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TMI Blog2022 (3) TMI 1053X X X X Extracts X X X X X X X X Extracts X X X X ..... ature differs". The respondent is stated to have served a legal notice of demand upon the petitioner and when the petitionerfailed to make the payment within the statutory period, the complaint, which is subject matter of this petition, came to be filed before the trial Magistrate. The learned Magistrate, after recording the preliminary evidence, took cognizance of the offence and issued process against the petitioner in terms of its order dated 26.07.2019. The complaint and the order issuing process against the petitioner is under challenge before this Court. 3) The petitioner has urged two grounds, one that the complaint and the order of issuing process are not legally tenable as the dishonour of cheque was due to difference in drawer's signatures and, as such, offence under Section 138 of NI Act is not made out against the petitioner. The other ground that has been urged by the petitioner is that the cheque in question was given by the petitioner to the respondent as a security pursuant to a memorandum of understanding executed by the parties on 30th November, 2017, and not in discharge of any legally outstanding amount or in discharge of any debt. 4) I have heard learned coun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ney 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. At first blush, 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. However, the provision has been interpreted by the Supreme Court in a number of judgments in a manner so as to include within its ambit even the cases where the dishonor of cheque has taken place for the reasons other than the aforesaid two reasons. 7) In NEPC Micon Limited And Others vs. Magma Leasing Limited, ( 1999)4 SCC 253, the Supreme Court rejected the contention that Section 138 of the NI Act has to be interpreted strictly or in disregard of the object sought to be achieved by the Statute. Relying upon its earlier judgment in the case of Kanwar Singh vs Delhi Administration, AIR 1965 SC 871 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 regarding interpretation of Section 138 of the Act to the limit extent as indicated above." 9) The question whether stop payment instructions, which result in dishonor of a cheque, would amount to an offence under Section 138 of the NIA Act, was considered by the Supreme Court in M. M. T. C. Ltd. Vs. M/S Medchl Chemicals, (2001) 1 SCC 234, and it was held that same would come within the ambit of definition of offence under Section 138 of the NIA Act. Similar view was taken by the Supreme Court in the case of Goaplast (P) Ltd vs. Chico Ursula D'Souza, (2003) 3 SCC 232. 10) In the face of foregoing discussion, it is clear that the Supreme Court has interpreted the provisions contained in Section 138 of the NI Act in a liberal manner so as to achieve the object for which the said provision has been enacted. Not only the cases of dishonour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that a dishonour of the cheque by the drawer after issue of a notice to the holder asking him not to present a cheque would not attract Section 138 has been specifically overruled in Modi Cements Ltd. case (supra). The net effect is that dishonour on the ground that the payment has been stopped, regardless whether such stoppage is with or without notice to the drawer, and regardless whether the stoppage of payment is on the ground that the amount lying in the account was not sufficient to meet the requirement of the cheque, would attract the provisions of Section 138." 14) The Supreme Court on the basis of the aforesaid observations and the ratio, while dealing with a case in which the cheques were dishonoured by the bank on the ground that drawer's signatures were incomplete and that no image was found or that the signatures did not match, came to the conclusion that criminal prosecution against the accused in such cases should be allowed to proceed and the judgment and orders passed by the High Court quashing the criminal proceedings were set aside. 15) Both the judgments of the Supreme Court in Vinod Tanna's case as well as in Laxmi Dyechem's case (supra) have been rendered b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udes other liability as well. This aspect of the matter has not been appreciated by the High Court, neither been dealt with or even referred to in the impugned judgment. 11.The issue as regards the co-extensive liability of the guarantor and the principal debtor, in our view, is totally out of the purview of Section 138 of the Act, neither the same calls for any discussion therein. The language of the Statute depicts the intent of the law-makers to the effect that wherever there is a default on the part of one in favour of another and in the event a cheque is issued in discharge of any debt or other liability there cannot be any restriction or embargo in the matter of application of the provisions of Section 138 of the Act: 'Any cheque' and 'other liability' are the two key expressions which stands as clarifying the legislative intent so as to bring the factual context within the ambit of the provisions of the Statute. Any contra interpretation would defeat the intent of the legislature. The High Court, it seems, got carried away by the issue of guarantee and guarantor's liability and thus has overlooked the true intent and purport of Section 138 of the Act. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the cheque in a proceedings initiated under Section 138 of the N.I. Act. Therefore, there cannot be a hard and fast rule that a cheque which is issued as security can never be presented by the drawee of the cheque. If such is the understanding a cheque would also be reduced to an "on demand promissory note" and in all circumstances, it would only be a civil litigation to recover the amount, which is not the intention of the statute. When a cheque is issued even though as "security" the consequence flowing therefrom is also known to the drawer of the cheque and in the circumstance stated above if the cheque is presented and dishonoured, the holder of the cheque/drawee would have the option of initiating the civil proceedings for recovery or the criminal proceedings for punishment in the fact situation, but in any event, it is not for the drawer of the cheque to dictate terms with regard to the nature of litigation." 19) In view of the foregoing enunciation of law on the subject, 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 b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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