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GAUHATI HIGH COURT
B.D. Agarwal, J.
Sri Don Ayengia —Appellant
versus
State of Assam —Respondent
Criminal Appeal No. 10 and 41 of 2012
Decided on 2.4.2014
For the Appellant:Mr. A.K.Bhuyan, Smt.B.Bhuyan, Mr.I.Sharma, Mr.R.S.Deuri, Smt.P.Pathak, Mr. A.Saikia, Advocates
For the Respondent: Mr.A.B.Choudhury, Mr.A.K.Purkayastha, Mr.M.J.Baruah, Mr.K.Munir, APP, Assam
IMPORTANT POINTS
(i) Cheque issued as collateral security, cannot be enforced by way of filing complaint under section 138 of N.I. Act.
(ii) A debt which is legally barred and not recoverable cannot be enforced under section 138 of the Act.
Headnote:(i) Negotiable Instrument Act, 1881—Section 138—Legally Enforceable liability—Criminal and Civil Liabilities—Dishonour of cheque—Liability barred under Civil Law, cannot be recovered by way of filing complaint under Section 138 of the Act—The respondent convicted for issue of five cheques each for Rs. 2,00,000/- and sentenced to undergo simple imprisonment for one year and to pay compensation of Rs. 12,00,000/- In appeal sentence of imprisonment set aside and sentence of fine of Rs. 2,000/- imposed along with compensation of Rs. 12,00,000/—Held, that both fine and compensation cannot be imposed together- Held further collateral security cannot be executed or enforced by way of filing criminal complaint under section 138 of the Act (Paras 13, 14 and 15)
(ii) Negotiable instrument Act 1881—Section 138—Explanation—Debt or other liability”Principal loan of Rs. 10,00,000/- paid by the complainant to accused no. 2 and accused no. 1 was not party to original agreement—Held the complainant could not execute the promissory note and recover the amount from accused no. 1 by way of filing civil suit—A debt which could not be recovered in a civil suit cannot be recovered under section 138 of 1881 Act—No person can be convicted or prosecuted in a proceeding under section 138 who indemnifies the principal debtor for his liability towards the complainant. (Para 13, 15 and 16)
Facts of the Case:
The complaint filed under Sections 138 and 142 of 1881 Act alleging that he was partner of the firm which entered into agreement under which the complaint paid Rs. 10, 00,000/- to the accused but the agreement was cancelled by way of execution of promissory note. Wherein the accused promised to refund Rs. 10, 00,000/- within a month and accordingly he issued post dated cheque but the said cheque was tendered by the complainant before expiry of due date i.e. prior to expiry of period of one month as agreed. The cheque was dishonoured about which the complainant came to know on 15.09.2007. – The cheques were again tendered on the basis of endorsement on 05.11.2007 which were again dishonoured- Notice issued on 27.11.2007 was replied, denying that he had any knowledge of handing over of any cheque to the complainant-However, the respondent took responsibility to pay the entire amount of Rs. 10,00,000/- and issued fresh cheque in second weak of January 2008. On the basis of endorsement on the promissory note, the respondent was convicted under section 138.
Findings of the court
No person can be convicted or prosecuted in a proceeding under Section 138 of the NI Act, who indemnifies the principal debtor for his liability towards the complainants unless such guarantor enters into an agreement with the holder of the cheque. In the present case, neither A1/respondent had any legally enforceable debt towards the holder of the cheque nor did he stand as a guarantor on the basis of any valid contract of guarantee. Besides this, blank cheques were handed over to the principal debtor (A2) to be kept as security against his liability and not against any legally recoverable debt or liability against A1/respondent. Hence, the conviction of the respondent/petitioner in Criminal Revision Petition No. 41 of 2012 held, was against the law and set aside.
Result : Revision Petition allowed.
B.D.Agarwal, J.—In this case the moot question to be decided is as to whether a person indemnifying the holder of a cheque can be said to have legally enforceable delbt or other liability towards the holder of the cheque when the payer defaults in payment of the cheque amount u/s.138 of the Negotiable Instruments Act, 1881.
2. The appeal and revision petition are directed against the judgment dated 9.11.2011, passed by the learned Sessions Judge in Criminal Appeal Nos.9 of 2010, affirming the judgment of the learned Judicial Magistrate, passed in CR Case No.270 of 2008 dated 5.1.2010, whereby the accused has been convicted u/s.138 of the NI Act.
3. I have heard Sri A.K.Bhuyan. learned counsel for the appellant and the respondent/accused was represented b. Sri AB Choudhury, learned senior counsel. who was ably assisted by Sri M.J.Baruah. learned counsel. Also heard Sri K.Munir, Additional Public Prosecutor for the State of Assam. I have also gone through the impugned judgments and the oral and documentary evidence, proffered by both the parties.
4. The complaint u/s.138 r/w S.I 2 of the Nl Act was filed by the appellant in Criminal Appeal No.10 of 2012 pleading that the complainant was a partner of a firm, named and styled as Mrs. Ayaar, Consortium. The said firm had entered into a development agreement with the accused No.2, Nazimul Islam. The agreement was executed on 6.7.2007 and as per the terms apd conditions of the agreement the complainant paid a sum of Rs.l0 lakhs as advance to the accused Nazimul Islam against construction of a multi-storied building over a certain plot of land. However, the agreement could not materialize and it was cancelled by way of execution of a ‘Promissory Note’ on 13.8.2007. As per the terms of the Promissory Note the accused Nazimul Islam promised to refund the advance amount of Rs.10 lakhs to the complainant within a month and for a limited period of one month the said accused deposited as many as five cheques with the complainant as security. The accused Nazimul Islam further agreed to pay interest for one month for the delay in refunding the money. Though the accused Nazimul Islam promised to refund the loan amount within one month the post-dated cheques were issued on the date of execution of Promissory Note dated 13.8.2007. The cheques were dated 5.9.2007, 7.9.2007, 9.9.2007 and 11.9.2007 and those were deposited by the complainant in his bank even before the due date i.e. expiry of one month period of the Promissory Note. Cheques were presented in the bank twice. The fact of dishonour of the cheques in the first round came to be known to the complainant on 15.9.2007. On this date the accused No.1 respondent Haren Mudoi came into picture. The respondent indemnified the complainant and ratified that earlier cheques, handed over to Nazimul Islam, were actually issued by him, by way of making an endorsement in the original Promissory Note. On the basis of this endorsement the complainant again deposited the cheques in his bank on 5.11.2007, only to be dishonoured by the bank. It was followed by a statutory Notice on 27.11.2007. The notice was replied by accused No.l respondent on 7.12.2007 through his lawyer, under Exhibit-21, denying that he had any knowledge of handing over of the cheques to the complainant by Nazimul Islam and also about the dishonour of the cheques due to insufficient fund prior to 25.9.2007 (sic 15.9.2007). Though the respondent also pleaded that he had no business relation with the complainant he took the responsibility to pay the whole amount of Rs.10 lakhs tentatively in the second week of January, 2008 by issuing fresh cheques. On the basis of the respondents endorsement in the Promissory Note and his certain admissions in the reply to the notice of the complaint the respondent in Criminal Appeal No. 10 of 2012 has been convicted u/s.138 of the NI Act.
4.1 Since there are counter appeal and revision petition I would refer the parties as complainant and ac
