Some Thoughts on Negotiable Instruments Act

(By K.G. Balasubramanian, Advocate, Ernakulam)

It was not sufficient, the draftsman thought. He felt “may presume” is insufficient. After more than a century, law had to be a better taskmaster, bitterness aside. So, he put in S.138. Well, he was not content with that prodigy. He embellished the scene further by saying: It shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque of the nature referred to in S.138 for the discharge, in whole or in part, of any debt or other liability. And, Lo! There was a blitzkrieg on criminal legal system.

In ((1983) 3 SCC 502) State of U.P. v. Pussu, their Lordships, perhaps with a strong distaste to antiquated precedents and maxims, endorsed the view that: “.......The dangers of exaggerated devotion to the rule of benefit of doubt at the expense of social defence and to the soothing sentiment that all acquittals are always good regardless of justice to the victim and the community, demand especial emphasis in the contemporary context of escalating crime and escape.............. The excessive solicitude reflected in the attitude that a thousand guilty men may go but one innocent martyr should not suffer is a false dilemma. Only reasonable doubts belong to the accused. Otherwise any practical system of justice will then break down and lose credibility with the community. The evil of acquitting a guilty person light heartedly as a learned author Glanville Williams in ‘Proof of Guilt’ has saliently observed, goes much beyond the simple fact that just one guilty person has gone unpunished. If unmerited acquittals become general, they tend to lead to a cynical disregard of the law, and this in turn leads to a public demand for harsher legal presumptions against indicted ‘persons and more severe punishment of those who are found guilty. Thus too frequent acquittals of the guilty may lead to a ferocious penal law, eventually eroding the judicial protection of the guiltless. For all these reasons it is true to say, with Viscount Simon that, “a miscarriage of justice may arise from the acquittal of the guilty no less than from the conviction of the innocent...........”In short, our jurisprudential enthusiasm for presumed innocence must be moderated by the pragmatic need to make criminal justice potent and realistic”.

It is interesting, if not intriguing, to reassess the legislative and commercial background in which the draftsman contrived this juggernaut and the resultant judicial adventures.

(1991 (2) KLT 341) Anto v. Union of India, proceeded to propound that: Even though the normal rule is that an act or illegal omission, in order to constitute an offence, must be had with the requisite mental condition in the form of intention, knowledge or reasonable belief, that pre-requisite could be statutorily dispensed with in appropriate cases by creating strict liability offences in the interest of Nation.

(1995 (1) KLT SN 13 (C.No.18) Bom.) Mayuri Pulse Mills v. Union of India laid down that: .....Enactment of Ss.138 to 142 has been made to meet creditors’ concern in a growing and developing country with a liberal economic policy and opening of more avenues for trade, commerce and industry. Creation of strict liability is an effective measure by encouraging greater vigilance to prevent the usual callous or otherwise attitude of drawers of cheques in discharge of debts or otherwise.............., it is obvious that for that absolute liability full effect must be given to the legal fiction.

Their Lordships were quite sure in (2002 (3) KLT 218 (SC)) I.C.D.S. Ltd. v. Beena Shabeer that “...............The language of the statute depicts the intent of the law-makers to the effect that wherever there is a default on the part of one in favour of another and in the event a cheque is issued in discharge of any debt or other liability there cannot be any restriction or embargo in the matter of application of the provisions of S.138 of the Act”.

But, in (2008 (1) KLT 425 (SC)) Krishna Janardhan Bhat v. Dattatraya Hegde, their Lordships were inclined to regress that: “.................Statute mandates raising of presumption but it stops at that. It does not say how presumption drawn should be held to have rebutted. Other important principles of legal jurisprudence, namely presumption of innocence as human rights and the doctrine of reverse burden introduced by S.139 should be delicately balanced. Such balancing acts, indisputably would largely depend upon the factual matrix of each case, the materials brought on record and having regard to legal principles governing the same.”

But, such “balancing acts” do end in inconvenient situations at times. The ingredient of enforceable liability, dependent on ever so many factors, known and unknown to a creditor, gets the backseat despite big brother S.139. S.118 has limited application in a criminal prosecution in the teeth of Ss.138 and 139. The latter have obvious content, nexus and object. Otherwise, why was S.118 retained while incorporating S.139 ? The intent in engrafting S.138 and companions is intelligible and unambiguous: You issued a dud cheque, you face the music.

It was at a time when the above thoughts were eclipsed in mind, that I came across the declaration of law in (2008 (4) KLT 509) Joseph Sartho v. Gopinathan Nair. The case is one between the payee and drawer of a cheque. It is a simple case of “I owe you money; take my cheque”. Now, a person makes a cheque or issues a cheque. The payee accepts the same, by delivery. The maker is not transferring the instrument. A cheque becomes a cheque because and only after it is signed/made. Without the signature of the maker, it remains a piece of paper. By affixing his signature, the maker is certainly not negotiating it. He is giving life to it. He is not signing it with the intention of transferring it to the payee. As between them - drawer (maker) and payee (holder) - there is no element of negotiation or indorsement. The act of making the cheque and delivering it to the promisee is but an act of bipartite contract. I am not forgetting that there is yet another contract between the maker and his banker. By indorsement, an instrument is transferred. Strictly speaking, it is a tripartite affair, for there have to be a drawer, an indorser and an indorsee. I do not think that the maker of a cheque can normally indorse it to another. S.56 may intervene when there is an intention to negotiate. It does not appear logical that making of a cheque is an indorsement of that cheque. An allonge becomes necessary because of constraint of space on the instrument and the need for negotiation. To me, it appears S.15 and allonge crop up only in tripartite situations.

S.46 says that an instrument payable to bearer is negotiable by delivery and one payable to order is negotiable by indorsement. This is further clarified in S.47. A payee under a bearer cheque becomes holder in due course by mere delivery of the instrument to him. A subsequent holder from him becomes a holder in due course again by mere delivery, indorsement being unnecessary. In the case of a cheque payable to order, a subsequent holder from the payee can be a holder only by indorsement and delivery, vide S.48, if otherwise permissible, subject to S. 50. This appears to be all the more so from Ss.72 and 73.

For the purpose of S.138, presentment of the cheque at the drawee bank is inevitable. S.138 contemplates bipartite and tripartite situations, vide cl.(c) of the proviso. Hence, Joseph was perfectly justified in presenting the cheque. Was it possible or necessary to have obtained an endorsement of part payment on the instrument, considering the fact that there was neither negotiation nor indorsement, between him and Gopinathan, within the meaning of Ss.15 and 56 ? I think not. Had not Joseph confessed? Can Gopinathan Nair say that the cheque was good at the time of delivery, but dud, because of part payment and want of indorsement? Again, I think not. The interesting question is whether the drawee bank, with its prerogative, could have honoured/dishonoured the cheque by applying S.15 (Quaere). True, Gopinathan continues to be indebted. Is his acquittal merited?

From Probation to Pension 

(By K. Ramakumar, Sr.Advocate, High Court of Kerala)

A case on probation ends up as a case on pension by the time it attains culmination in our judicial system. No less a person than the former Chief Justice of India advised a corporate giant to go to New York instead of New Delhi to settle its legal claims in view of the inordinate delay in the Indian justicing system. What a sad spectacle in the conspicuous country of Chandrayan ?

It looks, delay has become part and parcel of our otherwise fine judicial system, certified by the Mahatma as the best legacy Britishers left behind. And the tall talks about the assault on arrears also have become part of judicial history. Several Commissions spending public money have submitted lengthy and laborious reports with no solution in sight. Time has come to talk less about arrears and act instead to annihilate it altogether.

The robed men, Lawyers and law givers alike, are primarily responsible for the avoidable delay. Excepting the advent of cases under the Negotiable instruments Act, litigation in the Subordinate Courts, particularly civil litigation is becoming a vanishing variety, posing a threat to the very existence of Subordinate Courts. Yet legal adjudication is limping there. Lower courts in the country lament rightly of lack of infrastructure - even basic books, furniture, space, toilets, etc. What we really need is more number of Judges and facilities for the Subordinate Judiciary, the sturdy back-bone of our judiciary, than in higher courts. How about the cool capacious and comfortable courts? There is delay there as well, despite the toil till mid-night by some of our Judges with commitment to their job. Something appears to be wrong somewhere. Why should intake of new cases take away all the time of the courts? An alarming event in all High Courts in the country. Do our knowledgeable and experienced Judges need so much time to determine whether a case is prima facie made - and not made out  - for open sesame. Why insist on instructions or statements from ‘Sirkar’ Counsel when the rules of the High Court (Kerala High Court) mandate only advance notice on Interlocutory Applications. The arrival of new cases, an every day occurrence, eats away a lion’s share of the litigative process, crowding out the long queue in quest of justice. The suggestion to strangulate the new born at birth-stage is a remedy worse than the disease.

This should end. The end can be sighted only by efforts both from the Bench and the Bar. Litigants - many of whom distraught senior citizens are loath to be told - ‘Look here, we have new cases, you wait’.

The Bar if really believed to be one side of the same coin should be taken into trust and confidence as the agony of aging and anxious litigants is best received in their antenna. The sophisticated system now claimed to be innovated in the High Courts to identify cases and categorize them for speedy listing is inadequate altogether. A committee of experienced practitioners (of course only acceptable to Judges) should surely help eliminate the unwanted cases, clearing the ground for intricate and involute dispute determination.

An integrated judiciary, be it remembered is a great unifying force in a semi-federal set up with colourful diversities. It still commands the confidence of the common people and the only credible institution in the country. Let us pass it on to posterity as a bounty - not burden.

Tough and taciturn action therefore should take the place of the tabor of statistics.