Accused Admitting Signatures on "Blank Cheque" makes section 139 of NI Act Applicable: SC

Overview

• Section 139 of the Negotiable Instruments Act 1881, granting a presumption in favour of the holder, provides that the holder received the cheque of the nature referred to in section 138 for the discharge of a debt or a liability.
• This implies that the onus to prove otherwise (that such a cheque was not for repayment of a debt) is on the payee.
• In an order dated 10^th February 2021, the Supreme Court held that a blank cheque is also sufficient to attract section 139 of the Negotiable Instruments Act, if an accused acknowledges his signatures on such a cheque.

Here's what happened

• In the present case, the Respondent was in a business with the appellants, and in the course of business, the Appellants had to pay the Respondent a sum of Rs 11,20,000.
• A Cheque and a Deed of Undertaking in favour of the respondent were consequently issued by the Appellants on the same day.
• The Respondent presented the cheque in the bank which was returned due to insufficiency of funds.
• When the respondent sent a notice to the Appellants, they denied their liability to pay stating that the cheque was only to help the respondent in some other debt recovery proceedings, not pertaining to the present case.
• The Respondent took the appellants to the trial court, wherein the trail court refused the claims of the Respondent stating that he had “failed to establish a legally enforceable liability on the date of issue of cheque”.
• The Respondent further appealed the order in High Court, wherein the HC held the Appellants liable, providing that, “The signature of the accused has been put over the seal of the firm and therefore, the contention of the learned counsel appearing for the respondents that the accused put his signature alone without any seal in the blank stamp paper cannot be accepted.”
• Aggrieved by the order, the Appellants approached the Supreme Court for relief.

The Hon'ble Supreme Court's Observations

• Upholding the impugned order of the High Court, The bench comprising Justices NV Ramana, Surya Kant and Aniruddha Bose held that “the trial Court completely overlooked the provisions and failed to   appreciate the statutory presumption   drawn   under Section 118 and Section 139 of NIA.”
• The Bench further pointed out that as per the provisions of the Negotiable Instruments Act, the signatures of an accused on any negotiable instrument once accepted by the accused, operate these ‘reverse onus' clauses (namely Section 118 and Section 139 of the Act). 

Conclusion 

The Hon'ble Supreme Court although dismissed the appeal of the Appellants, cancelled the sentence awarded in the impugned order, as the Appellants had paid up the amount in the Supreme Court's registry and were only arguing the case for its merit. 

WHAT ARE YOUR VIEWS ON THE THIS JUDGEMENT OF THE SUPREME COURT? Let us know in the comments below.