1993 (10) TMI 347 - SC - Companies Law

Offence under Section 138 of the Negotiable Instruments (Amendment) Act, 1988 comitted Held that - The post-dated cheque becomes a cheque under the Act of the date which is written on the said cheque and the six months period has to be reckoned for the purposes of Section 138(a) from the said date. One of the main ingredients of the offence under Section 138 of the Act is, the return of the cheque by the bank unpaid. Till the time the cheque is returned by the bank unpaid, no offence under Section 138 is made out. A post-dated cheque cannot be presented before the bank and as such the question of its return would not arise. It is only when the post-dated cheque becomes a cheque , with effect from the date shown on the face of the said cheque, the provisions of Section 138 come into play. The net result is that a post-dated cheque remains a bill of exchange till the date written on it. With effect from the date shown on the face of the said cheque it becomes a cheque under the Act and the provisions of Section 138(a) would squarely be attracted. In the present case the post-dated cheques were drawn in March 1990 but they became cheques in the year 1991 on the dates shown therein. The period of six months, therefore, has to be reckoned from the dates mentioned on the face of the cheques. Even otherwise we agree with the reasoning adopted by the Division Bench of the Kerala High Court. Section 138 has to be construed with reference to the context. If the object of bringing Section 133 of the Act on the statute has to be fulfilled then the only interpretation which can be given to Clause (a) of proviso to Section 138 of the Act is that a post-dated cheque shall be deemed to have been drawn on the date it bears. Appeals allowed.

Summary

Issues Involved:
1. Applicability of Section 138 of the Negotiable Instruments Act, 1881 to post-dated cheques.
2. Interpretation of the date on which a cheque is considered "drawn" under Section 138(a) of the Act.

Detailed Analysis:

1. Applicability of Section 138 of the Negotiable Instruments Act, 1881 to Post-Dated Cheques:
The primary issue in this case is whether Section 138 of the Negotiable Instruments Act, 1881, applies to post-dated cheques. The appellant filed complaints under Section 138 after the cheques issued by the respondent were dishonored due to insufficient funds. The High Court quashed the proceedings, ruling that Section 138 did not apply to post-dated cheques. This decision was based on the interpretation that post-dated cheques are not "drawn" on the date they bear but on the date they are written, which in this case was more than six months before the cheques were presented.

The Supreme Court disagreed with the High Court's interpretation. It held that post-dated cheques, although initially bills of exchange, become cheques on the date written on them, i.e., the date they are payable on demand. Therefore, Section 138 applies to post-dated cheques from the date they bear.

2. Interpretation of the Date on Which a Cheque is Considered "Drawn" Under Section 138(a):
The second issue revolves around the interpretation of the term "drawn" in Section 138(a) of the Act. The High Court, following the Madras High Court's ruling in Babu Xavier v. Lalchand Munoth, held that a cheque is "drawn" on the date it is written and made, not the date it bears. This interpretation excluded post-dated cheques from the ambit of Section 138 if presented beyond six months from the date they were written.

The Supreme Court rejected this interpretation, supporting the Kerala High Court's view in Manoj K. Seth v. Fernandez. The Supreme Court clarified that a post-dated cheque is considered "drawn" on the date it bears, not the date it is written. This interpretation aligns with the legislative intent to enhance the acceptability of cheques and hold drawers liable for dishonored cheques due to insufficient funds.

The Court emphasized that a post-dated cheque remains a bill of exchange until the date written on it, at which point it becomes a cheque payable on demand. Therefore, the six-month period for presenting the cheque, as stipulated in Section 138(a), begins from the date the cheque bears, not the date it was written.

Conclusion:
The Supreme Court allowed the appeals, setting aside the High Court's judgment. The Court held that post-dated cheques are subject to the provisions of Section 138 of the Negotiable Instruments Act, 1881, from the date they bear. The learned Chief Judicial Magistrate, Karnal, was directed to proceed with the complaints in accordance with the law. This judgment ensures that post-dated cheques are treated as cheques from the date they bear, thus fulfilling the legislative intent of enhancing the reliability and acceptability of cheques in commercial transactions.