2012 (12) TMI 106 - SC - Companies Law

Dishonour of Cheque u/s 138 - dishonor due to change in authorized signatories - Stop Payment instructions and post-dated cheque - held that - There is in our view no qualitative difference between a situation where the dishonour takes place on account of the substitution by a new set of authorised signatories resulting in the dishonour of the cheques already issued and another situation in which the drawer of the cheque changes his own signatures or closes the account or issues instructions to the bank not to make the payment. So long as the change is brought about with a view to preventing the cheque being honoured the dishonour would become an offence under Section 138 subject to other conditions prescribed being satisfied. Stoppage of cheque after notice to the drawer - held that - dishonour on the ground that the payment has been stopped, regardless whether such stoppage is with or without notice to the drawer, and regardless whether the stoppage of payment is on the ground that the amount lying in the account was not sufficient to meet the requirement of the cheque, would attract the provisions of Section 138. Regarding offer to settlement after dishonor - held that - The offer made by the respondent-company was in any case conditional and subject to the settlement of accounts. So also whether the cheques were issued fraudulently by the authorised signatory for amounts in excess of what was actually payable to the appellant is a matter for examination at the trial. That the cheques were issued under the signature of the persons who were authorised to do so on behalf of the respondent-company being admitted would give rise to a presumption that they were meant to discharge a lawful debt or liability. Allegations of fraud and the like are matters that cannot be investigated by a Court under Section 482 Cr.P.C. and shall have to be left to be determined at the trial after the evidence is adduced by the parties. Dishonor of cheque after resignation by the signatories after issuance of cheque - held that - Just because the authorised signatories of the cheques have taken a different line of defence than the one taken by by the company does not in our view justify quashing of the proceedings against them. - authorised signatory liable to be prosecuted along with the company even after resignation. Rebuttable presumption - held that - The instant matter however do not relate to a case of stop payment instruction to the bank as the cheque in question had been returned due to mismatching of the signatures but more than that the petitioner having neither raised nor proved to the contrary as envisaged under Section 139 of the NI Act that the cheques were not for the discharge of a lawful debt nor making the payment within fifteen days of the notice assigning any reason as to why the cheques had at all been issued if the amount had not been settled, obviously the plea of rebuttal envisaged under Section 139 does not come to his rescue so as to hold that the same would fall within the realm of rebuttable presumption envisaged under Section 139 of the Act.

Issues Involved:
1. Whether the dishonour of a cheque due to mismatched signatures attracts penal provisions under Section 138 of the Negotiable Instruments Act, 1881.
2. Interpretation of Section 138 of the Negotiable Instruments Act, particularly in relation to dishonour reasons beyond insufficient funds.
3. The applicability of the presumption under Section 139 of the Negotiable Instruments Act and its rebuttal.

Detailed Analysis:

1. Whether the dishonour of a cheque due to mismatched signatures attracts penal provisions under Section 138 of the Negotiable Instruments Act, 1881:

The Supreme Court addressed whether dishonour of a cheque due to mismatched signatures falls under the penal provisions of Section 138 of the Negotiable Instruments Act. The High Court had quashed the complaints on the ground that mismatched signatures do not attract Section 138, which applies only to dishonour due to insufficient funds or amounts exceeding the arrangement with the bank. The Supreme Court disagreed, stating that the expression "amount of money... is insufficient" is a genus encompassing various species such as account closure, payment stoppage, and mismatched signatures. The Court emphasized that any deliberate act resulting in dishonour, including mismatched signatures, constitutes an offence under Section 138, provided other statutory conditions are met.

2. Interpretation of Section 138 of the Negotiable Instruments Act, particularly in relation to dishonour reasons beyond insufficient funds:

The Court examined the scope of Section 138, which penalizes dishonour of cheques for insufficient funds or amounts exceeding arranged limits. The Court held that a narrow interpretation would defeat the legislative intent of ensuring the credibility of negotiable instruments. Citing precedents, the Court affirmed that dishonour for reasons like account closure or payment stoppage also falls under Section 138. The Court reiterated that the provision aims to prevent dishonest practices and ensure that cheques are honoured as promised.

3. The applicability of the presumption under Section 139 of the Negotiable Instruments Act and its rebuttal:

Section 139 presumes that a cheque is issued for discharging a lawful debt or liability, shifting the burden of proof to the drawer to rebut this presumption. The Court noted that this presumption is rebuttable at trial, and the drawer must prove that the cheque was issued without lawful consideration. The Court highlighted that even in cases of stop payment instructions, the presumption under Section 139 applies, and the drawer must show valid reasons for such instructions, including the absence of debt or liability. The Court emphasized that the trial court must examine whether the drawer had sufficient funds and whether the stop payment was for valid reasons.

Conclusion:

The Supreme Court allowed the appeals, setting aside the High Court's orders and directing the trial court to proceed with the complaints. The Court clarified that mismatched signatures leading to cheque dishonour fall under Section 138, and the presumption under Section 139 must be rebutted by the drawer. The Court stressed that the legislative intent of ensuring cheque credibility and preventing dishonest practices must guide the interpretation of these provisions. The judgment underscores that deliberate acts resulting in cheque dishonour, including mismatched signatures, constitute an offence under Section 138, subject to the drawer's opportunity to rebut the presumption of lawful debt under Section 139.

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