Full Judgment Text
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PETITIONER:
M/S.ELECTRONICS TRADE & TECHNOLOGYDEVELOPMENT CORPORN. LTD.,
Vs.
RESPONDENT:
DATE OF JUDGMENT: 22/01/1996
BENCH:
RAMASWAMY, K.
BENCH:
RAMASWAMY, K.
G.B. PATTANAIK (J)
CITATION:
JT 1996 (1) 643 1996 SCALE (1)636
ACT:
HEADNOTE:
JUDGMENT:
WITH
CRIMINAL APPEAL NOS. OF 1996
(Arising out of SLP (Crl) Nos.3009-13 of 1992)
O R D E R
Leave granted.
We have heard the counsel on both sides.
The appellant laid the complaints under Section 138 of
the Negotiable Instruments Act, 1881 (for short, ’the Act’)
for dishonor of cheque for insufficiency of the funds in
the accounts of the accused. The complaint of the appellant
read thus:
"The above cheque was presented by the
complainant on 28.1.1990, through their
Bankers M/s. Hyderabad Bank, Sarojini
Devi Road, Secunderabad for realisation,
with the promise by the accused, that
the same will be honored when
presented. However, the said cheque was
dishonoured with the Banker’s
endorsement dated 29.11.1990. "1.
referred to drawer. 2. instructions for
stopping payment and 3. stamped exceeds
arrangements". It is evident from the
Banker’s memo dated 29.11.1990 that the
said cheque was dishonoured by the Bank
for wants of funds only.
On receipt of the intimation dated
29.11.1990 from the Bank, the
complainant has issued a notice on
6.12.1990 to the accused by Registered
Post Acknowledgement Due, informing him
that the cheque dated 30.6 1996 was
dishonoured by their bankers and
demanded payment within 15 days from the
date of receipt of the said notice. The
said notice was received and
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acknowledged by the accused. No Payment
has been made by the accused as required
under Section 138(C) of the Negotiable
Instruments Act. The accused 2 also
stood as a guarantor to the payment of
the complainant, as the proprietor of
M/s. V.V. Rama Rao and Co., Saleemnagar
Colony Hyderabad.
The accused 2 has issued the cheque
knowing fully well that he has no Bank
balance to their credit and he cannot
honour the cheque for want of funds
alone. He has not taken any steps to
honour the cheque and arrange payment as
required under Section 138(C) of the
Negotiable Instruments Act. The
accused has thereby committed the
offence under Section 138 of the
Negotiable Instruments Act. The
dishonesty intention of the accused in
instructing the Bank to stop payment in
evident from the conduct of the accused.
He has instructed their Bank to stop
payment only with the malafide intention
of escaping from the liability under
Section 138 of the Negotiable
Instruments Act. He has so instructed
their Bank so he has no funds to their
credit. Hence the accused is liable for
the offence Under Section 138 of ‘the
negotiable lnstruments Act."
Section 138 of the Act was brought on statute by
Central Act 66 of 1988 w.e.f. April 1, l989 with a view to
penalise the accused in cases of dishonor of certain
cheques for insufficiency of funds in the accounts of the
accused. It reads thus:
"138. Dishonor of cheque for
insufficiency, etc., of funds in the
accounts. - Where any cheque drawn by a
person on an account maintained by him
with a banker for payment of any amount
of money to another person from out of
that account for the discharge, in whole
or in part. of any debt or other
liability, is returned by the bank
unpaid, either because of the amount of
money standing to the credit of that
account is insufficient of the amount of
money standing to the credit of that
account is insufficient to honour the
cheque or that it exceeds the amount
arranged to be paid from that account by
an agreement made with that bank, such
person shall be deemed to have committed
an offence and shall, without prejudice
to any other provision of this Act, be
punished with imprisonment for a term
which may extend to one, or with fine
which may extend to twice the amount of
the cheque, or with both:
Provided that nothing contained in
this section shall apply unless :
(a) the cheque has been presented to the
bank within a period of six months from
the date on which it is drawn or
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within the period of its validity,
whichever is earlier;
(b) the payee or the holder in due
course of the cheque, as the case may
be, makes a demand for the payment of
the said amount of money by giving a
notice in writing, to the drawer of the
cheque, within fifteen days of the
receipt of information by him from the
bank regarding the return of the cheque
as unpaid: and
(c) the drawer of such cheque fails to
make the payment of the said amount of
money to the payee or as the case may
be, to the holder in due course of the
cheque within fifteen days of the
receipt of the said notice.
Explanation. - For the purposes of this
section, "debt or other liability" means
a legally enforceable debt or other
liability."
Explanation to Section 138 amplifies that for the
purpose of the Section, "debt or other liability" means a
legally enforceable debt or other liability.
It would thus be clear that when a cheque is drawn by a
person on an account maintained by him with the banker for
payment of any amount of money to another person out of the
account for the discharge of the debt in whole or in part or
other liability returned by the bank with the endorsement
like (1) in this case, "I refer to the drawer" (2)
"instructions for stoppage of payment" and (3) "stamp
exceeds arrangement", it amounts to dishonor within the
meaning of Section 138 of the Act. On issuance of the notice
by the payee or the holder in due course after dishonor, to
the drawer demanding payment within 15 days from the date of
the receipt of such a notice, if he does not pay the same,
the statutory presumption of dishonest intention, subject
to any other liability, stands satisfied.
Shri Nageswara Rao, learned counsel appearing for the
respondents, contended that stoppage of payment due to
instructions does not amount to an offence under Section 138
and that, therefore, the ingredients in Section 138 have not
been satisfied. We find no force in the contention. The
object of bringing Section 138 on statute appears to be to
inculcate faith in the efficiency of banking operations and
credibility in transacting business on negotiable
instruments. Despite civil remedy, Section 138 intended to
prevent dishonesty on the part of the drawer of negotiable
instrument to draw a cheque without sufficient funds in his
account maintained by him in a bank and induces the payee
or holder in due course to act upon it. Section 138 draws
presumption that one commits the offence if he issues the
cheque dishonestly. It is seen that once the cheque has been
drawn and issued-to the payee and the payee has presented
the cheque and thereafter, if any instructions are issued to
the Bank for non-payment and the cheque is returned to the
payee with such an endorsement, it amounts to dishonor of
cheque and it comes within the meaning of Section 138.
Suppose after the cheque is issued to the payee or to the
holder in due course and before it is presented for
encashment, notice is issued to him not to present the same
for encashment and yet the payee or holder in due course
presents the cheque to the Bank for payment and when it is
returned on instructions, Section 138 does not get
attracted. Under these circumstances, since the accused has
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not made the payment within 15 days from the date of the
receipt of the notice issued by the payee or the holder in
due course, the dishonest intention is inferable from those
facts. Accordingly, the ingredients as contained in Section
138 have been prima facie made out in the complaint. The
High Court, therefore, was wholly incorrect in its
conclusion that the ingredients have not been made out in
the complaint. Tha orders of the High Court quashing the
complaints are illegal. They are accordingly set aside and
the trial Court is directed to disposed of the matters as
expeditiously as possible. It is made clear that we do not
intend to express any opinion on merits.
The appeals are allowed.