Cheque Issued To Repay Bribe Money Not Legally Enforceable Debt U/S. 138 Of Negotiable Instruments Act: Madras High Court
The High Court held that a cheque issued to return money paid as an illegal gratification cannot constitute a legally enforceable debt under Section 138 of the Negotiable Instruments Act, since such an agreement is void ab initio and opposed to public policy.
Justice K. Murali Shankar, Madras High Court, Madurai Bench
The Madras High Court has ruled that repayment of an amount paid as illegal gratification cannot give rise to a legally enforceable liability under the Negotiable Instruments Act.
The High Court clarified that an agreement founded on unlawful consideration, such as payment for securing a government job, is void under Section 23 of the Indian Contract Act, 1872.
The Court was hearing a criminal appeal filed under Sections 372 and 378 of the Code of Criminal Procedure challenging the acquittal of the accused by a Fast Track Judicial Magistrate Court, in a complaint under Section 138 of the Negotiable Instruments Act.
A Bench comprising Justice K. Murali Shankar, while observing that under the Indian Contracts Act a void agreement cannot be enforced by the Court law and does not create any legal rights or obligations between the parties”, held: “The agreement to secure a job in exchange for money is opposed to public policy, rendering it void ab initio, i.e., from the very beginning. Consequently, Section 65 of the Indian Contract Act is inapplicable. This scenario falls squarely within the illustration to Section 23 of the Indian Contract Act, which renders such agreements unlawful”.
Advocate M. Mariya Vinola appeared for the appellant-complainant, while Advocate K. Sudalaiyandi and B. Thanga Aravindh, Government Advocate, appeared for the respondents.
Background
The complainant alleged that the accused, who was employed in the Tamil Nadu State Transport Corporation (TNSTC), had demanded ₹3 lakhs to secure a conductor’s job for him through his influence in the labour union. Believing the representation, the complainant paid the amount. When the job was not arranged, the accused issued two cheques to return the money, both of which were dishonoured — the second for insufficiency of funds.
The complainant then initiated prosecution under Section 138 of the NI Act after issuing a statutory notice, which went unanswered. The trial court, upon examining the evidence, acquitted the accused, holding that the cheque was not issued towards the discharge of a legally enforceable debt.
The complainant appealed, contending that the debt was distinct from the initial agreement and that the cheque issued later gave rise to a new cause of action.
Court’s Observation
The Madras High Court noted that both the complaint and oral evidence clearly established that the payment of ₹3 lakhs was made to obtain a government job, which constituted an unlawful consideration. Relying on Section 23 of the Indian Contract Act, the Court reiterated that an agreement with an unlawful object or consideration is void and unenforceable.
Referring to the doctrine “in pari delicto potior est conditio possidentis” (in equal fault, the condition of the possessor is better), the Court explained that when both parties voluntarily engage in an illegal transaction, neither can seek assistance from the legal system. The Bench held that Section 138 of the NI Act applies only to legally enforceable debts or liabilities, and not to obligations arising from void or immoral agreements.
Citing Virender Singh v. Laxmi Narain (2007), the Court endorsed the principle that when money is paid for securing a government post, it is tantamount to a bribe, and any cheque issued to repay such money cannot be enforced in law.
The Bench further discussed Section 65 of the Indian Contract Act, observing that restitution applies only where an agreement is later discovered to be void, not where it is void from inception. The Court held that “where the agreement was void and the parties knowingly entered into such a void agreement, the parties cannot claim restitution.”
Conclusion
The Court concluded that since the complainant’s claim was based on money paid for an unlawful purpose, there existed no legally enforceable debt or liability.
Holding that the trial court had correctly acquitted the accused, the High Court observed that “the impugned judgment acquitting the accused is perfectly legal and deserves no interference.” The appeal was therefore dismissed as devoid of merit.
Cause Title: P. Kulanthaisamy v. K. Murugan & Another
Appearances
Appellant: Advocate M. Mariya Vinola
Respondents: Advocate K. Sudalaiyandi, B. Thanga Aravindh, Government Advocate