A clear reading of section 138 leaves no doubt in our mind that the circumstances under which such dishonour takes place are required to be totally ignored. In this case, the law only takes note of the fact that the payment has not been forthcoming and it matters little that any of the manifold reasons may have caused that situation. If, for instance, the closure of an account or the stoppage of payment or any other of the commonplace reasons for dishonour were to be justifiable, then, the Legislature would have set these out in the section as exceptions not constituting an offence. No such intention can be read into section 138, as none exists. The solitary exception made by the Legislature is with regard to the drawer being offered a final opportunity of paying up the amount within 15 days from the receipt of notice which, in other-words, provides a last opportunity to prove one's bona fides. It is obvious, that having regard to the widespread practice of issuing cheques which are dishonoured and the many ingenious methods of avoiding payment that are practiced, the Legislature has opted for a non-nonsense situation. The possibility has not been overlooked whereby an account any inadvertently be overdrawn or a dishonour may be for technical reasons or where a genuine mistake has occurred and the grace period provided for by the Legislature after service of notice on the drawer is in order to afford an opportunity to the drawer to rectify these. Undoubtedly, even when the dishonour has taken place due to the dishonesty of the depositor, the drawer is still given a last chance to act otherwise. Consequently, the reasons for dishonour even if they be very valid as was sought to be pointed out in this case, should not and cannot be taken into account by a Magistrate when such a complaint is presented.
1. On the unusual facts that have emerged before us in this petition, certain interesting points of law have been canvassed which are of some consequence having regard to the fact that they concern the ambit and scope of section 138 of the Negotiable Instruments Act, 1881. This recently introduced proviso of law was specially placed on the statute book for purposes of making the dishonour of cheques punishable by a criminal court and thereby providing a speedy and efficacious remedy to the victim of such a situation. The provision, however, prescribes certain conditions and limitations which have been seriously debated in the course of the hearing of this petition and which are summarised by us below as they substantially represent the high points of the issues in controversy :
(a) Whether it is open to a complainant to invoke the process of a criminal court alleging an offence under section 138 of the Negotiable Instruments Act at any point of time earlier to that as it prescribed in the section and whether this infirmity is at all curable or whether it is fatal to the prosecution ?
(b) What is the correct manner in which the time-frame as is prescribed in sections 138 and 142 of the Negotiable Instruments Act is required to be computed ?
(c) Whether it would be open to the complainant, in the course of proceedings under section 482 of the Code of Criminal Procedure, to produce material before the High Court for purposes of effectively amendings statements or the factual position or as has happened in the present case, the material date set out in the complaint or conversely, whether the record of the lower court is sacrosanct and cannot be altered at this stage ?
(d) Is section 138 to be afforded restrictive application by confining it to the narrow category of cases where the rejection slip reads "insufficiency of funds" or was it prescribed as an antidote for the malignant trade practice of indiscriminately issuing cheques that are dishonoured without any compunction, in other words, would dishonour of a cheque attract criminal consequences in the normal course ?
2. The facts that are material for purposes of the decision of this petition are set out in brief. Admittedly, the petitioner before us, at the relevant time, was the executive director of a limited company doing business under the name and style of Porwal Pulp and Paper Mills Ltd. As appears from the record, respondent No. 1, who is the complaint before the trial court, had made certain supplies to the mills and it is his case that 12 cheques, each one in the sum of Rs. 15,000 were issued to him towards payment against the goods in question. That the supplies had taken place several months earlier is not in dispute and we are not immediately concerned with the exact dates or the nature of those transactions. The 12 cheques in question were presented to his bankers on June 21, 1991. All the 12 cheques were returned by the complainant's bankers with the endorsement "refer to drawer". This was communicated to the complainant on July 8, 1991. The complainant thereupon addressed separate notices in respect of each cheque, all of which are dated July 18, 1991, and these notices were despatched to the accuses under registered post with acknowledgment due. The complainant states that on July 29, 1991, the entire bunch of notices was delivered by the postal authorities to the accused. The date is of some significance because it is in relation to this date that the entire controversy has arise. We shall presently deal with those circumstances which we are setting out in the narrative. Thereafter, on August 9, 1991, the complaint approached the trial court at Satara and he filed 12 separate complaints each in respect of one of the cheques. The complaint discloses that the offence alleged was one under section 138 of the Negotiable Instruments Act. The learned Magistrate, as the record indicates, on the same day took down the verification of the complainant and issued process against the accused under section 138 of the Negotiable Instruments Act as also under section 420 of the Indian Penal Code. It is in relation to this order issuing process which is dated August 9, 1991, that the present petition has been filed. The petitioner before us has invoked the inherent jurisdiction of this court and has contended on a number of grounds that the proceedings before the trial court are liable to be quashed. Respondent No. 1 who is the original complainant has filed a detailed affidavit and has also relied on several documents as annexures to that affidavit on the basis of which he has sought to justify the order whereby process was issued.
3. Mr. Manohar, learned counsel appearing on behalf of the petitioner has, in the first instance, assailed the maintainability of the proceeding initiated before the trial court because, it is his case that no offence whatsoever was disclosed on August 9, 1991, when the learned Magistrate took cognizance of the complaint and issued process. In support of this contention, Mr. Manohar has advanced the submission that the provision of section 138 of the Negotiable Instruments Act specifically lay down a requirement that certain conditions are required to be complied with and, according to Mr. Manohar, in the absence of these conditions, no offence can be said to have been complete. He proceeds to state that if as on August 9, 1991, no offence can be said to have been committed by the accused, no complaint could have been presented in respect of such alleged offence and, consequently, the Magistrate was wrong in issuing process. Mr. Manohar's submission is that the proceedings themselves are liable to be quashed on the grounds that they have been made out by him.
4. In support, Mr. Manohar relies on the definition of the term "complaint" as it appears in section 2(d) of the Code of Criminal Procedure, which reads as follows :
"(d) 'complaint' means any allegation made orally or in writing to a Magistrate, with a view to his taking action under this Code, that some person, whether known or unknown, has committed an offence, but does not include a police report;"
5. Mr. Manohar submits that at the starting point of the proceeding, since in this case the law was set in motion before the trial court on the basis of a written complaint or a private complaint, it was essential for the complainant to have made out before the learned Magistrate that an offence had in fact been committed. Unless such offence had in fact taken place on or before August 9, 1991, no such complaint itself was maintainable. In order to appreciate the significance of this argument, a reference to Chapter XV of the Code would also be useful because it is this chapter which governs the taking of cognizance of complaints by Magistrates in cases of private complaints. There is little ambiguity in the phraseology used in section 200 which makes it quite explicit that a Magistrate can only take cognizance of an offence. It, therefore, needs to be examined as to whether at all an offence was in fact disclosed as on August 9, 1991, as submitted by learned counsel.
6. For this purpose, it would be useful to reproduce the provisions of section 138 of the Negotiable Instruments Act, which read as follows :
"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 one year, 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 giving a notice, in writing, to the drawer of the cheque, within fifteen days of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and
(c) the drawer of such cheque fails to make the payment of the said amount of money to the payee or, as the case may be to the holder in due course of the cheque, within fifteen days of the receipt of the said notice."
7. Relying on this definition, Mr. Manohar advanced the submission that section 138 initially proceeds to define the ingredients of the offence and the punishment that would follow in the event of such an offence having been committed. But what is of paramount significance is the fact that the section contains a proviso which makes certain eventualities conditions precedent for the commission of an offence. We are not immediately concerned with the first and second of these proviso but Mr. Manohar relies on sub-clause (c) whereby the requirement is that the drawer of the cheque must have failed to make payment of the said amount to the payee "within 15 days of the receipt of the said notice". That notice was served within the prescribed time on the drawer of the cheque in this case is undisputed. But what needs to be examined is as to whether he had failed to make the payment of the amount in question within the stipulated period of 15 days of the receipt of the notice. Mr. Manohar points out to us that the complaint specifically mentions the date of service of the notice on the accused as July 29, 1991. He, therefore, advances the straight contention that sub-clause (c) confers on the accused a total period of immunity of 15 days from the date on which the notice has been served on him and within which period, it is open to the accused to save himself form the consequences of the dishonour by making the payment in question. Mr. Manohar states that once the Legislature has, for good reason, provided this leeway or immunity period, it also ipso facto means that during that period, no complaint can be filed against his because the accused has committed no offence unless the period of 15 days has elapsed. Therefore, by a simple process of calculation, adding on a period of 15 days to July 29, 1991, the complaint filed on August 9, 1991, would be premature in so far as the period of 15 days had not elapsed at that point of time.
8. Mr. Manohar supports this argument by referring to section 142 of the Negotiable Instruments Act, which section reads as follows :
"142. Cognizance of offences. - Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974) -
(a) no court shall take cognizance of any offence punishable under section 138 except upon a complaint, in writing, made by the payee or, as the case may be, the holder in due course of the cheque;
(b) such complaint is made within one month of the date on which the cause of action arises under clause (c) of the proviso to section 138;
(c) no court inferior to that of a Metropolitan Magistrate or a Judicial Magistrate of the first class shall try any offence punishable under section 138."
9. Reliance is placed by learned counsel on sub-clause (c) because he contends that even if a complaint was wrongly presented to the learned Magistrate, section 142 creates a total legal prohibition on the court from taking cognizance of offences except during the time period prescribed by this section. That time period has been well defined in sub-clause (c) which states that the complaint will have to be made within one month of the date on which the cause of action arise under clause (c) of the provisions of section 138. That provision clearly stipulates that the offence defined in section 138 of the Negotiable Instruments Act shall come into existence in the event of the accused not making the payment within a period of 15 days of the service of he notice on him. Though this is in the negative sense, it effectively means that only when the period of 15 days after service of the notice has elapsed and the accused has still defaulted in making the payment, does he commit the offence. Relying on these provisions, Mr. Manohar concludes that the complaint presented to the trial court on August 9, 1991, i.e., before the 15-day immunity period had elapsed, was still-born, that it was effectively void in law and that the learned Magistrate was in error in having entertained the complaint. Mr. Manohar has relied on several reported decisions which we shall refer to presently.
10. Mr. Jahagirdar, learned counsel appearing on behalf of the complaint, has submitted before us that the interpretation canvassed on behalf of the petitioner ought not to be upheld. In the first instance, Mr. Jahagirdar has contended that the date mentioned in the complaint as being the date of service of the notice on the accused, viz., July 29, 1991, is an error. He relies on the affidavit filed in this proceeding and he has also produced before us a certificate issued by the sub-postmaster at Kamptee. According to Mr. Jahagirdar, the mention of the date as July 29, 1991, is an error in the complaint and that this court should construe the date as July 26, 1991, replying on the certificate that is produced before us.
11. The position, unfortunately, does not appear to be as simple as that. Undoubtedly, Mr. Jahagirdar has produced before us a certificate which we have no reason to doubt. However, the acknowledgments that are produced before us do not appear to have any date on them. Some degree of ambiguity undoubtedly arises. We do not propose to enter into any controversy with regard to the date of actual service of the notice on the accused for the reason that the law is well-settled in so far as this court will necessarily have to be circumscribed by the record that is produced before it. That record is the record of the material that was placed before the learned Magistrate on August 9, 1991. Admittedly, the affidavit and the certificate that are now shown to us were not before the learned Magistrate and, therefore, it would be highly improper and impermissible for us to base any decision on such material that was not before the trial court. It is well settled law that in proceedings under section 482 of the Code of Criminal Procedure, no new material can be introduced by either party in support of their contentions before the High Court. Reference may only be made to one such decision which is reported as State of Bihar v. P. P. Sharma [1991] Crl LJ 1438 (SC), and a recent decision of the Supreme Court in the case of Smt. Chand Dhawan v. Jawahar Lal . The
supreme Court in this case has reiterated once again the well-settled position that at the stage of quashing, the court cannot rely on new material that is sought to be produced before the High Court. This principle cannot be departed from and, under these circumstances, we are required to proceed on the basis of the original statement contained in the complaint that the service of the notice was effected on the accused on July 29, 1991. If this date were to be accepted, there can be little dispute about the fact that the complaint presented before the trial court was well within the time frame of 15 days as prescribed by section 138(c) of the Negotiable Instruments Act.
12. Mr. Jahagirdar has advanced an ingenuous submission which we need to deal with in so far as he contends that the act that is punishable effectively is the dishonour of the cheque in so far as once a cheque has been issued, it should normally be presumed that the drawer of the cheque had necessary funds for honouring the cheque and would make arrangements for payment. It is for this reason that the Legislature has made the act of dishonour punishable by a criminal court. He, therefore, submits that the period of 15 days as prescribed in section 138(c) must be construed by the court as a grace period within which it is open to the accused person to make amends or in other words, to purge himself of the offence which is already complete. He points out to us that after the act of dishonour of the cheque is communicated to the complainant, he is required to serve a notice on the drawer within a prescribed period and that right through this time, the drawer gets the benefit of paying up the money and being exonerated of the consequences of dishonour. The Legislature gives the drawer a final grace period of 15 days after service of this notice and according to Mr. Jahagirdar, if a complaint were to be filed within this span of 15 days, the correct way of viewing as to whether an offence is committed or not would be by examining the subsequent developments and by finding out as to whether within the period of 15 days, regardless of when the complaint was filed, the accused paid up the amount of whether he defaulted. Mr. Jahagirdar's contention effectively is that if the ingredients of the offence, viz., issuance of a cheque and the dishonour thereof are substantially complied with and if the record shows even at this point of time, that the accused did not have the intention and in fact did not make the payment it would not retrospectively render the filing of the complaint bad in law. He has visualised a situation where a court defers the issuance of process until the time-period has elapsed in order to ensure as to whether the accused really intends to make the payment within the time limit available to him. Such a situation has not arisen in the present case and we, therefore, do not propose to deal with that eventuality. On the facts presented before us, there is no dispute that the complaint was presented within the period of 15 days and proceeding on those facts, we need to decide as to whether at all in the first instance, the complaint was maintainable.
13. For this purpose, one needs to go back to the specific provisions of section 142 of the Negotiable Instruments Act. This provision in terms section 138 of the Act except in certain specified situations. Section 138 defines as to when and under what circumstances an offence can be said to have been committed. In order to remove any possible ambiguity, section 142(b) of the Negotiable Instruments Act reiterates the position that the point of time when the cause of action has arisen is to commence when the notice period of 15 days as prescribed in the proviso to section 138(c) has elapsed. Reading these provisos together, we have no hesitation in holding that no offence can be said to have been committed unless and until the period of 15 days as prescribed under sub-clause (c) of section 138 has in fact elapsed. A court would, therefore, be barred in law from taking cognizance of a complaint in respect of such an offence, at any point of time prior to this. It is not permissible to advance a submission that a complaint can be presented earlier to a Magistrate and kept pending for an order or process at a later point of time because the Code is quite specific about the fact that it is at the point of time when a private complaint is presented to the court that the court takes cognizance of it. It is open to the court to defer the subsequent process either to examine the complainant or to sent the complaint for enquiry and report by the police or for that matter, if no case is made out, to dismiss the complaint. The point of time at which cognizance is taken however, is when the complaint is presented to the learned Magistrate and applying this test, there can be no dispute about the fact than on August 9, 1991, when the complaint was presented to the learned Magistrate, no offence can be said to have been committed and, therefore, no cognizance could have been taken by him. It is unnecessary for us to deal with the subsidiary argument advanced by Mr. Manohar regarding the process issued under section 420 of the Indian Penal Code. Even if the learned Magistrate was of the view that an offence under section 420 of the Indian Penal Code was made out, the complaint itself as also the verification statement do not make out either on facts or in law any offence under section 420 of the Indian Penal Code. In fairness, Mr. Jahagirdar has stated that he does not propose to justify the issuance of process under section 420 of the Indian Penal Code.
14. In view of the considerable importance of the points involved, it is necessary for us to advert to the position as obtains in law particularly since section 138 of the Negotiable Instruments Act has, in the recent past, arisen for interpretation before different courts. Mr. Manohar, in the first instance, relied on the decision in the case of Prithviraj Kukkillayya v. Mathew Koshy [1991] 71 Comp Cas 131 (Ker); 1 KLT 595 and also in a subsequent decision of the same Bench in the case of N. C. Kumaresan v. Ameerappa [1991] 1 KLT 797, 893; [1992] 74 Comp Cas 848 (Ker). A Division Bench of the Kerala High Court, after considering the ambit and scope of sections 138 and 142 of the Negotiable Instruments Act, has held that the prosecution for such an offence would only be maintainable when the period of 15 days from the receipt of the notice by the drawer of the cheque has elapsed. The court observed that the dishonour of the cheque by itself does not give rise to a cause of action because payment can be made on receipt of the notice of demand contemplated in clause (b) of section 138 and in that event, there is no offence, nor any attempt to commit the offence nor even a preparation to commit the offence. Failure to pay the amount within fifteen days of receipt of notice alone is the cause of action that would permit prosecution and nothing else.
15. Mr. Manohar thereafter drew our attention to a decision in M. M. Malik v. Prem Kumar Goyal [1991] Crl. LJ 2594; [1992] 73 Comp Cas 425 (P & H), whereby the learned single judge of the Punjab and Haryana High Court while considering section 138 of the Negotiable Instruments Act, has held that for an offence under this provision of law, the fulfilment of conditions contemplated by all the provisions is a condition precedent. Mr. Manohar also referred to the decision in the case of Rajiv Kumar v. State of Uttar Pradesh [1991] Crl. LJ 3010; [1993] 78 Comp Cas 507 (All), wherein the learned single judge of the Allahabad High Court, while construing the requirements of sub-clause (b) of section 138 held that in the absence of a notice as contemplated by that sub-clause, no cognizance can be taken under section 142. Reliance was also placed on a Division Bench decision of the Kerala High Court in the case of Manoj K. Seth v. R. J. Fernandez [1991] Crl. LJ 3253; [1992] 73 Comp Cas 441 (Ker), wherein the court was concerned with the provision of sub-clause (a) of section 138 and the court took the view that in the case of a post-dated cheque, if it is not presented within the period of six months as prescribed in this sub-clause, no offence can be said to have been committed. Learned counsel also drew our attention to the decision, in the case of Ess Bee Food Specialities v. Kapoor Bros. [1992] Crl. LJ 739; [1993] 78 Comp Cas 570 (P & H), wherein a leaned single judge of the Punjab and Haryana High Court has reiterated the aforesaid position in law by once again holding that the offence becomes complete only when the period prescribed under section 138, proviso (b), and the notice period expires and payment is not made. Mr. Manohar has also relied on the decision in the case of Anil K. Mehta v. Hans Raj [1992] Crl. LJ 1044; [1993] 78 Comp Cas 784, Wherein the aforesaid principle has once again been upheld and the court has observed that the date of issuance of the cheque is immaterial for construing the offence.
16. The position as enunciated in the aforesaid decisions is, in our considered view, the correct one and there can be little ambiguity about the fact that this being a penal provision, the ingredients of the offence and the time frame prescribed will have to be strictly construed.
17. Certain arguments were advanced by learned counsel in support of the submission that the complaint as filed does not disclose any offence against the present accused. Learned counsel has submitted that the accused was the executive director of the company, that there is no deeming provision of law that a criminal liability accrues to him, and that in the absence of it being pointed out that he was responsible for the day-to-day business of the company, the learned Magistaate was wrong in issuing process. In the view that we have taken, it is unnecessary for us to examine this aspect of the matter though we must observe in passing that there is some substance in this contention.
18. Mr. Manohar was critical of the prosecution in this case having been instituted in Kolhapur; whereas the accused is a resident of Nagpur and the company has its place of business near Chandrapur. Even though he did not seriously attack the validity of the local jurisdiction vis-a-vis the Kolhapur court having entertained the complaint, he did make a serious issue of the fact that the whole purpose of having instituted a criminal proceeding against the accused virtually at the other end of the State was obviously directed as a pressure tactic and to that extent, constituted abuse of the process of court. Even though the question does not directly arise, Mr. Jahagirdar was quick to point out that the complainant resides at Kolhapur and the non-payment of the money to him at Kolhapur constitutes the gravamen of the charge and, therefore, under section 177 of the Criminal Procedure Code, the proceedings were rightly instituted before the local court. The anatomy of section 138 comprise certain necessary components before the offence can be said to be complete, the last of them being the act of non-payment in spite of 15 days having elapsed after receipt of the final notice. It is true that the cheques may have been issued by the accused at his place of residence or business, the bank on which it is drawn being often located at a second spot and inevitably the complainant or the payee has his place of residence or business at yet another location. It was for this reason that the Kerala High Court in the case of P. K. Muraleedharan v. C. K. Pareed [1992] Crl. LJ 1965; [1993] 76 Comp Cas 615, took the view that any of the three courts could exercise jurisdiction. In our considered view, where undoubtedly each of the components constitutes a stage in the commission of the offence, the final nonpayment being the ultimate one, section 178 of the Criminal Procedure Code, would clearly apply to an offence of this type. It would be perfectly valid and reasonable to hold, therefore, that the aggrieved party, viz., the complainant is fully justified in approaching the local court having jurisdiction over the area where the payment was to be made to him in the final instance. Having defaulted in the first instance, the law casts a special obligation on the drawer of the cheque to make amends by tendering payment to the payee and the correct approach in such a situation would be to construe the offence as having been complete at the place where the payment ought to have been tendered to the drawee but was wrongfully not done. Applying these principles, therefore, it cannot be held that the invocation of the jurisdiction of the court at Kolhapur was either incorrect or that it constituted abuse.
19. Mr. Manohar advanced a submission before us that the company is a sick undertaking and that a distinction would, therefore, have to be drawn in this instance between a case where a cheque is issued wantonly without there being a guarantee of its being honoured and genuine inability to pay because of economic distress. He did not plead this as a defence but sought to explain his client's conduct by stating that there was valid reason for the non-payment, viz., a genuine inability to pay, and that there was no dishonesty on the part of the accused. Mr. Jahagirdar was quick to point out that these provisions have been interpreted by several courts and that a correct construction of section 138 could only mean that the liability of a drawer is absolute, if the payment is not forthcoming and that the Legislature did not intend to permit any excuses.
20. It is essential to deal with the submission of Mr. Manohar when he alluded to the fact that the company was a sick unit. He did not elaborate on this aspect and for good reason because section 138 regards the circumstances under which the dishonour has taken place as being wholly irrelevant. Black's Law Dictionary defines "dishonour" in relation to a negotiable instrument as being a situation whereby "payment is refused or cannot be obtained".
21. A clear reading of section 138 leaves no doubt in our mind that the circumstances under which such dishonour takes place are required to be totally ignored. In this case, the law only takes note of the fact that the payment has not been forthcoming and it matters little that any of the manifold reasons may have caused that situation. If, for instance, the closure of an account or the stoppage of payment or any other of the commonplace reasons for dishonour were to be justifiable, then, the Legislature would have set these out in the section as exceptions not constituting an offence. No such intention can be read into section 138, as none exists. The solitary exception made by the Legislature is with regard to the drawer being offered a final opportunity of paying up the amount within 15 days from the receipt of notice which, in other-words, provides a last opportunity to prove one's bona fides. It is obvious, that having regard to the widespread practice of issuing cheques which are dishonoured and the many ingenious methods of avoiding payment that are practiced, the Legislature has opted for a non-nonsense situation. The possibility has not been overlooked whereby an account any inadvertently be overdrawn or a dishonour may be for technical reasons or where a genuine mistake has occurred and the grace period provided for by the Legislature after service of notice on the drawer is in order to afford an opportunity to the drawer to rectify these. Undoubtedly, even when the dishonour has taken place due to the dishonesty of the depositor, the drawer is still given a last chance to act otherwise. Consequently, the reasons for dishonour even if they be very valid as was sought to be pointed out in this case, should not and cannot be taken into account by a Magistrate when such a complaint is presented.
22. Black's Law Dictionary defines the term "dishonour" as follows :
"Dishonour. - To refuse to accept or pay a draft or to pay a promissory note when duly presented. An instrument is dishonoured when a necessary or optional presentment is duly made and due acceptance or payment is refused, or cannot be obtained within the prescribed time, or in case of bank collections, the instrument is seasonably returned by the midnight deadline; or presentment is excused and the instrument is not duly accepted or paid."
23. The Negotiable Instruments Act does not define this term but the title of section 138 lists the insufficiency of funds as being one of the situations that could contribute to a dishonour and inevitably, the most important one; but it is followed by the word "etc.". This is of some significance as will be evident from the aforesaid definition and it is, therefore, essential that a correct understanding of the terminology used must necessarily imply that the overriding clause in section 138 revolves around the concept of inability to obtain the payment, the manifold situations giving rise to that result being secondary. It is for this reason that the preponderance of judicial authority has held the view that the return of a cheque is itself an indication that the funds are not forthcoming. While enacting section 138, the intention was not to punish a drawer whose cheque has not been honoured in one or two limited situations permitting at the same time the same result in altered circumstances.
24. In this context, it is useful to make a brief reference to a few of the reported decisions wherein the courts have had occasion to consider certain situations that have arisen as a result of dishonour. The Calcutta High Court in the case of Voltas Ltd. v. Hiralal Agarwalla [1991] Crl. LJ 609; [1991] 71 Comp Cas 273 referred to the familiar situation of a cheque having been returned with the endorsement "refer to drawer" and the accused having contended that this is only a back reference and does not constitute dishonour. In a well considered judgment, the learned single judge has very rightly and correctly construed such a situation as a clear case of a cheque being returned for want of funds, giving rise to an action under section 138. In the case of Sekhar Gupta v. Subhas Chandra Mondal [1992] 73 Comp Cas 590 (Cal), an interesting question arose as to whether an action is maintainable under section 138 in the case of a cheque that is presented for payment more than once. A division Bench of the Kerala High Court in the case of N. C. Kumaresan v. Ameerappa [1992] 74 Comp Cas 848 (Ker), has taken the view that more than one cause of action on the same cheque is not envisaged and that a complaint is maintainable only on the strength of the first cause of action when the cheque was returned for the first time. The Division Bench has proceeded on the reasoning that the Legislature never intended multiplication of the offences in relation to the number of times that the same cheque was dishonoured. In contrast to this view, the Calcutta High Court in the decision referred to supra, and in our considered view very correctly, held that the fresh cause of action accrues every time the cheque is dishonoured but that the period for sending the notice demanding payment is to be reckoned for the date of receipt of intimation of dishonour on the last presentation and that, it is on the basis of this action alone, that a complaint would be maintainable. Merely because a cheque is represented, regardless of whether it is at the complainant's own volition or at the request of the accused and it is dishonoured on this occasion, there is nothing in section 138 which can be read as construing that the failure to make payment would not constitute an offence.
25. The Punjab and Haryana High Court in the case of M. M. Malik v. Prem Kumar Goyal [1992] 73 Comp Cas 425, has analysed the aforesaid sections and held that the cause of action will be complete when the drawer of the cheque fails to make payment within 15 days of the receipt of the notice contemplated by proviso (b) and that the offence shall be deemed to have been committed only from the date when the notice period expires. The court had construed the endorsement "refer to drawer" as the bankers' inability to honour the cheque for want of funds in the account of the drawer and further held that as far as the jurisdiction was concerned, the principle that the "debtor has to find the creditor" would apply and that the court within whose jurisdiction the creditor is located will have jurisdiction to entertain the complaint. We are in agreement with these views.
26. A slightly different situation had arisen before the Kerala High Court in the case of Calcutta Sanitary Wares v. C. T. Jacob [1991] 1 BC 512; [1993] 76 Comp Cas 347, where the court was considering a situation whereby the cheque was initially dishonoured on the basis of a stop-payment memo. The court held that "the object of the provision cannot be allowed to be defeated by such ingenious action". The court took the view that dishonour pre-supposes non-payment as the funds in question were not forthcoming and that in these circumstances also, the failure to pay the amount within 15 days of the notice of demand would still constitute an offence as any other view would defeat the specific provisions of section 138.
27. Another somewhat similar situation had arisen in the case of Omprakash Bhojraj Maniyar v. Swati Girish Bhide [1992] Mah. LJ 302; [1993] 78 Comp Cas 797 (Bom), wherein a learned single judge of the Aurangabad Bench of this High Court upheld the view that section 138 would not apply in a case where a cheque was returned unpaid with the endorsement that the account was closed by the drawer. The learned single judge had construed a complaint under section 138 as being misconceived in a case where a cheque was returned on the ground that the account had been closed. Relying on the qualifying provisions in section 138 which uses the phrase "insufficiency of funds" or "exceeding arrangement", it was held that the ground of dishonour not being insufficiency of funds, no offence was disclosed.
28. This, to our mind, is too narrow a construction of the section and fails to take into account the objects and reasons behind the amendment. The wording and the endorsement from the bank or the circumstances under which a cheque is returned are not the guiding criterion but the fact that on presentation of the cheque, the payment was not made. There could be a host of reasons for this but the bottom line of the situation is that the payment could not be made by the banker and the mechanics of the reasons apart, the irresistible conclusion that, had the funds been available, the payment would have been made leads back to the position that dishonour, therefore, implies insufficiency of funds. We are reinforced in this view by the definition of a cheque as appears in section 6 of the Negotiable Instruments Act which defines it as a bill of exchange drawn on a specified banker. A bill of exchange is defined in section 5 which reads as follows :
"A bill of exchange is an instrument in writing containing an unconditional order signed by the maker directing a certain person to pay a certain sum of money only to, or to the order of, a certain person or to bearer of the instrument."
29. Reading these provisions with the statement of objects and reasons of the Banking, Public Financial Institutions and Negotiable Instruments Laws (Amendment) Act, 1988 (66 of 1988), whereby Chapter 17 comprising sections 138 to 142 were inserted with effect from April 1, 1989, there can be little doubt that section 138 was intended to be a provision to curb instances of dishonour. It will have to be presumed that the multifarious grounds on which a cheque would be dishonoured are commonplace and in not having made any exception for such situations, the legislative intent behind section 138 was that cases of dishonour of a cheque would constitute a criminal offence unless the payment was forthcoming within the prescribed period. The reference to the term "insufficiency of funds" was obviously a qualifying clause which only reiterates the basic principle that an order to the bank conveyed through a cheque make a prescribed payment would only fail in a situation where the bank could not implement that directive for want of the requisite funds. The circumstances that may contribute to the situation would, therefore, be irrelevant. The presumption in section 139 heavily supports this view.
30. It would be useful in this regard to refer to another decision of this court, in the case ofPawankumar v. Ashish Enterprises [1992] Crl. LJ 1619; [1993] 78 Comp Cas 346, where the cheque was returned with the endorsement "suit field by bank against account-holder". The court held that the reason apart, the dishonour had been occasioned because of insufficiency of funds, and further that the criminal proceedings under section 138 were justified regardless of the plea that civil action for recovery had been initiated. In our considered view, if the object of introducing section 138 on the statute book is to be achieved, it will have to be meaningfully enforced, brushing aside technical and frivolous pleas.
31. In the result, the petition succeeds. The order of the learned Magistrate dated August 9, 1991, issuing process against the petitioner who is the original accused is set aside and as a necessary consequence, the criminal proceedings are quashed. The bail bond executed by the petitioner to stand cancelled. The security deposit provided by him to the trial court is ordered to be refunded to him. Rule absolute accordingly.
Print Page
Bombay High Court
Rakesh Nemkumar Porwal vs Narayan Dhondu Joglekar on 29 July, 1992
Equivalent citations: 1994 (3) BomCR 355, 1993 78 CompCas 822 Bom
Bench: M S Kurdukar
1. On the unusual facts that have emerged before us in this petition, certain interesting points of law have been canvassed which are of some consequence having regard to the fact that they concern the ambit and scope of section 138 of the Negotiable Instruments Act, 1881. This recently introduced proviso of law was specially placed on the statute book for purposes of making the dishonour of cheques punishable by a criminal court and thereby providing a speedy and efficacious remedy to the victim of such a situation. The provision, however, prescribes certain conditions and limitations which have been seriously debated in the course of the hearing of this petition and which are summarised by us below as they substantially represent the high points of the issues in controversy :
(a) Whether it is open to a complainant to invoke the process of a criminal court alleging an offence under section 138 of the Negotiable Instruments Act at any point of time earlier to that as it prescribed in the section and whether this infirmity is at all curable or whether it is fatal to the prosecution ?
(b) What is the correct manner in which the time-frame as is prescribed in sections 138 and 142 of the Negotiable Instruments Act is required to be computed ?
(c) Whether it would be open to the complainant, in the course of proceedings under section 482 of the Code of Criminal Procedure, to produce material before the High Court for purposes of effectively amendings statements or the factual position or as has happened in the present case, the material date set out in the complaint or conversely, whether the record of the lower court is sacrosanct and cannot be altered at this stage ?
(d) Is section 138 to be afforded restrictive application by confining it to the narrow category of cases where the rejection slip reads "insufficiency of funds" or was it prescribed as an antidote for the malignant trade practice of indiscriminately issuing cheques that are dishonoured without any compunction, in other words, would dishonour of a cheque attract criminal consequences in the normal course ?
2. The facts that are material for purposes of the decision of this petition are set out in brief. Admittedly, the petitioner before us, at the relevant time, was the executive director of a limited company doing business under the name and style of Porwal Pulp and Paper Mills Ltd. As appears from the record, respondent No. 1, who is the complaint before the trial court, had made certain supplies to the mills and it is his case that 12 cheques, each one in the sum of Rs. 15,000 were issued to him towards payment against the goods in question. That the supplies had taken place several months earlier is not in dispute and we are not immediately concerned with the exact dates or the nature of those transactions. The 12 cheques in question were presented to his bankers on June 21, 1991. All the 12 cheques were returned by the complainant's bankers with the endorsement "refer to drawer". This was communicated to the complainant on July 8, 1991. The complainant thereupon addressed separate notices in respect of each cheque, all of which are dated July 18, 1991, and these notices were despatched to the accuses under registered post with acknowledgment due. The complainant states that on July 29, 1991, the entire bunch of notices was delivered by the postal authorities to the accused. The date is of some significance because it is in relation to this date that the entire controversy has arise. We shall presently deal with those circumstances which we are setting out in the narrative. Thereafter, on August 9, 1991, the complaint approached the trial court at Satara and he filed 12 separate complaints each in respect of one of the cheques. The complaint discloses that the offence alleged was one under section 138 of the Negotiable Instruments Act. The learned Magistrate, as the record indicates, on the same day took down the verification of the complainant and issued process against the accused under section 138 of the Negotiable Instruments Act as also under section 420 of the Indian Penal Code. It is in relation to this order issuing process which is dated August 9, 1991, that the present petition has been filed. The petitioner before us has invoked the inherent jurisdiction of this court and has contended on a number of grounds that the proceedings before the trial court are liable to be quashed. Respondent No. 1 who is the original complainant has filed a detailed affidavit and has also relied on several documents as annexures to that affidavit on the basis of which he has sought to justify the order whereby process was issued.
3. Mr. Manohar, learned counsel appearing on behalf of the petitioner has, in the first instance, assailed the maintainability of the proceeding initiated before the trial court because, it is his case that no offence whatsoever was disclosed on August 9, 1991, when the learned Magistrate took cognizance of the complaint and issued process. In support of this contention, Mr. Manohar has advanced the submission that the provision of section 138 of the Negotiable Instruments Act specifically lay down a requirement that certain conditions are required to be complied with and, according to Mr. Manohar, in the absence of these conditions, no offence can be said to have been complete. He proceeds to state that if as on August 9, 1991, no offence can be said to have been committed by the accused, no complaint could have been presented in respect of such alleged offence and, consequently, the Magistrate was wrong in issuing process. Mr. Manohar's submission is that the proceedings themselves are liable to be quashed on the grounds that they have been made out by him.
4. In support, Mr. Manohar relies on the definition of the term "complaint" as it appears in section 2(d) of the Code of Criminal Procedure, which reads as follows :
"(d) 'complaint' means any allegation made orally or in writing to a Magistrate, with a view to his taking action under this Code, that some person, whether known or unknown, has committed an offence, but does not include a police report;"
5. Mr. Manohar submits that at the starting point of the proceeding, since in this case the law was set in motion before the trial court on the basis of a written complaint or a private complaint, it was essential for the complainant to have made out before the learned Magistrate that an offence had in fact been committed. Unless such offence had in fact taken place on or before August 9, 1991, no such complaint itself was maintainable. In order to appreciate the significance of this argument, a reference to Chapter XV of the Code would also be useful because it is this chapter which governs the taking of cognizance of complaints by Magistrates in cases of private complaints. There is little ambiguity in the phraseology used in section 200 which makes it quite explicit that a Magistrate can only take cognizance of an offence. It, therefore, needs to be examined as to whether at all an offence was in fact disclosed as on August 9, 1991, as submitted by learned counsel.
6. For this purpose, it would be useful to reproduce the provisions of section 138 of the Negotiable Instruments Act, which read as follows :
"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 one year, 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 giving a notice, in writing, to the drawer of the cheque, within fifteen days of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and
(c) the drawer of such cheque fails to make the payment of the said amount of money to the payee or, as the case may be to the holder in due course of the cheque, within fifteen days of the receipt of the said notice."
7. Relying on this definition, Mr. Manohar advanced the submission that section 138 initially proceeds to define the ingredients of the offence and the punishment that would follow in the event of such an offence having been committed. But what is of paramount significance is the fact that the section contains a proviso which makes certain eventualities conditions precedent for the commission of an offence. We are not immediately concerned with the first and second of these proviso but Mr. Manohar relies on sub-clause (c) whereby the requirement is that the drawer of the cheque must have failed to make payment of the said amount to the payee "within 15 days of the receipt of the said notice". That notice was served within the prescribed time on the drawer of the cheque in this case is undisputed. But what needs to be examined is as to whether he had failed to make the payment of the amount in question within the stipulated period of 15 days of the receipt of the notice. Mr. Manohar points out to us that the complaint specifically mentions the date of service of the notice on the accused as July 29, 1991. He, therefore, advances the straight contention that sub-clause (c) confers on the accused a total period of immunity of 15 days from the date on which the notice has been served on him and within which period, it is open to the accused to save himself form the consequences of the dishonour by making the payment in question. Mr. Manohar states that once the Legislature has, for good reason, provided this leeway or immunity period, it also ipso facto means that during that period, no complaint can be filed against his because the accused has committed no offence unless the period of 15 days has elapsed. Therefore, by a simple process of calculation, adding on a period of 15 days to July 29, 1991, the complaint filed on August 9, 1991, would be premature in so far as the period of 15 days had not elapsed at that point of time.
8. Mr. Manohar supports this argument by referring to section 142 of the Negotiable Instruments Act, which section reads as follows :
"142. Cognizance of offences. - Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974) -
(a) no court shall take cognizance of any offence punishable under section 138 except upon a complaint, in writing, made by the payee or, as the case may be, the holder in due course of the cheque;
(b) such complaint is made within one month of the date on which the cause of action arises under clause (c) of the proviso to section 138;
(c) no court inferior to that of a Metropolitan Magistrate or a Judicial Magistrate of the first class shall try any offence punishable under section 138."
9. Reliance is placed by learned counsel on sub-clause (c) because he contends that even if a complaint was wrongly presented to the learned Magistrate, section 142 creates a total legal prohibition on the court from taking cognizance of offences except during the time period prescribed by this section. That time period has been well defined in sub-clause (c) which states that the complaint will have to be made within one month of the date on which the cause of action arise under clause (c) of the provisions of section 138. That provision clearly stipulates that the offence defined in section 138 of the Negotiable Instruments Act shall come into existence in the event of the accused not making the payment within a period of 15 days of the service of he notice on him. Though this is in the negative sense, it effectively means that only when the period of 15 days after service of the notice has elapsed and the accused has still defaulted in making the payment, does he commit the offence. Relying on these provisions, Mr. Manohar concludes that the complaint presented to the trial court on August 9, 1991, i.e., before the 15-day immunity period had elapsed, was still-born, that it was effectively void in law and that the learned Magistrate was in error in having entertained the complaint. Mr. Manohar has relied on several reported decisions which we shall refer to presently.
10. Mr. Jahagirdar, learned counsel appearing on behalf of the complaint, has submitted before us that the interpretation canvassed on behalf of the petitioner ought not to be upheld. In the first instance, Mr. Jahagirdar has contended that the date mentioned in the complaint as being the date of service of the notice on the accused, viz., July 29, 1991, is an error. He relies on the affidavit filed in this proceeding and he has also produced before us a certificate issued by the sub-postmaster at Kamptee. According to Mr. Jahagirdar, the mention of the date as July 29, 1991, is an error in the complaint and that this court should construe the date as July 26, 1991, replying on the certificate that is produced before us.
11. The position, unfortunately, does not appear to be as simple as that. Undoubtedly, Mr. Jahagirdar has produced before us a certificate which we have no reason to doubt. However, the acknowledgments that are produced before us do not appear to have any date on them. Some degree of ambiguity undoubtedly arises. We do not propose to enter into any controversy with regard to the date of actual service of the notice on the accused for the reason that the law is well-settled in so far as this court will necessarily have to be circumscribed by the record that is produced before it. That record is the record of the material that was placed before the learned Magistrate on August 9, 1991. Admittedly, the affidavit and the certificate that are now shown to us were not before the learned Magistrate and, therefore, it would be highly improper and impermissible for us to base any decision on such material that was not before the trial court. It is well settled law that in proceedings under section 482 of the Code of Criminal Procedure, no new material can be introduced by either party in support of their contentions before the High Court. Reference may only be made to one such decision which is reported as State of Bihar v. P. P. Sharma [1991] Crl LJ 1438 (SC), and a recent decision of the Supreme Court in the case of Smt. Chand Dhawan v. Jawahar Lal . The
supreme Court in this case has reiterated once again the well-settled position that at the stage of quashing, the court cannot rely on new material that is sought to be produced before the High Court. This principle cannot be departed from and, under these circumstances, we are required to proceed on the basis of the original statement contained in the complaint that the service of the notice was effected on the accused on July 29, 1991. If this date were to be accepted, there can be little dispute about the fact that the complaint presented before the trial court was well within the time frame of 15 days as prescribed by section 138(c) of the Negotiable Instruments Act.
12. Mr. Jahagirdar has advanced an ingenuous submission which we need to deal with in so far as he contends that the act that is punishable effectively is the dishonour of the cheque in so far as once a cheque has been issued, it should normally be presumed that the drawer of the cheque had necessary funds for honouring the cheque and would make arrangements for payment. It is for this reason that the Legislature has made the act of dishonour punishable by a criminal court. He, therefore, submits that the period of 15 days as prescribed in section 138(c) must be construed by the court as a grace period within which it is open to the accused person to make amends or in other words, to purge himself of the offence which is already complete. He points out to us that after the act of dishonour of the cheque is communicated to the complainant, he is required to serve a notice on the drawer within a prescribed period and that right through this time, the drawer gets the benefit of paying up the money and being exonerated of the consequences of dishonour. The Legislature gives the drawer a final grace period of 15 days after service of this notice and according to Mr. Jahagirdar, if a complaint were to be filed within this span of 15 days, the correct way of viewing as to whether an offence is committed or not would be by examining the subsequent developments and by finding out as to whether within the period of 15 days, regardless of when the complaint was filed, the accused paid up the amount of whether he defaulted. Mr. Jahagirdar's contention effectively is that if the ingredients of the offence, viz., issuance of a cheque and the dishonour thereof are substantially complied with and if the record shows even at this point of time, that the accused did not have the intention and in fact did not make the payment it would not retrospectively render the filing of the complaint bad in law. He has visualised a situation where a court defers the issuance of process until the time-period has elapsed in order to ensure as to whether the accused really intends to make the payment within the time limit available to him. Such a situation has not arisen in the present case and we, therefore, do not propose to deal with that eventuality. On the facts presented before us, there is no dispute that the complaint was presented within the period of 15 days and proceeding on those facts, we need to decide as to whether at all in the first instance, the complaint was maintainable.
13. For this purpose, one needs to go back to the specific provisions of section 142 of the Negotiable Instruments Act. This provision in terms section 138 of the Act except in certain specified situations. Section 138 defines as to when and under what circumstances an offence can be said to have been committed. In order to remove any possible ambiguity, section 142(b) of the Negotiable Instruments Act reiterates the position that the point of time when the cause of action has arisen is to commence when the notice period of 15 days as prescribed in the proviso to section 138(c) has elapsed. Reading these provisos together, we have no hesitation in holding that no offence can be said to have been committed unless and until the period of 15 days as prescribed under sub-clause (c) of section 138 has in fact elapsed. A court would, therefore, be barred in law from taking cognizance of a complaint in respect of such an offence, at any point of time prior to this. It is not permissible to advance a submission that a complaint can be presented earlier to a Magistrate and kept pending for an order or process at a later point of time because the Code is quite specific about the fact that it is at the point of time when a private complaint is presented to the court that the court takes cognizance of it. It is open to the court to defer the subsequent process either to examine the complainant or to sent the complaint for enquiry and report by the police or for that matter, if no case is made out, to dismiss the complaint. The point of time at which cognizance is taken however, is when the complaint is presented to the learned Magistrate and applying this test, there can be no dispute about the fact than on August 9, 1991, when the complaint was presented to the learned Magistrate, no offence can be said to have been committed and, therefore, no cognizance could have been taken by him. It is unnecessary for us to deal with the subsidiary argument advanced by Mr. Manohar regarding the process issued under section 420 of the Indian Penal Code. Even if the learned Magistrate was of the view that an offence under section 420 of the Indian Penal Code was made out, the complaint itself as also the verification statement do not make out either on facts or in law any offence under section 420 of the Indian Penal Code. In fairness, Mr. Jahagirdar has stated that he does not propose to justify the issuance of process under section 420 of the Indian Penal Code.
14. In view of the considerable importance of the points involved, it is necessary for us to advert to the position as obtains in law particularly since section 138 of the Negotiable Instruments Act has, in the recent past, arisen for interpretation before different courts. Mr. Manohar, in the first instance, relied on the decision in the case of Prithviraj Kukkillayya v. Mathew Koshy [1991] 71 Comp Cas 131 (Ker); 1 KLT 595 and also in a subsequent decision of the same Bench in the case of N. C. Kumaresan v. Ameerappa [1991] 1 KLT 797, 893; [1992] 74 Comp Cas 848 (Ker). A Division Bench of the Kerala High Court, after considering the ambit and scope of sections 138 and 142 of the Negotiable Instruments Act, has held that the prosecution for such an offence would only be maintainable when the period of 15 days from the receipt of the notice by the drawer of the cheque has elapsed. The court observed that the dishonour of the cheque by itself does not give rise to a cause of action because payment can be made on receipt of the notice of demand contemplated in clause (b) of section 138 and in that event, there is no offence, nor any attempt to commit the offence nor even a preparation to commit the offence. Failure to pay the amount within fifteen days of receipt of notice alone is the cause of action that would permit prosecution and nothing else.
15. Mr. Manohar thereafter drew our attention to a decision in M. M. Malik v. Prem Kumar Goyal [1991] Crl. LJ 2594; [1992] 73 Comp Cas 425 (P & H), whereby the learned single judge of the Punjab and Haryana High Court while considering section 138 of the Negotiable Instruments Act, has held that for an offence under this provision of law, the fulfilment of conditions contemplated by all the provisions is a condition precedent. Mr. Manohar also referred to the decision in the case of Rajiv Kumar v. State of Uttar Pradesh [1991] Crl. LJ 3010; [1993] 78 Comp Cas 507 (All), wherein the learned single judge of the Allahabad High Court, while construing the requirements of sub-clause (b) of section 138 held that in the absence of a notice as contemplated by that sub-clause, no cognizance can be taken under section 142. Reliance was also placed on a Division Bench decision of the Kerala High Court in the case of Manoj K. Seth v. R. J. Fernandez [1991] Crl. LJ 3253; [1992] 73 Comp Cas 441 (Ker), wherein the court was concerned with the provision of sub-clause (a) of section 138 and the court took the view that in the case of a post-dated cheque, if it is not presented within the period of six months as prescribed in this sub-clause, no offence can be said to have been committed. Learned counsel also drew our attention to the decision, in the case of Ess Bee Food Specialities v. Kapoor Bros. [1992] Crl. LJ 739; [1993] 78 Comp Cas 570 (P & H), wherein a leaned single judge of the Punjab and Haryana High Court has reiterated the aforesaid position in law by once again holding that the offence becomes complete only when the period prescribed under section 138, proviso (b), and the notice period expires and payment is not made. Mr. Manohar has also relied on the decision in the case of Anil K. Mehta v. Hans Raj [1992] Crl. LJ 1044; [1993] 78 Comp Cas 784, Wherein the aforesaid principle has once again been upheld and the court has observed that the date of issuance of the cheque is immaterial for construing the offence.
16. The position as enunciated in the aforesaid decisions is, in our considered view, the correct one and there can be little ambiguity about the fact that this being a penal provision, the ingredients of the offence and the time frame prescribed will have to be strictly construed.
17. Certain arguments were advanced by learned counsel in support of the submission that the complaint as filed does not disclose any offence against the present accused. Learned counsel has submitted that the accused was the executive director of the company, that there is no deeming provision of law that a criminal liability accrues to him, and that in the absence of it being pointed out that he was responsible for the day-to-day business of the company, the learned Magistaate was wrong in issuing process. In the view that we have taken, it is unnecessary for us to examine this aspect of the matter though we must observe in passing that there is some substance in this contention.
18. Mr. Manohar was critical of the prosecution in this case having been instituted in Kolhapur; whereas the accused is a resident of Nagpur and the company has its place of business near Chandrapur. Even though he did not seriously attack the validity of the local jurisdiction vis-a-vis the Kolhapur court having entertained the complaint, he did make a serious issue of the fact that the whole purpose of having instituted a criminal proceeding against the accused virtually at the other end of the State was obviously directed as a pressure tactic and to that extent, constituted abuse of the process of court. Even though the question does not directly arise, Mr. Jahagirdar was quick to point out that the complainant resides at Kolhapur and the non-payment of the money to him at Kolhapur constitutes the gravamen of the charge and, therefore, under section 177 of the Criminal Procedure Code, the proceedings were rightly instituted before the local court. The anatomy of section 138 comprise certain necessary components before the offence can be said to be complete, the last of them being the act of non-payment in spite of 15 days having elapsed after receipt of the final notice. It is true that the cheques may have been issued by the accused at his place of residence or business, the bank on which it is drawn being often located at a second spot and inevitably the complainant or the payee has his place of residence or business at yet another location. It was for this reason that the Kerala High Court in the case of P. K. Muraleedharan v. C. K. Pareed [1992] Crl. LJ 1965; [1993] 76 Comp Cas 615, took the view that any of the three courts could exercise jurisdiction. In our considered view, where undoubtedly each of the components constitutes a stage in the commission of the offence, the final nonpayment being the ultimate one, section 178 of the Criminal Procedure Code, would clearly apply to an offence of this type. It would be perfectly valid and reasonable to hold, therefore, that the aggrieved party, viz., the complainant is fully justified in approaching the local court having jurisdiction over the area where the payment was to be made to him in the final instance. Having defaulted in the first instance, the law casts a special obligation on the drawer of the cheque to make amends by tendering payment to the payee and the correct approach in such a situation would be to construe the offence as having been complete at the place where the payment ought to have been tendered to the drawee but was wrongfully not done. Applying these principles, therefore, it cannot be held that the invocation of the jurisdiction of the court at Kolhapur was either incorrect or that it constituted abuse.
19. Mr. Manohar advanced a submission before us that the company is a sick undertaking and that a distinction would, therefore, have to be drawn in this instance between a case where a cheque is issued wantonly without there being a guarantee of its being honoured and genuine inability to pay because of economic distress. He did not plead this as a defence but sought to explain his client's conduct by stating that there was valid reason for the non-payment, viz., a genuine inability to pay, and that there was no dishonesty on the part of the accused. Mr. Jahagirdar was quick to point out that these provisions have been interpreted by several courts and that a correct construction of section 138 could only mean that the liability of a drawer is absolute, if the payment is not forthcoming and that the Legislature did not intend to permit any excuses.
20. It is essential to deal with the submission of Mr. Manohar when he alluded to the fact that the company was a sick unit. He did not elaborate on this aspect and for good reason because section 138 regards the circumstances under which the dishonour has taken place as being wholly irrelevant. Black's Law Dictionary defines "dishonour" in relation to a negotiable instrument as being a situation whereby "payment is refused or cannot be obtained".
21. A clear reading of section 138 leaves no doubt in our mind that the circumstances under which such dishonour takes place are required to be totally ignored. In this case, the law only takes note of the fact that the payment has not been forthcoming and it matters little that any of the manifold reasons may have caused that situation. If, for instance, the closure of an account or the stoppage of payment or any other of the commonplace reasons for dishonour were to be justifiable, then, the Legislature would have set these out in the section as exceptions not constituting an offence. No such intention can be read into section 138, as none exists. The solitary exception made by the Legislature is with regard to the drawer being offered a final opportunity of paying up the amount within 15 days from the receipt of notice which, in other-words, provides a last opportunity to prove one's bona fides. It is obvious, that having regard to the widespread practice of issuing cheques which are dishonoured and the many ingenious methods of avoiding payment that are practiced, the Legislature has opted for a non-nonsense situation. The possibility has not been overlooked whereby an account any inadvertently be overdrawn or a dishonour may be for technical reasons or where a genuine mistake has occurred and the grace period provided for by the Legislature after service of notice on the drawer is in order to afford an opportunity to the drawer to rectify these. Undoubtedly, even when the dishonour has taken place due to the dishonesty of the depositor, the drawer is still given a last chance to act otherwise. Consequently, the reasons for dishonour even if they be very valid as was sought to be pointed out in this case, should not and cannot be taken into account by a Magistrate when such a complaint is presented.
22. Black's Law Dictionary defines the term "dishonour" as follows :
"Dishonour. - To refuse to accept or pay a draft or to pay a promissory note when duly presented. An instrument is dishonoured when a necessary or optional presentment is duly made and due acceptance or payment is refused, or cannot be obtained within the prescribed time, or in case of bank collections, the instrument is seasonably returned by the midnight deadline; or presentment is excused and the instrument is not duly accepted or paid."
23. The Negotiable Instruments Act does not define this term but the title of section 138 lists the insufficiency of funds as being one of the situations that could contribute to a dishonour and inevitably, the most important one; but it is followed by the word "etc.". This is of some significance as will be evident from the aforesaid definition and it is, therefore, essential that a correct understanding of the terminology used must necessarily imply that the overriding clause in section 138 revolves around the concept of inability to obtain the payment, the manifold situations giving rise to that result being secondary. It is for this reason that the preponderance of judicial authority has held the view that the return of a cheque is itself an indication that the funds are not forthcoming. While enacting section 138, the intention was not to punish a drawer whose cheque has not been honoured in one or two limited situations permitting at the same time the same result in altered circumstances.
24. In this context, it is useful to make a brief reference to a few of the reported decisions wherein the courts have had occasion to consider certain situations that have arisen as a result of dishonour. The Calcutta High Court in the case of Voltas Ltd. v. Hiralal Agarwalla [1991] Crl. LJ 609; [1991] 71 Comp Cas 273 referred to the familiar situation of a cheque having been returned with the endorsement "refer to drawer" and the accused having contended that this is only a back reference and does not constitute dishonour. In a well considered judgment, the learned single judge has very rightly and correctly construed such a situation as a clear case of a cheque being returned for want of funds, giving rise to an action under section 138. In the case of Sekhar Gupta v. Subhas Chandra Mondal [1992] 73 Comp Cas 590 (Cal), an interesting question arose as to whether an action is maintainable under section 138 in the case of a cheque that is presented for payment more than once. A division Bench of the Kerala High Court in the case of N. C. Kumaresan v. Ameerappa [1992] 74 Comp Cas 848 (Ker), has taken the view that more than one cause of action on the same cheque is not envisaged and that a complaint is maintainable only on the strength of the first cause of action when the cheque was returned for the first time. The Division Bench has proceeded on the reasoning that the Legislature never intended multiplication of the offences in relation to the number of times that the same cheque was dishonoured. In contrast to this view, the Calcutta High Court in the decision referred to supra, and in our considered view very correctly, held that the fresh cause of action accrues every time the cheque is dishonoured but that the period for sending the notice demanding payment is to be reckoned for the date of receipt of intimation of dishonour on the last presentation and that, it is on the basis of this action alone, that a complaint would be maintainable. Merely because a cheque is represented, regardless of whether it is at the complainant's own volition or at the request of the accused and it is dishonoured on this occasion, there is nothing in section 138 which can be read as construing that the failure to make payment would not constitute an offence.
25. The Punjab and Haryana High Court in the case of M. M. Malik v. Prem Kumar Goyal [1992] 73 Comp Cas 425, has analysed the aforesaid sections and held that the cause of action will be complete when the drawer of the cheque fails to make payment within 15 days of the receipt of the notice contemplated by proviso (b) and that the offence shall be deemed to have been committed only from the date when the notice period expires. The court had construed the endorsement "refer to drawer" as the bankers' inability to honour the cheque for want of funds in the account of the drawer and further held that as far as the jurisdiction was concerned, the principle that the "debtor has to find the creditor" would apply and that the court within whose jurisdiction the creditor is located will have jurisdiction to entertain the complaint. We are in agreement with these views.
26. A slightly different situation had arisen before the Kerala High Court in the case of Calcutta Sanitary Wares v. C. T. Jacob [1991] 1 BC 512; [1993] 76 Comp Cas 347, where the court was considering a situation whereby the cheque was initially dishonoured on the basis of a stop-payment memo. The court held that "the object of the provision cannot be allowed to be defeated by such ingenious action". The court took the view that dishonour pre-supposes non-payment as the funds in question were not forthcoming and that in these circumstances also, the failure to pay the amount within 15 days of the notice of demand would still constitute an offence as any other view would defeat the specific provisions of section 138.
27. Another somewhat similar situation had arisen in the case of Omprakash Bhojraj Maniyar v. Swati Girish Bhide [1992] Mah. LJ 302; [1993] 78 Comp Cas 797 (Bom), wherein a learned single judge of the Aurangabad Bench of this High Court upheld the view that section 138 would not apply in a case where a cheque was returned unpaid with the endorsement that the account was closed by the drawer. The learned single judge had construed a complaint under section 138 as being misconceived in a case where a cheque was returned on the ground that the account had been closed. Relying on the qualifying provisions in section 138 which uses the phrase "insufficiency of funds" or "exceeding arrangement", it was held that the ground of dishonour not being insufficiency of funds, no offence was disclosed.
28. This, to our mind, is too narrow a construction of the section and fails to take into account the objects and reasons behind the amendment. The wording and the endorsement from the bank or the circumstances under which a cheque is returned are not the guiding criterion but the fact that on presentation of the cheque, the payment was not made. There could be a host of reasons for this but the bottom line of the situation is that the payment could not be made by the banker and the mechanics of the reasons apart, the irresistible conclusion that, had the funds been available, the payment would have been made leads back to the position that dishonour, therefore, implies insufficiency of funds. We are reinforced in this view by the definition of a cheque as appears in section 6 of the Negotiable Instruments Act which defines it as a bill of exchange drawn on a specified banker. A bill of exchange is defined in section 5 which reads as follows :
"A bill of exchange is an instrument in writing containing an unconditional order signed by the maker directing a certain person to pay a certain sum of money only to, or to the order of, a certain person or to bearer of the instrument."
29. Reading these provisions with the statement of objects and reasons of the Banking, Public Financial Institutions and Negotiable Instruments Laws (Amendment) Act, 1988 (66 of 1988), whereby Chapter 17 comprising sections 138 to 142 were inserted with effect from April 1, 1989, there can be little doubt that section 138 was intended to be a provision to curb instances of dishonour. It will have to be presumed that the multifarious grounds on which a cheque would be dishonoured are commonplace and in not having made any exception for such situations, the legislative intent behind section 138 was that cases of dishonour of a cheque would constitute a criminal offence unless the payment was forthcoming within the prescribed period. The reference to the term "insufficiency of funds" was obviously a qualifying clause which only reiterates the basic principle that an order to the bank conveyed through a cheque make a prescribed payment would only fail in a situation where the bank could not implement that directive for want of the requisite funds. The circumstances that may contribute to the situation would, therefore, be irrelevant. The presumption in section 139 heavily supports this view.
30. It would be useful in this regard to refer to another decision of this court, in the case ofPawankumar v. Ashish Enterprises [1992] Crl. LJ 1619; [1993] 78 Comp Cas 346, where the cheque was returned with the endorsement "suit field by bank against account-holder". The court held that the reason apart, the dishonour had been occasioned because of insufficiency of funds, and further that the criminal proceedings under section 138 were justified regardless of the plea that civil action for recovery had been initiated. In our considered view, if the object of introducing section 138 on the statute book is to be achieved, it will have to be meaningfully enforced, brushing aside technical and frivolous pleas.
31. In the result, the petition succeeds. The order of the learned Magistrate dated August 9, 1991, issuing process against the petitioner who is the original accused is set aside and as a necessary consequence, the criminal proceedings are quashed. The bail bond executed by the petitioner to stand cancelled. The security deposit provided by him to the trial court is ordered to be refunded to him. Rule absolute accordingly.
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