Cheque Dishonour and Legal Liability: A Landmark Judgment Explained

The case of T.P. Murugan (Dead) Thr. LRs. v. Bojan and Posa Nandhi Rep. Thr. POA Holder, T.P. Murugan v. Bojan deals with dishonour of cheques under Section 138 of the Negotiable Instruments Act. The Supreme Court of India delivered its judgment on July 31, 2018, reinstating the conviction of the respondent and setting aside the High Court’s acquittal.

The appellants had filed two complaints under the N.I. Act for dishonour of cheques worth Rs. 37,00,000/- and Rs. 14,00,000/-, issued by the respondent. The cheques were issued in favor of the appellants in connection with their investments in Maanihada Tea Produce Company Pvt. Ltd. The respondent issued a promissory note along with these cheques on August 7, 2002. However, when the cheques were presented for encashment on February 3, 2003, they were dishonoured due to ‘Stop Payment’ instructions.

Arguments by the Parties

Petitioner’s Arguments

• The respondent admitted his signatures on the cheques and the promissory note.
• The cheques were issued towards repayment of an enforceable debt.
• The respondent failed to return the appellants’ share in the company despite several demands.
• Trial Court and Sessions Court had rightly convicted the respondent.

Respondent’s Arguments

• The cheques were issued as security and not towards discharge of any debt.
• The promissory note was allegedly signed in blank and later filled in by a third party.
• The transaction did not establish any legally enforceable debt.

Supreme Court’s Observations

The Supreme Court, while setting aside the High Court’s order, held:

• Under Section 139 of the N.I. Act, once a cheque is issued, there is a statutory presumption that it was issued in discharge of a legally enforceable debt.
• The respondent failed to produce credible evidence to rebut this presumption.
• The defense regarding blank cheques and security purposes lacked credibility as there was no demand for return of the cheques for seven years.
• The High Court had erred in setting aside the conviction by merely raising a doubt about the purpose of the cheques.

Final Judgment

The Supreme Court restored the conviction of the respondent and upheld the Trial Court’s sentence of six months of rigorous imprisonment and a fine of Rs. 5,000/-. This ruling reinforces the strict interpretation of cheque dishonour cases and the obligations of issuers under the Negotiable Instruments Act.

Petitioner Name: T.P. Murugan (Dead) Thr. LRs. & Posa Nandhi Rep. Thr. POA Holder, T.P. Murugan.
Respondent Name: Bojan.
Judgment By: Justice Rohinton Fali Nariman, Justice Indu Malhotra.
Place Of Incident: Coimbatore.
Judgment Date: 31-07-2018.

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