2012 (5) TMI 508 - HC - Indian Laws

Court Upholds Guarantor Liability in Cheque Bounce Case

The court dismissed the petition seeking the quashing of a complaint under section 138 of the Negotiable Instruments Act, 1881. It held that the liability ... Liability of drawer and guarantor under section 138 of the Negotiable Instruments Act - Scope of the expressions 'any cheque' and 'other liability' in section 138 - Effect of signed blank cheque and implied authority to fill itLiability of drawer and guarantor under section 138 of the Negotiable Instruments Act - Scope of the expressions 'any cheque' and 'other liability' in section 138 - Whether a guarantor who issues cheques can be prosecuted under section 138 of the Negotiable Instruments Act notwithstanding non-action against the principal borrower. - HELD THAT: - The Court held that the language of section 138, commencing with the words 'Where any cheque' and including discharge of 'any debt' or 'other liability', indicates the legislative intent to attract liability whenever a cheque is issued and dishonoured for insufficiency of funds and notice/payment provisions remain unfulfilled. The Court relied on the principle that these expressions bring within the statutory ambit cheques issued in discharge of liabilities irrespective of the underlying status of the principal debtor. Consequently, the co-extensive liability debate between guarantor and principal borrower is outside the purview of section 138 and does not provide a defence to prosecution of a guarantor who has issued the cheque and whose cheque is dishonoured. The Court therefore rejected the contention that mere status as guarantor precludes prosecution under section 138 where the statutory ingredients are otherwise satisfied. [Paras 6, 7]Complaint under section 138 against the petitioner (guarantor) is maintainable; the contention that a guarantor cannot be prosecuted in absence of action against the principal borrower is rejected.Effect of signed blank cheque and implied authority to fill it - Liability of drawer and guarantor under section 138 of the Negotiable Instruments Act - Whether signed blank cheques, subsequently filled in by the payee, absolve the drawer of liability under section 138. - HELD THAT: - The Court rejected the petitioner's contention that blank cheques filled by the respondent attract no legal consequences. It held there is no legal requirement that the drawer must himself fill up a cheque; when a blank cheque is signed and handed over, the signatory gives implied authority to the holder to fill the blank. The petitioner's admitted signatures on the cheques preclude escape from liability on the ground that the cheques were not filled in by him. Thus issuance of signed blank cheques does not negate the statutory offence if the other ingredients of section 138 are satisfied. [Paras 8]Signed blank cheques filled by the payee do not absolve the drawer; the petitioner's defence that the cheques were blank and filled by respondent is rejected.Final Conclusion: Petition under section 482 CrPC dismissed as devoid of merits; delay in re-filing condoned and criminal complaint under section 138 against the petitioner may proceed. Issues:- Petitioner seeks quashing of complaint under section 138 of the Negotiable Instruments Act, 1881.- Allegation against guarantor's liability under section 138.- Interpretation of legislative intent regarding liability under section 138.- Blank cheques signed by petitioner and filled by respondent.Issue 1: Quashing of ComplaintThe petitioner sought quashing of a complaint under section 138 of the Negotiable Instruments Act, 1881, pending in the court of Metropolitan Magistrate, Delhi. The petitioner contended that as a guarantor, they cannot be prosecuted under section 138 without action against the principal borrower. However, the court found no merit in this argument, emphasizing that the liability of the guarantor is co-extensive with that of the principal debtor under section 138. The court referred to relevant legal provisions and Supreme Court judgments to establish that the liability under section 138 cannot be avoided if a cheque is returned unpaid, regardless of the reason.Issue 2: Allegation Against Guarantor's LiabilityThe petitioner argued that as a guarantor, they cannot be held liable under section 138 of the Act as the blank cheques issued were misused by the respondent. The court rejected this argument, stating that once the petitioner admitted their signatures on the cheques, they cannot escape liability by claiming the cheques were filled by the respondent. The court highlighted that issuing a blank cheque implies authority for the holder to fill it, and the petitioner cannot avoid liability on this ground alone.Issue 3: Interpretation of Legislative IntentThe court analyzed the legislative intent behind section 138 of the Act, emphasizing that the language used in the provision clearly indicates that liability is triggered when a cheque is drawn for the discharge of any debt or other liability and is returned unpaid. The court referred to Supreme Court judgments to support the interpretation that the liability under section 138 extends to both debt and other liabilities, leaving no room for avoiding liability based on the relationship between guarantor and principal debtor.Issue 4: Blank Cheques Filled by RespondentLastly, the petitioner argued that the blank cheques issued were filled by the respondent, suggesting no legal consequences. The court dismissed this argument, stating that there is no legal requirement for the drawer to fill the cheque personally. Once the petitioner signed the blank cheques, they impliedly authorized the respondent to fill them, and the petitioner cannot evade liability on the grounds of the cheques being filled by the respondent.In conclusion, the court dismissed the petition, finding it devoid of merit based on the analysis of the issues related to the quashing of the complaint, guarantor's liability under section 138, interpretation of legislative intent, and the filling of blank cheques by the respondent.