1996 (1) TMI 398 - SC - Companies Law

Complaints under Section 138 of the Negotiable Instruments Act, 1881 for dishonour of cheque for insufficiency of the funds in the accounts of the accused Held that - Suppose after the cheque is issued to the payee or to the holder in due course and before it is presented for encashment, notice is issued to him not to present the same for encashment and yet the payee or holder in due course presents the cheque to the Bank for payment and when it is returned on instructions, Section 138 does not get attracted. Under these circumstances, since the accused has not made the payment within 15 days from the date of the receipt of the notice issued by the payee or the holder in due course, the dishonest intention is inferable from those facts. Accordingly, the ingredients as contained in Section 138 have been prima facie made out in the complaint. The High Court, therefore, was wholly incorrect in its conclusion that the ingredients have not been made out in the complaint. The orders of the High Court quashing the com-plaints are illegal. They are accordingly set aside and the trial Court is directed to disposed of the matters as expeditiously as possible. It is made clear that we do not intend to express any opinion on merits.

Issues:
Interpretation of Section 138 of the Negotiable Instruments Act, 1881 regarding dishonour of cheques for insufficiency of funds.
Validity of complaints filed under Section 138 against the accused for dishonour of a cheque.
Consideration of dishonest intention of the accused in instructing the bank to stop payment on the cheque.
Applicability of statutory presumption under Section 138 in cases of dishonoured cheques.
Analysis of the High Court's decision to quash the complaints filed by the appellant.

Interpretation of Section 138:
The judgment delves into the interpretation of Section 138 of the Negotiable Instruments Act, which penalizes the dishonour of cheques due to insufficient funds. The provision outlines the conditions under which an individual is deemed to have committed an offense, including the presentation of a cheque for payment from an account with insufficient funds. The explanation to the section clarifies that "debt or other liability" refers to a legally enforceable obligation. The court emphasizes that dishonour of a cheque in such circumstances falls within the purview of Section 138.

Validity of Complaints:
The appellant filed complaints under Section 138 against the accused for dishonouring a cheque. The complaints detailed the presentation of the cheque, subsequent dishonour by the bank, and the issuance of a notice demanding payment. The court noted that the accused, aware of the lack of funds, failed to honor the cheque and did not take steps to arrange payment, thereby committing an offense under Section 138. The complaints were found to meet the statutory requirements, and the High Court's decision to quash them was deemed incorrect.

Dishonest Intention:
The judgment addresses the accused's alleged dishonest intention in instructing the bank to stop payment on the cheque. The court observed that such actions, coupled with the failure to make payment within the stipulated period after receiving a notice, infer a dishonest motive. The accused's conduct, including instructing the bank to stop payment to evade liability, was considered indicative of dishonesty under Section 138.

Statutory Presumption and High Court's Decision:
The court emphasized that Section 138 establishes a presumption of dishonest intention when a cheque is dishonored, and the drawer fails to make payment within the specified timeframe after receiving a notice. The High Court's ruling to quash the complaints was overturned, with the trial court directed to proceed with the matters expeditiously. The judgment refrained from expressing any opinion on the merits of the case while upholding the validity of the complaints under Section 138.

This comprehensive analysis of the judgment highlights the court's interpretation of Section 138, validation of the complaints, assessment of dishonest intention, application of statutory presumption, and reversal of the High Court's decision.

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