TMI Blog2008 (5) TMI 748X X X X Extracts X X X X X X X X Extracts X X X X ..... Overseas Branch, New Delhi dated 10.4.2006. It is further alleged that the complainant presented the said cheque through its banker for collection and the same has been returned unpaid with the remarks funds insufficient and payment stopped by attachment order/court order . 3. The submission of the petitioner is that even according to the complainant, the said cheque was a post dated one, which was presentable for encashment after nearly one year and eight months from the date of its alleged issue. He submits that in the meantime, the operation of the account on which the cheque was allegedly issued was stopped on account of an attachment order/court order in relation to FIR No.283/2005 u/s 406/420/467/468/471/120-B IPC registered against the petitioner with P.S Connaught Place. On account of the said attachment order, it was not possible for the petitioner to operate the said account either to deposit any amount in the account, or to withdraw any amount therefrom. For an offence to be made out u/s 138 of the Negotiable Instruments Act, the account must be maintained by the drawer with his banker for payment of the amount for which the cheque is drawn. He submits that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 98 SC 1057; 3. NEPC Micon Ltd Others V. Magma Leasing Ltd ., 1999 Cri L.J. 2883; 4. Yogendra Kumr Gupta V. Ram Prakash Agarwal , 2007(2) Crimes 467 (M.P); 5. Vinod Tanna Another V. Zaheer Siddqui , 2002(1) Crimes 104; 6. Bishan Dayal V. Dinesh Kumar Singal II( 2007) DLT(Cri) 630. 7. D. Vinod Shivappa V. Nanda Belliappa , 130(2006) DLT 534(SC) 7. I proceed to examine the cases cited by the petitioner and thereafter I shall examine the cases cited by the respondent. In Ramesh Kumar (supra), on the same date on which the accused issued cheques i.e. on 25.9.2000, the Company Court at Thiruvananthapuram passed orders for winding up of the accused company. One of the cheques was dishonoured for the reason funds insufficient , while other two were dishonoured assigning the reasons operations stopped by the Court . In relation to the cheque which had been dishonoured on account of funds insufficient , the High Court rejected the challenge to the complaint made by the accused. However, it drew a distinction when it came to the complaints filed in respect of the two cheques which have been dishonoured with the reason operations stopped by the Court . The Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccount holder/accused, who had thereafter proceeded to issue a cheque dated 3.6.1997. Since the account had not been closed by the accused, but by the bank on its own without intimation to the account holder, the Court held that the complaint u/s 138 of the Act was not maintainable. 8. The respondent has relied on Pawankumar (supra) to contend that Section 138 of the Act is attracted when the person concerned who has issued the cheque does not have adequate funds in his credit to honour the cheque. In this case the Bank had filed a recovery suit against the drawer/account holder. The drawer/account holder had no amount to his credit in his bank account. This decision does not deal with a situation like the present, and is therefore of hardly any assistance in deciding the present controversy. The material difference was that the drawer did not have any amount in his account on which the cheque was drawn and the suit was filed by the same bank precisely for the same reason, that the drawer/account holder had even not repaid the loan that he had taken from the Bank. The real reason for dishonour was the insufficiency of funds. 9. In (supra), the Supreme Court held that once t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ostensible reason is one attributable to a voluntary act/omission of the drawer, and that the same is merely a ruse to avoid payment of the cheque and the real reason is the insufficiency of funds in the account, or that the amount of the cheque exceeds the arrangement that the drawer has with the bank under an agreement. 11. In Yogendra Kumar Gupta (supra) the Madhya Pradesh High Court has expressed the view that the reason for dishonour of cheque is wholly irrelevant, and if the amount remained unpaid despite demand notice being served upon accused, he can be held liable under Section 138 of the Act. With due respect, the interpretation given by the Madhya Pradesh High Court in the aforesaid decision does not appeal to me. For arriving at its aforesaid conclusion, the Madhya Pradesh High Court has relied upon the decision in Modi Cements Limited (supra), which was a case where the drawer of the cheque had issued stop payment instructions after drawing the cheque and before its presentation by the drawee. With respect to the Madhya Pradesh High Court, the Supreme Court in this decision does not appear to have laid down a general and broad proposition that irrespective of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould not and cannot be taken into account by a Magistrate when such a complaint is presented. 28. ...................................... The wording and the endorsement from the bank or the circumstances under which a cheque is returned are not the guiding criterion but the fact that on presentation of the cheque, the payment was not made. There could be a host of reasons for this (i.e. for the dishonour of the cheque) but the bottom line of the situation is that the payment could not be made by the banker and the mechanics of the reasons apart, the irresistible conclusion that, had the funds been available, the payment would have been made leads back to the position that dishonour, therefore, implies insufficiency of funds. We are reinforced in this view by the definition of a cheque as appears in section 6 of the Negotiable Instruments Act which defines it as a bill of exchange drawn on a specified banker. A bill of exchange is defined in section 5 which reads as follows : A bill of exchange is an instrument in writing containing an unconditional order signed by the maker directing a certain person to pay a certain sum of money only to, or to the order of, a certain pers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... my view an obiter dicta. 14. Even otherwise, the above extracted observations do not seem to be in consonance with the clear and unambiguous language of the Statute. Section 138 of the Act is a comprehensive provision. It firstly creates the offence that defines the ingredients that must exist for the offence to get completed and thereafter also prescribes the punishment with which the offender can be punished. The Section is divided into two parts. The first part deals with the essential ingredients which constitute the offence. The second part is a proviso, which lays down certain preconditions which must be fulfilled before the Section can be applied. The essential preconditions found in the main body of the Section cannot be obliterated by focussing only on the preconditions laid down in the proviso, for the application of the Section. 15. The Legislature, in its wisdom has cautiously not used the expression irrespective of the reasons for dishonour and instead has used the words 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 agre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat proceedings under Section 138 read with Section 142 of the Act would not lie where, before the date on which the cheque was drawn or before expiry of the statutory period of 15 days after notice, a restraint order of BIFR under Section 22A of the SICA was passed against the company. In such a case it may reasonably be said that the dishonouring of the cheque by the bank and failure to make payment of the amount by the company and/or its directors is for reasons beyond the control of the accused. This Court has also held in M.L.Gupta Anr. V. Ceat Financial Services Ltd ., 136(2007) DLT 308 that once the Company Court passes an order for winding up of a company and appoints a provisional liquidator, in respect of cheques which may have been issued prior to the passing of such an order by the Court, which became payable after the passing of the winding up orders, no offence under Section 138 of the Act would be made out. 19. No doubt, the said provision has to be construed in a meaningful way so as to advance the purpose for which it has been enacted. However, the interpretation of the said section cannot be stretched to such limits so as to render the drawer of a cheque lia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purported to discharge their liability by issuing cheques without really intending to do so, which was demonstrated by the fact that there was no sufficient balance in the account to discharge the liability . Apart from civil liability, a criminal liability was imposed on such unscrupulous drawers of cheques. The prosecution, however, was made subject to certain conditions. With a view to avoid unnecessary prosecution of an honest drawer of a cheque, or to give an opportunity to the drawer to make amends, the proviso to Section 138 provides that after dishonour of the cheque, the payee or the holder of the cheque in due course must give a written notice to the drawer to make good the payment. The drawer is given 15 days time from date of receipt of notice to make the payment, and only if he fails to make the payment he may be prosecuted. The object which the proviso seeks to achieve is quite obvious. It may be that on account of mistake of the bank, a cheque may be returned despite the fact that there is sufficient balance in the account from which the amount is to be paid. In such a case if the drawer of the cheque is prosecuted without notice, it would result in great in-justice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account had not been attched under the orders of a Court, nothing prevented the petitioner from either depositing money in his account or entering into an agreement with his bank to arrange for sufficient funds in the account, to be able to honour the cheque in question by the date when the said cheque could have been presented for payment at the earliest. This is so because there was sufficient time gap i.e of nearly one year and eight months between the date of alleged issue of cheque and the date of its presentation. As held by the Hon'ble Supreme Court in Modi Cement s (supra), the issuance of the cheque without having sufficient balance in the account of the drawer does not by itself tantamount to the commission of an offence u/s 138 of the Act. However, in the facts of this case, the petitioner could not have, even if he would have so desired, either deposited funds in his account or otherwise made arrangements for the payment of the cheque upon its presentation by entering into an agreement with the bank, since there was a Court attachment on the bank account of the drawer. This Court attachment was by a Court ceased of the case arising out of FIR No.283/2005 u/s 406/4 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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