2012 (5) TMI 508 - HC - Indian Laws

Negotiable Instruments Act Blank Cheque - dishonor of cheque - co-extensive liability of the guarantor and the principle debtor - petitioner contended that guarantor cannot be prosecuted under section 138 of the Act without taking any action against the principal borrower. Blank cheques had been handed over by the petitioner to the respondent No. 1 towards security which have been misused - Held that - Petitioner has not denied his signatures on the cheques. Once he has admitted his signatures on the cheque he cannot escape his liability on the ground that the same has not been filled in by him. When a blank cheque is signed and handed over, it means that the person signing it has given implied authority to the holder of the cheque, to fill up the blank which he has left. A person issuing a blank cheque is supposed to understand the consequences of doing so. He cannot escape his liability only on the ground that blank cheques had been issued. - petition is dismissed Bare perusal of the provision clearly shows that the section commences with the words Where any cheque . The use of word any assumes significance here. It shows that for whatever reason if a cheque is drawn on an account maintained by the drawer with its bank, in favour of any person for the discharge of any debt or other liability, the ingredients of offence under section 138 of the Act gets attracted in case cheque is returned dishonoured for insufficiency of funds and the cheque amount is not paid within the statutory period despite service of notice.

Summary

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 Complaint
The 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 Liability
The 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 Intent
The 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 Respondent
Lastly, 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.