"Presumption u/s 139 of the NI Act, can't be raised at the initial stages if the complainant is himself relying on an illegal consideration," Delhi Court

Dwarka Court, Delhi has recently held that presumption under section 139 of the Negotiable Instruments Act, cannot be raised at the initial stages if the complainant is himself relying on illegal consideration.

Shipra Dhankar, Metropolitan Magistrate (NI Act), Dwarka Court noted that Reference may also be made to the well established legal maxim “in pari delicito potior est conditio defendantis”, which embodies the principle: “the Courts will refuse to enforce an illegal agreement at the instance of a person who is himself a party to an illegality or fraud”.

Enforcing contracts which are patently illegal would further set a bad precedent and result in the Court becoming a tool for enforcement of illegal debts," Dhankar added.

The matter pertains to a person (accused in this case) who took money to exercise influence in the grant of tender. However, when he Couldn’t succeed, sought to return the money taken through cheques. Whereas, the cheques bounced/got dishonored. In furtherance to which the applicant herein approached the court over the dishonor of cheque.

However, the court observed that "A bare reading of the above facts, as gleaned from the complaint, manifests that the transaction in pursuance of which the cheque was drawn is manifestly illegal and unenforceable."

The Court relied upon the judgment in the case of Virender Singh Vs. Laxmi Narain And Anr wherein it was held that if the consideration or object of an agreement is unlawful, illegal or against the public policy, the agreement itself is void and legally unenforceable; as a result of this, any cheque issued in discharge of liability under such a void agreement, cannot be said to be issued in discharge of a legally enforceable debt or liability. As a result of this, no case u/s 138 of the NI Act would lie in case such a cheque gets dishonored."

Dhankar observed that "The sole purpose of the agreement was to obtain a tender in favour of the complainant, not on the basis of its intrinsic merit, but on the basis of “good links” of the accused with the NTPC higher authorities. Such agreements are expressly rendered void and of no legal consequence by virtue of S.23 of the Indian Contract Act."

Case Title: Virender Dahiya Vs. Keshav Kumar