Introduction
Can a cheque, an instrument representing a promise of payment, be legally enforced when the debt it seeks to repay originates from an agreement explicitly forbidden by law and opposed to public policy? This fundamental question of legal enforceability versus moral turpitude was the key determinant in a criminal appeal before the Madurai Bench of the Madras High Court, where a complainant sought to overturn the acquittal of an accused in a case filed under Section 138 of the Negotiable Instruments (NI) Act. The dispute offers a stark reminder that the legal system, including the rigorous provisions of the NI Act, will not lend its authority to validate transactions rooted in illegality or impropriety.
The case P. Kulanthaisamy v. K. Murugan and another1, began with a private complaint by P. Kulanthaisamy against K. Murugan. The Complainant’s entire case rested on an alleged transaction where he paid the Accused Rs. 3 lakhs in 2016, to secure a conductor job for him in the TNSTC2. The Accused, a worker in the mechanical section who claimed influence through the Labour Union, failed to deliver the job. When the Complainant demanded the return of his money, the Accused subsequently issued a cheque for Rs. 3 lakhs in 2017, for discharging the amount due. This cheque, when presented, was returned dishonoured for insufficient funds. The Complainant’s attempt to prosecute the Accused for the offence of cheque dishonour under Section 138 of the NI Act was, however, unsuccessful at the trial court, which acquitted the Accused on the grounds that the cheque was not issued to discharge a legally enforceable debt or liability.
The appeal hinged solely on whether the Rs. 3 lakhs in question constituted a “legally enforceable debt or liability”. The Complainant’s counsel argued that while the initial agreement was for a job, the complaint was based on the cheque issued subsequently, which created a different cause of action. This reasoning sought to isolate the cheque from the tainted origin of the transaction. However, the High Court focused intently on the nature of the underlying consideration. The Complainant’s own complaint and the testimony of his witnesses unequivocally stated that the amount was given to the Accused for securing a conductor job in a Government entity. The court rightfully acknowledged that such a payment, made to secure a public office or government employment, is essentially a bribe and is inherently opposed to public policy.
Interlinking the Negotiable Instruments Act and Contract Law
This critical juncture seamlessly interlinked the criminal provisions of the NI Act with the fundamental principles of the Indian Contract Act, 1872. The court referred to Section 23 of the Contract Act, which declares the consideration or object of an agreement as unlawful if it is “opposed to public policy”. An agreement whose object or consideration is unlawful is expressly declared void.
The transaction in this case perfectly mirrored Illustration (f) to Section 23, which provides a “fitting answer” to the issue: “A promises to obtain for B an employment in the public service and B promises to pay 1,000 rupees to A. The agreement is void, as the consideration for it is unlawful”. Since the Rs. 3 lakhs was given as an illegal gratification for a public job, the initial agreement was void and did not create any legal rights or obligations. A cheque issued to discharge an amount arising from a void and illegal transaction cannot, by its very nature, be for the discharge of a legally enforceable debt as required by Section 138 of the NI Act.
Furthermore, the Court invoked the legal maxim “in pari delicto potior est conditio possidentis,” which translates to “in equal fault, the condition of the possessor is better”. This doctrine is applied when both parties are equally at fault in an immoral or wrongful act, and the court will refuse to assist either party. By engaging in a transaction for job-for-cash, the Complainant was considered equally culpable, and therefore, the law would not help him recover the money.
A similar point of law was dealt with in the Delhi High Court case of Virender Singh v. Laxmi Narain and another3, which was relied upon by the Accused’s counsel and extracted in the judgment. In that case, money was paid to secure a job in the Haryana Police, and a subsequent dishonoured cheque led to a Section 138 complaint. The rationale applied there was precisely the same: “Neither party is a victim of exploitation. Both had voluntarily and by their free will joined hands to flout the law”. Because the parties were in pari delicto, the money could not be recovered in a court of law, meaning there was no legally enforceable debt or liability, and consequently, Section 138 of the said Act would not be attracted.
Conclusion
The Madras High Court upheld the acquittal, finding that the trial court was correct in its decision. The case firmly establishes that the presumption of liability under the Negotiable Instruments Act is immediately rebutted when the underlying consideration for the debt is demonstrated to be unlawful or opposed to public policy under the Indian Contract Act. The law, in its essence, refuses to become an instrument for enforcing illegal gratifications, making the cheque a worthless piece of paper in the eyes of justice.
Citations
- P. Kulanthaisamy v. K. Murugan and another Crl.A.(MD)No.758 of 2022
- Tamil Nadu State Transport Corporation
- Virender Singh v. Laxmi Narain and another Criminal Rev. P. 106 of 2005
Expositor(s): Adv. Archana Shukla
