Case Summary: Smt. Anupama Biswal v. State of Odisha & Another (2025) | Doctrine of In Pari Delicto

The present case arises out of an application under Section 482 of the Code of Criminal Procedure, 1973 (Cr.P.C.) filed by the petitioner, Smt. Anupama Biswal before the High Court of Orissa at Cuttack, seeking the quashing of the criminal complaint filed under Section 138 of the Negotiable Instruments Act, 1881 (N.I. Act). The complaint, registered as ICC Case No.208 of 2021, was initiated by the opposite party No. 2 for the alleged dishonour of two cheques issued by the petitioner.

The petitioner argued that the cheques were not issued to discharge a legally enforceable debt and, therefore, the complaint under Section 138 of the N.I. Act was not maintainable. The central issue in this case was whether the debt arising from an illegal transaction — payment for securing a medical college seat — constituted a legally enforceable debt under Section 138 of the N.I. Act.

Case Title: Smt. Anupama Biswal v. State of Odisha & Another

Citation: CRLMC No. 3881 of 2023

Court: High Court of Orissa at Cuttack

Bench: The Honourable Shri Justice Sibo Sankar Mishra

Date of Judgment: 04 March 2025

Facts of the Case

1. The dispute arose from a financial transaction between the son of the petitioner and the opposite party No. 2 (complainant).
2. The complainant alleged that on the assurance given by the petitioner’s son to arrange a seat for the complainant’s son in a Government Medical College, the complainant had given a substantial amount of cash to the petitioner’s son.
3. The petitioner’s son, however, failed to secure the promised admission to the Government Medical College.
4. Subsequently, the complainant demanded a refund of the money paid.
5. To discharge the alleged liability created by her son, the petitioner issued two cheques from her bank account in favour of the complainant.
6. On presentation, the cheques were dishonoured by the bank due to insufficient funds.
7. The complainant issued a statutory notice under Section 138 of the N.I. Act, demanding payment.
8. Since the petitioner failed to repay the amount within the stipulated time, the complainant initiated criminal proceedings under Section 138 of the N.I. Act.

Issue

Whether a cheque issued for an illegal transaction constitute a legally enforceable debt under Section 138 NI Act?

Legal Proceedings and Arguments

(A) Petitioner’s Arguments

The petitioner, represented by Mr. Dipti Ranjan Mohapatra, argued for quashing the criminal complaint primarily on the following grounds:

No Legally Enforceable Debt

The cheque was issued to discharge a debt arising from an illegal transaction — securing admission in a medical college through illegal means — which is against public policy.

An illegal debt or a debt arising out of an immoral consideration cannot be treated as a legally enforceable debt under Section 138 of the N.I. Act.

Doctrine of Pari Delicto

The parties were in pari delicto (in equal fault) since the complainant willingly participated in an illegal transaction. The courts should not enforce illegal contracts or debts arising from such transactions. Relying on the doctrine of ex turpi causa non oritur actio (no action arises from an immoral cause), the petitioner argued that the cheque was not enforceable as the underlying transaction was illegal.

Judicial Precedents

The petitioner’s counsel relied on multiple judgments to support the argument that debts arising from illegal or immoral transactions are not legally enforceable:

N.V.P. Pandian v. M.M. Roy (AIR 1979 Mad 42) – Held that money paid to secure admission to a medical college is against public policy and is not recoverable in law.

Virender Singh v. Laxmi Narain (MANU/DE/9709/2006) – Held that where the underlying transaction is illegal, the presumption of a legally enforceable debt under Section 138 of the N.I. Act does not apply.

R. Parimala Bai v. Bhaskar Narasimhaiah (2018 SCC OnLine Kar 3989) – Held that money paid for securing a job was illegal and unenforceable under Section 138 of the N.I. Act.

Jeyaramachandran v. Babu @ A.M.Iqbal (Crl.A.Nos 534 & 535 of 2013)– Affirmed that the doctrine of in pari delicto applies to illegal transactions and debts arising from such transactions are not legally enforceable.

(B) Respondent’s Arguments

The complainant, represented by Mr. Lalit Sahu, opposed the quashing petition on the following grounds:

Presumption of Legally Enforceable Debt

Under Section 139 of the N.I. Act, once a cheque is issued and dishonoured, there is a statutory presumption that the cheque was issued in discharge of a legally enforceable debt.

The burden was on the petitioner to rebut this presumption during the trial, not at the quashing stage.

Maintainability of Complaint

The complaint under Section 138 of the N.I. Act was legally maintainable as the petitioner had admitted to issuing the cheques.

Whether the underlying transaction was illegal could only be determined after a full trial.

Simultaneous Prosecution Under Section 420 IPC

The complainant cited the judgment in Fayaz Ahmad Sheikh & Another v. Mushtaq Ahmad Khan & Another (Jammu & Kashmir High Court) to argue that prosecution under Section 138 of the N.I. Act and Section 420 of the IPC could run simultaneously as the ingredients of both offences are distinct.

Legal Analysis by the Court

Justice Sibo Sankar Mishra conducted a detailed legal analysis based on statutory provisions and judicial precedents:

1. Section 138 of the N.I. Act: The Court explained that for an offence under Section 138 of the N.I. Act to be established, the cheque must have been issued to discharge a legally enforceable debt. The Court relied on the statutory explanation under Section 138, which defines “debt or other liability” as a legally enforceable debt.
2. Public Policy and Illegality: The Court held that a debt arising out of an illegal transaction (securing admission to a medical college through unfair means) cannot be treated as a legally enforceable debt. The doctrine of ex turpi causa non oritur actio was applied — no action can arise from an immoral or illegal act.
3. In Pari Delicto Doctrine: Both the petitioner’s son and the complainant were equally involved in the illegal transaction. Since both parties were at equal fault, the court could not allow the complainant to recover the money.
4. Presumption Under Section 139 N.I. Act: The Court held that the presumption under Section 139 is rebuttable. Since the petitioner demonstrated that the underlying debt was illegal and immoral, the presumption stood rebutted.
5. Judicial Precedents: The Court followed the judgments of the Supreme Court and various High Courts, which consistently held that debts arising from illegal or immoral transactions are not enforceable under the N.I. Act.

Judgment

The High Court held that the debt was created by the illegal act of securing admission through unfair means. The cheques were issued to discharge an illegal debt and were, therefore, not enforceable under Section 138 of the N.I. Act. The Court quashed the complaint under Section 138 of the N.I. Act. The opposite party No. 2 was, however, given the liberty to pursue other remedies following the law if any offence is established against the petitioner.

Outcome

• The criminal complaint under Section 138 of the N.I. Act was quashed.
• The High Court reaffirmed the principle that debts arising from illegal or immoral acts are not legally enforceable.
• The complainant was allowed to seek other legal remedies.

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