Legal Awareness & Information.

Cheque for Bribe Repayment Not a 'Legally Enforceable Debt' Under NI Act, HP High Court Upholds Acquittal

Shimla: The Himachal Pradesh High Court has ruled that a cheque issued to return money paid as a bribe does not constitute a "legally enforceable debt" under Section 138 of the Negotiable Instruments Act, 1881 (NI Act). While upholding the acquittal of an accused in a cheque bounce case, Hon’ble Mr. Justice Rakesh Kainthla affirmed that courts will not assist in recovering money from transactions that are void and against public policy.

The bench dismissed an appeal filed by a complainant, Subhash Chand, against the judgment of the Sessions Judge, Kinnaur, which had acquitted the accused, Mohan Singh Thakur.

Background of the Case

The case originated from a complaint filed by Subhash Chand, an agriculturalist and government contractor. He alleged that Mohan Singh Thakur, a Technical Advisor at Tarni Hydro Pvt. Ltd., had promised to secure a construction contract for him in exchange for ₹15,00,000. After the complainant paid the amount, the accused failed to secure the contract.

To repay the sum, the accused issued two cheques, one for ₹10,00,000 and another for ₹5,00,000. When the complainant presented the ₹5,00,000 cheque, it was dishonored for "insufficient funds." A subsequent legal notice went unanswered, leading to the filing of a criminal complaint under Section 138 of the NI Act.

The Trial Court initially convicted the accused, holding that since the work was not awarded, the accused was liable to return the money, making the dishonored cheque a valid basis for conviction. However, the Sessions Court overturned this decision on appeal, acquitting the accused. This acquittal was challenged by the complainant in the High Court.

Key Arguments

Complainant's Stance: The complainant’s counsel, Mr. Sudhir Thakur, argued that the issuance of the cheque created a presumption of a legally enforceable liability. Since the accused failed to deliver on his promise, he was obligated to return the money, and the cheque was issued for this purpose.

Accused's Defence: The accused’s counsel, Mr. Amrik Singh, contended that the payment was a bribe to unlawfully secure a contract. Such a transaction is not a legally enforceable debt, and a cheque issued for its repayment cannot attract criminal liability under Section 138 of the NI Act.

High Court's Analysis and Ruling

Justice Kainthla, after a thorough review, sided with the accused's arguments and upheld the acquittal. The Court's reasoning was grounded in the fundamental principle that the debt must be "legally enforceable."

The judgment highlighted that the money was paid to influence the accused to get work allotted "otherwise than on merit." The Court observed, "Thus, the money was paid as consideration for getting the work allotted to the complainant otherwise than on merit, and it was rightly submitted on behalf of the accused that the amount was towards the bribe for getting the work allotted."

Citing a series of judgments from the Delhi High Court, Punjab & Haryana High Court, and even its own previous rulings, the Court emphasized that agreements that are illegal or against public policy are void under Section 23 of the Indian Contract Act, 1872. A key excerpt from the judgment reads:

"The present admitted proposition of fact is squarely covered by illustration (f) attached to Section 23 of the Contract Act, which reads as under: ‘A promises to obtain for B an employment in the public service, and B promises to pay 1,000 rupees to A. The agreement is void, as the consideration for it is unlawful.’"

The Court concluded that since the initial transaction was illegal, any subsequent promise to repay it, including through a cheque, does not create a legally enforceable debt.

Final Decision

The High Court found that the view taken by the Sessions Court in acquitting the accused was reasonable and not perverse. It held that no complaint under Section 138 of the NI Act could be maintained based on a cheque issued to return a bribe.

"In the present case, the amount was paid for securing the work in a Company where the accused was employed; thus, it was in the nature of a bribe... The cheque was not issued in discharge of the legal liability, and no complaint could have been filed based upon such a cheque," the Court stated before dismissing the appeal.