Case BriefsHigh Courts

Bombay High Court: K.R. Shriram, J., dismissed a criminal appeal filed against the order of the trial court whereby the accused was acquitted of the charge under Section 138 (dishonour of cheque) of the Negotiable Instruments Act, 1881.

The appellant had initiated a complaint under Section 138 against the accused alleging dishonour of cheque issued by him in favour of the appellant. It was alleged that the subject cheque was issued by the accused for payment of outstanding liability in relation to purchase of grapes from the appellant. The accused did not deny the purchase of grapes; he, however, contended that the subject cheque was given only as a security cheque and the outstanding payment was already made in three installments. The accused was tried for the offence as aforesaid. At the conclusion of the trial, the accused was found not guilty and was, therefore, acquitted. Aggrieved, the appellant preferred the instant appeal.

 The High Court reiterated the well-settled law that it is settled law that the important ingredient for the offence punishable under Section 138 is that cheque must have been issued for the discharge in whole or in part of any debt or other liability. If the cheque is not issued for the discharge of any debt or other liability, Section 138 can not be invoked.

Perused the facts of the instant case, the Court found that the appellant, in his cross-examination, had admitted that the cheque issued was only for guarantee. Relying on its earlier decisions, the Court noted that if the cheque is issued only as security for performance of a certain contract or an agreement and not towards the discharge of any debt or other liability, offence punishable under Section 138 is not made out.

Following the aforenoted position of law, and noting the admission of the appellant in his cross-examination, the Court concluded that there could be no other conclusion that the cheque was not issued for the discharge of any debt or other liability. The important ingredient for the offence punishable under Section 138, therefore, was missing.

Moreover, it was found that the appellant had been giving different dates on which the cheque was issued, which shows that he was economical with the truth. Reiterating that a person, who’s case is based on falsehood, has no right to approach the Court, the High Court dismissed the instant appeal. [Shantaram Namdeo Sathe v. State of Maharashtra, 2019 SCC OnLine Bom 4354, decided on 15-11-2019]

Case BriefsHigh Courts

Delhi High Court: Suresh Kumar Kait, J., dismissed a criminal petition wherein the petitioner sought quashing of the summoning order passed by the Metropolitan Magistrate and also the criminal complaint under Section 138 read with 142 of the Negotiable Instruments Act, 1881.

The petitioner represented by Ehraz Zafar, Akash Tyagi and Sataya Anand, Advocates, submitted that the complaint in question was filed on 2-5-2013, however, the cognizance was taken by the court by issuing summons against the petitioner on 17-04-2017. The punishment under Section 138 is two years and the cognizance taken by the trial court is after more than four years. It was contended that, therefore, the complaint was liable to be rejected.

At the outset, the High Court noted the fact remains that the instant was not the case of a warrant. The complaint was filed under Section 138 NI Act which is a summary trial. Relying on the Supreme Court decision in Indra Kumar Patodia v. Reliance Industries Ltd., (2012) 13 SCC 1, the High Court held that, The limitation provided under Section 468 is not applicable,

It was further held that, ”Moreover, the cognizance of the complaint was taken by the CMM concerned, who thereafter marked the case to the trial court concerned. The trial court after going through the contents of the complaint and evidence on record, issued summons. However, it is provided in Section 138 and 142 of the NI Act that the summons shall be issued within the prescribed time.”

In such view of the matter, the Court did not find any merit in the instant petition and, therefore, dismissed the same. [Uma Kant Umesh v. State (NCT of Delhi), 2019 SCC OnLine Del 10754, decided on 22-10-2019]

Case BriefsHigh Courts

Bombay High Court: S.S. Shinde, J. refused to interfere with the order of the Magistrate whereby process was issued against the applicants (directors of the accused company) for the commission of offence under Section 138 read with Section 141 of the Negotiable Instruments Act, 1881.

The complainant’s case was that the accused company had issued a post-dated cheque on their favour on account of payment for supply of certain bio-medical equipment’s. However, on presentation, the said cheque was dishonoured and, therefore, the complainant instituted the current proceedings against the accused company as well as the applicants (directors of the accused company).

The applicants submitted that the Magistrate erred in issuing process against them as he failed to consider that the applicants had, at the time of commission of the offence, already resigned from their offences. Per contra, the complainant rebutted their submission with the help of Section 168 of the Companies Act, 2013 (resignation of directors).

Perusing Section 168, the High Court opined that the said provision make it abundantly clear that, the Director who wishes to resign from his office, has to give notice in writing to the company and the Board shall on receipt of such notice, take note of the same and company shall intimate the Registrar in such manner, within such time and in such form as may be prescribed and shall also place fact of such resignation in the report of the directors laid in the immediately following general meeting of the company provision.

Considering the record of the case, it was noted that although the applicants had forwarded their resignation from the office of Director, however, the same was not yet approved by the Board as contemplated by the section discussed above.

Holding that the documents produced by the applicants cannot be considered as uncontroverted or of unimpeachable character, the Court was of the view that the order of issuance of process against the applicants passed by the Magistrate needs no interference.

In such view of the matter, the Court held the instant criminal application to be devoid of merits and rejected the same. [Kulwant Chauhan v. State of  Maharashtra, 2019 SCC OnLine Bom 2280, decided on 23-09-2019]

Case BriefsHigh Courts

Delhi High Court: Mukta Gupta, J. allowed a petition filed against the order of the trial Judge whereby the petitioner’s complaint filed for the commission of offence under Section 138 (dishonour of cheque) of the Negotiable Instruments Act, 1881, was dismissed for non-prosecution.

The petitioner had advanced a loan to the respondent who defaulted in repaying the same. The cheque given by the respondent for the discharge of the said liability was also dishonoured. After fulfilling the codal formalities, the petitioner filed a complaint under Section 138.

The petitioner along with his counsel was present when the Metropolitan Magistrate issued summons against the respondent. Thereafter, on the next date, counsel for the petitioner was present but Metropolitan Magistrate was not available on account of training, Thereafter, counsel for the petitioner was present and bailable warrants were issued against the respondent. When notice was required to be framed, the case was transferred to another Metropolitan Magistrate. On the subsequent date, none appeared before the Metropolitan Magistrate as the advocates were on strike. On the date of the impugned order, the complaint was dismissed on account of non-appearance on behalf of the petitioner.

The High Court was of the view that the petition ought to be allowed. It was considered that neither the complainant nor his counsel could appear due to strike as mentioned above and that the clerk of the counsel wrongly noted the next date, and therefore the complainant or his counsel could not again appear on the date of the impugned order. In such circumstances of the case, the Court thought it fit to restore petitioner’s complaint on the file of the Metropolitan Magistrate. The petition was accordingly allowed. [Rajeev Kumar v. Gagan Makhija, 2019 SCC OnLine Del 9708, decided on 07-08-2019]

Case BriefsHigh Courts

Kerala High Court: B Sudheendra Kumar, J. allowed the petition and quashed the complaint and further proceedings against the petitioners which were filed by the Respondent 2.

In the instant case, Respondent 2, Branch Manager, had filed a complaint against the petitioners, trustees of a trust, alleging offence under Section 138 of the Negotiable Instruments Act, 1881. Hence, the instant criminal cases had been filed by petitioners, praying for quashing the complaint and further proceedings against them. The Court appointed Advocate Jamshed Hafiz as amicus curiae.

The learned counsel for the petitioners, Shaji Chirayath had argued that no successful prosecution against the petitioners, invoking the provisions under Section 141 of the NI Act, could be sustained, as the “Trust” was not an “association of individuals”. The learned counsel for the Respondent 2, Salil Narayanan K.A. argued that the “Trust” was an “association of individuals” and hence, the petitioners were vicariously liable under Section 141 of the NI Act. The learned amicus curiae, Jamshed Hafiz submitted that the “Trust” will not come within the ambit of “association of individuals” and hence, the provisions of Section 141 of the NI Act could not be made applicable to prosecute the petitioners under Section 138 of the NI Act.

The first issue involved in the instant case was that the “trust” was a body corporate or not. As per the Sections 3,11,13,47 and 48 of the NI Act, it was clear that the trustees were the owners of the property and were bound to maintain and defend all suits for the preservation of the trust. Thus it appeared that the “Trust” was not capable of suing and being sued in a Court of law. Therefore, a “Trust” was not a juristic person and was not like a body corporate, which had a legal existence of its own.

The second issue involved was that the “trust” was an “association of individuals” or not. For this, the Court placed reliance on Ramanlal Bhailal Patel v. State of Gujarat, (2008) 5 SCC 449, in which it was held that an “association of persons/body of individuals” was one in which two or more persons join in a common purpose and common action to achieve some common benefit. As per Section 3 of the NI Act, the trustees do not get benefit out of the trust. Therefore, it could not be said that the trustees were persons joined together for a common action to achieve some common benefit. Since, the common purpose of the “Trust” was not to achieve benefit to the trustees, the “Trust” could not be said to be an “association of persons/body of individuals”.

In view of the above, it was held that the “Trust” was neither a “body corporate” nor an “association of individuals” as provided in the explanation to Section 141 of the NI Act. Therefore, no prosecution against the petitioners, the trustees, invoking the provisions under Section 141 of the NI Act could be maintained. Consequently, no successful prosecution against the petitioners, invoking the provisions of Section 141 of the NI Act, could be sustained as the petitioners did not sign the cheque involved in the instant case. The complaint and further proceedings against the petitioners in the instant case were quashed.[N.M. Nabeesa v. State of Kerala, 2019 SCC OnLine Ker 2481, decided on 06-02-2019]

Case BriefsHigh Courts

Delhi High Court: Sunil Gaur, J. allowed a petition filed against the order of the trial court whereby it had passed summoning orders against the petitioners in a complaint filed for committing of an offence under Section 138 (dishonour of cheque) of the Negotiable Instruments Act, 1881.

The petitioners, represented by Senior Advocate N. Hariharan with Ashwani Kr. Dhatwalia, Iti Sharma and Kuljeet Rawal, Advocates, prayed for quashing the summoning orders as well as the complaint filed under Section 138. They relied on Indus Airways (P) Ltd. v. Magnum Aviation (P) Ltd.,(2014) 12 SCC 539 for submitting that the cheques in question were security cheques, they disputed that there was no existing debt or liability. Per contra, Ashish Pratap Singh and Deepa Sharma, Advocates appearing for the complainant submitted that the cheques in question were towards an existing liability and were not security cheques.

The High Court referred to Pepsi Foods Ltd. v. Special Judicial Magistrate, (1998) 5 SCC 749 quashed the complaint and the summoning order, as it was found that there were no averments in the complaint on the basis of which a complaint could be maintained. Further, in SMS Pharmaceuticals Ltd. v. Neeta Bhalla, (2005) 8 SCC 89 reiterated that in the case of Section 138, the essential averments are to be made in the complaint. Again, in Omniplast (P) Ltd. v. Standard Chartered Bank, (2015) 15 SCC 693, it was declared that in the absence of requisite pleadings in respect of the transaction concerned, quashing of the complaint of Section 138 NI Act is justified.

In the present matter, after perusing the record, the Court was of the opinion that the necessary ingredients to maintain the complaints in question were lacking, thereby rendering the impugned order unsustainable and so, the continuance of proceedings arising out of the complaints in question would be an exercise in futility. Resultantly, the impugned complaints and the summoning orders were quashed.[Shivom Minerals Ltd., v. State, 2019 SCC OnLine Del 9329, decided on 17-07-2019]

Case BriefsHigh Courts

Bombay High Court: S.S Shinde, J. dismissed a criminal application filed against the order of a Judicial Magistrate thereby issuing process against the applicant for an offence punishable under Section 138 (dishonour of cheque) of the Negotiable Instruments Act, 1881.

The complainant-respondent had alleged that he advanced a loan of Rs 30 lakhs to the applicant, for the repayment of which, the applicant had issued a cheque in his name. However, on presenting the cheque for encashment, it was returned unpaid due to insufficiency of funds. Pursuant thereto, after complying with codal formalities, the complainant filed a complaint against the applicant for the commission of an offence under Section 138 of NI Act. Consequently, the Magistrate issued a process. Aggrieved thereby, the applicant filed the present application under Section 438 CrPC.

The applicant, represented by S.V. Marwadi, Advocate, inter alia, contended that the complaint was filed after the statutory period of limitation has ended. Per contra, S.V. Marwadi, Advocate representing the complainant contended otherwise and supported the impugned order.

The High Court was of the view that to find out whether the complaint filed by the complainant was within the period of limitation or otherwise, appreciation of documents was necessary. Prima Facie, it appeared that the complaint was within limitation, and therefore it could not be concluded at the threshold that the complaint was not maintainable. Similarly, it was held that the other contentions made on behalf of the applicant also required to be appreciated at the trial. In such view of the matter, the Court held that the present application was liable to be dismissed. Orders were made accordingly. [Amit Digvijay Singh v. Gokuldas Jagannath Bhutada, 2019 SCC OnLine Bom 1350, decided on 19-07-2019]

Case BriefsHigh Courts

Kerala High Court: R. Narayana Pisharadi, J. dismissed a petition seeking to quash a complaint filed under Section 142 of the Negotiable Instruments Act, 1881.

The complainant and the accused were close relatives. The accused had borrowed an amount of Rs 35,00,000 from the complainant. The cheque given by the accused to repay the money was dishonored due to insufficient funds. The complainant received intimation of this on 13-02-2014 and he sent a notice regarding the same to the accused on 15-02-2015 which was received by him on 17-02-2014.

The learned counsel for the petitioner, K.B. Pradeep, submitted that no demand for payment of the amount of the cheque was made by the complainant as per the notice sent by him under clause (b) of the proviso to Section 138 of the Act and therefore, the notice was defective and the proceedings initiated against the petitioner pursuant to such notice could not be sustained.

The counsel representing the complainant, K.K. Dheerendrakrishnan, contended that the requirement under clause (b) of the proviso to Section 138 of the Act had been complied with.

The High Court observed that a demand for payment of the amount of the cheque by sending a notice in writing was an essential condition for filing such a complaint was a condition precedent for filing a complaint about an offence under Section 138 of the NI Act. The Court relied on K.R. Indira v. G. Adinarayana, (2003) 8 SCC 300 in which it was held that if no demand for payment of amount was made, the notice would fall short of its legal requirement. The Court, on a perusal of the said notice, found that demand of payment of the amount was made in the notice sent by the complainant. In view thereof, the Court held that the impugned notice was meeting the requirements as under Section 138(b) of the Act. The Court also declined the petitioner’s contention that the notice was defective as the nature of the debt or liability was not mentioned. It was held that there was no statutory mandate that the notice should narrate the nature of debt or liability. All the other pleas of the petitioners were not sustained as they were pertaining to questions of facts and the Court held that it would not express its view on disputed questions of fact in a petition under Section 482 of the Criminal Procedure Code, 1974.

In view of the above, the Court held that the impugned notice met the requirement under Clause (b) of the proviso to Section 138 of the Act and hence the petition to quash the said complaint was dismissed.[B. Surendra Das v. State of Kerala, 2019 SCC OnLine Ker 1624, decided on 20-05-2019]

Case BriefsHigh Courts

Bombay High Court: S.S. Shinde, J. dismissed a writ petition filed against the order of the Magistrate who had directed the petitioner to deposit 20% of the amount of the subject cheques while allowing his application of exemption from appearance on the condition that his Advocate record the plea.

The petitioner was alleged to be a debt of Rs 100 crores due to Aditya Birla Real Estate Fund — the complainant. It was alleged that he had issued 4 cheques in the name of the complainant for discharging the said debt. However, when presented for encashment, the said cheques were dishonoured for insufficiency of funds. After the legal formalities, the complainant registered a complaint under Section 138 (dishonour of cheque) of the Negotiable Instruments Act, 1881. Subsequently, the process was issued by the Magistrate and summons were served on the petitioner. He was, however, not able to appear before the Magistrate due to non-availability of confirmed railway ticket from Gurgaon to Mumbai. But he instructed his Advocate to attend the proceedings and “take appropriate steps in the interest of the petitioner”. The Advocate appeared before the Magistrate and presented an application for personal exemption of the petitioner. The Magistrate passed a conditional order thereby allowing the exemption application on a condition that the Advocate for the petitioner shall record plea on his behalf if the Advocate pleads not guilty then the petitioner shall secure his presence for bail and deposit 20% of the cheque amount as interim compensation within 60 days from the date of the order. The impugned order was passed by the Magistrate in the exercise of his powers under Section 143-A of the NI Act.

Rohan R. Sonawane, Advocate for the petitioner contended that Magistrate erred in passing the impugned order when the petitioner was absent and an exemption application seeking personal exemption for the day was sought on his behalf. Per contra, A.A. Ponda, N. Mndargi, S. Poria and C. Keswani, Advocates for Aditya Birla Real Estate Fund, opposed the present petition.

The High Court referred to several cases of the Supreme Court including Surinder Singh Deswal v. Virender Gandhi, 2019 SCC OnLine SC 739 and Bhaskar Industries Ltd. v. Bhiwani Denim & Apparels Ltd. (2001) 7 SCC 401. It was noted, The magistrate is empowered to record the plea of the accused even when his counsel makes such plea on behalf of the accused in a case where the personal appearance of the accused is dispensed with.” The contention of the petitioner was that no written instructions were given to the Advocate, thereby authorising him to record a plea of the accused. On this aspect, the Court stated: “Under Section 205 CrPC on the first day, the Advocate for the accused can record the plea, for which written application by the accused is not contemplated.”

Note was also taken of the fact that the petitioner filed the present petition near about 2 months from the date of passing the impugned order. The proceedings under Section 138 are required to be disposed of within 6 months keeping in view the mandate of Section 143 of the NI Act and within 3 months from the date of assignment of the case as held by the Supreme Court in Indian Bank Assn. v. Union of India, (2014) 5 SCC 590.

Keeping in view the mandate of Section 143, the Court was of the opinion that the Magistrate was right in passing the impugned order. In such view of the matter, it was held that the petition was liable to be rejected.[Sidharth Chauhan v. Aditya Birla Real Estate Fund, 2019 SCC OnLine Bom 1297, decided on 19-07-2019]

Case BriefsHigh Courts

Bombay High Court: Rohit B. Deo, J. allowed a petition filed against the order of the trial court whereby it had issued process against the accused-petitioners for the offence punishable under Section 138 (dishonour of cheque) of the Negotiable Instruments Act, 1881.

The accused were a company registered under the Companies Act and its Managing Director and Chief Financial Officer. The accused contended that the company was registered with the Board for Industrial and Financial Reconstruction (BIFR), and was declared a “sick unit” on 16-7-2009, and a direction under Section 22-A of the Sick Industrial Companies (Special Provision) Act, 1985, restraining the company from disposing of its assets was issued.

The company entered into certain contracts with the complainant-respondent and issued 12 cheques in complainant’s favour in regard to the said agreements. Subsequently, the complainant presented the cheques for encashment which were dishonoured and therefore after codal formalities, the complaint was filed under Section 138 NI Act. The trial court passed an order issuing process under the said offence. The accused challenged the order of the trial court on several grounds. The thrust of the submissions of Senior Counsel Anil Mardikar, representing the accused was that in view of the decision Kusum Ingots &Alloys Ltd. v. Pennar Peterson Securities Ltd., (2000) 2 SCC 745, the ingredients of offence punishable under Section 138 were not established. This submission was on the premise that in view of the proceedings under SICA and the orders passed by the BIFR therein, the accused were precluded from honoring the cheques, even if it is assumed that the cheques were issued towards satisfaction of the existing and legally enforceable debt.

The High Court noted that in Kusum Ingots, the Supreme Court articulated that if before the date on which the cheque was drawn or expiry of the statutory period of 15 days after notice, a restraint order of BIFR under Section 22-A was passed against the company, then it cannot be said that the offence under Section 138 of the Act was completed. The reasoning of the Supreme Court was that the failure to make the payment would be for reasons beyond the control of the accused and it may also be contended that the amount claimed is not recoverable from the assets of the company in view of the ban order passed by the BIFR.

However, Shilpa Tapdiya, Advocate appearing for the complainant contended the provisions of the Sick Industrial Companies (Special Provisions) Repeal Act, 2003 came into force in 2016, the proceedings pending before the BIFR stood abated in view of the provisions of Section 4(b) of the Repeal Act. The submission was that in view of the repeal, the proceedings initiated under Section 138 of the Act were not barred and no exception could be taken to the order of issuance of process dated 20-04-2018.

The High Court found itself unable to countenance the said submission. It was held: “The statutory immunity available under Section 22 of the SICA Act may not be available w.e.f. 1-12-2016. However, in view of the observations in Para 19 of Kusum Ingots, it must be held that the offence under Section 138 of NI Act was not complete and the order of issuance of process is unsustainable. The offence is not complete, not because there was a statutory bar, but as explained by the Supreme Court, because the directors of the company were prevented by reasons beyond their control from honouring the cheques. The repeal of SICA, cannot breathe life in the complaint which was still born since the offence was not complete as on the date of the issuance of process by the learned Magistrate.”

In view of that the effect of the restraint order under the SICA which was in force prior to the issuance of the cheque, and in any event prior to the expiry of the statutory period and having found merit in the submission that the offence under Section 138 of the NI Act was not complete, it was held that the order of issuance of process was liable to be quashed. Orders were made accordingly.[NRC Ltd. v. Fuel Corpn. of India, 2019 SCC OnLine Bom 1222, decided on 09-07-2019

Case BriefsHigh Courts

Jharkhand High Court: Anil Kumar Choudhary, J. dismissed an interlocutory application praying for grant of special leave under Section 378(4) of the Code of Criminal Procedure against a judgment passed by Judicial Magistrate, Jamshedpur on the grounds of probable violation of the settled principle of law.  

The appellant-complainant granted a friendly loan of Rs 35,000 to accused-respondent 2 which was not paid back and the same was demanded back. The accused-respondent 2 issued a cheque in pursuance of the same demand, however, it was dishonored due to lack of funds in the bank account. Thereafter, a notice was issued which was never acknowledged by the accused-respondent 2 and consequently a complaint under Section 138 of Negotiable Instruments Act, 1881 was filed. The trial court, however, acquitted the accused-respondent 2 by concluding the complaint to be premature. 

Issue: whether there exists a prescribed period for filing a complaint to retrieve loan amount or can the same be done at any time after the issuance of notice. 

The appellant-complainant was represented by Mukesh Kumar Dubey who submitted that the trial court was mechanical in it’s approach and ignored the fact and law. Further, it was contested that the judgment is perverse and hence, the special leave should be granted.  The defense was represented by the Additional Public Prosecutor who submitted that a settled principle of law should not be hampered by such appeals. It was contended that in case of notice is not received by the payee, presumption of notice would be on the 30th day from the date of issuance and only after waiting for the statutory period of 15 days the amount would be payable. Therefore, at the earliest, the complaint can be filed after 45 days from the issuance of notice. It was contested that since the complaint was issued only in 22 days therefore, special leave should not be granted.  

The Court after considering all evidences presented concluded that the trial court acted in consonance with the settled principle of law which required a minimum of 45 days from the issue of notice of demand in case there exists no evidence to suggest receipt of notice by the concerned parties. Further, relying on Subodh S. Salaskar v. Jayprakash M. Shah, (2008) 13 SCC 689, the court affirmed the mandated requirement of 30 days from the date of issuance of notice and held that the complaint is premature. Therefore, special leave was not to be granted. [Shyam Sundar Singh v. State of Jharkhand, 2019 SCC OnLine Jhar 768, decided on 20-06-2019]

Case BriefsHigh Courts

Himachal Pradesh High Court: Vivek Singh Thakur, J. disposed of a petition relating to dishonour of cheques wherein the petitioner wilfully confessed on payment of the remaining amount to the respondent.

In the instant case, the petitioner/accused was convicted by the learned Judicial Magistrate 1st Class, Shimla and had served simple imprisonment for six months and was subjected to payment of a fine amount for dishonour of cheques. The petitioner had borrowed money from respondent which was due from his end. 

The counsel representing the petitioner, Parmod Singh Thakur stated that the amount of compensation that was awarded by the lower court being Rs 65,000, Rs 10,000 of which has been paid by cash and the remaining amount was deposited with the Registry of the High Court in installments and thereby, he intends to compound the matter and not contest the matter any further. The Counsel also submitted that the interest amount was also deposited to the Himachal Pradesh State Legal Services Authority and requested the Court to release the amount deposited in favour of the respondents.

The counsel representing the respondents, Seema Guleria, did not object to the compounding of the case and the compromise arrived and stated that the compromise arrived between the parties was out of the free will and no coercion, pressure, or threat was involved therein.

The High Court took note of the submissions of both the parties and directed the Registry to release the amount in favour of the respondents. The High Court also considered the entire amount deposited by the petitioner and the part amount being handed to the respondents by cash and the 15% of cheque amount payable to the Himachal Pradesh State Legal Services Authority.[Mohan Lal v. Golf Link Finance and Resort Ltd., 2019 SCC OnLine HP 912, decided on 02-07-2019]

Case BriefsHigh Courts

Bombay High Court: K.K. Sonawane, J. dismissed a criminal application filed under Section 432 CrPC seeking relief of quashing the order passed by Additional Sessions Judge directing the applicant to deposit Rs 2 lakhs towards part of the compensation awarded by Magistrate (First Class) while convicting him for an offence punishable under Section 138 (dishonour of cheque) of the Negotiable Instruments Act, 1881.

The applicant was convicted for an offence of dishonour of cheque and he was awarded a sentence 1-year simple imprisonment along with deposition of compensation amounting to Rs 6.5 lakhs. The applicant appealed against the order of the trial court. The Additional Sessions Judge, while admitting his appeal, suspended the sentence of imprisonment and directed him to deposit Rs 2 lakhs as part of the compensation before the next date.

Sharikh Mazhar A. Jahagirdar, Advocate for the applicant contended that the Appellate Court had no jurisdiction to impose the condition of part payment of compensation, pending the appeal. Per contra, M.L. Sangeet, Advocate represented the respondent.

The High Court was of the view that the submissions made on behalf of the applicant were not sustainable. The Court relied on the Supreme Court decisions in Hari Singh v. Sukhbir Singh, (1988) 4 SCC 551Dalmiya Cement (Bharat) Ltd. v. Galaxy Traders & Agencies Ltd., (2001) 6 SCC 463; and Stanny Felix Pinto v. Jangid Builders (P) Ltd., (2001) 2 SCC 416. Considering the law laid down in these cases, the High Court observed that: “it is evident that while suspending the sentence for the offence under Section 138 of NI Act, it is advisable that the appellate Court imposes the condition of deposit of compensation, keeping in mind the provisions of Section 138 of NI Act. When the amount of compensation is heavy, the Court can direct the deposit of a reasonable amount. Only in exceptional cases, the Appellate Court can grant interim protection without requiring a deposit of compensation amount.”

In such view of the matter, finding no reason to interfere in the impugned order, the Court dismissed the application. [Rahul Kisan Khande v. Samir Salim Shaikh, 2019 SCC OnLine Bom 834, decided on 02-04-2019]

Case BriefsHigh Courts

Karnataka High Court: K. Natarajan, J. upheld the decision of the lower courts against the offence under Section 138 of Negotiable Instrument Act, 1881. 

The facts of the case were that the accused availed the credit facility from the complainant board by executing the documents like Hundi Agreement etc. according to which the accused was required to pay the bill amount along with the agreed rate of interest within 90 days. The cheque was thus issued for the payment which was dishonoured for the reason that payment was stopped by the drawer. When no response was given to the legal notice, the complainant lodged the complaint before the Magistrate in which the accused was held guilty and convicted and sentenced to pay fine. 

The appeal was thus preferred before the Fast Track Court (Session) XI, Bengaluru which was dismissed. Thus the revision petition against the same was filed in the aforementioned case.

The learned counsel, G.B Nandish for the petitioner contended that trial court failed to appreciate the evidence on record and the aspects about admission by the complainant witnesses. 

The learned counsel, Abdul Reyaz Khan for the respondent contended that the amount received from the accused were all adjusted in the books and the amount was due for the accused as he has issued the cheque along with the letters. The documents were appreciated by the trial court and held guilty. He, thus, prayed for dismissing the revision petition.  

High Court on noting the submission of the party held that this court cannot re-appreciate the evidence on record when there is concurrent finding of the courts below, unless there is any illegality or error committed by both the courts below which calls for interference by the court. Thus Revision petition was dismissed and accused was held guilty for the offence punishable under Section 138 of NI Act, 1881.[A.K. Aijaz Ahmed v. Naijaz Ahmed Shariff, Criminal Revision Petition No. 1386 of 2010, decided on 10-05-2019]

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[Disclaimer: This note is for general information only. It is NOT to be substituted for legal advice or taken as legal advice. The publishers of the blog shall not be liable for any act or omission based on this note]

Introduction

Over the years there have been many important changes in the way cheques are issued/bounced/dealt with. Commercial globalisation has resulted in giving a big boost to our country. With the rapid increase in commerce and trade, use of cheque also increased and so did the cheque bouncing disputes.[1] The object of Sections 138-142 of the Negotiable Instruments Act, 1881  is to promote the efficacy of banking operations and to ensure credibility in transacting business through cheques.[2]

Section 138 casts a criminal liability punishable with imprisonment or fine or with both on a person who issues a cheque towards discharge of a debt or liability as a whole or in part and the cheque is dishonoured by the bank on presentation.[3] Section 138 was enacted to punish unscrupulous drawers of cheques who, though purport to discharge their liability by issuing cheque, have no intention of really doing so. Apart from civil liability, criminal liability is sought to be imposed by the said provision on such unscrupulous drawers of cheques. However, with a view to avert unnecessary prosecution of an honest drawer of the cheque and with a view to give an opportunity to him to make amends, the prosecution under Section 138 of the Act has been made subject to certain conditions. These conditions are stipulated in the proviso to Section 138.[4]

In criminal law, commission of offence is one thing and prosecution is quite another. Commission of offence is governed by Section 138 of the Act. Prosecution is governed by Section 142 of the Act.[5] It is also noteworthy that Section 138 while making dishonour of a cheque an offence punishable with imprisonment and fine, also provides for safeguards to protect drawers of such instruments where dishonour may take place for reasons other than those arising out of dishonest intentions. It envisages service of a notice upon the drawer of the instrument calling upon him to make the payment covered by the cheque and permits prosecution only after the expiry of the statutory period and upon failure of the drawer to make the payment within the said period.[6]

Negotiable Instruments Act, 1881

Section 138. Dishonour of cheque for insufficiency, etc., of funds in the account.—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 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 two years, 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 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 thirty 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.

Classification of Offence

An offence committed under Section 138 is a non-cognizable offence (a case in which a police officer cannot arrest the accused without an arrest warrant). Also, it is a bailable offence.

Cases

Ingredients

The ingredients of the offence under Section 138 are:

(a)  cheque is drawn by the accused on an account maintained by him with a banker;

(b)  the cheque amount is in discharge of a debt or liability; and

(c)  the cheque is returned unpaid for insufficiency of funds or that the amount exceeds the arrangement made with the bank, the offence standing committed the moment the cheque is returned unpaid.

Further steps laid down by way of the proviso are distinct from the ingredients of the offence which the enacting provision creates and makes punishable. Thus, an offence within the contemplation of Section 138 is complete with the dishonour of the cheque but taking cognizance of the same by any court is forbidden so long as the complainant does not have the cause of action to file a complaint in terms of clause (c) of the proviso read with Section 142, Dashrath Rupsingh Rathod v. State of Maharashtra, (2014) 9 SCC 129.

 Conditions precedent for constituting an offence under S. 138

There are three distinct conditions precedent, which must be satisfied before the dishonour of a cheque can constitute an offence and become punishable.

(i) The cheque ought to have been presented to the bank within a period of 6 months [3 months]* from the date on which it is drawn or within the period of its validity, whichever is earlier.

(ii) The  payee or the holder in due course of the cheque, as the case may be, ought to make a demand for the payment of the said amount of money by giving a notice in writing, to the drawer of the cheque, within 30 days of the receipt of information by him from the bank regarding the return of the cheque as unpaid.

(iii) The drawer of such a cheque should have failed to make 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 15 days of the receipt of the said notice.

It is only upon the satisfaction of all the three conditions mentioned above and enumerated under the proviso to Section 138 as clauses (a), (b) and (c) thereof that an offence under Section 138 can be said to have been committed by the person issuing the cheque, MSR Leathers v. S. Palaniappan, (2013) 1 SCC 177.

 Sentence

The sentence prescribed under Section 138 is up to two years or with fine which may extend to twice the amount or with both. What needs to be noted is the fact that power under Section 357(3) CrPC to direct payment of compensation is in addition to the said prescribed sentence, if sentence of fine is not imposed. The direction to pay compensation can be enforced by default sentence under Section 64 IPC  and by recovery procedure prescribed under Section 431 CrPC, Meters and Instruments (P) Ltd. v. Kanchan Mehta, (2018) 1 SCC 560.

 Compounding of offence [recording of compromise between the parties]

Section 147 makes offence punishable under the provisions of NI Act compoundable.

If the original complainant comes to the Court and says that he is withdrawing himself from prosecution on account of compromise and he has compounded the matter, then the conviction and sentence have to be set aside. No formal permission to compound the offence is required, Rameshbhai Sombhai Patel v. Dineshbhai Achalanand Rathi, 2004 SCC OnLine Guj 469.

Though compounding requires consent of both parties, even in absence of such consent, the court, in the interests of justice, on being satisfied that the complainant has been duly compensated, can in its discretion close the proceedings and discharge the accused, Meters and Instruments (P) Ltd. v. Kanchan Mehta, (2018) 1 SCC 560.

 Quashing of complaint by the High Court under S. 482 CrPC [inherent powers] 

If an accused wants the process under Sections 138 and 141 to be quashed by filing a petition under Section 482 CrPC , he must make out a case that making him stand the trial would be an abuse of process of court, Gunmala Sales (P) Ltd. v. Anu Mehta, (2015) 1 SCC 103.

Where to file a case for S. 138 offence?

If cheque delivered for collection through an account

If the cheque is delivered for collection through an account, the case will be tried by the court not inferior to that of a Metropolitan Magistrate or a Judicial Magistrate of the first class within whose local jurisdiction the branch of the bank where the payee or holder in due course, as the case may be, maintains the account is situated. [Section 142(2)(a)]

 If cheque presented for payment by payee or holder in due course otherwise through an account

In such a situation, the case will be tried by the court not inferior to that of a Metropolitan Magistrate or a Judicial Magistrate of the first class within whose local jurisdiction the branch of the drawee bank where the drawer of the cheque maintains the account is situated. [Section 142(2)(b)]

Debt or other liability

Explanation to Section 138 is abundantly clear that the dishonoured cheque must have been received by the complainant against a “legally enforceable debt or liability”, Nanda v. Nandkishor, 2010 SCC OnLine Bom 54.

Liability of a guarantor

The words “any cheque” and “other liablity” in Section 138 clarifies the legislative intent. If the cheque is given towards any liability which may have been incurred even by someone else (such as in a case of a guarantor), the person who draws the cheque is liable for prosecution in case of dishonour of the cheque, ICDS Ltd. v. Beena Shabeer, (2002) 6 SCC 426.

Mens rea not required for offence under S. 138

The objective of Parliament was to strengthen the use of cheques, distinct from other negotiable instruments, as mercantile tender and therefore it became essential for Section 138 to be freed from the requirement of proving mens rea [guilty state of mind]. This has been achieved by deeming the commission of an offence dehors mens rea not only under Section 138 but also by virtue of the succeeding two sections. Section 139  carves out the presumption that the holder of a cheque has received it for the discharge of any liability. Section 140 clarifies that it will not be available as a defence to the drawer that he had no reason to believe, when he issued the cheque, that it would be dishonoured, Dashrath Rupsingh Rathod v. State of Maharashtra, (2014) 9 SCC 129.

Can a case be filed if the cheque is presented for encashment more than once?

The holder or payee of the cheque may present the cheque for encashment on any number of occasions within the period of its validity [three months from the date of issue]. A dishonour, whether based on a second or any successive presentation of a cheque for encashment, would be a dishonour within the meaning of Section 138, MSR Leathers v. S. Palaniappan, (2013) 1 SCC 177.

“Stop payment” instructions by the drawer

A complaint under Section 138 can be made not only when the cheque is dishonoured for reason of funds being insufficient to honour the cheque or if the amount of the cheque exceeds the amount in the account, but also where the drawer of the cheque instructs its bank to “stop payment”. If the accused shows that in his account there were sufficient funds to clear the amount of the cheque at the time of presentation of the cheque and that the stop-payment notice had been issued because of other valid causes, then offence under Section 138 would not be made out, MMTC Ltd. v. Medchl Chemicals and Pharma (P) Ltd., (2002) 1 SCC 234.

Case of a post-dated cheque

On the faith of payment by way of a post-dated cheque, the payee alters his position by accepting the cheque. If stoppage of payment before the due date of the cheque is allowed to take the transaction out of the purview of Section 138, it will shake the confidence which a cheque is otherwise intended to inspire regarding payment being available on the due date, Goaplast (P) Ltd. v. Chico Ursula D’Souza, (2003) 3 SCC 232.

“Account closed” by the drawer

Return of a cheque on account of account being closed would be similar to a situation where the cheque is returned on account of insufficiency of funds in the account of the drawer of the cheque which squarely brings the case within Section 138, NEPC Micon Ltd. v. Magma Leasing Ltd., (1999) 4 SCC 253.

“Signatures do not match”

The expression “amount of money … is insufficient” appearing in Section 138 of the Act is a genus and dishonour for reasons such as “account closed”, “payment stopped”, “referred to the drawer” are only species of that genus. Just as dishonour of a cheque on the ground that the account has been closed is a dishonour falling in the first contingency referred to in Section 138, so also dishonour on the ground that the “signatures do not match” or that the “image is not found”, would constitute a dishonour within the meaning of Section 138 of the Act, Laxmi Dyechem v. State of Gujarat, (2012) 13 SCC 375.

Notice under S. 138

When the notice is sent by registered post by correctly addressing the drawer of the cheque, the mandatory requirement of issue of notice in terms of clause (b) of proviso to Section 138 of the Act stands complied with. It is needless to emphasise that the complaint must contain basic facts regarding the mode and manner of the issuance of notice to the drawer of the cheque, C.C. Alavi Haji v. Palapetty Muhammed, (2007) 6 SCC 555.

Presumption as to service of Notice

It is clear from Section 27 of the General Clauses Act, 1897 and Section 114 of the Evidence Act, 1872 that once notice is sent by registered post by correctly addressing to the drawer of the cheque, the service of notice is deemed to have been effected. However, the drawer is at liberty to rebut this presumption, N. Parameswaran Unni v. G. Kannan, (2017) 5 SCC 737.

 What if addressee refuses to receive Notice

The Supreme Court in a catena of cases has held that when a notice is sent by registered post and is returned with postal endorsement “refused” or “not available in the house” or “house locked” or “shop closed” or “addressee not in station” or “intimation served, addressee absent”, due service has to be presumed, N. Parameswaran Unni v. G. Kannan, (2017) 5 SCC 737.

Payment may be made within 15 days of receiving summons if Notice not received

Any drawer who claims that he did not receive the notice sent by post, can, within 15 days of receipt of summons from the court in respect of the complaint under Section 138, make payment of the cheque amount and submit to the court that he had made payment within 15 days of receipt of summons (by receiving a copy of complaint with the summons) and, therefore, the complaint is liable to be rejected, C.C. Alavi Haji v. Palapetty Muhammed, (2007) 6 SCC 555.

 Presumption under S. 139

Once the execution of cheque is admitted, Section 139 creates a presumption that the holder of a cheque receives the cheque in discharge, in whole or in part, of any debt or other liability, Basalingappa v. Mudibassapa, 2019 SCC OnLine SC 491.

This presumption is no doubt rebuttable at trial but there is no gainsaying that the same favours the complainant and shifts the burden to the drawer of the instrument (in case the same is dishonoured) to prove that the instrument was without any lawful consideration, Laxmi Dyechem v. State of Gujarat, (2012) 13 SCC 375.

Note: Presumption under Section 139 is frequently read with Section 118 providing presumption of consideration, presumption as to date on the instrument, etc.

Case of a blank cheque

If a signed blank cheque is voluntarily handed over to a payee, towards some payment, the payee may fill up the amount and other particulars. This in itself would not invalidate the cheque. The onus would still be on the accused to prove that the cheque was not in discharge of a debt or liability by adducing evidence. It is immaterial that the cheque may have been filled in by any person other than the drawer, if the cheque is duly signed by the drawer, Bir Singh v. Mukesh Kumar, (2019) 4 SCC 197.

Case of a fiduciary relationship between complainant and accused [relationship of trust and confidence]

The existence of a fiduciary relationship between the payee of a cheque and its drawer, would not disentitle the payee to the benefit of the presumption under Section 139, in the absence of evidence of exercise of undue influence or coercion, Bir Singh v. Mukesh Kumar, (2019) 4 SCC 197.

 Rebutting the presumption

When an accused has to rebut the presumption under Section 139, the standard of proof for doing so is that of “preponderance of probabilities”. Therefore, if the accused is able to raise a probable defence which creates doubt about the existence of a legally enforceable debt or liability, the prosecution can fail. The accused can rely on the materials submitted by the complainant in order to raise such a defence and it is conceivable that in some cases the accused may not need to adduce evidence of his own, Rangappa v. Sri Mohan, (2010) 11 SCC 441.

 Not necessary for accused to appear in witness box for rebuttal

It is not necessary for the accused to come in the witness box in support of his defence. Section 139 imposes an evidentiary burden and not a persuasive burden, Basalingappa v. Mudibassapa, 2019 SCC OnLine SC 491.

Complainant to prove financial capacity if disputed by accused

It is incumbent upon the complainant to prove his financial capacity to extend the loan in question, if the accused disputes the same, Basalingappa v. Mudibassapa, 2019 SCC OnLine SC 491.  

Complaint by a company

The complainant has to be a corporeal person who is capable of making a physical appearance in the court. If a complaint is made in the name of an incorporeal person (like a company or corporation) it is necessary that a natural person represents such juristic person in the court. There may be occasions when different persons can represent the company, Associated Cement Co. Ltd. v. Keshvanand, (1998) 1 SCC 687.

Defect can be rectified later

Even if initially there was no authority given by the company in favour of the de facto complainant, still the company can, at any stage, rectify that defect. At a subsequent stage the company can send a person who is competent to represent the company, MMTC Ltd. v. Medchl Chemicals and Pharma (P) Ltd., (2002) 1 SCC 234.

Offence by companies and vicarious liability of officers of the Company

Three categories of persons can be discerned from Section 141  who are brought within the purview of the penal liability through the legal fiction envisaged in the section. They are: (1) the company which committed the offence, (2) everyone who was in charge of and was responsible for the business of the company, and (3) any other person who is a director or a manager or a secretary or officer of the company, with whose connivance or due to whose neglect the company has committed the offence, Anil Hada v. Indian Acrylic Ltd., (2000) 1 SCC 1.

Section 141 extends criminal liability on account of dishonor of cheque in case of a company to every person who at the time of the offence, was in charge of, and was responsible for the conduct of the business of the company. By a deeming provision contained in Section 141, such a person is vicariously liable to be held guilty for the offence under Section 138 and punished accordingly, SMS Pharmaceuticals Ltd. v. Neeta Bhalla, (2005) 8 SCC 89.

Case against the Directors

A director of a company who was not in charge of and was not responsible for the conduct of the business of the company at the relevant time, will not be liable for a criminal offence under the provisions, National Small Industries Corpn. Ltd. v. Harmeet Singh Paintal, (2010) 3 SCC 330.

Impleading the Company as accused necessary

The commission of offence by the company is an express condition precedent to attract the vicarious liability of others. For maintaining the prosecution under Section 141 of the Act, arraigning of a company as an accused is imperative. The only exception would be in a case where the company cannot be prosecuted against without obtaining sanction of a court of law or other authority. In such case, trial against the other accused may be proceeded against if ingredients of Sections 138 and 141 are otherwise fulfilled, Aneeta Hada v. Godfather Travels & Tours (P) Ltd., (2012) 5 SCC 661.

 Necessary averments in complaint to put vicarious liability

For making directors liable for the offences committed by the company under Section 141, there must be specific averments against the directors, showing as to how and in what manner they were responsible for the conduct of the business of the company, National Small Industries Corpn. Ltd. v. Harmeet Singh Paintal, (2010) 3 SCC 330.

Case of a Managing Director and signatory of a cheque

Specific averments against the Managing Director or Joint Managing Director are not required to be made in the complaint. By virtue of the office they hold as Managing Director or Joint Managing Director, these persons are in charge of and responsible for the conduct of business of the company. Therefore, they get covered under Section 141. So far as the signatory of a cheque which is dishonoured is concerned, he is clearly responsible for the incriminating act and will be covered under sub-section (2) of Section 141, SMS Pharmaceuticals Ltd. v. Neeta Bhalla, (2005) 8 SCC 89.

Offence by a partnership firm and vicarious liability of partners

For the purpose of Section 141, a firm comes within the ambit of a company.

Partner of a firm is liable to be convicted for an offence committed by the firm if he was in charge of and was responsible to the firm for the conduct of the business of the firm or if it is proved that the offence was committed with the consent or connivance of, or was attributable to any neglect on the part of the partner concerned, Katta Sujatha v. Fertilizers & Chemicals Travancore Ltd., (2002) 7 SCC 655.

 Online proceedings

At least some number of Section 138 cases can be decided online. If complaint with affidavits and documents can be filed online, process issued online and the accused pays the specified amount online, it may obviate the need for personal appearance of the complainant or the accused. Only if the accused contests, need for appearance of parties may arise which may be through counsel and wherever viable, video-conferencing can be used. Personal appearances can be dispensed with on suitable self-operating conditions. This is a matter to be considered by the High Courts and wherever viable, appropriate directions can be issued, Meters and Instruments (P) Ltd. v. Kanchan Mehta, (2018) 1 SCC 560.

 Interim compensation to the complainant

Section 143-A empowers the Court trying an offence under Section 138, to order the drawer of the cheque to pay interim compensation to the complainant which shall not be more than 20% of the amount of the cheque. Such interim compensation has to be paid by the drawer within a period of 60 days (extendable by 30 days) from the date of the order directing such compensation. Such compensation may be recovered as if it were a fine under Section 421 CrPC.

If the drawer of the cheque is acquitted, the complainant has to repay the amount of such compensation received within 60 days (extendable by 30 days) from the date of the acquittal order. The complainant has also to pay interest on such amount at the bank rate as published by RBI prevalent at the beginning of the relevant financial year.

Payment pending appeal against conviction

A drawer of cheque who is convicted under Section 138, may file an appeal against his conviction. In such a case, by the provision of Section 148, the Appellate Court can order him to deposit such sum which shall be at least 20% of the compensation or fine awarded by the trial court. Such amount is payable in addition to any interim compensation paid under Section 143-A. The Court can release such amount to the complainant at any time during pendency of the appeal.

In case of appellant’s acquittal, the complainant has to repay the amount to him in the same manner as mentioned above under “interim compensation to the complainant”.

Further Suggested  Reading

1. Avtar Singh –

2. Bimal N. Patel – Banking Law and Negotiable Instruments Act [Buy here]

3. Surendra Malik and Sudeep Malik – Supreme Court on Dishonour of Cheques And Negotiable Instruments (in 2 Volumes)[Buy Here]

4. Sumeet Malik – P.L. Malik’s NEGOTIABLE INSTRUMENTS ACT, 1881 with Exhaustive notes on Dishonour of Cheques [Buy Here]

Read also from SCC Online Archives

Del HC | No reason to stay proceedings under S. 138 NI Act where trial in another FIR involving the parties is pending

Kar HC | Presence of a legally recoverable debt at the time of issuing cheque is a necessity for an action under S. 138 NI Act

Madras HC | Presumption under S. 139 NI Act not available in case of principal-agent relationship between accused and complainant

NCLAT | Section 138 NI Act proceedings not covered within the period of moratorium under Section 14 IBC

P&H HC | Section 138 of NI Act and Section 420 IPC not exclusive to each other, a person can be charged with both offences simultaneously


† Assistant Editor (Legal), EBC Publishing Pvt. Ltd.

[1] Law Commission of India, 213th Report, Fast Track Magisterial Courts for Dishonoured Cheque Cases, November 2008.

[2] Modi Cements Ltd. v. Kuchil Kumar Nandi, (1998) 3 SCC 249.

[3] SMS Pharmaceuticals Ltd. v. Neeta Bhalla, (2005) 8 SCC 89.

[4] C.C. Alavi Haji v. Palapetty Muhammed, (2007) 6 SCC 555.

[5] William Rosario Fernandes v. Cabral & Co., 2006 SCC OnLine Bom 918.

[6] Laxmi Dyechem v. State of Gujarat, (2012) 13 SCC 375.

* The period of “six months” mentioned in S. 138 proviso (a) remains unchanged as there has been no amendment in this regard. However, RBI vide Circular RBI/2011-12/251 DBOD AML BC No. 47/14.01.001/2011-12, dated 4-11-2011, has changed the default period within which a cheque may be presented for payment, from a period of six months from the date of the instrument, to a period of only three months from such date, w.e.f. 01-04-2012.

Case BriefsHigh Courts

Delhi High Court: Sunil Gaur, J. dismissed a petition seeking quashing of a complaint filed under Section 138 (dishonour of cheque) of the Negotiable Instruments Act, 1881, with a liberty to the petitioner to raise his pea before the trial court.

The petitioner sought quashing of the complaint by recourse to Section 142(1)(a). Rakesh Taneja, Advocate for the petitioner submitted that the subject cheques were issued in the name of one Raj Pal Kapoor, but the complaint was filed by Kapoor Jewel mines (P) Ltd. It was pointed out that there were no averments in the complaint as to how Kapoor Jewel Mines became a holder in due course of the subject cheques. Per contra, Harjinder Singh and Ravinder Singh, Advocates for Kapoor Jewel Mines contended that the present petition deserved dismissal.

The High Court held that ascertaining how the holder of the subject cheques became a holder in due course is an aspect which cannot be pre-judged at the initial stage, and is required to be considered after the evidence is recorded. It was said: “Section 9 of the Negotiable Instruments Act, 1881 defines the ‘holder in due course’ and its import cannot be pre-judged.”

The Supreme Court in Laxmin Dychem v. State of Gujarat, (2012) 13 SCC 375, has reiterated that unless the contrary is proved, the presumption shall be made that the holder of a negotiable instrument is the holder in due course. Applying the dictum to the present facts, the High Court did not find it to be a fit case to quash the complaint as the plea raised by the petitioner was required to be tested at the trial. Thus the petition was dismissed. The petitioner was however given liberty to raise his plea before the trial court at the appropriate stage. [Jagdish Chander v. Kapoor Jewel Mines (P) Ltd., 2019 SCC OnLine Del 8292, decided on 24-04-2019]

Case BriefsHigh Courts

Bombay High Court: V.M. Deshpande, J. dismissed a criminal appeal and imposed costs of Rs 5000 on the appellant for filing the criminal complaint under Section 138 of the Negotiable Instruments Act, 1881 and thereafter going dormant for years together.

The present was a matter wherein after filing a complaint under Section 138, the complainant became dormant in prosecuting the case and did not take any step further as were necessarily required under law. Even after directing the complainant to take necessary steps, he remained absent and therefore the trial judge dismissed his application for condonation of delay. The complainant filed the present appeal against the order of the trial judge.

The High Court said that the litigant cannot be dormant for years together; when a proceeding has filed a litigant before the court of law, it is his onerous duty to prosecute the same diligently. It was observed that since the present was a private complaint, it was complainant’s duty to serve the non-applicants. The Court said: “It appears from conduct of the applicant/complainant that it is his luxurious litigation. The Courts are experiencing filing of necessary litigations since there are some type of litigants who want to torment their ego.” It was further said: “This type of attitude on the part of the litigants has to be curbed though it is the right of citizens to approach to the court of law for redressal of their grievance if any,. At the same time, it is the duty of such citizens to prosecute the remedy availed of diligently and should not allow proceedings to remain in a dormant state for years together.”

During the course of hearing, the complainant could not offer any explanation as to why he could not any step to serve the non-applicants. In that view of the matter, the appeal was dismissed with costs of Rs 5000 to be deposited with the High Court Legal Service Sub-Committee at Nagpur. [Ramzan Khan v. Khadim Tours and travels, 2019 SCC OnLine Bom 709, decided on 24-04-2019]

Case BriefsHigh Courts

Delhi High Court: Sanjeev Sachdeva, J., dismissed a petition assailing the Appellate Court’s order whereby it had set aside the judgment of conviction passed against the accused (respondent) by the trial court for an offence under Section 138 of the Negotiable Instruments Act, 1881 (dishonour of cheque).

The complainant (petitioner) alleged that he gave a friendly loan of Rs 4.90 lakhs to the accused and in discharge of such liability, the accused issued a cheque. However, when the cheque was presented to the bank for encashment, it was returned unpaid with the endorsement “insufficient funds”. Subsequently, a complaint under Section 138 was filed and the matter went to trial. The trial court convicted the accused but on appeal, the Appellate Court acquitted him. Aggrieved thereby, the complainant filed the present petition.

The accused was represented by H.G.R. Khattar, Advocate. His defence was that the complainant was employed in the shop of one Subhash Aggarwal. He alleged that the subject cheque was issued in blank to Subhash Aggarwal and the same had been misused. Further, the complainant and his wife earned a monthly income of Rs 15,000 each and they could not have extended a loan of Rs 4.90 lakhs to him.

The High Court was of the view that no error could be found with the Appellate Court’s order. It was observed, “it is very surprising that a person who earns only Rs 15,000 per month would make an arrangement of Rs 4,90,000/- and give the same as a friendly loan. No date of extending the loan or rate of interest at which such loan was extended, has been mentioned. Neither there is any document executed nor the date when the loan was and of its repayment is mentioned.” In the Court’s opinion, the defence raised by the accused was probable and rightly rebutted the statutory presumption. In such view of the matter, the petition was dismissed and the impugned order was upheld. [Sanjay Verma v. Gopal Halwai, 2019 SCC OnLine Del 7572, decided on 15-03-2019]