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Issues Involved:
1. Legislative competence of the Union Parliament to enact Section 138 of the Negotiable Instruments Act. 2. Constitutionality of excluding mens rea in Section 138. 3. Differential treatment of companies and individuals under Section 138. 4. Interpretation of the phrase "fails to make payment" in proviso (c) to Section 138. 5. Constitutionality of the presumption in Section 139. 6. Applicability of Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985, to prosecutions under Section 138. Issue-wise Detailed Analysis: 1. Legislative Competence of the Union Parliament: The petitioners argued that the Union Parliament lacks the legislative competence to enact Section 138, as it concerns the relationship of debtor and creditor, falling under the State List (Entry 30). The court held that Section 138, in its pith and substance, concerns banking and negotiable instruments (Entries 45 and 46 of List I), and does not primarily deal with money-lending or money-lenders. Thus, the legislation is within the competence of the Union Parliament. 2. Constitutionality of Excluding Mens Rea: The petitioners contended that excluding mens rea from Section 138 violates Article 14 of the Constitution. The court noted that while mens rea is generally an essential ingredient of a criminal offence, it can be excluded by statute either explicitly or by necessary implication. Section 138 creates strict liability, and its objective is to enhance the acceptability of cheques in settlements of liabilities. The court held that the exclusion of mens rea in Section 138 is not arbitrary and does not violate Article 14, as it serves a larger public interest. 3. Differential Treatment of Companies and Individuals: The petitioners argued that Section 141, which provides a safeguard for individuals in charge of companies, creates an unreasonable classification violating Article 14. The court held that treating companies and individuals differently is reasonable, as a company is a legal person distinct from its shareholders or members. The classification is based on the reality that wrongful acts of a company are acts of its agents. Therefore, the classification is neither irrational nor unreasonable. 4. Interpretation of "Fails to Make Payment": The petitioners suggested that the words "fails to make payment" in proviso (c) to Section 138 should imply "failure without reasonable cause." The court rejected this, stating that the explicit language of the statute and the principle of strict liability incorporated in Section 138 do not support such an interpretation. The court emphasized that the failure to make payment within the stipulated period triggers the offence under Section 138, regardless of the reason. 5. Constitutionality of the Presumption in Section 139: The petitioners argued that the presumption in Section 139 violates Article 20(3) of the Constitution, which protects against self-incrimination. The court held that the presumption in Section 139 is a rebuttable presumption and does not compel the accused to be a witness against himself. The court explained that such presumptions are common in criminal statutes and do not violate constitutional protections. 6. Applicability of Section 22 of the Sick Industrial Companies (Special Provisions) Act: The petitioners contended that prosecution under Section 138 is barred by Section 22 of the Sick Industrial Companies (Special Provisions) Act, which suspends legal proceedings against a sick industrial company. The court held that Section 22 applies to proceedings for winding up, execution, distress, or recovery of money but does not bar prosecution under penal laws like the Negotiable Instruments Act. Guidelines for Interpretation: The court provided guidelines for interpreting Sections 138, 139, and 142: - Section 138 should be construed strictly as it incorporates strict liability. - The drawer of a cheque is liable for prosecution if the cheque is issued for the discharge of any debt or liability and is dishonoured due to insufficiency of funds or exceeding arrangements with the bank. - The presumption under Section 139 operates in favor of the payee or holder in due course but not for a holder without consideration. - The burden initially lies on the complainant to show the cheque was issued for a legally enforceable debt, after which the burden shifts to the accused to disprove it. - A Judicial First Class Magistrate or Metropolitan Magistrate trying an offence under Section 138 can impose a fine exceeding Rs. 5,000 if warranted. Conclusion: The writ petitions were dismissed, and the court upheld the constitutionality and legislative competence of Section 138 of the Negotiable Instruments Act, providing detailed guidelines for its interpretation. The stay orders were vacated, and the concerned Magistrates were directed to dispose of the cases expeditiously.
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