Orissa HC Quashes Cheque Bounce Case: No Relief for Complainant in Illegal Deal

Introduction:

In the case of Smt. Anupama Biswal v. State of Odisha & Another, the Orissa High Court has quashed criminal proceedings against a cheque bounce case, stating “immoral debt” or illegal transactions are not legally enforceable.

This decision underscores the principle that the law does not support claims originating from unlawful conduct.

Section 138 of the Negotiable Instruments Act (N.I. Act) provides a legal remedy in cases of cheque dishonour when a cheque is issued for a legally enforceable debt. However, in this case, the court examined whether a cheque issued in an illegal agreement could sustain a criminal complaint.

Facts of the Case:

The complainant gave substantial sum in cash to the petitioner’s son in order to arrange a seat in a Government Medical College for her son. When the petitioner’s son was unable to arrange a seat, the complainant demanded a refund. To settle the matter, the petitioner issued two cheques to the complainant. Upon presentation, both the cheques were dishonored due to insufficient funds.

Thus, the complainant issued a notice, following non-payment within the stipulated time, she initiated criminal proceedings under Section 138 of the N.I. Act against the petitioner. Consequently, the petitioner filed a motion in the High Court seeking to quash the proceedings.

Legal Framework:

1- Section 138 of the N.I. Act: It criminalizes the dishonor of cheques issued for legally enforceable debts or liabilities. The provision ensures the credibility of negotiable instruments and promotes financial discipline.

2- Section 139 of the N.I. Act: Provides a presumption that the cheque was issued in discharge of a legally enforceable debt, placing the burden on the accused to rebut this presumption.

3- Section 23 of the Indian Contract Act, 1872: Declares agreements void if the consideration or object of the agreement is unlawful or against public policy.

4- Doctrine of Pari Delicto: When both parties are equally at fault in an illegal transaction, courts refuse to provide any legal remedy to either party, leaving them in the position they stand.

Arguments by petitioner and respondent:

Petitioner:

• The petitioner contented that the debt which arose was from an illegal agreement to secure a medical college seat through unlawful means, rendering it unenforceable under Section 138 of the N.I. Act.
• The petitioner based her arguments on the judgements of Karnataka HC’s case R. Parimala Bai v. Bhaskar Narasimhaiah and Delhi HC in Virender Singh v. Laxmi Narain and Ors., where it was held that when the money is paid for an illegal object or an object which opposes the public policy the agreement will render to be void thus, unenforceable by law.
• The petitioner invoked the Doctrine of Pari Delicto, stating that the courts court should not aid a party seeking relief from an illegal transaction.

Respondent:

• The respondent on the other hand submitted that in order to ascertain if the dues are legally recoverable could only be done by undertaking the complete trial.
• The complainant argued that under Section 139 of the N.I. Act, there is a presumption that a dishonored cheque represents a legally enforceable debt, placing the burden on the petitioner to rebut this presumption during trial.

Court's Analysis and Judgment:

The Orissa High Court emphasized on the fact that to initiate the proceedings under Section 138 of N.I. Act, the cheque issued must be for a legally enforceable debt. In this case the debt was an illegal transaction to secure admission by unlawful means therefore it could not be considered a valid debt.

Further, the court emphasized that enforcing such debt would violate the public policy which would thus lead to the agreements being rendered illegal.

The court mentioned the Doctrine of Pari Delicto, stating that the complainant itself is a party to an illegal transaction and cannot get a benefit from her own wrongdoing. Thus, the court refused to enforce illegal debt.

Additionally, the court cleared the concept of presumption under Section 139 of N.I. Act stating that the statutory provision is rebuttable in nature and the evidence provided of illegal nature of the transaction successfully rebutted the presumption of a legally enforceable debt.

The Court noted that “no action can stem from an immoral or illegal basis, and as such, it will not help a party seek the recovery of funds if the debt originates from unlawful or unethical activities”.

Implications of the Judgement:

• Legal Precedent: The ruling strengthens the legal stance that agreements with unlawful objectives will not be protected under financial laws.
• Deterrent Effect: It serves as a warning to parties engaging in corrupt dealings that they cannot seek judicial relief.
• Reinforcement of Public Policy: By refusing to enforce illegal transactions, the court upholds the sanctity of lawful agreements and discourages unethical practices.
• Protection of Judicial Process: Courts are prevented from being misused as instruments to enforce illegal contracts.

Conclusion:

The judgment in Anupama Biswal v. State of Odisha & Another exemplifies the courts' commitment to upholding public policy by refusing to enforce unlawful agreements. It highlights the significance of maintaining ethical financial dealings and ensuring that the law does not become a tool for validating illegal conduct.

This case serves as a reminder that legal protection is only available to those engaged in legitimate transactions. Individuals and businesses must ensure their dealings comply with the law to safeguard their financial interests.

References:

1- Verdictum.in

2- Indian Kanoon