2021 (2) TMI 745 - HC - Indian Laws

Dishonor of Cheque - insufficiency of funds - acquittal of the accused - HELD THAT - In the constructive imputation, notice to be considered as they are in the same cluster of management of the company. Accused No.3 is the authorized signatory to cheque. In the second notice issued address, names are there but notice is addressed to accused No.3. In the light of first presentation due knowledge of impugned notice have thereunder the impact and hyper technicality cannot be allowed to veto the regular process of law. In the context and circumstances There is no lacunae in presentation of the cheque. Another point that was submitted by learned counsel Sri.Chokka Reddy for respondents is that there is an agreement not to take action for first two years on the face of it which defence neither was raised nor could be accepted to exonerate the accused. Learned counsel for appellant submits the complainant is not affluent and it is very difficult for him to tolerate the financial burden. The cheque admittedly is issued in respect of existing legally recoverable debt and there was mandatory obligation and accused had issued the cheques in discharge of the obligation and that came to be dishonoured and tried to raise hyper technical issues against the substantive rights which cannot be accepted and on the other hand for the reasons morefully stated above It is found that the accused has committed offence punishable under Section 138 of the Negotiable Instruments Act and is liable to face punishment. In the process Judgment passed by the learned trial Judge is liable to be set aside. Accused is convicted for the offence punishable under Section 138 of the Negotiable Instruments Act and sentenced to pay a fine of ₹ 2,00,000/-. Out of which complainant be given compensation of ₹ 1,90,000/- payable by the accused and ₹ 10,000/- is ordered to be adjusted to the State Exchequer - appeal allowed.

Summary

Issues:
1. Acquittal under Section 138 of the Negotiable Instruments Act.
2. Compliance with formalities for dishonored cheques.
3. Validity of legal notices and agreements.
4. Presentation of cheques within validity period.
5. Addressing legal notices to accused parties.

Issue 1: Acquittal under Section 138 of the Negotiable Instruments Act
The case involved an appeal against the acquittal of the accused under Section 138 of the Negotiable Instruments Act. The complainant had entered into an agreement with a private limited company for investment returns. Cheques issued by the accused were dishonored, leading to the complaint. The court examined the requirements of Section 138, emphasizing the obligation to honor a cheque issued in discharge of a monetary obligation. The appellant argued that the issuance, presentation, and dishonor of the cheques were not disputed, indicating the accused's failure to honor their financial commitment.

Issue 2: Compliance with formalities for dishonored cheques
The court highlighted the formalities required under the Negotiable Instruments Act for dishonored cheques. It was noted that the complainant had issued legal notices within the stipulated timeframes after the cheques were dishonored. The court emphasized the importance of following the prescribed procedures, including issuing notices within specific time limits, to establish the offense under Section 138.

Issue 3: Validity of legal notices and agreements
The respondents raised concerns regarding the legal notices issued and the existence of an agreement limiting actions against the company. The court analyzed Section 142(b) and the proviso, which allow for complaints beyond the prescribed period under sufficient cause. The court dismissed the argument that the agreement prevented legal action, emphasizing the complainant's right to seek redress for dishonored cheques within the legal framework.

Issue 4: Presentation of cheques within validity period
The court addressed the necessity of presenting cheques within their validity period, highlighting the implications of presenting stale cheques. It was noted that the complainant had presented the cheques within the stipulated timeframe, despite challenges in serving legal notices. The court rejected the defense of non-presentation of cheques or limitations, affirming the complainant's adherence to legal requirements.

Issue 5: Addressing legal notices to accused parties
The court examined the issue of addressing legal notices to accused parties, particularly the authorized signatory of the cheques. The respondents argued against the specificity of the notices, but the court upheld the validity of the notices issued. The court emphasized that technicalities should not impede the legal process, especially when dealing with substantive rights and obligations under the Negotiable Instruments Act.

In conclusion, the court allowed the appeal, setting aside the previous judgment and convicting the accused under Section 138 of the Negotiable Instruments Act. The accused was sentenced to pay a fine, with compensation awarded to the complainant. The court underscored the importance of upholding legal obligations and ensuring compliance with formalities in financial transactions to prevent dishonored cheques and subsequent legal actions.