DON AYENGIA Vs. STATE OF ASSAM & ORS.
Negotiable Instruments Act, 1881
Section 138 - Dishonour of cheque for insufficiency, etc., of funds in the account.
Supreme Court of India (Division Bench (DB)- Two Judge)
Appeal (Crl.), 82-83 of 2016, Judgment Date: Jan 28, 2016
REPORTABLE
IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPEAL NOS. 82-83 OF 2016
(Arising out of S.L.P. (Crl.) Nos.4517-4518 of 2014)
Don Ayengia …Appellant
Versus
The State of Assam & Anr. …Respondents
JUDGMENT
T.S. THAKUR, J.
1. Leave granted.
2. These appeals arise out of a judgment and order dated 2nd April, 2014
passed by the High Court of Assam, Nagaland, Mizoram and Arunachal Pradesh
at Guwahati in Criminal Appeal No.10 and Criminal Revision No.41 both of
the year 2012 whereby the High Court has allowed the Criminal Revision
No.41 of 2012 and set aside the conviction of respondent Haren Mudoi under
Section 138 of the Negotiable Instruments Act, 1881 and dismissed Criminal
Appeal No.10 of 2012 filed by the Complainant/Appellant.
3. The Complainant/Appellant in these appeals is a partner in M/s. Ayaan
Consortium. He entered into an agreement with one Nazimul Islam for
construction of a multi-storeyed building over a certain parcel of land. It
is not in dispute that the Complainant/Appellant paid to Nazimul Islam in
connection with the said agreement a sum of Rs.10,00,000/- (Rupees Ten
Lakhs only). It is also not in dispute that the agreement did not
materialise in the execution of the work in question with the result that
the same was cancelled in terms of a Promissory Note dated 13th August,
2007 executed by Nazimul Islam in favour of the Complainant/Appellant. The
Promissory Note, apart from cancelling the agreement, promised to pay to
the Complainant/Appellant the amount of Rs.10,00,000/- received by the
executant Nazimul Islam within a period of one month from the date the
Promissory Note was executed. What is important is that the Promissory Note
further stipulated that the amount of Rs.10,00,000/- was being refunded by
the executant in terms of five post-dated cheques dated 5th September,
2007, 7th September, 2007, 9th September, 2007, 11th September, 2007 and
13th September, 2007, the receipt whereof was acknowledged by the
Complainant/Appellant. The Promissory Note, at the same time, somewhat
contradicted itself when it mentioned that the cheques were being issued as
a security and shall be returned to Nazimul Islam when the amount of
Rs.10,00,000/- is paid by him within a period of one month. Interest at the
bank rates was also promised to be paid on the said amount of Rs.10,00,000/-
.
4. The cheques so received by the Complainant/Appellant appear to have
been presented for payment after the expiry of the period of one month
stipulated for the return of the amount when no such return was made to the
Complainant/Appellant. All the cheques were, however, dishonoured by the
bank on the ground of insufficiency of funds. A second presentation also
proved abortive for the same reason. It was at this stage that Respondent
No.2-Haren Mudoi appeared on the scene and indemnified the
Complainant/Appellant by acknowledging that the cheques in question were
actually issued by him and handed over to Nazimul Islam. This
acknowledgment was reflected in the form of an endorsement on the
Promissory Note in which he agreed to the cheques being presented for
payment after 25th September, 2007. The Complainant/Appellant accordingly
once again presented the cheques for payment on 5th November, 2007 but the
same were dishonoured by the bank for the third time. This led to the issue
of a statutory notice by the Complainant/Appellant to which the Respondent
sent a reply through the lawyer denying that he had any knowledge of
handing over of all the cheques to the Complainant/Appellant by Nazimul
Islam and also about the dishonour of the cheques due to insufficiency of
funds. What is significant is that, in the reply, the Respondent undertook
to pay the whole amount of Rs.10,00,000/- by the second week of January,
2008 by issuing fresh cheques.
5. A complaint under Section 138 of the Negotiable Instruments Act, 1881
was in the above backdrop filed by the appellant against both Nazimul Islam
and Haren Mudoi. Since Nazimul Islam had, in the meantime, passed away,
proceedings against him abated but the trial court found the Respondent
guilty and accordingly convicted him for the offence punishable under
Section 138 of the Negotiable Instruments Act, 1881 and sentenced him to
undergo simple imprisonment for a period of one year. In addition, the
trial court awarded compensation to the Complainant/Appellant in a sum of
Rs.12,00,000/- to be paid within a period of three months.
6. Aggrieved by the judgment and order passed by the trial court, the
Respondent preferred Criminal Appeal No.9 of 2010 before Additional
Sessions Judge, Kamrup at Guwahati, who, while upholding the conviction of
the Respondent modified the sentence awarded to him to payment of a fine of
Rs.2,000/- (Rupees Two Thousand only) and, a default sentence of
imprisonment for a period of one month, in addition to the amount of
compensation awarded by the trial court. The sentence of imprisonment was,
in that view, set aside by the appellate court.
7. Criminal Appeal No.10 of 2012 and Criminal Revision No.41 of 2012
were then filed before the High Court at Guwahati by the parties. While
Criminal Appeal No.10 of 2012 was filed by the Complainant/Appellant,
Criminal Revision No.41 of 2012 challenged the conviction of the Respondent
by the trial court and affirmed by the Appellate Court for an offence under
Section 138 of the Negotiable Instruments Act, 1881. The High Court has,
as seen earlier, set aside the conviction of the Respondent and allowed
Criminal Revision No.41 of 2012 while dismissing Criminal Appeal No.10 of
2012 in terms of the judgment and order impugned in the present appeals.
8. We have heard learned counsel for the parties at some length who have
taken us through the orders passed by the courts below. We may at the
outset gainfully extract Promissory Note dated 13th August, 2007 executed
by Nazimul Islam in favour of the complainant in which the deceased Nazimul
Islam had acknowledged his liability to refund the amount of Rs.10,00,000/-
received by him from the Complainant/Appellant in this appeal. The
Promissory Note was in the following words:
“PROMISSORY NOTE Dated 13.8.2007
I Shri Nazimul Islam s/o Late Sirajul Islam resident of Bishnu Rabha
Path Beltola do hereby declare that after mutual discussion between us (the
parties) as per agreement dated 06/07/07 have decided to cancel the said
agreement and as such the advance amount of Rs.10,00,000/- (Rupees Ten
Lakhs only) shall be refunded within a period of one month from today. The
amount is being refunded vide cheques Nos. 191254 dated 05.09.2007, 191255
dated 07.09.2007, 191256 dated 09.09.2007, 191257 dated 11.09.2007 and
cheque No.191258 dated 13.09.2007 which has been acknowledged by Mr. Dhan
Ayengia, resident of Nabagrah Road, Guwahati. It may here be mentioned
that these cheques have been issued as a security and shall be returned to
me as and when the payments are received from me, within the mentioned
period. Further it may be also be mentioned that one month’s bank interest
shall be paid by me, after the payment is cleared, within the stipulated
period.
(Nazimul Islam) 13.8.2007”
9. We may also extract, at this stage, the endorsement which the
Respondent made on the Promissory Note acknowledging that the cheques
handed over to the Complainant/Appellant herein were actually issued by him
and agreeing that the same may be presented for payment after 25th
September, 2007. The endorsement was in the following manner:
“The above cheques are issued by me to Nazimul Islam to deliver to
Mr. Don Ayengia the cheques are already been bounce. Now, we have
requested Mr. Dona Ayengia to represent the cheques after 25.09.2007 to
contact me. 15.09.2007
(H.Mudoi)”
10. It is not in dispute that the execution of the Promissory Note and
the endorsement made by the Respondent has been satisfactorily proved at
the trial. Concurrent findings recorded by the trial court and the first
appellate court to that effect conclude the factual part of the
controversy. The only question that survives in the above background is
whether the cheques issued by the Respondent were meant to discharge, in
whole or part, “any debt or other liability” within the meaning of Section
138 of the Negotiable Instruments Act, 1881.
11. We have no hesitation in answering that question in the affirmative.
The facts as narrated above and as held proved by the trial Court and the
appellate court, leave no manner of doubt, that Nazimul Islam had received
an amount of rupees ten lakhs from the complainant in connection with the
agreement executed between the two. It is also not in dispute that upon
termination of the agreement, the amount paid to Nazimul Islam was
refundable to the complainant and that Nazimul Islam had agreed to refund
the same within one month. The promissory note executed by Nazimul Islam
contained an unequivocal acknowledgment of not only the debt/liability
aforementioned but promised to liquidate the same within one month with
interest at the bank rate. Five cheques handed over were to be returned
but only upon payment of the amount in question. Such being the fact
situation, it cannot be said that the cheques had nothing to do with any
debt or other liability. As a matter of fact, the existence of the debt or
liability was never in dispute. On the contrary, it was acknowledged by
Nazimul Islam who simply sought one month’s time to pay up the amount. The
cheques were post dated, only to give to the drawer the specified one
month’s time to pay the amount. There is thus a direct relationship
between the liability and the cheques issued in connection therewith. Thus
far there is no difficulty. The difficulty arises only because the
promissory note uses the words “security” qua the cheques. This would
ordinarily and in the context in which the cheques were given imply that
once the amount of rupees ten lakhs was paid, the cheques shall have to be
returned. There would be no reason for their retention by the complainant
or for their presentation. In case, however, the amount was not paid
within the period stipulated, the cheques were liable to be presented for
otherwise there was no logic or reason for their having been issued and
handed over in the first instance. If non-payment of the agreed
debt/liability within the time specified also did not entitle the holder to
present the cheques for payment, the issue and delivery of any such cheques
would be meaningless and futile if not absurd. It is important to note
that it was not a case where no debt or liability was determined or
acknowledged to be payable. If cheques were issued in relation to a
continuing contract or business where no claim is made on the date of the
issue nor any determinate amount payable to the holder, one could perhaps
argue that the cheques cannot be presented or prosecution launched on a
unilateral claim of any debt or liability. The present is, however, a case
where the existence of the debt/liability was never in dispute. It was on
the contrary acknowledged and a promise was made to liquidate the same
within one month. Failure on the part of the debtor to do so could lead to
only one result, viz. presentation of the cheques for payment and in the
event of dishonour, launch of prosecution as has indeed happened in the
case at hand.
12. The argument that the respondent had no liability to liquidate the
debt owed by Nazimul Islam, has not impressed us. What is important is
whether the cheques were supported by consideration. Besides the fact that
there is a presumption that a negotiable instrument is supported by
consideration there was no dispute that such a consideration existed in as
much as the cheques were issued in connection with the discharge of the
outstanding liability against Nazimul Islam. At any rate the endorsement
made by the respondent on the promissory note that the cheques can be
presented for encashment after 25-09-2007 clearly shows that the cheques
issued by him were not ornamental but were meant to be presented if the
amount in question was not paid within the extended period. The High Court
in our view fell in error in upsetting the conviction recorded by the
Courts below who had correctly analysed the factual situation and applied
the law applicable to the same.
13. In the result, we allow these appeals and set aside the order passed
by the High Court to the extent it allowed Criminal Revision No.41 of 2012
filed by the respondent. Consequently the order passed by the appellate
court shall stand restored. We, however, do not see any reason to
interfere with the order passed by the High Court to the extent it
dismissed Criminal Appeal No.10 of 2012. No costs.
…………………….……..……CJI.
(T.S. THAKUR)
………………………….…..……J.
(KURIAN JOSEPH)
New Delhi
January 28, 2016