2011 (3) TMI 1464 - HC - Companies Law

Dishonor of cheque - section 138 of the Negotiable Instruments Act (N.I. Act) - Held that - asin order to bring home the guilt of the respondents under section 138 N.I. Act, the petitioners are first required to establish that the instruments which were presented for encashment and returned unpaid were actually the cheques as defined under section 6 of the N.I. Act. A cheque is a bill of exchange drawn on a specified banker authorising him to pay the amount mentioned in the cheque on demand to the drawee and debit the same to the account of the drawer. Mode of operation of bank account was joint by two Directors - Since the aforesaid purported cheques do not bear the signatures of the second joint signatory, the aforesaid instruments do not qualify the definition of a valid cheque which could be acted upon by the bank in terms of the instructions regarding the mode of operation of the bank account. - aforesaid instruments cannot be termed as validly drawn cheques and as such one of the most essential ingredients of offence under section 138 N.I. Act is lacking in this case. The respondents may have committed an offence of cheating punishable under section 420 IPC but by no means it can be said that they are guilty of offence under section 138 N.I. Act.

Issues:
Delay in filing appeals against dismissal of complaints under section 138 of the Negotiable Instruments Act (N.I. Act).
Validity of complaints filed against respondents under section 138 N.I. Act based on dishonored cheques.
Interpretation of essential ingredients required to prove guilt under section 138 N.I. Act.
Definition of a valid cheque under section 6 of the N.I. Act.
Consideration of evidence and defense presented in the case.

Issue 1: Delay in filing appeals
The petitioners sought condonation of delay in filing appeals against the dismissal of their complaints under section 138 of the N.I. Act. The respondent had no objection to condoning the delay, and the court, considering the concession and reasons provided, granted the condonation of delay in filing the appeals.

Issue 2: Validity of complaints under section 138 N.I. Act
The complaints alleged that the respondent company issued cheques to the petitioner, which were dishonored by the bank. Despite demand notices, the respondents failed to pay, leading to the complaints under section 138 N.I. Act. The defense claimed misuse of cheques by the complainant after resignation and that the cheques were not issued to discharge any debt. The trial court dismissed the complaints, stating the cheques were not valid as they lacked signatures of both authorized signatories, essential for a valid cheque under the N.I. Act.

Issue 3: Interpretation of essential ingredients under section 138 N.I. Act
To establish guilt under section 138 N.I. Act, the petitioners needed to prove that the dishonored instruments were valid cheques as defined in section 6 of the N.I. Act. The definition clarifies a cheque as a bill of exchange drawn on a specified banker for payment on demand. The court emphasized that the instruments presented must meet the criteria of a valid cheque to maintain complaints under section 138 N.I. Act.

Issue 4: Definition of a valid cheque under section 6 of the N.I. Act
Section 6 of the N.I. Act defines a cheque as a bill of exchange drawn on a specified banker for payment on demand. The court analyzed the evidence, including bank records, to determine if the dishonored cheques met the requirements of a valid cheque. The lack of signatures from both joint signatories rendered the instruments invalid as per the mode of operation of the bank account, leading to the dismissal of the complaints.

Issue 5: Consideration of evidence and defense
The defense argued that the cheques were not valid as they lacked signatures of both authorized signatories. The court upheld this argument, stating that the absence of signatures from the second joint signatory made the cheques invalid under the N.I. Act. The defense's claim of misrepresentation by the respondents did not establish guilt under section 138 N.I. Act, but it could potentially lead to an offense under a different statute.

This judgment primarily dealt with the dismissal of complaints under section 138 of the N.I. Act due to the lack of valid cheques as per the statutory requirements. The court emphasized the essential ingredients needed to prove guilt under this section, focusing on the definition of a valid cheque and the mode of operation of the bank account. The defense's argument regarding misrepresentation did not hold ground in establishing guilt under the N.I. Act. The court's detailed analysis of the evidence and legal provisions led to the dismissal of the petitions for leave to appeal, affirming the trial court's decision.

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