TMI Blog2022 (3) TMI 1053X X X X Extracts X X X X X X X X Extracts X X X X ..... hat 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. - CRM(M) No.308/20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he reason that there was difference of signatures appearing on the cheque constitutes an offence under Section 138 of the NI Act. In order to determine this question, the provisions contained in Section 138 are required to be noticed. It 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 for a term which may be extended to two years , or with fine which may extend to twice the amount of the cheque, or with both: Provided that nothing contained in this section shall apply unless- (a) the cheque has been pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gislative object underlying the said provision. The Supreme Court relied upon its own decision in State of Tamil Nadu Vs. M. K. Kandaswami and Others 1974(4) S.C.C. 745, and it was observed that while interpreting a penal provision which is also remedial in nature a construction that would defeat its purpose or have the effect of scrapping it from the statute book, should be avoided and that if more than one constructions are possible, the Court should choose to adopt construction that would preserve the workability and efficacy of the Statute and avoid an interpretation that would render the provision sterile. The Court, accordingly, held that when a cheque is returned by the banker of a drawer with the comments account closed the same would constitute an offence under Section 138 of NI Act. 8) In Modi Cements Ltd vs. Kuchil Kumar Nandi, (1998) 3 CC 249, the Supreme Court, while considering the question whether dishonor of a cheque on account of stoppage of payment by the drawer would constitute an offence under Section 138 of the NI Act, observed as under: 18. The aforesaid propositions in both these reported judgments, in our considered view, with great respect are con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heques on account of stop payment and account closed have also been brought within the ambit of offence under the aforesaid provision. 11) In Vinod Tanna vs. Zaheer Siddiqui, (2002) 7 SCC 541, the Supreme Court, while dealing with a case where the cheque drawn by the accused was not been honoured by the bank on account of drawer s signatures being incomplete, held that dishonour of cheque for the aforesaid reason would not constitute an offence under Section 138 of the NI Act and, accordingly, the criminal proceedings against the accused were quashed. 12) The aforesaid decision of the Supreme Court came up for consideration before the same Court in the case of Laxmi Dyechem vs. State of Gujarat and others, (2012) 13 SCC 375. The Court, after noticing its earlier decisions on interpretation of the provisions of Section 138 of the NI Act, made the following observations: 15. A three-Judge Bench of this Court in Rangappa v. Sri Mohan [(2010) 11 SCC 441: (2010) 4 SCC (Civ) 477 : (2011) 1 SCC (Cri) 184] has approved the above decision and held that failure of the drawer of the cheque to put up a probable defence for rebutting the presumption that arises under Section 139 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , wherein the ratio laid down in Vinod Tanna s case has been termed as per incuriam. Therefore, as per law of precedents, the ratio laid down in Laxmi Dyechem s case has to be followed. Accordingly, as per the ratio laid down in Laxmi Dyechem s case, 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. 16) The other ground which has been urged by the petitioner is that the cheque in question was not given in discharge of any debt by the petitioner to the respondent but it was given only as security pursuant to the memorandum of understanding executed between the parties. According to the petitioner, since the cheque was not given in discharge of any debt, as such, offence under Section 138 of the NI Act is not made out. 17) The law on this aspect of the matter is no longer res integra. The Supreme Court in the case of I. C. D. S. Ltd. vs. Beena Shabeer anr. (2002) 6 SCC 25, while setting aside the judgment of the Kerala High Court, where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the same thus does not lend any assistance to the contentions raised by the respondents. 18) In Sripati Singh vs. State of Jharkhand and Ors., 2021 SCC Online SC 1002, the Supreme Court has, while dealing with the question whether dishonor of cheque given as security would constitute an offence under Section 138 of the NI Act, observed as under: 16. A cheque issued as security pursuant to a financial transaction cannot be considered as a worthless piece of paper under every circumstance. Security in its true sense is the state of being safe and the security given for a loan is something given as a pledge of payment. It is given, deposited or pledged to make certain the fulfilment of an obligation to which the parties to the transaction are bound. If in a transaction, a loan is advanced and the borrower agrees to repay the amount in a specified timeframe and issues a cheque as security to secure such repayment; if the loan amount is not repaid in any other form before the due date or if there is no other understanding or agreement between the parties to defer the payment of amount, the cheque which is issued as security would mature for presentation and the drawee of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titioner 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. Here it would be apt to quote para 5 of the judgment rendered by the Supreme Court in M/S Womb Laboratories Pvt. Ltd. vs. Vijay Ahuja and anr., 2019 SCC Online 2086 5. In our opinion, the High Court has muddled the entire issue. The averment in the complaint does indicate that the signed cheques were handed over by the accused to the complainant. The cheques were given by way of security, is a matter of defence. Further, it was not for the discharge of any debt or any liability is also a matter of defence. The relevant facts to countenance the defence will have to be proved that such security could not be treated as debt or other liability of the accused. That would be a triable issue. We ..... X X X X Extracts X X X X X X X X Extracts X X X X
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