2021 (5) TMI 455 - HC - Indian Laws

Dishonor of Cheque - It is claimed by the accused before the Trial Magistrate that on presentation of the cheque by the complainant after having been intimated/requested not to do so does not constitute an offence under Section 138 of the Act - HELD THAT - The accused runs a SSI unit under the name and style of M/S Indian Pack Industries, at Industrial Complex Rangreth, Srinagar. The unit aforesaid went into losses and, therefore, same was declared sick in the year 1996. Since the unit of the petitioner/accused was covered by the policy of rehabilitation framed by the then Government, the rehabilitation cost of the project of the petitioner was worked out by the complainant to the tune of ₹ 98.16/ lacs, out of which 30% of the amount was released and disbursed by the complainant. As a security for the aforesaid amount, the accused claims to have deposited few undated blank cheques. As, it appears, the accused defaulted and, accordingly, cheque bearing No.219443 dated 4th of September, 2007, for an amount of ₹ 1,22,646/ was put for encashment by the complainant so as to realize first instalment of the amount advance by way of soft loan. The cheque was dishonoured by the banker of the accused for the reason that it exceeded the arrangement. The plea of Mr. Hanan that since the accused had intimated to the complainant in advance for cancellation of the cheques issued by him, the subsequent presentation of the said cheques in the bank and their dishonour would not constitute an offence under Section 138 of the Act, is found to be grossly misconceived. Petition dismissed.

Summary

Issues:
1. Quashment of complaint and order under Section 138 of the Negotiable Instruments Act.
2. Interpretation of Section 138 regarding cheque dishonour and liability.
3. Application for discharge by accused and rejection by Trial Magistrate.
4. Legal position on cheque cancellation and subsequent presentation.

Analysis:

1. The petitioner sought quashment of a complaint and order under Section 138 of the Negotiable Instruments Act, claiming that informing the payee to wait for funds before presenting the cheque should not attract Section 138. The Trial Magistrate rejected the accused's discharge application, leading to the petition.

2. The accused argued that requesting cheque cancellation before presentation absolves liability under Section 138. The Trial Magistrate's rejection was based on the accused's belated application and failure to appreciate the complainant's notice of intimation, leading to the petition challenging the order.

3. The accused's application for discharge was contested as belated by the respondents, claiming it aimed to delay the trial. The Government Advocate argued that mere cheque cancellation request does not absolve the drawer from Section 138 liability, leading to the dispute.

4. The judgment highlighted the legal position on cheque dishonour and liability under Section 138, citing relevant case laws. The court emphasized that informing the payee to cancel the cheque before presentation does not negate the offence under Section 138, dismissing the petition due to reliance on overruled judgments.

5. The court expressed concern over the counsel's reliance on outdated judgments without verifying their legal standing, warning against presenting incorrect legal positions. The petition was dismissed, emphasizing the need for diligent legal research and preparation by counsels to avoid misinterpretation of the law.

6. The judgment concluded by dismissing the petition, directing parties to bear their own costs, and instructing the trial court to be informed of the order. The decision was based on the accused's misconceived argument regarding cheque cancellation and liability under Section 138.