank cheque leaf. Further that there may be such instances where the sum is ascertainable and the signed blank cheque leaf is given to fill up the same after ascertaining the same. It was held that in such cases there would be no difficulty to infer implied authority given by the drawer and simply because the cheque is seen filled up or written in the hand writing of another person, it cannot lead to a conclusion that only a signed blank cheque leaf was given and the person signed the cheque may have difficulty due to many reasons to write the cheque and it might have been filled up by the payee or by another. In such cases it Crl.R.P. No. 893 of 2017 20 cannot be said that what was handed over was only a signed blank cheque leaf and in all such cases the ultimate conclusion may depend upon the proof of the transaction and execution of the instrument and it must also be held that when it is a case that only a signed blank cheque leaf was handed over by the drawer, then he must offer satisfactory explanation as to under what circumstances he had handed over the signed blank cheque to the other person. Considering the totality of the evidence and circumstances, it is for the court to draw the inference as to whether it was given with an implied authority to fill up the same showing the amount ascertained or ascertainable to discharge the debt or liability. Therefore, there may be cases that implied authority may be inferred and the contention that when a signed blank cheque leaf is handed over, it can never be filled up and that if it is filled up it would amount to a material alteration within the meaning of using Sec. 87 of the N.I. Act, does not stand to rhyme or reason. Similarly, it was also held that the contention that Sec. 20 of the N.I. Act is applicable to an unfilled or blank cheque leaf also is untenable. It will be pertinent to refer paragraph Nos.39 and 40 of the said judgment rendered by this Court in Purushothaman Nair's case (supra), which reads as follows: Crl.R.P. No. 893 of 2017 21
39. With regard to instruments other than a cheque, an implied authority is given to the holder at time of entrusting it to fill up the same. There may be instances where an implied authority is given to the person, at the time of entrusting a signed blank cheque containing the signature of the drawer of the cheque, to fill the columns therein.
40. If a principal or employer deputes his agent or employee to purchase an article and if the dealer fills up that signed blank cheque leaf showing the exact amount covered by the bill showing the price of the article sold then it cannot be said that what was handed over by the drawer of the cheque is only a signed blank cheque leaf. In such cases an implied authority to the trader/seller of the article to fill up the cheque leaf can certainly be inferred. Similarly, there may also be cases where at the time of settlement of accounts, a particular amount was found payable by the drawer of the cheque to the other party and if a signed blank cheque entrusted to be filled up later is filled up in tune with the accounts, showing the actual amount payable by the drawer of the cheque to the other party, then also it can be said that there was the implied authority to fill up the signed blank cheque leaf. There may be such instances where the sum is ascertainable and the signed blank cheque leaf is given to fill up the same after ascertaining the same. In such cases there would be no difficulty to infer implied authority given by the drawer. Simply because the cheque is seen filled up or written in the hand writing of another person it can not lead to a conclusion that only a signed blank cheque leaf was given. The person signing the cheque may have difficulty due to many reasons to write the cheque and it might have been filled up by the payee or by another. In such cases it cannot be said that what was handed over was only a signed blank cheque leaf. In all such cases the ultimate conclusion may depend upon the proof of the transaction and execution of the instrument. It must also be held that when it is a case that only a signed blank leaf was handed over by the defendant, then he must offer satisfactory explanation as to the circumstance under which the signed blank cheque happened to be handed over. Considering the totality of the evidence and circumstances, it is for the court to draw the inference as to whether it was given with an Crl.R.P. No. 893 of 2017 22 implied authority to fill up the same showing the amount ascertained or ascertainable to discharge the debt or liability. Therefore, there may be such cases where implied authority can be inferred. But the contention that when a signed blank cheque leaf is handed over, it can never be filled up and that if it is filled up it would amount to a material alteration within the meaning of using Sec. 87 of the N.I. Act, does not stand to rhyme or reason. Similarly, the contention that Sec. 20 of the N.I.Act is applicable to an unfilled or blank cheque leaf also cannot be accepted. It would depend upon the facts of each case. Therefore, it is neither a case which attracts Sec. 87 of the N.I.Act nor is it a case where the plaintiff can rely upon Sec.20 of the N.I.Act and contend that as a signed blank cheque leaf is given it gives an authority to fill up the same according to the whim and fancy of the payee.
14. Therefore it has been by now well established that where a signed blank cheque leaf is voluntarily given by the drawer/account holder to the other party, and whereby implied or explicit authority is given to other party to quantify the liability at the appropriate time and then fill up the same and present it for collection etc., then Sections 20 and 87 of NI Act will have no application to the fact of such a case. It will all depend upon the fact of the case whether blank signed cheque leaf was given voluntarily by the drawer/account holder to the proposed payee, and whether implicit or explicit authority has been given by the drawer to the other party to quantify the liability and to fill up the cheque at the appropriate time etc. Crl.R.P. No. 893 of 2017 23
15. Coming to the facts of this case, it is seen that Ext.P3 is the loan sanction order and Ext.P4 is the loan agreement. Condition No.13 of Ext.P3 envisages endorsement of blank signed cheque leaf of the petitioner and authority is given to the Bank to fill it it up and present for repayment, in case the petitioner does not pay the defaulted arrears. Clauses 24 to 26 of Ext.P4, also speaks about the entrustment of the blank signed cheques of borrowal of the sureties and the authority given to the Bank to fill it up and present the same for payment. Clause 27 exclusively authorises the Bank to realise the whole amount of principal remaining unpaid together with interest in case of default of payment of instalments. Clause 26 specifically mentions about the cheque numbers of the blank signed cheque leaves handed over in the instant case. By Ext.P5 notice dated 30.11.2012, the complainant/Co-operative Bank had clearly intimated the petitioner about the exact arrear amounts and also about the resolution of the Bank to fill up the cheque and present the same for payment, in case of default on the part of the petitioner. Further Ext.P6 is the ledger extract maintained by the complainant/Co-operative Bank, which would show the overdue as on 15.12.2012 (date of Ext.P7 dishonoured cheque) is Rs.76,938/-. Crl.R.P. No. 893 of 2017 24 It is not in dispute that Ext.P7 cheque is only for Rs.76,938/-. The accused has admitted the transactions in the Bank, the entrustment of the signed cheque leaf in blank form and implicit authority given by the accused to complainant/Co-operative Bank, to fill up the cheque. Therefore going by the legal principles laid down by this Court in Purushothaman Nair's case (supra) and the other afore cited judgments would apply, with all its vigour in the facts of this case.
16. The petitioner's contention that the liability amount is not quantified at the time of entrustment of the blank signed cheques is absolutely unsustainable and untenable. The petitioner has voluntarily entered into an agreement with the complainant/Co-operative Bank, that he would pay off the due loan amount and in case of default, the complainant/Co-operative Bank, is at liberty to fill up the blank signed cheque leaf given by him by showing the amounts which are actually due as liability and then present the same for collection. The said cheques bear the signature of the petitioner/drawer and it has been voluntarily entrusted by the petitioner to the complainant/Co-operative Bank. In such circumstances, the contention that the cheque can be said to have been executed only when the exact liability was quantified Crl.R.P. No. 893 of 2017 25 and known at the time of entrustment of the blank signed cheque, is clearly untenable and it is only to be rejected. Going by the legal principles laid down by the Apex Court in Sampelly Satyanarayana Rao's case (Supra) and other case laws referred to therein, the crucial issue is that the cheque represents discharge of existing enforceable liability or whether it represents advance amount without there being any subsisting liability. Where once the loan amount has been disbursed and as per the agreement the installment has fallen due on the date shown in the post-dated cheques then the dishonour of such post-dated cheque would certainly attract the offence under Section 138 of NI Act. Therefore the aforesaid contention of the petitioner is only to be rejected. Further since the petitioner/drawer of the cheque has voluntarily given authority to the complainant/Co-operative Bank to fill up the same in the manner indicated above, the execution of such a cheque which represents the actual liability cannot be said to be in any manner defective in terms of the provisions contained in NI Act.
17. The other contention raised by the petitioner is that he had discharged the entire liability. But both the courts below have found that no evidence whatsoever have been let in by the accused Crl.R.P. No. 893 of 2017 26 to prove his plea of discharge. In the result, the concurrent findings made by the courts below regarding the conviction of the petitioner is legally proper and correct and is not amenable for any revisional interference at the hands of this Court.
18. As regards the sentence it is to be noted that though the trial court has sentenced the petitioner to undergo simple imprisonment for three months and to pay compensation of Rs.76,938/- with default sentence clause of one month, the appellate court has reduced the substantive sentence of simple imprisonment till rising of the court and has confirmed the direction to pay the compensation of Rs.76,938/- with default sentence clause of one month. The said sentence and the direction to pay compensation cannot be said to be disproportionate or excessive, taking into consideration of the fact that the dishonoured cheque is for Rs.76,938/-. The Apex Court has held in Vijayan v. Baby reported in 2011 (4) KLT 355 (SC) that the criminal court would award interest upto 9% per annum from the date of cheque upto date of realisation, as compensation, apart from the cheque amount. In the instant case both the courts below have been lenient towards the petitioner inasmuch as no interest has been ordered to be given as compensation, though the Crl.R.P. No. 893 of 2017 27 dishonoured cheque arose out of a loan transaction entered into by the petitioner. For these reasons, the sentence of simple imprisonment till rising of the court and direction to pay compensation of Rs.76,938/- and default sentence clause of one month are not liable for any revisional interference.
19. Sri.S.Renjith, learned counsel for the petitioner submits that in case the petitioner is so inclined to affirm conviction and sentence of this case, then time by six months may be granted to the petitioner to pay the amounts.
20. Considering the fact that the amount is only for Rs.76,938/-and Ext.P7 cheque has been issued as early as on 15.12.2012, this Court is inclined to grant only time by five months to pay the compensation. Accordingly it is ordered that the petitioner is given five months time from 15.08.2017 to pay the compensation amount of Rs.76,938/- directly to the complainant/Co-operative Bank.
21. On receiving such payment the complainant will give necessary receipts for such payments, so as to enable the accused to produce the same before the trial court and to satisfy the said court about such payments.
22. The petitioner will personally appear before the trial Crl.R.P. No. 893 of 2017 28 court at 11.A.M. on 20.01.2018 to suffer the sentence of imprisonment till the rising of the court and to satisfy the trial court about payment of the total compensation amount of Rs.76,938/- directly to the complainant. Needless to say on default of the petitioner to pay the said amount, he will have to undergo simple imprisonment for a period of one month.
23. Until 20.01.2018, all further coercive steps that may be taken against the petitioner in pursuance of the execution of the impugned sentence in this case will stand deferred.
Registry will forward a copy of this order to the trial court and to R1/complainant.
With these observations and directions, this Crl.R.P. stands finally disposed of.
sd/-
ALEXANDER THOMAS, JUDGE AMV/30/08/2017 /TRUE COPY/ P.A.TO JUDGE