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TMI Blog2012 (12) TMI 106X X X X Extracts X X X X X X X X Extracts X X X X ..... t lying in the account was not sufficient to meet the requirement of the cheque, would attract the provisions of Section 138. Regarding offer to settlement after dishonor - held that:- The offer made by the respondent-company was in any case conditional and subject to the settlement of accounts. So also whether the cheques were issued fraudulently by the authorised signatory for amounts in excess of what was actually payable to the appellant is a matter for examination at the trial. That the cheques were issued under the signature of the persons who were authorised to do so on behalf of the respondent-company being admitted would give rise to a presumption that they were meant to discharge a lawful debt or liability. Allegations of fraud and the like are matters that cannot be investigated by a Court under Section 482 Cr.P.C. and shall have to be left to be determined at the trial after the evidence is adduced by the parties. Dishonor of cheque after resignation by the signatories after issuance of cheque - held that:- Just because the authorised signatories of the cheques have taken a different line of defence than the one taken by by the company does not in our view justif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecution of the respondents legally impermissible. Before we advert to the merits of the contentions urged at the Bar by the learned counsels for the parties, we may briefly set out the factual backdrop in which the controversy arises. 3. The appellant is a proprietorship firm engaged in the sale of chemicals. It has over the past few years supplied Naphthalene Chemicals to the respondent-company against various invoices and bills issued in that regard. The appellant s case is that a running account was opened in the books of account of the appellant in the name of the respondent-company in which the value of the goods supplied was debited from time to time as per the standard accounting practice. A sum of Rs.4,91,91,035/- (Rupees Four Crore Ninety One Lac Ninety One Thousand Thirty Five only) was according to the appellant outstanding against the respondent-company in the former s books of accounts towards the supplies made to the latter. The appellant s further case is that the respondent-company issued under the signatures of its authorised signatories several post dated cheques towards the payment of the amount aforementioned. Several of these cheques (one hundred and seve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs signature differs from the specimen supplied and/or no image found-signature and/or incomplete signature/illegible and for return/dishonour of cheque on the above endorsement will not attract ingredients of Section 138 of the Act and insufficient fund as a ground for dishonouring cheque cannot be extended so as to cover the endorsement signature differed from the specimen supplied or likewise. If the cheque is returned/bounced/dishonoured on the endorsement of drawers signature differs from the specimen supplied and/or no image found-signature and/or incomplete signature / illegible , the complaint filed under Section 138 of the Act is not maintainable. Hence, a case is made out to exercise powers under Section 482 of the Code of Criminal Procedure, 1973 in favour of the petitioner . 5. Special Criminal Applications No.896 to 935 of 2010 were then filed by the remaining accused persons challenging the proceedings initiated against them in the complaints filed by the petitioner on the very same ground as was taken by Mustafa Surka. Reliance was placed by the petitioners in the said petitions also upon the decision of this Court in Vinod Tanna s case (supra) and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... two contingencies envisaged under Section 138 of the Act, which to the extent the same is relevant for our purposes reads as under: 138. Dishonour of cheque for insufficiency, etc., of funds in the account. Where any 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, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of 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, such person shall be deemed to have committed an offence and shall, without prejudice to any other provision of this Act, be punished with imprisonment of a term which may extend to one year, or with fine which may extend to twice the amount of the cheque, or with both. 8. From the above, it is manifest that a dishonour would constitute an offence only if the cheque is retuned by the bank unpaid either because the amount of money standing to the credit of the drawer s account is insufficient to h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h is also remedial in nature a construction that would defeat its purpose or have the effect of obliterating it from the statute book should be eschewed and that if more than one constructions are possible the Court ought to choose a construction that would preserve the workability and efficacy of the statute rather than an interpretation that would render the law otiose or sterile. The Court relied upon the much quoted passage from the Seaford Court Estates Ltd. v. Asher (1949 2 All E.R. 155) wherein Lord Denning, L.J. observed: The English language is not an instrument of mathematical precision. Our literature would be much poorer if it were. This is where the draftsmen of Acts of Parliament have often been unfairly criticised. A judge, believing himself to be fettered by the supposed rule that he must look to the language and nothing else, laments that the draftsmen have not provided for this or that, or have been guilty of some or other ambiguity. It would certainly save the judges trouble if Acts of Parliament were drafted with divine prescience and perfect clarity. In the absence of it, when a defect appears a judge cannot simply fold his hands and blame the draftsman. He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssuing a cheque against a debt or liability the drawer can easily get rid of the penal consequences notwithstanding the fact that a deemed offence was committed. Further the following observations in para 6 in Electronics Trade Technology Development Corpn. Ltd. 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 bank and induce the payee or holder in due course to act upon it. Section 138 draws presumption that one commits the offence if he issues the cheque dishonestly (emphasis supplied) in our opinion, do not also lay down the law correctly. 20. On a careful reading of Section 138 of the Act, we are unable to subscribe to the view that Section 138 of the Act draws presumption of dishonesty against drawer of the cheque if he without sufficient funds to his credit in his bank account to honour the cheque issues the same and, therefore, this amounts to an offence under Section 138 of the Act. For the reasons stated hereinabove, we are unable to share the views expressed by this Court in the above two cases and we respectfully differ with the same regardin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actions. The said provisions were intended to discourage people from not honouring their commitments by way of payment through cheques. The court should lean in favour of an interpretation which serves the object of the statute. A post-dated cheque will lose its credibility and acceptability if its payment can be stopped routinely. The purpose o f a post-dated cheque is to provide some accommodation to the drawer of the cheque. Therefore, it is all the more necessary that the drawer of the cheque should not be allowed to abuse the accommodation given to him by a creditor by way of acceptance o f a postdated cheque. In view of Section 139, it has to be presumed that a cheque is issued in discharge of any debt or other liability. The presumption can be rebutted by adducing evidence and the burden of proof is on the person who wants to rebut the presumption. This presumption coupled with the object of Chapter XVII of the Act leads to the conclusion that by countermanding payment of post-dated cheque, a party should not be allowed to get away from the penal provision of Section 138 of the Act. A contrary view would render Section 138 a dead letter and will provide a handle to perso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here is in our view no qualitative difference between a situation where the dishonour takes place on account of the substitution by a new set of authorised signatories resulting in the dishonour of the cheques already issued and another situation in which the drawer of the cheque changes his own signatures or closes the account or issues instructions to the bank not to make the payment. So long as the change is brought about with a view to preventing the cheque being honoured the dishonour would become an offence under Section 138 subject to other conditions prescribed being satisfied. There may indeed be situations where a mismatch between the signatories on the cheque drawn by the drawer and the specimen available with the bank may result in dishonour of the cheque even when the drawer never intended to invite such a dishonour. We are also conscious of the fact that an authorised signatory may in the ordinary course of business be replaced by a new signatory ending the earlier mandate to the bank. Dishonour on account of such changes that may occur in the course of ordinary business of a company, partnership or an individual may not constitute an offence by itself because such a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounts in excess of what was actually payable to the appellant is a matter for examination at the trial. That the cheques were issued under the signature of the persons who were authorised to do so on behalf of the respondent-company being admitted would give rise to a presumption that they were meant to discharge a lawful debt or liability. Allegations of fraud and the like are matters that cannot be investigated by a Court under Section 482 Cr.P.C. and shall have to be left to be determined at the trial after the evidence is adduced by the parties. 18. On behalf of the signatories of the cheques dishonoured it was argued that the dishonour had taken place after they had resigned from their positions and that the failure of the company to honour the commitment implicit in the cheques cannot be construed an act of dishonesty on the part of the signatories of the cheques. We do not think so. Just because the authorised signatories of the cheques have taken a different line of defence than the one taken by by the company does not in our view justify quashing of the proceedings against them. The decisions of this Court in National Small Industries Corporation Limited v. Harmeet Sin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion under Section 139 of the NI Act itself since the accused issuing the cheque is at liberty to prove to the contrary. This is already reflected under Section 139 of the NI Act when it lays down as follows:- 139. Presumption in favour of holder.-- It shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque, of the nature referred to in Section 138 for the discharge, in whole or in part, of any debt or other liability. 2. We have to bear in mind that the Legislature while incorporating the provisions of Chapter XVII, Sections 138 to 142 inserted in the NI Act (Amendment Act 1988) intends to punish only those who know fully well that they have no amount in the bank and yet issue a cheque in discharge of debt or liability already borrowed/incurred -which amounts to cheating, and not to punish those who refused to discharge the debt for bona fide and sustainable reason. It is in this context that this Hon ble Court in the matter of M.M.T.C. Ltd. And Anr vs. Medchl Chemical and Pharma (P) Ltd. And Anr. (2002) 1 SCC 234, was pleased to hold that cheque dishonour on account of drawer s stop payment instruction constitutes an offence unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this presumption coupled with the object of Chapter XVII of the Act leads to the conclusion that by countermanding payment of post-dated cheque, a party should not be allowed to get away from the penal provision of Section 138 of the Act. Therefore, in order to hold that the stop payment instruction to the bank would not constitute an offence, it is essential that there must have been sufficient funds in the accounts in the first place on the date of signing of the cheque, the date of presentation of the cheque, the date on which stop payment instructions were issued to the bank. Hence, in Goaplast matter (supra), when the magistrate had disallowed the application in a case of stop payment to the bank without hearing the matter merely on the ground that there was no dispute about the dishonour of the cheque issued by the accused, since the signature was admitted and therefore held that no purpose would be served in examining the bank manager since the dishonour was not in issue, this Court held that examination of the bank manager would have enabled the Court to know on what date stop payment order was sent by the drawer to the bank clearly leading to the obvious inference that s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ange the payment of the amount covered by the cheque and it is only when the drawer despite the receipt of such a notice and despite the opportunity to make the payment within the time stipulated under the statute does not pay the amount, that the said default would be considered a dishonour constituting an offence, hence punishable. But even in such cases, the question whether or not there was lawfully recoverable debt or liability for discharge whereof the cheque was issued, would be a matter that the trial court will have to examine having regard to the evidence adduced before it keeping in view the statutory presumption that unless rebutted, the cheque is presumed to have been issued for a valid consideration. In view of this the responsibility of the trial judge while issuing summons to conduct the trial in matters where there has been instruction to stop payment despite sufficiency of funds and whether the same would be a sufficient ground to proceed in the matter, would be extremely heavy. 7. As already noted, the Legislature intends to punish only those who are well aware that they have no amount in the bank and yet issue a cheque in discharge of debt or liability which a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds or where it exceeds the amount arranged to be paid from that account, since Section 138 cannot be applied in isolation ignoring Section 139 which envisages a right of rebuttal before an offence could be made out under Section 138 of the Act as the Legislature already incorporates the expression unless the contrary is proved which means that the presumption of law shall stand and unless it is rebutted or disproved, the holder of a cheque shall be presumed to have received the cheque of the nature referred to in Section 138 of the NI Act, for the discharge of a debt or other liability. Hence, unless the contrary is proved, the presumption shall be made that the holder of a negotiable instrument is holder in due course. 9. Thus although a petition under Section 482 of the Cr.P.C. may not be entertained by the High Court for quashing such proceedings, yet the judicious use of discretion by the trial judge whether to proceed in the matter or not would be enormous in view of Section 139 of the NI Act and if the drawer of the cheque discharges the burden even at the stage of enquiry that he had bona fide reasons to stop the payment and not make the said payment even within the st ..... X X X X Extracts X X X X X X X X Extracts X X X X
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