2024 (10) TMI 792 - HC - Indian Laws

Dishonour of cheque - no specific overt act has been alleged or attributed against the petitioner for the commission of alleged offence - HELD THAT - The Negotiable Instruments Act, 1881 was enacted to define and amend the law relating to Promissory Notes, Bills of Exchange and Cheques. The Banking, Public Financial Institutions and Negotiable Instruments Laws (Amendment) Act, 1988 has inserted new Chapter XVII comprising sections 138 to 142 with effect from 01.04.1989 in the Act. Section 138 of the Act provides the penalties in case of dishonour of cheques due to insufficiency of funds etc. in the account of the drawer of the cheque. However, sections 138 to 142 of the Act were found deficient in dealing with dishonour of cheques. The Negotiable Instruments (Amendment and Miscellaneous Provisions) Act, 2002 amended sections 138, 141 and 142 and inserted new sections 143 to 147 in the Act aimed at speedy disposal of cases relating to dishonour of cheque through their summary trial as well as making them compoundable. The Hon ble Supreme Court in the case Electronics Trade Technology Development Corporation Ltd., Secunderabad v. Indian Technologists Engineers (Electronics) (P) Ltd. 1996 (1) TMI 398 - SUPREME COURT , observed that the object of bringing section 138 on statute appears to inculcate the faith in the efficacy of banking operations and credibility in transacting business on negotiable instruments and section 138 intended to prevent dishonesty on the part of the drawer of negotiable instrument to draw a cheque without sufficient funds in his account maintained by him in a book and induce the payee or holder in due course to act upon it. The Bengal Money Lenders Act, 1940 and Chapter XVII of the Negotiable Instruments Act, 1881 which was incorporated by the Banking, Public Financial Institutions and Negotiable Instruments Laws (Amendment) Act, 1988 for providing penalties in case of dishonour of cheques with an objective to encourage the culture of use of cheques and enhancing the credibility of the instrument. Both statutory provisions were enacted with different objectives and intent and are operational in independent and separate legal spheres. There is no apparent conflict between provisions of the Bengal Money Lenders Act, 1940 which is not apparently bars civil remedy for a money lender who is not having valid licence or certificate for doing business of money lending and Chapter XVII of the Act which provides criminal remedies and penalties in case of dishonour of a cheque due to reasons as mentioned in section 138 of the Act. There are insufficient reasons placed before this court that no proceedings can be initiated or continued and it would be gross abuse of process of law. The revisional application filed by the Petitioner has devoid of merits - revision dismissed.

Summary

Issues Involved:

1. Whether the proceedings under Section 138 of the Negotiable Instruments Act, 1881 can be quashed on the grounds that the complainant is an unlicensed money lender under the Bengal Money Lenders Act, 1940.
2. Interpretation of Section 138 of the Negotiable Instruments Act, 1881 in conjunction with the Bengal Money Lenders Act, 1940.
3. Applicability of judgments from other jurisdictions, specifically the Bombay Money Lenders Act, 1946, to the present case.

Detailed Analysis:

1. Proceedings under Section 138 of the Negotiable Instruments Act:

The petitioner sought to quash the proceedings under Section 138 of the Negotiable Instruments Act, 1881, arguing that the complainant was an unlicensed money lender under the Bengal Money Lenders Act, 1940. The petitioner contended that the transaction did not constitute a legally enforceable debt or liability, as required under Section 138, due to the lack of a money lending license. The petitioner relied on judgments from the Bombay High Court, which held that transactions conducted without a money lending license are void and do not attract Section 138 proceedings.

2. Interpretation of Section 138 and the Bengal Money Lenders Act:

The court examined the provisions of the Bengal Money Lenders Act, 1940, and the Negotiable Instruments Act, 1881. It was highlighted that Section 138 deals with the dishonour of cheques and aims to ensure the credibility of negotiable instruments. The court noted that the Bengal Money Lenders Act is primarily regulatory, requiring money lenders to hold a license but does not explicitly prohibit lending without a license. The court emphasized the Doctrine of Harmonious Construction, stating that the provisions of different statutes should be read to give maximum effect without defeating each other. It concluded that there is no apparent conflict between the two statutes, as the Bengal Money Lenders Act does not bar criminal proceedings under Section 138 for dishonoured cheques.

3. Applicability of Judgments from Other Jurisdictions:

The court considered the reliance on judgments from the Bombay High Court, which dealt with the Bombay Money Lenders Act, 1946. It was clarified that the legal position under the Bombay Money Lenders Act is not applicable to the present case, which falls under the jurisdiction of the Bengal Money Lenders Act, 1940. The court distinguished the circumstances and legal provisions of the two acts, noting that the Bengal Money Lenders Act does not debar a money lender from initiating proceedings under Section 138 of the Negotiable Instruments Act.

Conclusion:

The court concluded that the proceedings under Section 138 of the Negotiable Instruments Act, 1881, should not be quashed solely on the grounds of the complainant being an unlicensed money lender under the Bengal Money Lenders Act, 1940. The court emphasized that the objective of Section 138 is to maintain the credibility of cheques as negotiable instruments and should be interpreted independently of the regulatory provisions of the Bengal Money Lenders Act. The revisional application filed by the petitioner was dismissed, and the proceedings were allowed to continue, reinforcing the independent operation of Section 138 in ensuring the integrity of banking transactions.