calcutta high court

Calcutta High Court: While deciding a revision petition against the order convicting petitioner under Section 138 of the Negotiable Instruments Act, 1881, Shampa Dutt (Paul),* J., held that the presumption of liability has been rebutted by the petitioner, and the dishonored cheque did not constitute an offence in this case. The Court set aside the petitioner’s conviction under Section 138 of the Negotiable Instruments Act, 1881, and acquitted the petitioner. The Court ordered for returning the deposited amount to the petitioner.

Factual Matrix

The instant case involves a criminal revision petition against the order dated 29-11-2019 passed by the City Sessions Court, Calcutta, affirming the order dated 20-04-2017 passed by the Metropolitan Magistrate.

The petitioner was convicted under Section 138 of the Negotiable Instruments Act, 1881, and sentenced to imprisonment until rising of the court by way of detention inside the courtroom. Additionally, the petitioner was directed to pay compensation of Rs. 10,00,000/-, with a default sentence of simple imprisonment for one year.

The case stems from a complaint filed by the opposite party against the petitioner for issuing a dishonored cheque. The complainant alleged that the petitioner had a business transaction with him, and a cheque was issued as part of the transaction. However, the cheque was dishonored due to “Drawer Signature Incomplete.” The complainant sent a demand notice to the petitioner, and upon non-payment, initiated legal proceedings.

Moot Point

  1. Whether the lower courts erred in their judgment by mechanically affirming the petitioner’s conviction under Section 138 of the Negotiable Instruments Act, 1881?
  2. Whether the lower courts failed to consider important factors, such as the closure of the petitioner’s business, the clearance of dues, and the purpose of the issued cheque, leading to an erroneous conviction?
  3. Whether the petitioner successfully rebutted the presumption of liability under Section 139 of the Negotiable Instruments Act, 1881?

Parties’ Contentions

The petitioner contended that the impugned order was passed without proper consideration of the evidence presented. It was contended that there was no application of judicial mind, and both the Appellate Court and the Trial Court reached an erroneous finding of guilt.

The petitioner contended that the complainant admitted that the petitioner’s business had closed before the cheque was issued, rendering the issuance of the cheque after business closure irrelevant. It was contended that the petitioner had cleared all dues before closing the business, as evidenced by Exhibit-B and Exhibit-C. It was further contended that the impugned cheque was issued without mentioning any date, serving as security, and was later presented by the complainant with ulterior motives.

The respondent contended that the petitioner admitted to issuing the cheque as a means to discharge his liability. It was contended that the Trial Court and the Appellate Court correctly passed their judgments, and there is no need for interference.

Legal Points

  • Section 138 of the Negotiable Instruments Act, 1881, defines the offence of dishonor of a cheque for insufficiency of funds or exceeding the amount arranged to be paid from the account.
  • The statute aims to promote confidence in banking operations and negotiable instruments by penalizing the dishonor of cheques.
  • The burden is on the drawer of the cheque to prove that it was issued without lawful consideration.

Court’s Assessment

The Court observed that the cheque was returned with the remark “Drawer’s Signature Incomplete.” The company in whose name the cheque was issued had closed down in March 2011, while the cheque was dated 24-10-2011, eight months later. The complainant failed to provide evidence of outstanding dues. The petitioner’s reply to the demand notice denied the debt and liability.

The Court referred to relevant legal precedents, including Vinod Tanna v. Zaheer Siddiqui, (2002) 7 SCC 541 and Laxmi Dyechem v. State of Gujarat, (2012) 13 SCC 375, emphasizing that Section 138 of the Negotiable Instruments Act must be interpreted in a manner that upholds the statute’s purpose and does not render it ineffective.

The Court noted that dishonor of a cheque can constitute an offence if the cheque is returned unpaid for either insufficiency of funds or exceeding the agreed amount.

The Court found that the petitioner had raised a substantial defense, challenging the existence of a lawful debt or liability at the time of issuing the cheque. It was also noted that the cheque was undated and had incomplete signatures.

“The Company closed down in March, 2011 and the Cheque is dated 24.10.2011. This prima facie supports the case of the petitioner that the cheque issued was undated and given as a security. The Signature on the cheque is also incomplete. As such on the date of presentation of the cheque, the company which allegedly issued the cheque was no more existence.”

Based on these considerations, the Court held that the mandatory provision of Section 138 of the Negotiable Instruments Act was not met in this case. The presumption of a debt or liability had been effectively rebutted, and the petitioner’s defense was credible. The Court also emphasized the need to interpret penal provisions like Section 138 in a manner that preserves the law’s efficacy.

Court’s Decision

Ultimately, the Court allowed the criminal revision, set aside the impugned judgment and order, and acquitted the petitioner. The petitioner was permitted to withdraw the deposited amount of Rs. 5,00,000/-. All connected applications were disposed of accordingly.

[Rajesh Singh v. Paprika Electronic (P) Ltd., 2023 SCC OnLine Cal 3039, order dated 25-09-2023]

*Judgment by Justice Shampa Dutt (Paul)

Advocates who appeared in this case :

Mr. Sanjib Bandyopadhyay, Counsel for the Petitioner

Mr. Aniruddha Bhattacharyya, Counsel for the Opposite Party 2

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