DON AYENGIAversusTHE STATE OF ASSAM & ANR

                          [2016] I S.C.R. 405



                             DON AYENGIA                                      A
                                    v.

                  Tl-IE STATE OF ASSAM & ANR.
                (Criminal Appeal Nos. 82-83of2016)
                          JANUARY 28, 2016                                    B

        (T.S. THAKUR, CJl AND KURIAN JOSEPH, J.]
      Negotiable J11str11me11ts Act. 1881: s.138 - Dishonour of'
cheque - C'o1111Jlai11ant entere(f into an agree111e11t }Or construction
of' building ll'ith 011e 'N' a11d paid him Rs. JO /akhs -Agree111ent did
                                                                              c
no/ materialise and was ca11celled i11 terms <Jf' promissory note
executed by 'N 'in.fi11·our <?fcomplainant - Pro111issorv note stipulated
promise lO plly Rs. I 0 lakh.1· within one mont /1 and f11rther the c/a11se
that the amount was being re.fimded by the executant in terms <~f
fire post dated cheques - Promissory note fio·ther stipulated that
the cheques ll'ere being issued as a security and shall be returned           D
to 'N' when the l/mou11t of'Rs.111 /akhs is paid by him 1l'ithi11 a period
()f one month - Interest was also promised to be paid 011 Rs. I 0 lakhs
- Pay111ent not nuffle 1l'ithi11 the prescribed tilne - Pre.-.;entation o.l
cheques after expiry of period of 011e 111onth - Dishonour of cheques
- Respondent no.2 appeared at this stage and indemnified the
                                                                              E
co1111Jlai11a11t by ack1101l'/edging that the cheques in question i1•ere
actually issued by him and handed over to 'N' - Cheq11es were again
presented and got dishonoured - Co111pllli11t agaiust responde111 no.2
and 'N' - 'N' e.,pired n1ewlll'hile - Ti'ill/ court found respo11de11t
no.2 guilty - High Court set aside the conriction - Held: The
promissory note executed by 'N · co111ai11ed <Ill unequi\'Oclll               F
acknowledgmenl <Jf 1101 only the debt/liability but promised to
liquidate the same ll'ilhin one molllh ll'ith interest al the hank rate -
Five cheques handed over ll'ere to be returned but onlr upon parmenl
of the amow11 in question - Such being the fact situation. it cannot
be said that the cheques had nothing to do ll'ilh any debt or other
                                                                              G
liability - Thus, there 11·as direct relationship be/ll'een the liability
am! the cheques issued in connection there1l'ith - The endorsement
 made by the respondellt 011 the promiss01:v note that the cheques
can be presented for encaslunent after a m0111h clearz)' sholl's thlll
 the cheques issued by hi111 ll'ere not ornamental but ll'ere meall/ to
                                                                              1-1
                                    405
406                  SUPREME COURT REPORTS                  [2016] l S.C.R.


 A    be presented if the amount in question was not paid within the.
      extended period - High Court fell in error in upsetting the conviction
      recorded by the Courts below.
              Disposing of the appeals, the Court
          HELD: 1. The execution of the Promissory Note and the
 B endorsement made by the Respondent was satisfactorily proved
   at the trial. Concnrrent findings recorded by the trial court and
   the first appellate court to that effect conclude the factual part of
   the controversy. The only question that survives in the above
   background is whether the cheques issued by the Respondent
 c were   meant to discharge, in whole or part, "any debt or other
   liability" within the meaning of Section 138 of the Negotiable
   Instruments Act, 1881. The facts showed that 'N' had received
   Rs. 10 lakhs from the complainant in connection with the
   agreement executed between the two. That upon termination of
   the agreement, the amount paid to 'N' was refundable to the
 D complainant and that 'N' had agreed to refund the same within
   one month. The promissory note executed by 'N' contained an
   unequivocal acknowledgment of not only the debt/liability
   aforementioned but promised to liquidate the same within one
   month with interest at the bauk rate. Five cheques handed over
 E were   to be returned but only upon payment of the amount in
   question. Such being the fact situation, it cannot be said that the
   cheques had nothing to do with any debt or other liability. The
   cheques were post dated, only to give to the drawer the specified
   one month's time to pay the amount. There is thus a direct
    relationship between the liability and the cheques issued in
 F connection therewith. 'rhus far there is no difficulty. The difficulty
   arises only because the promissory note uses the words "security"
   qua the cheques. This would ordinarily and in the context in
    which the cheques were given imply that once the amount of Rs.
    10 lakhs was paid, the cheques shall have to be returned. There
 G would be no reason for their retention by the complainant or for
    their presentation. In case, however, the amount was not paid
    within the period stipulated, the cheques were liable to be
    presented for otherwise there was no logic or reason for their
    having been issued and handed over in the first instance. If non-
    payment of the agreed debt/liability within the time specified also
 H
       DON AYENGIA v. THE STATE OF ASSAM & ANR.                          407


did not entitle the holder to present the cheques for payment,           A
the issue and delivery of any snch cheques would be meaningless
and futile if not absurd. It was not a case where no debt or liability
was determined or acknowledged to be payable. If cheques were
issued in relation to a continuing contract or business where no
claim is 8'ade on the date of the issue nor any determinate amount
                                                                         B
payable to the holder, one could perhaps argue that the cheques
cannot be presented or prosecution launched on a unilateral claim
of any debt or liability. The present is, however, a case where
the existence of the debt/liabjlity was never in dispute. It was on
the contrary acknowledged and a promise was made to liquidate
the same within one month. Failure on the part of the debtor to          c
do so could lead to only one result, viz. presentation of the cheques
for payment and in the event of dishonour, launch of prosecution
as has indeed happened in the case at hand. The endorsement
made by the respondent on the promissory note that the cheques
can be presented for encashment after 25-09-2007 clearly shows
                                                                         D
that the cheques issued by him were not ornamental but were
meant to be presented if the amount in question was not paid
within the extended period. The High Court fell in error in
upsetting the conviction recorded by the Conrts below. [Paras
10 to 12] (411-B-H; 412-A-E]
      CRIMINAL APPELLATE JURISDICTION: Criminal Appeal No.               E
82-83 of2016
       From the Order dated 02-04-2014 by the Gauhati High Court at
Gauhati at Gautiati in Criminal Appeal No. 10 of 2012 and Crl. Rev.
Petition No. 41 of2012
                                                                         F
      Parthiv K. Goswami, Yashuvardhan Singh, Diksha Rai, for the
Appellants.
      Navnit Kumar, Apeksha Saran, M/s. Corporate Law Group, Manoj
Goel, Shuvodeep Roy, for the Respondents.
      The Judgment of the Court was delivered by                         G
      T.S. THAKUR, CJI. I . Leave granted.
       2. These appeals arise out of a judgment and order dated 2"'
April, 2014 passed by the High Court of Assam, Nagaland, Mizoram
and Arunachal Pradesh at Guwahati in Criminal Appeal No. I 0 and
                                                                         H
408                   SUPREME COURT REPORTS                    [2016] I S.C.R.



 A    Criminal Revision No.41 both of the year 2012 whereby the High Cou11
      has allowed the Criminal Revision No.41 of 2012 and set aside the
      conviction of respondent Haren Mudoi under Section 138 of the
      Negotiable Instruments Act, 1881 and dismissed Criminal Appeal No. I 0
      of2012 filed by the Complainant/Appellant.

 B          3. The Complainant/Appellant in these appeals is a partner in M/
    s. Ayaan Consortium. He entered into an agreement with one Nazimul
    Islam for construction of a multi-storeyed building over a certain parcel
    ofland. It is not in dispute thatthe Complainant/Appellant paid to Nazi mu I
    Islam in connection with the said agreement a sum of Rs. I 0,00,000/-
    (Rupees Ten Lakhs only). It is also not in dispute that the agreement did
 c not materialise in the execution of the work in question with the result
    that the same was cancelled in terms of a Promissory Note dated 13'"
    August, 2007 executed byNazimul Islam in favour of the Complainant/
    Appellant. The Promissory Note, apart from cancelling the agreement,
    promised to pay to the Complainant/Appel !ant the amount of Rs. I 0.00,000/
 D - received by the executant Nazimul Islam within a period of one month
    from the date the Promissory Note was executed. What is important is
    that the Promissory Note further stipulated that the amount of
    Rs. I 0,00,000/- was being refunded by the executant in terms of five
    post-dated cheques dated 5'" September, 2007, 7"' September, 2007, 9"'
    September, 2007, 11'" September, 2007 and 13'" September, 2007, the
 E receipt whereof was acknowledged by the Complainant/Appellant. The
   'Promissory Note, at the same time, somewhat contradicted itself when
    it mentioned that the cheques were being issued as a security and shall
    be returned to Nazimul Islam when the amount of Rs. I 0,00,000/- is paid
    by him within a period of one month. Interest at the bank rates was also
 F promised to be paid on the said amount of Rs. I 0,00,000/-.
            4. The cheques so received by the Complainant/Appellant appear
      to have been presented for payment after the expiry of the period of one
      month stipulated for the return of the amount when no such return was
      made to the Complainant/ Appellant. All the cheques were, however,
 G    dishonoured by the bank on the ground of insufficiency of funds. A second
      presentation also proved abortive for the same reason. It was at this
      stage that Respondent No.2-Haren Mudoi appeared on the scene and
      indemnified the Complainant/Appellant by acknowledging that the
      cheques in question were actually issued by him and handed over to
      Nazimul Islam. This acknowledgment was reflected in the form of an
 H
        DON AYENGIA v. THE STATE OF ASSAM & ANR.                              409
                   [T.S. THAKUR, CJI.]

endorsement on the Promissory Note in which he agreed to the cheques          A
being presented for payment after 25'" September, 2007. The
Complainant/Appellant accordingly once again presented the cheques
fo_r payment on 5'" November. 2007 but the same were dishonoured by
the bank for the third time. This led to the issue of a statutory notice by
the Complainant/ Appellant to which the Respondent sent a reply through
                                                                              B
the lawyer denying that he had any knowledge of handing over of all the
cheques to the Complainant/Appellant by Nazimul lslam and also about
the dishonour of the cheques due to insufficiency of funds. What is
significant is that, in the reply, the Respondent undertook to pay the
whole amount of Rs. I 0,00,000/- by the second week of January, 2008
by issuing fresh cheques.                                                     c
       S. A complaint under Section 138 of the Negotiable Instruments
Act, 1881 was in the above backdrop filed by the appellant against both
Nazimul Islam and Haren Mudoi. Since Nazimul Islam had, in the
meantime, passed away, proceedings against ·him abated but the trial
cou1t found the Respondent guilty and accordingly convicted him for the       D
offence punishable under Section 138 of the Negotiable Instruments
Act. 1881 and sentenced him to undergo simple imprisonment for a period
of one year. In addition, the trial court awarded compensation to the
Complainant/ Appellant in a sum of Rs.12,00,000/- to be paid within a
period of three months.
                                                                              E
       6. Aggrieved by the judgment and order passed by the trial court.
the Respondent preferred Criminal Appeal No.9of2010 before Additional
Sessions Judge, Kamrup at Guwahati, who, while upholding the conviction
of the Respondent modified the sentence awarded to him to payment of
a fine ofRs.2,000/- (Rupees Two Thousand only) and, a defau It sentence
of imprisonment for a period of one month, in addition to the amount of       F
compensation awarded by the trial court. The sentence of imprisonment
was, in that view, set aside by the appellate court.
       7. Criminal Appeal No. I 0 of 2012 and Criminal Revision No.4 I
of2012 were then filed before the High Court at Guwahati by the parties.
While Criminal Appeal No.10 of2012 was filed by the Complainant/              G
Appellant, Criminal Revision No.41 of2012 challenged the conviction of
the Respondent by the trial cou1t and atlirmed by the Appellate Court
for an offence under Section 138 of the Negotiable Instruments Act,
1881. The High Court has, as seen earlier, set aside the conviction of
the Respondent and allowed Criminal Revision No.41 of 2012 while              H
410                       SUPREME COURT REPORTS                   [20 I 6J I S .C.R.


 A        dismissing Criminal Appeal No. I 0 of20 I 2 in terms of the judgment and
          order impugned in the present appeals.
                 8. We have heard learned counsel for the parties at some length
          who have taken us through the orders passed by the courts below. We
          may at the outset gainfully extract Promiswry Note dated 13'h August,
 B        2007 executed by Nazimul Islam in favour of the complainant in which
          the deceased Nazimul Islam had acknowledged his liability to refund the
          amount of Rs. I 0,00,000/- received by him from the Complainant/Appellant
          in this appeal. The Promissory Note was in the following words:
                  '"PROMISSORY NOTE Dated 13.8.2007
 c              I Shri Nazimul Islam s/o Late Sirajul Islam resident of Bishnu
                Rabha Path Be/tola do hereby declare that after mutual
                discussion between us (the parties) as per agreement dated
                06107107 have decided to cancel the said agreement and as
                such the advance amount qf Rs. l 0, 00, 0001- (Rupees Ten Lakhs
 D              only) shall be refunded within a period of one month from
                today. The amount is being refunded vide cheques Nos.
                 191254 dated 05.09.2007, 191255 daled 07.09.2007, 191256
                dated 09.09.2007, 191257 dated 11.09.2007 and cheque
                 No.191258 dated 13.09.2007 which has been acknowledged
                 by Mr. Dhan Ayengia, residenl of Nabagrah Road, Guwahati.
  E              It may here be mentioned that these cheques have been issued
                 as a security and shall be returned to me as and when the
                 payments are received from me, within the mentioned period.
                 Further it may be also be mentioned that one monlh s bank
                 interest shall be paid by me, after tM payment is cleared,
  F              within the stipulated period.
                                                       (Nazimul Islam) 13.8.2007"
                 9. We may also extract, at this stage, the endorsement which the
           Respondent made on the Promissory Note acknowledging that the
           cheques handed over to the Complainant/Appellant herein were actually
     G     issued by him and agreeing thatthe same may be presented for payment
           after 2S'h September, 2007. The endorsement was in the following
           manner:
                  "The above cheques are issued by me to Nazimul Islam to
                  deliver to Mr. Don Ayengia the cheques are already been
      H           bounce. Now, we have requested Mr. Dona Ayengia to
        DON AYENGIA v. THE STATE OF ASSAM & ANR.                                 411
                   [T.S. THAKUR, CJI.]

       represent the cheques after 25. 09. 2007 to contact me.                   A
       15. 09. 2007
                                                   (H.Mudoi)"
       10. ft is not in dispute that the execution of the Promissory Note
and the endorsement made by the Respondent has been satisfactorily
proved at the trial. Concurrent findings recorded by the trial court and         B
the first appellate court to that effect conclude the factual part of the
controversy. The only question that survives in the above background is
whether the cheques issued by the Respondent were meant to discharge,
in whole or part, "arty debt or other liability" within the meaning of Section
138 of the Negotiable Instruments Act, 1881.
                                                                                 c
        11. We have no hesitation in answering that question in the
affirmative. The facts as narrated above and as held proved by the trial
Court and the appellate court, leave no manner of doubt, that Nazimul
Islam had received an amount of rupees ten lakhs from the complainant
in connection with the agreement executed between the two. It is also
not in dispute that upon termination of the agreement, the amount paid to        D
Nazimul Islam was refundable to the complainant and that Nazimul Islam
had agreed to refund the same within one month. The promissory note
executed by Nazimul Islam contained an unequivocal acknowledgment
of not only the debt/liability aforementioned but promised to liquidate the
same within one month with interest at the bank rate. Five cheques               E
handed over were to be returned but only upon payment of the amount
in question. Such being the fact situation, it cannot be said that the cheques
had.nothing to do with any debt or other liability. As a matter of fact, the
existence of the debt or liability was never in dispute. On the contrary, it
was acknowledged by Nazimul Islam who simply sought one month's
time to pay up the amount. The cheques were post dated, only to give to          F
the drawer the specified one month's time to pay the amount. There is
thus a direct relationship between the liability and the cheques issued in
connection therewith. Thus far there is no difficulty. The difficulty
arises only because the promissory note uses the words "security" qua
the cheques. This would ordinarily and in the context in which the cheques       G
were given imply that once the amount of rupees ten lakhs was paid, the
cheques shall have to be returned. There would be no reason for their
retention by the complainant or for their presentation. In case, however,
 the amount was not paid within the period stipulated, the cheques were
 liable to be presented for otherwise there was no logic or reason for
                                                                                 H
412                    SUPREME COURT REPORTS                    [2016] I S.C.R.


 A    their having been issued and handed over in the first instance. If non-
      payment of the agreed debt/liability within the time specified also did not
      entitle the holder to present the cheques for payment, the issue and
      delivery of any such cheques would be meaningless and futile if not
      absurd. It is important to note that it was not a case where no debt or
      liability was determined or acknowledged to be payable. If cheques
 B
      were issued in relation to a continuing contract or business where no
      claim is made on the date of the issue nor any determinate amount payable
      to the holder, one could perhaps argue that the cheques cannot be
      presented or prosecution launched on a unilateral claim of any debt or
      liability. The present is, however. a case where the existence of the
 c    debt/I iability was never in dispute. It was on the contrary acknowledged
      and a promise was made to liquidate the same within one month. Failure
      on the part of the debtor to do so could lead to only one result, viz.
      presentation of the cheques for payment and in the event of dishonour,
       launch of prosecution as has indeed happened in the case at hand.
 D          12.The argument that the respondent had no liability to liquidate
    the debt owed by Nazimul Islam, has not impressed us. What is impo1tant
    is whether the cheques were supported by consideration. Besides the
    fact that there is a presumption that a negotiable instrument is supported
    by consideration there was no dispute that such a consideration existed
     in as much as the cheques were issued in connection with the discharge
  E of the outstanding liability against Nazimul Islam. At any rate the
    endorsement made by the respondent on the promissory note that the
    cheques can be presented for encashment after 25-09-2007 clearly shows
    that the cheques issued by him were not ornamental but were meant to
     be presented if the amount in question was not paid within the extended
  F period. The High Court in our view fell in error in upsetting the conviction
     recorded by the Courts below who had correctly analysed the factual
     situation and applied the law applicable to the same.
             13. In the result, we allow these appeals and set aside the order
      passed by the High Court to the extent it allowed Criminal Revision
  G   No.41 of2012 filed by the respondent. Consequently the order passed
      by the appellate court shall stand restored. We. however. do not sec any
      reason to interfere with the order passed by the High Court to the extent
      it dismissed Criminal Appeal No. I0 of2012. No costs.
      Dcvika Gujral                                            Appeals disposed of.

  H