1992 (9) TMI 369 - HC - Indian Laws

Dishonour of cheques - Scope and ambit of section 138 of the Negotiable Instruments Act 1881 - speedy and efficacious remedy to the victim - Computation of time-frame as is prescribed in sections 138 and 142 - HELD THAT - A clear reading of section 138 leaves no doubt in our mind that the circumstances under which such dishonour takes place are required to be totally ignored. In this case the law only takes note of the fact that the payment has not been forthcoming and it matters little that any of the manifold reasons may have caused that situation. If for instance the closure of an account or the stoppage of payment or any other of the commonplace reasons for dishonour were to be justifiable then the Legislature would have set these out in the section as exceptions not constituting an offence. No such intention can be read into section 138 as none exists. The solitary exception made by the Legislature is with regard to the drawer being offered a final opportunity of paying up the amount within 15 days from the receipt of notice which in other-words provides a last opportunity to prove one s bona fides. It is obvious that having regard to the widespread practice of issuing cheques which are dishonoured and the many ingenious methods of avoiding payment that are practiced the Legislature has opted for a non-nonsense situation. The possibility has not been overlooked whereby an account any inadvertently be overdrawn or a dishonour may be for technical reasons or where a genuine mistake has occurred and the grace period provided for by the Legislature after service of notice on the drawer is in order to afford an opportunity to the drawer to rectify these. Undoubtedly even when the dishonour has taken place due to the dishonesty of the depositor the drawer is still given a last chance to act otherwise. Consequently the reasons for dishonour even if they be very valid as was sought to be pointed out in this case should not and cannot be taken into account by a Magistrate when such a complaint is presented. Reading these provisions with the statement of objects and reasons of the Banking Public Financial Institutions and Negotiable Instruments Laws (Amendment) Act 1988 (66 of 1988) whereby Chapter 17 comprising sections 138 to 142 were inserted with effect from April 1 1989 there can be little doubt that section 138 was intended to be a provision to curb instances of dishonour. It will have to be presumed that the multifarious grounds on which a cheque would be dishonoured are commonplace and in not having made any exception for such situations the legislative intent behind section 138 was that cases of dishonour of a cheque would constitute a criminal offence unless the payment was forthcoming within the prescribed period. The reference to the term insufficiency of funds was obviously a qualifying clause which only reiterates the basic principle that an order to the bank conveyed through a cheque make a prescribed payment would only fail in a situation where the bank could not implement that directive for want of the requisite funds. The circumstances that may contribute to the situation would therefore be irrelevant. The presumption in section 139 heavily supports this view. It would be useful in this regard to refer to another decision of this court in the case of Pawankumar v. Ashish Enterprises where the cheque was returned with the endorsement suit field by bank against account-holder . The court held that the reason apart the dishonour had been occasioned because of insufficiency of funds and further that the criminal proceedings under section 138 were justified regardless of the plea that civil action for recovery had been initiated. In our considered view if the object of introducing section 138 on the statute book is to be achieved it will have to be meaningfully enforced brushing aside technical and frivolous pleas. In the result the petition succeeds. The order of the learned Magistrate dated August 9 1991 issuing process against the petitioner who is the original accused is set aside and as a necessary consequence the criminal proceedings are quashed. The bail bond executed by the petitioner to stand cancelled. The security deposit provided by him to the trial court is ordered to be refunded to him.

Summary

Issues Involved:
1. Premature Invocation of Criminal Process
2. Computation of Time-Frame under Sections 138 and 142 of the Negotiable Instruments Act
3. Introduction of New Material in Proceedings under Section 482 of the Code of Criminal Procedure
4. Scope of Section 138 of the Negotiable Instruments Act

Detailed Analysis:

1. Premature Invocation of Criminal Process:
The primary issue addressed was whether a complainant can invoke the criminal process alleging an offence under Section 138 of the Negotiable Instruments Act before the prescribed time and whether such an infirmity is curable or fatal to the prosecution. The court held that no offence can be said to have been committed unless and until the period of 15 days as prescribed under sub-clause (c) of Section 138 has elapsed. Therefore, the complaint filed on August 9, 1991, was premature since it was filed before the 15-day period had elapsed from the date of service of the notice (July 29, 1991). Consequently, the Magistrate was in error in taking cognizance of the complaint, rendering the proceedings liable to be quashed.

2. Computation of Time-Frame under Sections 138 and 142 of the Negotiable Instruments Act:
The court examined the correct manner of computing the time-frame prescribed in Sections 138 and 142 of the Negotiable Instruments Act. Section 138(c) requires that the drawer of the cheque must fail to make payment within 15 days of receiving the notice of dishonour. Section 142(b) stipulates that a complaint must be made within one month of the cause of action arising, which is after the 15-day period has elapsed. The court emphasized that the offence is deemed to have been committed only after the 15-day period has expired without payment being made. Therefore, presenting a complaint before this period is premature and invalid.

3. Introduction of New Material in Proceedings under Section 482 of the Code of Criminal Procedure:
The court addressed whether new material could be introduced in proceedings under Section 482 of the Code of Criminal Procedure to amend statements or factual positions. It was held that no new material can be introduced at this stage. The court must be circumscribed by the record that was before the Magistrate at the time of taking cognizance. Consequently, any affidavit or certificate produced later cannot be considered. The court relied on precedents such as State of Bihar v. P. P. Sharma and Smt. Chand Dhawan v. Jawahar Lal to reinforce this principle.

4. Scope of Section 138 of the Negotiable Instruments Act:
The court discussed whether Section 138 should be restricted to cases where the rejection slip reads "insufficiency of funds" or whether it applies broadly to any dishonour of a cheque. The court concluded that Section 138 was intended as a remedy for the widespread practice of issuing dishonoured cheques. The reasons for dishonour, whether it be "refer to drawer," "account closed," or any other reason, are immaterial. The critical factor is the failure to make payment within the stipulated period. The court referred to various judgments to support this view, including decisions from the Kerala High Court, Punjab and Haryana High Court, and Calcutta High Court. The court emphasized that the legislative intent behind Section 138 was to ensure that dishonour of cheques attracts criminal consequences, irrespective of the specific reason for dishonour.

Conclusion:
The court quashed the criminal proceedings against the petitioner, setting aside the Magistrate's order dated August 9, 1991. It was held that the complaint was premature and void in law as it was filed before the expiration of the 15-day period prescribed under Section 138(c) of the Negotiable Instruments Act. The court also reiterated that no new material could be introduced in proceedings under Section 482 of the Code of Criminal Procedure and that the scope of Section 138 encompasses any dishonour of a cheque, not just those due to insufficiency of funds.