Dev Raj Bhasin vs Parveen Kumar Kandhari

Virender Singh, J.—Disagreeing with the view taken by the learned trial Court vide which the complaint u/s 138 of Negotiable Instrument

Act (for short to be referred to as 'Act') filed by the petitioner (complainant) was dismissed on the ground that the cheque issued by the respondent

(accused) has bounced on account of a 'non existent account', the learned Revisional Court (1st Additional Sessions Judge, Jammu) has made the

instant reference recommending that order dated 30.01.2004 of learned Sub Registrar (Judicial Magistrate 1st Class) Jammu, be set aside.

The brief facts of the case run, thus:

A cheque bearing No. QDU-268452 dated 05.11.2003 drawn at Punjab National Bank, Shalamar Road, Jammu, was issued by the

respondent in favour of the petitioner. On presentation, it was returned unpaid with the remarks ""Account not existent"". The legal notice was

served upon the respondent, was admittedly received by him. However, he did not make the payment and this constrained the petitioner to file a

complaint u/s 138 of the 'Act' against the respondent. The petitioner produced the preliminary evidence in support of his case. The learned Trial

Court, however, dismissed his complaint u/s 203 Cr.P.C, primarily on the ground that the cheque in question was issued from a 'non-existent

account' and as such offence u/s 138 of the 'Act' was not made out. Aggrieved by the impugned order of dismissal of the complaint, the petitioner

knocked the doors of the Revisional Court.

Vide order dated 28.12.2005, the learned Revisional Court formed the opinion that the order passed by the learned Sub Registrar (Judicial

Magistrate 1st Class) Jammu, suffers from illegality and deserved to be set aside.

Therefore, the instant reference.

I have heard Mr. K.S. Puri, Advocate, appearing for the petitioner-complainant and Mr. Rajnesh Oswal, Advocate, appearing for the

respondent (drawer of the cheque). With their assistance, I have gone through the records also.

Mr. Puri, while supporting the view taken by the Revisional Court, submits that although Section 138 is the penal statute, it is the duty of the

Court to interpret it in consistent with the legislative intent and purpose so as to suppress the mischief to be played by the drawer of the cheque. In

the present case, the respondent has not only cheated the petitioner for which he is liable to be punished in accordance with law, he has no escape

from his liability under the 'Act' as well. Mr. Puri then submits that it cannot be said that the respondent (drawer of the cheque) was not aware of

the fact that his account in the bank was not in existence and still he issued the cheque. He cannot derive benefit from his own wrong.

In support of his arguments, Mr. Puri has relied upon a judgment of Hon'ble Apex Court rendered in NEPC Micon Limited and Others Vs.

Magma Leasing Limited, and Anr. judgment of Hon'ble Supreme Court titled ""Goaplast Pvt. Ltd. v. Shri Chico Ursula D'Souza and Anr.

AIR2003 SCW 1555 in which the view rendered in NEPC Micon's case (supra) was reiterated.

In the same stress, Mr. Puri states that dishonouring of the cheque on account of 'non-existence of the account' or the 'account being closed' will

fall within the mischief of Section 138 of the Act. To say so, he relies upon a Single Bench judgment of Himachal Pradesh High Court rendered in

Bal Krishan Sharma v. Tek Ram"" 2006 (3) JRC 14, in which the view taken by the Hon'ble Supreme Court in NEPC Micon's case (supra) was

followed. On the same rationale, Mr. Puri also relies upon a Single Judge's judgment of this Court rendered in ""Vijay Kumar Gupta v. M/S R.S.

Traders"" Judicial Reports 2005 (4)(Criminal) 511.

Refuting the submissions advanced by Mr. Puri, Mr. Oswal relies upon a judgment of the Hon'ble Karnataka High Court rendered in Deepa

Finance Corporation Vs. A.K. Mohammed, , in which the Hon'ble Bench observed that once the cheque is issued from a non-existent account, it

cannot be said that the cheque is drawn on account maintained by the drawer and, therefore, Section 138 of the Act was not attracted. Mr. Oswal

refers to para 11 of the said judgment.

Mr. Oswal lastly contends that NEPC Micon's case (supra) cited by Mr. Puri is distinguishable on facts and, therefore, he cannot derive any

advantage from the same.

After hearing rival contentions of the learned Counsel of both the sides and going through the records, I am of the considered opinion that the

view taken by the learned Revisional Court deserves to be upheld.

It goes without saying that Section 138 of the Act has been enacted to punish the unscrupulous drawers of the cheques who though purport to

discharge their liability by issuing cheques have no intention of really doing so. Apart from civil liability, they are also to be fastened with penal

action. At the same time, the legislative intent was also to avert unnecessary prosecution of honest drawers of the cheques and, therefore, the law

framers in their wisdom thought of giving reasonable time to them to make the payment within the prescribed limit after they receive the statutory

notice to do so.

In a recent view taken by three Judges' Bench of Hon'ble Apex Court in Appeal (Crl.) No. 767 of 2007 arising out of SLP (Criminal) No.

3910 of 2006 titled ""C.C. Alavi Haji v. Palapetty Muhammed and Anr."", Their Lordhships while dealing with the aspect of service of statutory

notice upon the drawer of the cheque, have rather observed that any drawer, who wants to join the issue with regard to the non-receiving of the

notice sent to him by registered post can even make the payment within fifteen days of the receipt of the notice from the Court in respect of a

complaint filed u/s 138 of the Act. So law takes care of a honest drawer and not of unscrupulous drawer.

Reverting to the facts of the case in hand, in my view, the respondent wants to escape his penal liability, simply on the ground that before the

issuance of the cheque, the account maintained by him was not in existence. In other words, he wants to take the advantage of his own wrong.

One cannot understand that if the account, from which the cheque was issued was already got closed by him for any reason whatsoever, he should

not have issued the cheque to the petitioner at all.

In NEPC Micon's case (supra), the facts, in short, were that the drawer of the cheque closed the account in the bank before presentation of

the cheque and when it was presented for clearance, the same was returned by the Bank with the remarks ""Account closed"". The question arose

whether in this situation, Section 138 of the Act would be attracted or not, Their Lordships while dealing with this aspect of the matter, observed in

para 15 of the said judgment as under:

In view of the aforesaid discussion we are of the opinion that even though Section 138 is a penal statute, it is the duty of the Court to interpret

it consistent with the legislative intent and purpose so as to suppress the mischief and advance the remedy. As stated above, Section 138 of the

Act has created a contractual breach as an offence and the legislative purpose is to promote efficacy of banking and of ensuring that in commercial

or contractual transactions cheques are not dishonoured and credibility in transacting business through cheques is maintained. The above

interpretation would be in accordance with the principle of interpretation quoted above 'brust away the cobweb varnish, and show the transactions

in their true light' (Wilmot C.J.) or (by Maxwell) ""to carry out effectively the breach of the statute, it must be so construed as to defeat all attempts

to do, or avoid doing, to an indirect or circuitous manner that it has prohibited."" Hence, when the cheque is returned by a bank with an

endorsement 'account closed', it would amount to returning the cheque unpaid because ""the amount of money standing to the credit of that account

is insufficient to honour the cheque"" as envisaged in Section 138 of the Act.

While reiterating the view taken in NEPC Micon's case (supra), the Hon'ble Apex Court in Goaplast Pvt. Ltd.'s case (supra) observed as

under:

NEPC Micon Limited and Others Vs. Magma Leasing Limited, was a case in which the drawer of the cheque closed the account in the Bank

before presentation of the cheque and the cheque when presented was returned by the Bank with the remark ""account closed"". The question arose

whether in this situation Section 138 of the Act would be attracted. It was contended on behalf of the appellant that Section 138 being a penal

provision it should be strictly interpreted. Section 138 according to the appellant applied only in two situations i.e. either because the money

standing to the credit of the account of the drawer is insufficient to honour the cheque or it exceeds the amount arranged to be paid from that

account by an agreement made with the bank. Rejecting the contentions raised on behalf of the accused this Court held that return of a cheque on

account of account being closed would be similar to a situation where the cheque is returned on account of insufficiency of funds in the account of

the drawer of the cheque. Before one closes his account in the Bank he withdraws the entire amount standing to credit in the account. Withdrawal

of the entire amount would therefore mean that there were no funds in the account to honour the cheque which squarely brings the case within

Section 138 of the Act. On the question of strict interpretation of penal provisions raised on behalf of the accused it was observed: ""If the

interpretation, which is sought for, were given, then it would only encourage, dishonest persons to issue cheques and before presentation of the

cheques, close the account and thereby escape from the penal consequences of Section 138"". Any interpretation which withdraws the life and

blood of the provision and makes it ineffective and a dead letter, should be averted. It is the duty of the Court to interpret the provision consistent

with the legislative intent and purpose so as to suppress the mischief and advance the remedy. The legislative purpose is 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….

In the aforesaid judgment, the Hon'ble Supreme Court also reiterated its earlier view rendered in case ""Modi Cements Ltd. v. Kuchil Kumar

Nandi"" AIR 1998 SCW 842.

The instant case is to be tested on the touch stone of the aforesaid rationale.

In my view, the observations of learned Single Judges rendered in ""Bal Krishan Sharma v. Tek Ram"" 2006 (3) JRC 14; and ""Vijay Kumar

Gupta v. MIS R.S. Traders"" 2005 (4) JRC 511 can also be read with advantage on the point at issue, so as to hold that the view taken by learned

Revisional Court does not suffer from any illegality.

As a sequel to the aforesaid discussion, the net result now surfaces is that the view taken by learned Sub Registrar (Judicial Magistrate 1st

Class) Jammu, in dismissing the complaint of the petitioner u/s 203 Cr.P.C. on the premise of 'non-existent of the account' maintained by the

respondent, is not sustainable and, therefore, the learned Revisional Court has rightly formed an opinion that it deserves to be set aside.

I therefore, in the instant reference, uphold the view taken by the learned Revisional Court, set aside the order dated 30.01.2004 of Sub

Registrar (JMIC) Jammu and direct the Court concerned to proceed with the complaint in accordance with law on the basis of preliminary

evidence already led by the petitioner-complainant in support of his case.

Since the respondent has not been summoned till date, he need not appear before the trial Court. However, the petitioner is directed to cause

his appearance before the Court concerned on 30.07.2007. Trial Court records be sent back forthwith.

The reference is answered in the aforesaid terms.