dishonour of cheque

Case BriefsHigh Courts

Kerala High Court: R. Narayana Pisharadi J., allowed a criminal revision petition in part in a matter relating to Section 138 of Negotiable Instruments Act, 1881.

In the present case, the accused had obtained an amount of Rs 5, 00,000 from the complainant on the promise that he would arrange a licence for the complainant for conducting petrol pump. Upon demanding the repayment of the amount the accused issued a cheque dated 05-02-2007 for Rs 5,00,000 in discharge of the liability. The cheque was dishonoured upon presenting it to the bank for the reason that there was no sufficient amount in the account of the accused. 

The trial court had found the petitioner guilty of offence punishable under Section 138 of Negotiable Instruments Act, 1881 and sentenced him to simple imprisonment for a period of four months and to pay a fine of Rs 5,00,000. The appellate court had also affirmed the conviction and the sentence imposed on the petitioner and dismissed the appeal. 

High Court upon perusal of the facts and circumstances allowed the revision petition in part. The Court affirmed the conviction passed by the trial court and affirmed by the appellate court thereafter but the sentence imposed upon the petitioner has been set aside. In supersession of the sentence, accused has been sentenced to pay a fine of Rs 5,10,000 and in default of payment of fine, to undergo simple imprisonment for a period of two months. [C.K. Mohini v. Varghese. M. Mathew, 2020 SCC OnLine Ker 492, decided on 05-02-2020]

Case BriefsHigh Courts

Delhi High Court: Rajnish Bhatnagar, J., dismissed a petition filed against the order of the Sessions Court whereby it had dismissed the review petition filed by the petitioners against the order of the Metropolitan Magistrate taking cognizance of offences under Section 138 and Section 141 of the Negotiable Instruments Act, 1881, against the petitioner.

The respondent company instituted a complaint under Section 138 read with Section 142 against the petitioners in respect of non-payment against the four dishonoured cheques for the total amount of Rs 16 crores issued on behalf of and/or by petitioner company in favour of the respondent’s company. The Metropolitan Magistrate had passed an order taking cognizance. Aggrieved, the petitioners filed a revision petition before the Sessions Court, which was dismissed. The petitioners now invoked the jurisdiction of the High Court under Sections 482 CrPC (inherent powers).

It was contended by the petitioners that the demand notice was defective as the demand had been made over and above the cheque amount and the legal demand notice was vague and ambiguous. Rejecting this point, the High Court held that the notice should be read as a whole. The perusal of the notice clearly set out the details of the cheque which had been dishonoured, so it could not be said that the demand made was ambiguous or in any way confusing the petitioners as there was no denial that the cheque in question were not issued or that they were not dishonoured for insufficient funds.

Besides the above point, a procedural issue arose as to whether the petitioners having availed of the remedy of revision should be allowed to take recourse to Section 482 CrPC as a substitute for virtually initiating a second revisional challenge or scrutiny which is clearly barred under Section 397(3) CrPC.

Perusing various provisions of the Negotiable Instruments Act, the High Court observed: “The provisions of Sections 142 to 147 lay down a Special Code for the trial of offences under Chapter 17 of the NI Act.” Reliance was placed on the Supreme Court decision in Mandvi Coop. Bank Ltd. v. Nimesh B. Thakore, (2010) 3 SCC 83, which held that the provisions of Sections 143, 144, 145 and 147 expressly depart from and override the provisions of CrPC, the main body of adjective law for criminal trials.

In the instant case, Court did not find any material which could be stated to be of sterling and impeccable quality warranting invocation of the jurisdiction of the High Court under Section 482 CrPC at this stage. More so, the defence as raised by the petitioners requires evidence, which could not be appreciated, evaluated or adjudged in the proceedings under Section 482. The petitioners, therefore, could not be allowed to take recourse to Section 482 as a substitute for initiating a second revision petition when there was nothing to show that there is a serious miscarriage of justice or abuse of the process of law.

Accordingly, the court found no infirmity in the order passed by the Session Judge and, therefore, dismissed the petition. [Tathagat Exports (P) Ltd. v. PEC Ltd., 2020 SCC OnLine Del 405, decided on 20-01-2020]

Case BriefsHigh Courts

Kerala High Court: R. Narayana Pisharadi, J., dismissed a revision petition which was filed against the judgment of the trial and the appellate court by the petitioner holding him guilty of the offence punishable under Section 138 of the Negotiable Instruments Act, 1881.

According to the complainant, the accused had borrowed an amount of Rs 2,50,000 from the complainant promising that he would repay the amount within three months which he failed to repay later the accused issued a cheque dated 17-08-2011 for Rs 2,50,000 to the complainant in discharge of the liability, the complainant presented the cheque in the bank but it was returned unpaid for the reason that there was no sufficient amount in the account of the accused further the complainant sent notice to the accused demanding payment of the amount of the cheque, the accused received the notice and replied to the complainant raising false contentions and did not pay the amount of the cheque. The accused contended that he was the manager of the petrol pump conducted by his brother-in-law and the complainant was the watchman in that petrol pump and that he had kept a signed blank cheque in the petrol pump and the complainant committed theft of the cheque and misused it and filed the case although no evidence was presented by the accessed to support his contentions.

The Court while dismissing the petition held that the courts above have properly analyzed the evidence in the case and come to the right conclusion. [T. Sunilkumar v. State of Kerela,  2020 SCC OnLine Ker 201, decided on 17-01-2020] 

Case BriefsHigh Courts

Bombay High Court: Vibha Kankanwadi, J., allowed a criminal revision application filed against the order of the Additional Sessions Judge whereby the appeal filed by the applicant against the decision of the trial court convicting him for dishonour of cheque punishable under Section 138 of the Negotiable Instruments Act, 1881, was dismissed for non-payment of fine. 

The applicant was convicted by the trial court under Section 138. He was sentenced to suffer simple imprisonment of 1 year and pay a fine of Rs 6.58 lakhs. The applicant filed an appeal against the decision of the trial court. The Additional Sessions Judge suspended his sentence pending the disposal of appeal subject to deposit of 20 percent of the fine amount as imposed by the trial court. However, the applicant failed to fulfill that condition within the prescribed limit and remained absent for a long time. In such circumstances, the Additional Sessions Judge dismissed the appeal in default for want of prosecution. Aggrieved thereby, the applicant file the instant revision application. 

The High Court gave due consideration to the submissions made by S.S. Bora, Advocate appearing for the applicant, and S.J. Salunke, Advocate representing the respondent. 

The Court relied on Bani Singh v. State of U.P., (1996) 4 SCC 720 and Vijay D. Salvi v. State of Maharashtra, (2007) 5 SCC 741, and reiterated that a criminal appeal cannot be dismissed for non-payment of fine, it will have to be disposed of on merits. 

In such view of the matter, the High Court held that the order passed by the Additional Sessions Judge was not a valid legal order and, therefore, quashed the said order. 

However, at the same time, the Court deprecated observed that the applicant cannot take the system for a ride. When the suspension of the sentence against him was conditional, then he was bound to obey those conditions. Deprecating the conduct of the applicant, the Court imposed costs of Rs 25,000 on him. [Adesh Prakashchand Jain v. Harish Punamchand Une, 2020 SCC OnLine Bom 96, decided on 08-01-2020]

Case BriefsHigh Courts

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

As per the complainant, she had given a loan of Rs 4.5 lakhs to the accused, for repayment of which, he had issued a cheque in favour of the complainant. However, on presenting the cheque for encashment, it was dishonoured. Per contra, the accused took the stand that the cheque in question was given to one Sanjay, who was a former business partner of the accused. The cheque was given to Sanjay to be handed over to a third party to connect with a mutually agreed transaction. However, subsequently, disputes arose between the accused and Sanjay. It was submitted that the Sanjay and complainant were very close friends and lived in the same house. The accused submitted that Sanjay dishonestly handed over the blank cheque in question to the complainant and fraud was being played upon him.

The High Court perused Section 138 (dishonour of cheque) along with its Explanation and noted that the keyword “legally enforceable debt or other liability”. Similarly, discussing Section 139 (presumption in favour of the holder), the Court noted that the presumption is rebuttable and the onus is on the accused to raise a probable defence.

The Court then reproduced the principles summarised and enumerated by the Supreme Court in Basalingappa v. Mudibasappa, (2019) 5 SCC 418, and observed that the standard of proof for rebutting the presumption is that of the preponderance of probabilities and not beyond a reasonable doubt. It was also noted as settled law that Section 139 imposes an evidentiary burden and not a persuasive burden.

On the factual score, it was found that there was no evidence as to when the amount in question was handed over to the accused. No receipts were produced. Also, there was no evidence to show that the complainant had Rs 4.5 lakhs to give to the accused, and it was also admitted that she was not even paying income tax. Moreover, the fact of the dispute between Sanjay and the accused was also admitted. All this, according to the High Court went on to prove that the accused had raised a probable defence that the complainant had not proved that there was a legally enforceable debt or other liability.

Accordingly, finding no fault with the order of the trial court, the High Court dismissed the present appeal and upheld the acquittal of the accused. [Tasneem Murshedkar Mazhar v. Ramesh, 2020 SCC OnLine Bom 20, decided on 02-01-2020]

OP. ED.

Let’s have a look at the Most-Viewed Blog Posts of the SCC Online Blog in the Year 2019:

“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 498-A was introduced in the year 1983 to protect married women from being subjected to cruelty by the husband or his relatives. A punishment extending to 3 years and fine has been prescribed. The expression “cruelty” has been defined in wide terms so as to include inflicting physical or mental harm to the body or health of the woman and indulging in acts of harassment with a view to coerce her or her relations to meet any unlawful demand for any property or valuable security. Harassment for dowry falls within the sweep of latter limb of the section. Creating a situation driving the woman to commit suicide is also one of the ingredients of “cruelty”.

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  • Adultery [S. 497 IPC and S. 198(2) CrPC]

    The word “adultery” derives its origin from the French word “avoutre”, which has evolved from the Latin verb “adulterium” which means “to corrupt”[1]. The dictionary meaning of adultery is that a married man commits adultery if he has sex with a woman with whom he has not entered into wedlock.

    Under Indian law, Section 497 IPC  makes adultery a criminal offence, and prescribes a punishment of imprisonment upto five years and fine. The offence of adultery under Section 497 is very limited in scope as compared to the misconduct of adultery as understood in divorce proceedings. The offence is committed only by a man who had sexual intercourse with the wife of another man without the latter’s consent or connivance. The wife is not punishable for being an adulteress, or even as an abettor of the offence[2]. Section 198 CrPC deals with a “person aggrieved”. Sub-section (2) treats the husband of the woman as deemed to be aggrieved by an offence committed under Section 497 IPC and in the absence of husband, some person who had care of the woman on his behalf at the time when such offence was committed, with the permission of the court. It does not consider the wife of the adulterer as an aggrieved person.

    Section 497 IPC and Section 198(2) CrPC together constitute a legislative packet to deal with the offence of adultery[3]which have been held unconstitutional and struck down by the Supreme Court in Joseph Shine v. Union of India, 2018 SCC OnLine SC 1676.

  • Maintenance – Wife

“Maintenance” is an amount payable by the husband to his wife who is unable to maintain herself either during the subsistence of marriage or upon separation or divorce. Various laws governing maintenance are as follows:

for Hindus – Hindu Marriage Act, 1955; Hindu Adoption and Maintenance Act, 1956

for Muslims – Muslim Women (Protection of Rights on Divorce) Act, 1986

for Parsis – Parsi Marriage and Divorce Act, 1936

for Christians – Divorce Act, 1869

secular laws – Criminal Procedure Code, 1973; Special Marriage Act,1954.

  • Live-In Relationship and Indian Judiciary

    It is being truly said that the only thing which is constant in this world is change. Indian society has observed a drastic change in its living pattern in the past few years. People are slowly and gradually opening their minds towards the idea of pre-marital sex and live-in relationships. However, this change has been continuously under criticism and highly discussed as such concepts lack legality and acceptance by society. Unlike marriage, in live-in relationships, couples are not married to each other but live together under the same roof that resembles a relation like marriage. In other words, we can say it is a cohabitation. In India, only those relations between a man and a woman is considered to be legitimate where marriage has taken place between the two based on existing marriage laws otherwise all other sort of relationships are deemed to be illegitimate.

    The reason behind people choosing to have a live-in relationship is to check the compatibility between couples before getting legally married. It also exempts partners from the chaos of family drama and lengthy court procedures in case the couple decides to break-up. Whatever the reason, it is very evident that in a conventional society like ours, where the institution of marriage is considered to be “sacred” an increasing number of couples choose to have a live-in relationship, even as a perpetual plan, over marriage. In such circumstances, many legal and social issues have arisen which have become the topic of debate. With time many incidents have been reported and seen where partners in live-in relationships or a child born out of such relationship have remained vulnerable for the very simple reason that such relationships have been kept outside the realm of law. There has been gross misuse by the partners in live-in relationships since they do not have any duties and responsibilities to perform. This article seeks to analyse the judicial response to the concept of live-in relationships so far. It also talks about the rights available to live-in partners in India and also, what is the status of children born out of such relationships.

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  • Maintenance – Children and Parents

In India, beneficial provisions for maintenance of children and parents are provided under various Acts. Objective of such provisions is to achieve a social purpose and to prevent vagrancy and destitution and to provide simple, inexpensive and speedy mechanism for providing support and maintenance to children and parents.

“the limited interest or Hindu Woman’s Estate [acquired under Section 3 of the Hindu Women’s Right Property Act] shall be held by the widow as full owner in terms of provisions of Section 14(1) of Hindu Succession Act, 1956?

“Section 23 of the DV Act does not provide a substantive right to parties but is a provision which empowers the trial court to pass an order granting interim maintenance in a petition filed under Section 12 of the DV Act. Merely because the trial court has not exercised the power under Section 23 of the DV Act, when a substantive petition under Section 12 of DV Act was filed and chose to pass an order only when a separate application under Section 23 of the DV Act was filed, does not mean that a Magistrate does not have the power to pass an order with effect from the date of filing of the substantive petition under Section 12.”

Case BriefsHigh Courts

Madras High Court: A Division Bench of A.P. Sahi, CJ and Subramonium Prasad, J., while deciding a petition filed in regard to declaring Section 142(2) of the Negotiable Instruments Act, 1881 as ultra vires Article 14 of Constitution, held by placing reliance on certain cases that,

“Parliament is competent to bring out the amendment under the Negotiable Instruments Act. The said amendment cannot be said to be ultra vires in view of the provisions of the Act or Part III of the Constitution of India.”

In the present petition, the challenge was placed upon Section 142(2) of NI Act on the ground that the said amendment is contrary to the Supreme Court case in, Dashrath Rupsingh Rathod v. State of Maharashtra, (2014) 9 SCC 129.

Counsel for the petitioner, K. Govindarajan, submitted that the above-said amendment amounts to setting at naught a judgment of the Supreme Court which is not permissible in law. Relying on the Supreme Court case in Prithvi Cotton Mills Ltd. v. Broach Borough Municipality, (1969) 2 SCC 283, it is well settled that,

“Legislation can take away the basis of a judgment.”

In Dashrath Rupsingh Rathod v. State of Maharashtra, (2014) 9 SCC 129, following was held with respect to the place of suing:

“…Once the cause of action accrues to the complainant, the jurisdiction of the Court to try the case will be determined by reference to the place where the cheque is dishonoured.

   (vii) The general rule stipulated under Section 177 of Cr.P.C applies to cases under Section 138 of the Negotiable Instruments Act. Prosecution in such cases can, therefore, be launched against the drawer of the cheque only before the Court within whose jurisdiction the dishonour takes place except in situations where the offence of dishonour of the cheque punishable under Section 138 is committed along with other offences in a single transaction within the meaning of Section 220(1) read with Section 184 of the Code of Criminal Procedure or is covered by the provisions of Section 182(1) read with Sections 184 and 220 thereof.”

Thus, the following was held in the above-said case by the Supreme Court,

a Complaint of dishonour of cheque can be filed only to the Court within whose local jurisdiction where the cheque is dishonoured by the bank on which it is drawn.

To resolve the concerns arising from the above-judgment, through the Negotiable Instruments (Amendment) Act, 2015, certain amendments in regard to challenged Section was made as follows:

“(2) The offence under section 138 shall be inquired into and tried only by a court within whose local jurisdiction,—

(a) if the cheque is delivered for collection through an account, the branch of the bank where the payee or holder in due course, as the case may be, maintains the account, is situated; or

(b) if the cheque is presented for payment by the payee or holder in due course, otherwise through an account, the branch of the drawee bank where the drawer maintains the account, is situated.

Explanation— For the purposes of clause (a), where a cheque is delivered for collection at any branch of the bank of the payee or holder in due course, then, the cheque shall be deemed to have been delivered to the branch of the bank in which the payee or holder in due course, as the case may be, maintains the account.”

Further Section 142(a) was also inserted through the Amendment Act, which is as follows:

“142A.(1) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 or any judgment, decree, order or direction of any court, all cases transferred to the court having jurisdiction under sub-section (2) of section 142, as amended by the Negotiable Instruments

(Amendment) Ordinance, 2015, shall be deemed to have been transferred under this Act, as if that subsection had been in force at all material times.

 (2) Notwithstanding anything contained in sub-section (2) of section 142 or sub-section (1), where the payee or the holder in due course, as the case may be, has filed a complaint against the drawer of a cheque in the court having jurisdiction under sub-section (2) of section 142 or the case has been transferred to that court under sub-section (1) and such complaint is pending in that court, all subsequent complaints arising out of section 138 against the same drawer shall be filed before the same court irrespective of whether those cheques were delivered for collection or presented for payment within the territorial jurisdiction of that court.

 (3) If, on the date of the commencement of the Negotiable Instruments (Amendment) Act,

2015, more than one prosecution filed by the same payee or holder in due course, as the case may be, against the same drawer of cheques is pending before different courts, upon the said fact having been brought to the notice of the court, such court shall transfer the case to the court having jurisdiction under sub-section (2) of section 142, as amended by the Negotiable Instruments (Amendment) Ordinance, 2015, before which the first case was filed and is pending, as if that subsection had been in force at all material times.”

Through the above Amendment Act, entire basis of the Supreme Court case in, Dashrath Rupsingh Rathod v. State of Maharashtra, (2014) 9 SCC 129, was removed.

By placing reliance on certain Supreme Court cases such as, State of Karnataka v. Karnataka Pawn Brokers Assn., (2018) 6 SCC 363; State of Karnataka v. Pro Lab, (2015) 8 SCC 557, Shri Prithvi Cotton Mills Ltd. v. Broach Borough Municipality, (1969) 2 SCC 283, following was laid down:

 “Legislature can take away the basis of the judgment of a judicial pronouncement by either Validating Act or passing amendments to the parent Act.”

Thus, on perusal of the above, no infirmity was found by the Court in the amendment. Therefore, said amendment cannot be said to be ultra vires in view of the provisions of the Act or Part III of the Constitution of India.

In view of the above, the writ petition stands dismissed. [Refex Energy Ltd. v. Union of India, 2019 SCC OnLine Mad 9941, decided on 18-12-2019]

Additional Reading:

Case BriefsHigh Courts

Bombay High Court: Vibha Kankanwadi, J., dismissed a writ petition filed against the order of the Sessions Judge whereby he had reversed the decision of the Magistrate who had directed the respondent herein to deposit 10% of the cheque amount.

The petitioner had filed a complaint against the respondent alleging the commission of the offence punishable under Section 138 (dishonour of cheque) of the Negotiable Instruments Act, 1881. Subsequently, the petitioner filed an application before the Magistrate praying to direct the respondent to deposit 20% of the cheque amount in view of the provisions under Section 143-A of NI Act. The Magistrate partly allowed the said application and directed the respondent to deposit 10% of the cheque amount.

The respondent challenged the said order of the Magistrate before the Sessions Judge, who reversed the order of the Magistrate. Aggrieved, the petitioner filed the instant writ petition. He contended that the order passed by the Magistrate was purely an interlocutory order as the trial was still pending, and therefore, the revision itself was barred under Section 397(2) CrPC.

At the outset, the High Court noted that the instant complaint was filed by the petitioner before Section 143-A came into force. Relying on G.J. Raja v. Tejraj Surana, 2019 SCC OnLine SC 989, reiterated that the operation of the said section is only prospective, i.e., it does not apply to the complaints filed before the section came into force. Thus, the High Court held that the provision under which the petitioner was seeking relief (i.e., under Section 143-A) was in fact not available to him, as the complaint was filed in the year 2017, however, Section 143-A was inserted in the statute book with effect from 1-9-2018.

The High Court then considered the submissions regarding the order passed by the Magistrate being interlocutory in nature and therefore not being amenable to revision by Sessions Judge. The Court relied on the decisions in Madhu Limaye v. State of Maharashtra, (1977) 4 SCC 551 and V.C. Shukla v. State, 1980 Supp SCC 92, and restated that in order that an order would be “interlocutory order”, it will have to be seen as to whether the rights of a person are affected.

In the instant case, the High Court held that, “Magistrate applied that provision of law which was not all applicable to the case in hand before him, therefore, definitely it had affected the right of the accused. Consequently, it cannot be said that, the order which was passed by the learned Magistrate was purely “interlocutory order” as contemplated under Section 397(2) CrPC.” Therefore, the Sessions Judge was justified in setting aside the said order by exercising his power under Section 397(1) of CrPC.

Resultantly, the instant writ petition was dismissed. [Hitendra v. Shankar, 2019 SCC OnLine Bom 5644, decided on 11-12-2019]

Case BriefsHigh Courts

Bombay High Court: Vibha Kankanwadi, J., while allowing a writ petition, quashed a complaint under Section 138 of the Negotiable Instruments Act, 1881, filed against the petitioner in a cheque dishonour case. It was held that the complaint filed by the respondent-complainant could not be treated as a “complaint” in the eyes of law.

The complainant, in her complaint, had alleged that the petitioner had taken a loan from her, which he failed to repay. He issued a cheque for the discharge of the said liability, which was dishonoured on presenting for encashment. Therefore, she filed the subject complaint before the Magistrate against the petitioner.

Aggrieved, the petitioner filed the instant petition praying for quashing of the complaint against him. His counsel, M.D. Thube-Mhase, submitted that when, as per the contents of the complaint, the accused had refused to accept the notice on 3-1-2017, the period of 15 days for the compliance after the service or refusal of the notice would have been till 18-1-2017, and the complainant could have filed the complaint on or after 19-1-2017 within the statutory period. However, when she has filed the complaint on 18-1-2017 itself, it cannot be taken as a complaint, and therefore, the complaint is liable to be quashed.

Per contra, A.N. Gaddime and A.V. Indrale Patil, counsel for the complainant, contended that though the complaint was filed on 18-1-2017, the complaint was registered on the next date, i.e., 19-1-2017, and the cognizance was taken by order of issuing process on 15-04-2017, therefore the complaint was maintainable.

The High Court considered the law as laid down in Yogendra Pratap Singh v. Savitri Pandey, (2014) 10 SCC 713, wherein the Supreme Court disapproved the view that if the complaint under Section 138 is filed before the expiry of 15 days from the date on which notice has been served on the drawer/accused, the same is premature and if on the date of taking cognizance a period of 15 days from the date of service of notice on the drawer/accused has expired, such complaint was legally maintainable.

Finally, observing that the date of 15th day or conversely the day on which the refusal was there should be excluded, the High Court held that complaint, which was filed on 18-1-2017, was definitely premature, i.e., before the expiry of 15 days of the refusal of the notice. Therefore, it was held, that the subject complaint could not be treated as a “complaint” in the eyes of law. Consequently, the writ petition was allowed and the complaint was quashed. [Afroj Khan v. Mandodra, 2019 SCC OnLine Bom 5422, decided on 12-12-2019]

Case BriefsHigh Courts

Kerala High Court: R. Narayana Pisharadi, J. rejected this petition in which the petitioner prayed to file an appeal against the judgment passed by the trial court, for an offence punishable under Section 138 of the Negotiable Instruments Act, 1881.

This petition was filed by the petitioner to seek relief against the order of the trial court where the trial court acquitted the accused under Section 255(1) of the Code of Criminal Procedure, 1973. Section 255(1) of CrPC states that if the Magistrate, after recording the evidence, finds that the accused is not guilty, he shall record an order of acquittal.

This petition was filed by the complainant in the trial court by the case S.T. No. 114 of  2017 on the file of the Court of the Chief Judicial Magistrate, Thodupuzha. The case was filed under the offence punishable under Section 138 of the NI Act. It consists of dishonour of cheque for insufficiency, etc., of funds in the account, punishable with imprisonment for a term which may extend to 2 years or with fine which may extend to twice the amount of the cheque.

During the trial, the prosecution as well as the accused, both were examined and documents were also marked, complying with the needs of Section 255 CrPC.

The facts of the present petition is that the petitioner wants to file an appeal because the trial court acquitted the accused under Section 255(1) CrPC on the ground that the cheque drawn by him was not on an account maintained by the accused himself, in the bank. Rather it was drawn on an account maintained by one Kavitha Chandrasekharan. The Manager of the Bank of the said account gave evidence that the said account did belonged to Kavitha Chandrasekharan. The counsel for the petitioner contended that the trial court should have charged the accused for an offence punishable under Section 420 of the Penal Code.

It was upheld in a Supreme Court judgment, Jugesh Sehgal v. Shamsher Singh, (2009) 14 SCC 683, that one of the basic ingredients of offence punishable under Section 138 of the Act is that the cheque shall be drawn on an account maintained in the bank in the name of the drawer himself. Hence, the Court here upheld the decision of the trial court.

After noting the contentions of the counsel for the petitioner, Latheesh Sebastian, and the counsel for the respondent, C.N. Prabhakaran, Senior Public Prosecutor, High Court held that the decision given by the Chief Judicial Magistrate was correct as the case did not satisfy all the ingredients that are needed to punish someone under Section 138 of the NI Act. Secondly, this Court also said that it was not necessary for the trial court to convert this case into a warrant case and start a de novo trial. Hence, the prayer for granting leave to file an appeal was rejected and the petition was dismissed. [Areeplavan Finance v. Chandrasekharan, 2019 SCC OnLine Ker 5330, decided on 11-12-2019]

Case BriefsHigh Courts

Delhi High Court: Suresh Kumar Kait, J., allowed a petition wherein directions were sought for quashing the complaint case filed against the petitioner under Section 138 (dishonour of cheque) read with Sections 141 (offences by companies) and 142 (cognizance of offence) of the Negotiable Instruments Act, 1881.

The petitioner- Society, Employees Welfare Fund of the employees of Hindustan Aeronautics Ltd., had issued four cheques for a total sum of Rs 4.1 Crores in favour of the respondent-complainant. According to the complainant, the petitioner had drawn to said cheques in the discharge of legally recoverable debt pursuant to the terms of the MoU/ Agreement to Sell concerned, however, on presentation of encashment, the subject cheques got dishonoured. The complainant-builder was represented by Nimesh Chib and Siddharth Chaturvedi, Advocates.

Per contra, Vikas Gupta and Ieshaan Gupta, Advocates, submitted on behalf of the petitioner that the proceeding initiated by the complainant was an abuse of the process of law, and the complaint does not satisfy ingredients of the offence punishable under Section 138 NI Act.

The High Court noted that the subject cheques were issued by the petitioner-Society on behalf of its individual members to facilitate the transaction in getting their houses constructed by the respondent. Since the individual members of the Society immediately doubted whether the respondent would be able to complete the flats, they did not deposit the amount with the Society and, thus, the cheques issued by the Society got dishonoured.

Being of the opinion that the petitioner-Society was not liable under Section 138, the High Court observed: “It is not disputed that the society was constituted for the welfare of its members who were interested in getting their houses constructed by the respondent. Therefore, the society played a role only to facilitate its members in getting their houses constructed and the society had no liability as per Section 138 NI Act on the date of signing of the MoU.”

It was further opined that even if it is presumed that the said was paid to the respondent as advance money, even then there appeared to be no criminal liability or any liability which was recoverable under provisions of Section 18.

In such view of the matter, the court allowed the instant petition and quashed the complaint case filed against the petitioner as also all proceedings emanating therefrom. [Employees Welfare Fund v. KRA Infrastructure Developer (P) Ltd., 2019 SCC OnLine Del 11245, decided on 19-11-2019]

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]

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Himachal Pradesh High Court: Sandeep Sharma, J. contemplated the petition filed under Section 12 of Contempt of Courts Act, where the petitioner prayed for punishing the respondent for willful disobedience of judgment passed by the Court.

The factual matrix of the case was that a case was filed against the respondent under Section 138 of Negotiable Instruments Act for dishonor of cheque, for which he was held guilty and the respondent undertook that he will make payments of the entire amount of compensation, after which the Court had compounded the offence and set aside the conviction. Respondent was sentenced for a month and compensation was also levied against him. The aforesaid judgment of conviction was upheld by learned Sessions Judge; subsequently, the respondent approached the Court by way of Criminal Revision under Section 397 CrPC and prayed to set aside judgments of conviction recorded by learned Courts below.

Court in the revision application considered the undertaking given by the respondent that he would pay the amount of compensation before a particular date and also deposited 15% of the cheque amount with the Himachal Pradesh State Legal Services Authority, proceeded to compound the offence and set aside the impugned judgments of conviction and sentence recorded by learned Courts below. Since the respondent failed to honor the undertaking given to Court, complainant had approached the Court in the instant proceedings, seeking appropriate action against the respondent for willful disobedience of judgment.

The respondent had tendered an unconditional apology for the disobedience on his part. It had been categorically stated that on account of non-compliance of the direction issued in the judgment rendered, the respondent had undergone imprisonment for one month. He further submitted that on account of financial constraints he was not in a position to fulfill his undertaking. The counsel for the respondent V.S. Chauhan submitted that the respondent had completed the tenure of his imprisonment. Hence, leniency was sought related to further consequences of default.  He further contended that since the respondent had already suffered for more than one month and appropriate remedy under law, was available to the complainant for the realization of his money, no fruitful purpose would be served in case of action, if any, was taken against the respondent.

The Court, found that in judgment by the Court had ordered that in the event of non-fulfillment of the solemn undertaking furnished by the respondent to the Court, judgment of conviction and sentence would automatically revive and separate proceedings for violation of undertaking would be initiated against the respondent in terms of provisions contained under the Contempt of Courts Act, 1971. But since the respondent, on account of his non-fulfillment of the undertaking, had already undergone imprisonment for one month and the complainant has a separate /specific remedy under Section 421 CrPC, for realization of amount of compensation awarded by learned trial Court, the Court saw no reason to proceed against the respondent in the instant proceedings. Further, it had been specifically stated in the reply that the respondent was not in a position to fulfill the undertaking.

The Court further noted that in Chintala Symala v. Chintala Venkata Satyanarayan Rao, (2008) 10 SCC 711, the Supreme Court had held that “We do not find any ground to modify the quantum of maintenance. However, as the contemnor has expressed his inability to pay the amount of maintenance in terms of the order passed by this Court, we do not consider it appropriate to proceed with the contempt case. At the same time, we consider it just and expedient to recall order.”

Hence, the Court decided to drop the charges on the decision rendered by the Supreme Court. Contempt notice issued to the respondent was discharged.[Dinesh Kumar Nanda v. Ramesh Ranta, 2019 SCC OnLine HP 1348, decided on 27-08-2019]

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Bombay High Court: S.S. Shinde, J. allowed a criminal application filed against the order of the Magistrate whereby he rejected the application filed by the applicant for recalling the issuance of process under Section 138 of the Negotiable Instrument Act, 1881, against him.

The applicant was one of the accused in a criminal complaint filed by the complainant against one Echovox (India) (P) Ltd. and its directors. Echovox defaulted in payment of lease credit extended by the complainant. The cheques issued by Echocvox in favour of the complainant for the charge of the said liability were dishonoured on the presentation for insufficiency of funds. The applicant was one of the directors of Echovox. However, he claimed that he had already resigned from the said position before the subject cheques were issued. After the complaint was filed, the Magistrate had issued process against all the accused including the applicant. Thereafter, the applicant filed an application for recalling of the said order against him. However, the Magistrate rejected the application. Aggrieved thereby, the applicant filed the present application.

The High Court, on perusal of the record, took note of the fact that in his reply to the statutory notice sent by the complainant, the applicant had informed them that he had ceased to be a director of the said company, and necessary Form No. 32 in that regard had already been filed with the Registrar of Companies. On facts of the case, the Court held:

“As already observed hereinabove, the Applicant was not the director of the accused 1 company at the time of issuance of cheques and therefore is not held to be responsible for the business of the said company as averred in the complaint. Respondent 2/Complainant has not brought on record any unimpeachable and incontrovertible evidence to show that the applicant is concerned with the issuance of cheques.”

In such view of the matter, the Court allowed the application filed by the applicant and set aside the order of the Magistrate impugned herein.[Ramesh Pahulraj Makhija v. State of Maharashtra, 2019 SCC OnLine Bom 1656, decided on 23-08-2019]

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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]

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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]

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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]

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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]

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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