2022 (3) TMI 1053 - HC - Indian Laws

Dishonor of Cheque - funds insufficient - difference in drawer s signature - cheque issued for discharge of any legally outstanding amount or in discharge of any debt or was given by the petitioner to the respondent as a security pursuant to a memorandum of understanding executed by the parties - Section 138 of NI Act - HELD THAT - The contention of the petitioner that in the instant case offence under Section 138 of the NI Act is not constituted because the cheque was dishonoured on account of difference in signatures and not for the reason of insufficiency of funds or exceeding the arrangement, deserves to be rejected. It is clear that an offence under Section 138 of the NI Act is constituted when a cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge of any debt, is returned by the bank unpaid either because the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank - it appears that it is only in two situations that Section 138 of the NI Act is attracted, firstly when there are insufficient funds available in the bank account of the person who is drawing the cheque and secondly where it exceeds the arrangement. It is clear that even if it is assumed that the petitioner had issued the cheque in favour of respondent as a security, still then it cannot be stated that no offence is made out, once the cheque issued by him has been dishonoured by the banker. Even otherwise, the questions whether the petitioner had issued the cheque as a security pursuant to the memorandum of understanding executed between the parties and whether at the time when the cheque was presented for its payment, it was not for discharge of any debt or any other liability cannot be determined either by the trial Magistrate at the time of taking of cognizance or by this Court in these proceedings. These are defences available to the accused/petitioner, veracity whereof can be determined during the trial of the case. The petition is found to be devoid of merit and the same is, accordingly, dismissed.

Summary

Issues Involved:

1. Whether dishonor of a cheque due to difference in signatures constitutes an offence under Section 138 of the NI Act.
2. Whether a cheque given as security pursuant to a memorandum of understanding can be considered as issued for discharge of debt or liability under Section 138 of the NI Act.

Issue-wise Detailed Analysis:

1. Dishonor of Cheque Due to Difference in Signatures:

The petitioner argued that the complaint and order issuing process are not legally tenable as the dishonor of the cheque was due to a difference in signatures, and thus, an offence under Section 138 of the NI Act is not made out. The court examined the provisions of Section 138, which states that an offence is constituted if a cheque is returned unpaid due to insufficient funds or exceeding the arrangement with the bank. However, the Supreme Court has interpreted this provision liberally to include other reasons for dishonor, such as "account closed" and "stop payment" instructions.

The court referenced several Supreme Court judgments, including NEPC Micon Limited vs. Magma Leasing Limited, Modi Cements Ltd vs. Kuchil Kumar Nandi, and M. M. T. C. Ltd. Vs. M/S Medchl Chemicals, which extended the scope of Section 138 to various scenarios beyond insufficient funds. Specifically, in Laxmi Dyechem vs. State of Gujarat, the Supreme Court concluded that dishonor due to incomplete or mismatched signatures also constitutes an offence under Section 138. Therefore, the court rejected the petitioner's contention, following the precedent set in Laxmi Dyechem.

2. Cheque Given as Security:

The petitioner claimed that the cheque was given as security pursuant to a memorandum of understanding and not for discharging any debt or liability. The court referred to the Supreme Court's judgment in I. C. D. S. Ltd. vs. Beena Shabeer, which clarified that the issuance of a cheque, regardless of whether it is for security or direct discharge of debt, falls within the ambit of Section 138 if the cheque is dishonored.

Further, in Sripati Singh vs. State of Jharkhand, the Supreme Court held that a cheque issued as security cannot be considered worthless and that its dishonor would attract the provisions of Section 138. The court emphasized that the nature of the cheque as security does not preclude criminal proceedings under Section 138 upon its dishonor.

The court also noted that the defenses regarding the cheque being issued as security and not for discharge of any debt are matters to be determined during the trial, not at the stage of cognizance or in these proceedings. This was supported by the Supreme Court's ruling in M/S Womb Laboratories Pvt. Ltd. vs. Vijay Ahuja, which stated that such defenses are triable issues.

Conclusion:

The court found the petition devoid of merit and dismissed it, directing the trial Magistrate to proceed in accordance with the law. The interim order dated 29.09.2021 was vacated, and a copy of the order was sent to the learned Magistrate for information and compliance.