Security Cheque Defence Rejected: T.P. Murugan v. Bojan, Supreme Court on Section 138
The Supreme Court restored the trial court's conviction in a cheque dishonour case after finding that the accused had failed to rebut the statutory presumption that the signed cheques were issued towards a legally enforceable debt. The mere assertion that they were old security cheques was insufficient on the evidence.
Facts: promissory note and two dishonoured cheques
In T.P. Murugan (Dead) Through Legal Representatives v. Bojan, the respondent executed a promissory note dated 7 August 2002 for Rs. 51,00,000 in favour of K. Posa Nandhi. On the same date, he issued two cheques: one for Rs. 37,00,000 in favour of K. Posa Nandhi and another for Rs. 14,00,000 in favour of T.P. Murugan. The complainants' case was that these instruments represented repayment of amounts invested in Maanihada Tea Produce Company.
Both cheques were presented on 3 February 2003 and dishonoured following stop-payment instructions. Statutory demand notices were issued; the respondent disputed the liability in a reply dated 17 February 2003. The complainants instituted two cases before Judicial Magistrate II, Coimbatore, under Section 138 of the Negotiable Instruments Act.
The accused claimed that he had given ten signed blank cheques as security for an earlier loan of Rs. 5,00,000 in 1995, repaid in 1996, and that the instruments were subsequently misused. He also asserted that the signed promissory note had been filled in by an employee of a finance company in connection with a vehicle hire-purchase transaction. The trial courts evaluated these assertions against the evidence.
Trial court, Sessions Court and Madras High Court
| Stage | Decision |
|---|---|
| Judicial Magistrate, Coimbatore | Convicted the accused under Section 138; imposed six months' rigorous imprisonment and a fine of Rs. 5,000, with a default sentence. |
| Sessions Court, 26 November 2008 | Dismissed the accused's appeals and affirmed the conviction and sentence, holding that the presumptions under Sections 118 and 139 were not rebutted. |
| Madras High Court, 27 September 2013 | Allowed the accused's criminal revisions and set aside the concurrent findings, accepting the defence that the instruments could have been issued as security. |
| Supreme Court, 31 July 2018 | Set aside the High Court's revisional order and restored the trial court's conviction and fine. |
Relevant provisions of the Negotiable Instruments Act, 1881
Section 138 - dishonour for insufficiency of funds
Section 138 creates a penal consequence where a cheque drawn on an account maintained by the drawer, for discharge in whole or part of a legally enforceable debt or other liability, is returned unpaid for insufficiency of funds or because it exceeds the arrangement with the bank. The statutory conditions include presentation within the cheque's validity, a written demand notice within 30 days of receiving information of dishonour, and failure to pay within 15 days of receipt of notice. The complainant must then comply with the filing requirements of Section 142. A dishonour due to stop-payment instructions can also attract Section 138 where the other legal ingredients are established.
Section 118(a) - presumption of consideration
Until the contrary is proved, a negotiable instrument is presumed to have been made or drawn for consideration. This presumption is rebuttable.
Section 139 - presumption in favour of the holder
Unless the contrary is proved, the holder of a cheque is presumed to have received it for discharge, wholly or partly, of a debt or other liability. Once execution or signature is admitted or proved, the statutory presumption ordinarily operates. The accused need not always enter the witness box: rebuttal can arise from the complainant's own evidence, cross-examination or defence material. The standard is the preponderance of probabilities, not proof beyond reasonable doubt.
Sections 142, 143A, 147 and 148 - proceedings and remedies
- Section 142: Governs cognizance, limitation and jurisdictional requirements for complaints under Section 138.
- Section 143A: Permits interim compensation in specified circumstances, subject to the statutory limits and judicial discretion; its application depends on the relevant commencement and case-law position.
- Section 147: Makes offences under the Act compoundable.
- Section 148: Concerns deposits that an appellate court may order in appeals by persons convicted under Section 138, subject to the statutory framework.
For the current text of the Act and amendments, consult the official India Code legislative database and search for the Negotiable Instruments Act, 1881.
Why the Supreme Court rejected the defence
The Supreme Court considered the accused's admitted signatures on the cheques and promissory note, the contemporaneous note describing a loan, and the evidence regarding the complainants' investment. It held that the accused had failed to produce credible material capable of rebutting the statutory presumptions.
- Promissory note: The note for Rs. 51 lakh expressly referred to a loan and corresponded to the combined cheque amounts.
- Unconvincing 1995 security-cheque story: The accused's claim that ten blank cheques had been retained despite repayment in 1996 was disbelieved by both courts of fact. There was no credible explanation for the long period without seeking their return.
- Later demand for return: The letter of 9 November 2002 seeking return of cheques was treated as an afterthought in the context of the evidence.
- Disputed promissory-note preparation: The claim that a finance-company employee had filled the note was undermined by evidence disputing that person's employment.
- Limits of revision: The High Court had reversed concurrent factual findings without sufficient basis for interfering in revisional jurisdiction.
Accordingly, the Supreme Court set aside the Madras High Court's order dated 27 September 2013 in Criminal Revision Petition Nos. 1657 and 1658 of 2008 and restored the trial court's conviction and fine. The case illustrates the importance of credible rebuttal evidence; it does not mean that every security cheque is automatically enforceable.
Can a security cheque lead to conviction under Section 138?
Yes, depending on the facts. Describing a cheque as a security cheque does not by itself exclude Section 138. The key issue is whether a legally enforceable debt or liability existed when the cheque was presented and the statutory conditions were satisfied. A cheque issued only as collateral for a liability that never arose, or for a debt already discharged, may present a different legal position.
The Supreme Court has examined security cheques in later decisions, including Sripati Singh v. State of Jharkhand (2021) and Sunil Todi v. State of Gujarat (2021). The controlling principle is to assess the real liability, terms of the transaction, timing of presentation and evidence, rather than rely solely on the label attached to the cheque. Judicial decisions and their exact factual contexts should be consulted before applying the principle to a particular dispute.
Current legal context and procedural caution
The Negotiable Instruments Act, 1881 remains the principal statute for cheque dishonour prosecutions. The Bharatiya Nagarik Suraksha Sanhita, 2023, came into force on 1 July 2024 as the general criminal procedure law, subject to savings and transitional provisions. Proceedings instituted before commencement may continue under the former Code of Criminal Procedure, 1973, where applicable. The original Murugan proceedings were governed by the procedural law then in force.
For official legislative materials, see India Code and the Supreme Court of India. Readers should verify current court practice, applicable amendments and any subsequent binding judgments when advising on a live case.
Practical lessons from the judgment
- Keep records of the underlying loan, investment, repayment and the purpose for which a cheque was delivered.
- Where an earlier debt is repaid, request return or cancellation of security instruments promptly and retain evidence.
- A reply to a statutory demand notice should be consistent with documentary evidence and the actual transaction.
- Concurrent findings of fact are not ordinarily displaced in revision merely because another inference is possible.
Read the Supreme Court judgment - 31 July 2018
Case: T.P. Murugan (Dead) Through Legal Representatives v. Bojan, Criminal Appeal Nos. 950-951 of 2018.
The PDF link above preserves the judgment document referenced by the original webpage. The Supreme Court's official website may also be used to locate the judgment through its judgment search facilities.
Frequently asked questions
Does signing a blank cheque create a presumption under Section 139?
If the signature and execution are admitted or proved, the statutory presumption may arise, but the accused can rebut it through credible evidence showing the absence of a legally enforceable liability.
Is a stop-payment instruction a complete defence?
No. Stop-payment dishonour can fall within Section 138 where the other statutory ingredients are established. The drawer may still rebut the presumption or establish that no enforceable liability existed.
What was the final outcome in T.P. Murugan v. Bojan?
The Supreme Court allowed the complainants' appeals, set aside the High Court's revisional decision and restored the conviction and fine ordered by the trial court.
Editorial note: This article explains a judgment delivered in 2018 and separately identifies later statutory context. It is intended for legal information and is not a substitute for case-specific professional advice.