C.M. Prasanna vs M.K. Saseendran and Another

K.A. Abdul Gafoor, J.—The appellant launched prosecution against the first respondent alleging an offence punishable u/s 138 of the Negotiable Instruments Act, 1881 (for short "the Act"). This was on the basis of exhibit P1 cheque for an amount of Rs. 15,000, which is said to have been issued in repayment of the amount due from the first respondent to the appellant.

Before the court below, the issuance of the cheque was not disputed. But, according to the first respondent, there were other amounts due from the appellant, and on account of that dispute, the first respondent issued a stop memo to the bank not to make payment when the cheque was presented. At the same time, it was revealed that when the cheque was dishonoured on that count, there was sufficient amount in the credit of the first respondent to honour the cheque. Therefore, the first respondent took up a plea that the dishonour would not attract Section 138 of the Act, as the bouncing was not on the ground of insufficiency of funds, but due to other reasons. The court below accepted this contention and acquitted the accused on that sole reason.

It is agreed before me by counsel on either side that the only point involved in this appeal is whether the return of the cheque on the ground of stoppage of payment by the drawer would attract the provisions of Section 138 of the Act. Therefore, both counsel addressed arguments only on that point.

It is submitted by counsel for the appellant, heavily relying on the decision of the apex court in Goaplast Pvt. Ltd. Vs. Shri Chico Ursula D''Souza and Another, , that even in such a case, Section 138 of the Act is attracted.

It is contended by counsel for the first respondent/accused that the facts in Goaplast Pvt. Ltd. Vs. Shri Chico Ursula D''Souza and Another, will not reveal whether, in the account maintained by the accused in that case, sufficient balance had been available at the time of presentation of the cheque. But, in this case, there is evidence that when exhibit P1 cheque was dishonoured, there was sufficient amount in the account maintained by him with his bankers to honour the cheque and that the cheque bounced only for the reason of the stoppage memo issued by the accused for the reason that certain amounts were due from the appellant. In this regard, the decision reported in M/s. Electronics Trade and Technology Development Corpn. Ltd., Secunderabad Vs. M/s. Indian Technologists and Engineers (Electronics) Pvt. Ltd. and another, has been cited, inviting me to the passage that (page 34):

After the cheque is issued to the payee or the holder in due course and before it is presented for encashment, notice is issued to him not to present the same for encashment and yet the payee or holder in due course presents the cheque to the bank for payment and it is returned on instructions, Section 138 does not get attracted.

It is submitted that the position will remain the same, even if a notice is issued to the bank to stop payment.

A close reading of the decision in M/s. Electronics Trade and Technology Development Corpn. Ltd., Secunderabad Vs. M/s. Indian Technologists and Engineers (Electronics) Pvt. Ltd. and another, will reveal that the ratio of the decision is the other way around. It had been made clear therein as follows (page 33):

It would thus be clear that when a cheque is drawn by a person on an account maintained by him with the banker for payment of any amount of money to another person out of the account for the discharge of the debt in whole or in part or other liability is returned by the bank with the endorsement like, (1) in this case ''I refer to the drawer'' (2) ''instructions for stoppage of payment'', and (3) ''stamp exceeds arrangement'', it amounts to dishonour within the meaning of Section 138 of the Act.

The ratio in M/s. Electronics Trade and Technology Development Corpn. Ltd., Secunderabad Vs. M/s. Indian Technologists and Engineers (Electronics) Pvt. Ltd. and another, really covers the point involved herein because, in this case also before the presentation of the cheque, the first respondent/accused had issued a notice to the bank "to stop payment" against exhibit P1 cheque.

Later, the Supreme Court, as rightly pointed out by counsel for the appellant, has considered this aspect in Goaplast Pvt. Ltd. Vs. Shri Chico Ursula D''Souza and Another, wherein it has been held that (page 649):

If we hold otherwise, by giving instructions to banks to stop payment of a cheque after issuing the same against a debt or liability, a drawer will easily avoid penal consequences u/s 138. Once the cheque is issued by a drawer, a presumption u/s 139 must follow and merely because the drawer issued notice to the drawee or to the bank for stoppage of payment it will not preclude an action u/s 138 of the Act by the drawee or the holder of the cheque in due course.

The Supreme Court has also made it clear that this was the view taken by the apex court in M/S Modi Cements Limited Vs. Shri Kuchil Kumar Nandi, .

Thus, the first respondent cannot avoid the criminal liability arising u/s 138 of the Act. The contention of the first respondent, that the case considered either in M/S Modi Cements Limited Vs. Shri Kuchil Kumar Nandi, or in Goaplast Pvt. Ltd. Vs. Shri Chico Ursula D''Souza and Another, did not reveal that the cheque in question therein did not reveal that the amount in the credit of the respective accused was not sufficient to honour the cheque, cannot be allowed to be pleaded in the light of the dictum in Goaplast Pvt. Ltd. Vs. Shri Chico Ursula D''Souza and Another, , because, the apex court has indicated that Section 138 had been enacted "to permit the efficacy of banking and of ensuring that in commercial or contractual transactions, cheques are not dishonoured and credibility in transacting business through banks is maintained."

Thus acceptance of the contention of the first respondent will defeat the very purpose behind Section 138 of the Act. Therefore, I am of the view that the decision taken by the court below is contrary to the provisions of Section 138 of the Act. Therefore, the only reason found by the court below for acquittal of the accused loses its significance. This results in reversal of the finding of acquittal and in conviction of the first respondent/accused for the offence punishable u/s 138, finding him guilty as such.

Accordingly, he is sentenced as follows:

(a) He shall undergo imprisonment for a day until the rising of the court on August 21, 2006, on which date, he shall appear before the court below to receive the sentence.

(b) He shall also pay a compensation of Rs. 15,000 on or before the said date.

(c) The default in payment of the compensation shall result in simple imprisonment for three months.

(d) The compensation amount, if collected, shall be paid to the appellant/complainant.