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Veera Exports v. T. Kalavathy
Factual and Procedural Background
The respondent issued eight cheques to the appellant for a total amount of Rs 4 lakhs, dated between 9 April 1995 and 30 April 1995. When the cheques were first presented on 15 May 1995 they were dishonoured. According to the appellant, the respondent sought additional time to pay, after which the respondent allegedly changed the dates on the cheques from 1995 to 1996 and endorsed them, asking that they be presented three months later.
The cheques were re-presented on 18 July 1996 and again dishonoured. A statutory notice was issued on 8 August 1996, eliciting a reply on 23 August 1996 in which the respondent claimed she had been forced to alter the dates. The appellant then lodged a complaint under Section 138 of the Negotiable Instruments Act (NI Act).
The respondent filed a petition before the Madras High Court to quash the complaint. By order dated 24 November 2000, the Single Judge quashed the proceedings, leading to the present appeals before the Supreme Court.
Legal Issues Presented
- Whether alteration of cheque dates to “revalidate” a cheque beyond its six-month currency period renders the instrument void under Section 87 of the NI Act.
- Whether disputed questions of fact concerning voluntary alteration can justify quashing a Section 138 complaint at the pre-trial stage.
Arguments of the Parties
Appellant's Arguments
- The respondent voluntarily changed the dates on the cheques and endorsed them, thereby revalidating the instruments.
- Section 138 proceedings should not be quashed because the respondent’s allegation of coercion is a factual dispute requiring trial.
Respondent's Arguments
- The validity period of a cheque is only six months; once that period expired in October 1995, the cheques became invalid and could not be revived by altering dates.
- The alteration of dates was forced and therefore constituted a material alteration making the cheques void under Section 87 of the NI Act.
Table of Precedents Cited
No precedents were cited in the provided opinion.
Court's Reasoning and Analysis
The Supreme Court characterised the High Court’s reasoning as “entirely fallacious.” It observed that neither the NI Act nor any other law prohibits a drawer from voluntarily revalidating a negotiable instrument. Referring to the text of Section 87, the Court explained that:
- Only an alteration made without the consent of parties renders an instrument void; a drawer who consents to or makes the alteration cannot later rely on Section 87 to avoid liability.
- Whether the alteration was made voluntarily or under coercion is a pure question of fact; such issues must be determined by evidence at trial, not on a petition to quash.
The Court therefore found that the High Court erred in concluding, at the threshold, that the cheques were void or that the complaint lacked merit. It reiterated that the existence of factual disputes precludes quashing under the High Court’s inherent jurisdiction.
Holding and Implications
Holding: The Supreme Court set aside the High Court’s order quashing the complaint and dismissed the respondent’s petition. The IInd Judicial Magistrate, Karur, was directed to proceed with the complaint in accordance with law.
Implications: The decision restores the prosecution under Section 138, emphasising that allegations of material alteration or coercion involve factual determinations unsuitable for adjudication at the quashing stage. No new precedent was created, but the ruling reinforces the principle that factual controversies should be resolved at trial rather than through pre-emptive quashment.
S.N Variava, J.— Leave granted.
2. Heard parties.
3. These appeals are against the judgment of a Single Judge of the Madras High Court by which the criminal proceedings launched by the appellant under Section 138 of the Negotiable Instruments Act have been quashed.
4. Briefly stated the facts are as follows:
The respondent had issued to the appellant 8 cheques, bearing various dates from 9-4-1995 to 30-4-1995, for a sum totalling Rs 4 lakhs. The cheques were presented for payment on 15-5-1995 but were dishonoured. It is the case of the appellant that the fact of dishonour was brought to the notice of the respondent and that the respondent then requested for more time to pay. The appellant claims that they granted her more time to pay. The appellant claims that as the respondent still could not pay the amounts, in January 1996, she changed the date of the cheques from 1995 to 1996. The appellant claims that the respondent also made the necessary endorsement on the cheques at that time. The appellant claims that the respondent then requested the appellant to present the cheques after a period of three months.
5. The cheques were again presented on 18-7-1996 and were dishonoured. A legal notice dated 8-8-1996 was served upon the respondent. The respondent, by her reply dated 23-8-1996, alleged that she had been forced to change the dates against her will. She also took up some other contentions. The appellant then filed a complaint under Section 138 of the Negotiable Instruments Act.
6. The respondent thereafter filed a petition in the High Court of Madras to quash the complaint. By the impugned order dated 24-11-2000, the High Court has quashed the complaint. Hence this appeal.
7. In the impugned judgment it has been held that the defence that the alteration in the date was not made voluntarily was a question of fact which would not constitute a ground for quashing the complaint. However, after so holding correctly, the Court goes on to state that the validity period of a cheque is only 6 months. It was held that the validity period of all the 8 cheques had already expired by October 1995, and then held that once the validity period was over, the cheques could not be revalidated by altering the dates so as to give fresh life to the cheques for another 6 months. It is held that in law, a cheque which has become invalid because of the expiry of the stipulated period could not be made valid by alteration of dates.
8. In our view this reasoning is entirely fallacious. There is no provision in the Negotiable Instruments Act or in any other law which stipulates that a drawer of a negotiable instrument cannot revalidate it. It is always open to a drawer to voluntarily revalidate a negotiable instrument, including a cheque.
9. The High Court has also placed reliance on Section 87 of the Negotiable Instruments Act, which reads as follows:
“87. Effect of material alteration.—Any material alteration of a negotiable instrument renders the same void as against anyone who is a party thereto at the time of making such alteration and does not consent thereto, unless it was made in order to carry out the common intention of the original parties;
Alteration by indorsee.—And any such alteration, if made by an indorsee, discharges his indorser from all liability to him in respect of the consideration thereof.
The provisions of this section are subject to those of Sections 20, 49, 86 and 125.”
The first paragraph of Section 87 makes it clear that the party who consents to the alteration as well as the party who made the alteration are disentitled to complain against such alteration e.g if the drawer of the cheque himself altered the cheque for validating or revalidating the same instrument he cannot take advantage of it later by saying that the cheque became void as there is material alteration thereto. Further, even if the payee or the holder of the cheque made the alteration with the consent of the drawer thereof, such alteration also cannot be used as a ground to resist the right of the payee or the holder thereof. It is always a question of fact whether the alteration was made by the drawer himself or whether it was made with the consent of the drawer. It requires evidence to prove the aforesaid question whenever it is disputed.
10. It is held by the High Court that a change of date is a material alteration which affected the interests of the respondent. It is held that the respondent not being a willing party to the said alteration, the cheques were void as contemplated by Section 87 of the Negotiable Instruments Act. At this stage there is no basis for arriving at such a conclusion. In the earlier part of the impugned judgment it has been correctly held that this is a question of fact. This is a fact which will have to be established on evidence during trial. At this stage the High Court could not have quashed the complaint merely on the basis of an assertion in the reply.
11. Under the circumstances the impugned order is set aside. The petition filed by the respondent stands dismissed. The IInd Judicial Magistrate, Karur shall now proceed with the complaint in accordance with law.
12. The appeal stands disposed of accordingly. There shall be no order as to costs.
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