Substantial Clarification: High Court affirms that while conviction under Section 138 NI Act can be accompanied by compensation under Section 357(3) CrPC, compensation should not ordinarily exceed the cheque amount unless supported by cogent reasons. This ruling upholds existing precedent on presumption under Sections 118 & 139 NI Act, clarifies the date of presentation for post-dated cheques, and limits excess compensation awards. The decision is binding on subordinate courts in Tamil Nadu and persuasive elsewhere.
Summary
| Category | Data |
|---|---|
| Case Name | CRL RC(MD)/732/2024 of M.Mohamed Ismail Vs Chidambaram |
| CNR | HCMD010791602024 |
| Date of Registration | 31-07-2024 |
| Decision Date | 31-10-2025 |
| Disposal Nature | PARTLY ALLOWED |
| Judgment Author | HONOURABLE MRS JUSTICE L.VICTORIA GOWRI |
| Court | Madras High Court, Madurai Bench |
| Bench | Single Judge (HONOURABLE MRS JUSTICE L.VICTORIA GOWRI) |
| Precedent Value | Binding on all subordinate courts in Tamil Nadu; persuasive for other courts |
| Overrules / Affirms | Affirms trial and appellate findings on conviction, clarifies/limits quantum of compensation |
| Type of Law | Criminal Law – Negotiable Instruments Act, 1881; Criminal Procedure Code, 1973 |
| Questions of Law |
|
| Ratio Decidendi |
The Court held that once the signature on the cheque is admitted, presumptions under Sections 118 and 139 NI Act arise, shifting the burden to the accused to make out a probable defence. The accused’s plea of lost cheque was found improbable, with no substantial rebuttal presented. For post-dated cheques, the period for presentation is reckoned from the date appearing on the cheque, not from the date of handover. While punishment of imprisonment for two years was confirmed, the direction to pay compensation of Rs. 20 lakhs (twice the cheque amount) under Section 357(3) CrPC was found excessive and reduced to Rs. 10 lakhs, i.e., the cheque amount. |
| Judgments Relied Upon |
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| Logic / Jurisprudence / Authorities Relied Upon by the Court | The Court relied on the principle of reverse onus under Sections 118 & 139 NI Act post-admission of signature, holder’s right to fill particulars under Section 20 NI Act, calculation of cheque presentation period from the cheque date (not delivery date), and proportionality of compensation under Section 357(3) CrPC. |
| Facts as Summarised by the Court | The complainant, a dentist, advanced multiple sums to the accused, an advocate, under personal and financial relationship. After dispute over repayment and a failed police settlement, the accused issued a post-dated cheque for Rs. 10 lakhs which bounced as “payment stopped by drawer”. The accused contested liability, asserting loss/theft of cheque. Courts below convicted the accused and imposed 2 years’ imprisonment and Rs. 20 lakhs compensation. The High Court confirmed conviction and sentence, but reduced compensation to the cheque amount. |
Practical Impact
| Category | Impact |
|---|---|
| Binding On | All subordinate courts in Tamil Nadu |
| Persuasive For | Other High Courts, Supreme Court |
| Follows |
|
What’s New / What Lawyers Should Note
- Clarifies that in Section 138 NI Act prosecutions, compensation under Section 357(3) CrPC should ordinarily not exceed the cheque amount, unless justified by detailed reasons.
- Reaffirms that post-dated cheques’ validity for Section 138 is reckoned from the date on the cheque, not the date of handover/delivery.
- Presumptions under Sections 118 and 139 NI Act operate strongly once signature is admitted; reverse burden on the accused can only be rebutted by cogent, probable evidence, not merely assertions or uncorroborated defences.
- Defence of “lost cheque” must be substantiated; mere police complaint/stop payment instruction is insufficient if subsequent conduct does not corroborate bona fides.
- Attendance or alibi-type defences must be proved through proper authentication, not just by producing documents not proved by the proper custodian.
Summary of Legal Reasoning
- The Court began by analysing the period of validity for cheque presentation, relying on Sections 5, 6, 19, 138, 139, and 140 of the NI Act and Supreme Court precedents to reiterate that the relevant date for limitation under Section 138 is the date printed on the cheque, not the delivery date.
- On presumptions, the Court relied on Bir Singh v. Mukesh Kumar, Kalamani Tex, and Rajesh Jain to clarify that once signature and account ownership are admitted, presumptions under Sections 118 and 139 must be rebutted by probable defence, which did not happen in this case.
- The petitioner’s defence of lost or stolen cheque was critically examined. The Court found the theory improbable, given the lack of follow-up with police and the unlikeliness of a senior lawyer carrying signed blank cheques in public transport.
- On financial capacity and documentary contradictions, the Court held that minor discrepancies regarding the source and routing of funds were immaterial, especially when the core lending transaction and the signature on the cheque stood admitted and documentary evidence on capacity was produced.
- The Court found the lower courts correct in not heavily relying on unproven attendance registers as evidence of presence or absence.
- On sentence, the Court found two years’ imprisonment justified, but held the compensation award of Rs. 20 lakhs excessive and reduced it to the cheque sum.
- Ultimately, the Court confirmed conviction and sentence, but reduced compensation.
Arguments by the Parties
Petitioner:
- The cheque was not issued towards a legally enforceable debt.
- Monies, if any, were received via self-cheques of complainant’s wife or father, not directly from the complainant.
- Courts below misread and misapplied evidence, failed to appreciate the “lost cheque” defence properly, and wrongly prioritised B-Diary over workplace attendance registers.
- The cheque was delivered in 2013 and thus presentation in August 2014 was beyond the three-month validity.
- Conviction and imposition of compensation at twice the cheque amount is excessive and punitive.
Respondent:
- Cheque was issued for a liability of Rs. 10,00,000/- with all particulars filled as per instructions of the accused.
- Under Section 20 NI Act, filling the date on a signed instrument is valid.
- On limitation, the operative date is the date on the cheque, not the date of issue or delivery; thus, presentation was within time.
- The “lost cheque” theory is unbelievable, not proved, and found false by both lower courts.
- Minor contradictions in the evidence do not undermine the presumption under Sections 118 & 139 NI Act, especially where the signature and account ownership are admitted.
- Banking documents and court records adequately establish financial dealings and complainant’s presence at the relevant place.
Factual Background
The dispute arose from multiple monetary advances given by the complainant, a dentist, to the accused, an advocate, in the context of a long-standing personal and financial relationship. After disagreements regarding repayment of chit fund or borrowed sums, the accused issued a post-dated cheque for Rs. 10 lakhs, which was dishonoured with the endorsement “payment stopped by drawer”. Notice was issued and replied to; the accused claimed loss or theft of the cheque. The complainant initiated prosecution under Section 138 NI Act. Both the trial and appellate courts found the accused guilty, imposed two years’ simple imprisonment, and directed payment of Rs. 20 lakhs as compensation.
Statutory Analysis
- Sections 5 (Bill of Exchange), 6 (Cheque), 19 (Payable on Demand), 138 (Dishonour of Cheque), 139 (Presumption in Favour of Holder), and 140 (Defence Not Allowed) of the Negotiable Instruments Act, 1881 were extensively discussed.
- The Court adopted a strict textual interpretation that the period for presentation under Section 138 runs from the date written on the instrument, not the date of delivery, especially for post-dated cheques.
- Section 20 NI Act was cited for the proposition that the holder may fill in particulars in an otherwise blank signed instrument.
- Section 357(3) CrPC was analysed, with the holding that the amount of compensation must ordinarily not exceed the cheque amount unless there are specific, justifiable circumstances.
Dissenting / Concurring Opinion Summary
No dissenting or concurring opinions were recorded in the judgment.
Procedural Innovations
The High Court modified the quantum of compensation under Section 357(3) CrPC to bring it in conformity with the cheque amount, despite sustaining conviction and sentence. No other procedural innovations, changes to burden of proof, or new guidelines were issued.
Alert Indicators
- ✔ Precedent Followed – The decision reaffirms and clarifies existing precedent under Sections 138, 139 NI Act, and Section 357(3) CrPC, without overruling Supreme Court or High Court law.