Hari Fabrics, Proprietor, S. Hariraj and Another vs Kulandaivel

M. Sathyanarayanan, J.—The Petitioners are arrayed as Accused Nos. 1 & 2 respectively, in S.T.C. No. 4573/2006, pending on the file of

the Court of Judicial Magistrate, Tiruchengode and they along with three other Accused are prosecuted for the alleged commission of the offence

u/s 138 read with 142 of the Negotiable Instruments Act. A perusal of the impugned Complaint would disclose that Accused Nos. 3 to 5 had

drawn the cheque in favour of the Petitioners/A-1 & A-2 and they in turn, endorsed the same in favour of the Respondent/Complainant and the

said cheque on presentation got dishonoured for the reason ""insufficient funds"".

Learned Counsel appearing for the Petitioners/A-1 & A-2 would submit that the drawer of the cheque alone is liable for Criminal prosecution

and not the endorsers and in support of his submission, placed reliance upon the decisions reported in S. Badhusha Bibi v. Anandkumar Trading

Co., 1991 (2) MWN (Cr.) 237 (Mad); and Moshin Leathers and another v. Moulana and others, 2010 (1) MWN (Cr.) DCC 103.

Per contra, learned Counsel appearing for the Respondent/Complainant, would submit that since the endorsers also can be brought within the

ambit of drawer, they are also equally liable and responsible for the dishonour and therefore, rightly prosecuted and would further submit that the

points urged by the learned Counsel appearing for the Petitioners, can be thrashed out only during the course of trial and hence, prays for dismissal

of the Petition.

In the decision reported in S. Badhusha Bibi v. Anandkumar Trading Co., 1991 (2) MWN (Cr.) 237 (Mad), similar issue arose for

consideration and it has been held as follows:

Mr. K.N. Basha, the learned Advocate appearing for the Petitioner contends that only the drawer of the cheque alone would be liable for

offence punishable u/s 138, Negotiable Instruments Act. In the instance case, the 2nd Accused, who is the Petitioner herein is only an endorser of

the cheque and as such she cannot be made liable for offence u/s 138, Negotiable Instruments Act. For better appreciation of the contention put

forth by the learned Counsel, Section 138, Negotiable Instruments Acts needs extraction; it reads as follows:

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 amount 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 extend to one year, 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 presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity

whichever is earlier;

b. The payee or the holder in due course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by

giving a notice in writing to the drawer of the cheque, within fifteen days of the receipt of information by him from the bank regarding the return of

the cheque as unpaid; and

c. The drawer of such cheque fails to make the payment of the said amount of money to the payee or as the case may be to the holder in due

course of the cheque, within fifteen days of the receipt of the said notice.

A reading of the Section makes it clear that only the drawer of the cheque can alone be proceeded with for offence u/s 138, Negotiable

Instruments Act, provided the other requirements are satisfied. The 2nd Accused, who is the Petitioner herein is not the drawer of the cheque.

Hence, she cannot be proceeded with. The case as against her is necessarily to be quashed.

The above cited judgment was also relied upon in the subsequent Judgment reported in Moshin Leathers and another v. Moulana and others,

2010 (1) MWN (Cr.) DCC 103, wherein it has been held as follows:

It is settled law that only the drawer of the cheque can be prosecuted for the offence u/s 138 of Negotiable Instruments Act but not the

endorsee. Here, in these cases, admittedly the Petitioners herein are not drawers of the cheques, which were dishonoured, but they are only the

endorsees of the cheques in question. Therefore, they cannot be prosecuted u/s 138 of Negotiable Instruments Act. The decision relied upon by

the learned Counsel for the Petitioners squarely applies to the facts of this case.

The Hon''ble Supreme Court in the decision reported in Mrs. Aparna A. Shah Vs. Sheth Developers Pvt. Ltd. and Another, , has held as

follows:

In order to constitute an offence u/s 138 of the N.I. Act, this Court, in Jugesh Sehgal Vs. Shamsher Singh Gogi, , noted the following ingredients

which are required to be fulfilled:

(i) a person must have drawn a cheque on an account maintained by him in a bank for payment of a certain amount of money to another person

from out of that account;

(ii) that cheque should have been issued for the discharge, in whole or in part, of any debt or other liability;

(iii) that cheque has been presented to the Bank within a period of six months from the date on which it is drawn or within the period of its validity

whichever is earlier:

(iv) that cheque is returned by the Bank unpaid, either because of the amount of money standing to the credit of the 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 the Bank:

(v) the payee or the holder in due course of the cheque makes a demand for the payment of the said amount of money by giving a notice in writing,

to the drawer of the cheque, within 15 days of the receipt of information by him from the bank regarding the return of the cheque as unpaid;

(vi) the drawer of such cheque fails to make payment of the said amount of money to the payee or the holder in due course of the cheque within 15

days of the receipt of the said notice.

Being cumulative, it is only when all the aforementioned ingredients are satisfied that the person who had drawn the cheque can be deemed to have

committed an offence u/s 138 of the Act.

Considering the language used in Section 138 and taking note of background agreement pursuant to which a cheque is issued by more than one

person, we are of the view that it is only the ""drawer"" of the cheque who can be made liable for the penal action under the provisions of the N.I.

Act. It is settled law that strict interpretation is required to be given to penal statutes.

Admittedly, the Petitioners/A-1 & A-2 are not the drawers of the cheque, even as per the allegations made in the Complaint. In the light of the

ratio laid down in the above cited decisions, the Petitioners/A-1 & A-2 viz. endorsers, cannot be prosecuted for the alleged commission of the

offence u/s 138 read with 142 of the N.I. Act.

In the result, this Criminal Original Petition is allowed and the proceedings in S.T.C. No. 4573/2006, pending on the file of the Court of Judicial

Magistrate, Tiruchengode, are quashed. It is made clear that the findings/observations made herein, are only for the purpose of disposal of this

Petition and the Trial Court need not be influenced by the same while proceeding against the other Accused and the Respondent herein is also at

liberty to work out his Civil remedy before the competent forum in accordance with law. Since the Calendar Case is of the year 2006, the Trial

Court is directed to give utmost importance for its early disposal.