Joseph vs Philip Joseph

N. Krishnan Nair, J.—This appeal is directed against the judgment dated 27.6.1994 of the Sessions Judge, Kottayam in Crl. Appeal No. 190/92. The case arose on a complaint filed by the petitioner herein before the Judicial First Class Magistrate. Palai, against the respondent herein, alleging the commission of the offence punishable u/s 138 of the Negotiable Instruments Act. After the trial, the learned Magistrate found the respondent (accused) guilty of the offence and convicted him. He was sentenced to undergo simple imprisonment for three months and to pay a fine of Rs.5,000/- in default to undergo simple imprisonment for one month Aggrieved by the order of conviction and sentence passed by the Magistrate, the respondent herein preferred an appeal before the Sessions Judge, Kottayam. The Sessions Judge, Kottayam allowed the appeal and set aside the conviction and sentence imposed upon the respondent and acquitted him. Aggrieved by the order of acquittal, the complainant has come up with this appeal.

The substance of the allegations in the complaint filed before the magistrate is as follows:-

The accused in discharge of an amount of Rs.25,000/- which he borrowed from the complainant, issued Ext.P1 cheque in favour of the complainant drawn on the Kozhuvanal Branch of the south Indian Bank Limited. When the complainant presented the cheque for encashment through the Palai Branch of the State Bank of Travancore, it was returned unpaid with the endorsement "account stands closed". Thereupon the complainant issued a notice to the accused, calling upon him to pay the amount covered by the dishonoured cheque. Since the accused was not prepared to comply with the notice, proceedings were initiated against him for the offence punishable u/s 138 of the Negotiable Instruments Act.

When the accused appeared before the court, the particulars of the offence were read over and explained to him. He pleaded not guilty. Thereupon, the complainant gave evidence as PW 1 and examined the Manager of the Kozhuvanal Branch of South Indian Bank as PW 2. Exts.P 1 to P8 were also marked. No defence evidence was adduced On an elaborate consideration of the evidence, the learned Magistrate found the accused guilty of the offence, convicted him and sentenced him as stated earlier. The appeal filed before the Sessions Judge was allowed and the accused was acquitted.

The order of acquittal passed by the learned Sessions Judge is seriously challenged in this appeal.

The learned counsel for the appellant strongly contended that the learned Sessions Judge should have found that the dishonour of cheque by a bank of the ground that account is closed would be covered by the phrase "the amount of money standing to the credit of the accused is insufficient to honour the cheque." According to the learned counsel, the decision reported in Japahari vs. Priya, 1993(2)KLT 141 is not correctly decided and the lower court should have relied on the decision reported in Thomas Varghese vs. Jerome, 1992(1) KLT 812. On the other hand, the learned counsel for the respondent supported the impugned judgment and urged that there is no ground for interference.

The important question that arises for consideration in this appeal is whether a drawer of cheque is liable u/s 138 of the Negotiable Instruments Act, if the cheque is issued after closing the account. In this case, admittedly, the account which the accused had with the bank was closed on 5.8.1987 and the cheque was issued in 1990. If we examine Section 138 of the Negotiable Instruments Act, it could be seen that in order to invite the penalty as provided for in Section 138 of the Negotiable Instruments Act, for the drawer of the cheque, there must have been a subsisting account with the bank, either on the date on which the cheque was issued or on the date which the cheque was bearing or at the time when the cheque was presented for encashment. No doubt, if the drawer of the cheque issues a cheque in favour of another and thereafter closes the account before the cheque reaching the bank, then the act of the drawer of the cheque would come within the purview of Section 138 of the Negotiable Instruments Act. [See the decision reported in Thomas Varghese vs. Jerome, 1992(1) KLT 812]. But, when the account was closed long back and the cheque was issued much later and there was no case for the payee of the cheque or the complainant that the cheque was really dated prior to the closing of the account, then the dishonour of the cheque on the basis that the account was closed long back in hot an offence u/s 138 of the Negotiable Instruments Act. In this connection, it is relevant to note the following observations of this court in Japahari vs. Priya, 1993(2)KLT 141):

A cheque cannot be issued de hors an account maintained by its drawer with the banker. Section 6 of the Act says that a cheque is a bill of exchange drawn on a specified banker. When the cheque is returned by the bank unpaid because of the amount of money standing to the credit of "that account" is insufficient to honour the cheque, it is open to the holder of the cheque to make demand for payment as indicated in clause (b) of the proviso. The words "that account" in the section denote to the account in respect of which the cheque was drawn. No doubt, if any person manages to issue a cheque without ah account with the bank concerned its consequences would not snowball into the offence described u/s 138 of the Act. Such acts may amount to other offences. For the offence u/s 138 of the Act there must have been an account maintained by the drawer at the time the cheque was drawn.

In this case, the evidence of PW 2 and ExtP8 would show that the account was closed 5.8.1987 and the cheque issued only on 9.11.1990. No doubt, the act of the accused by having issued a cheque when he was not maintaining any account with the bank and fraudulently representing to the complainant that there was funds to the credit of his account with the bank and on the basis of this representation, the complainant was deprived of his money, the act done by the appellant would come within the purview of Section 420 of the I.P.C. It is also relevant to note that Ex.P1 cheque leaf was not bearing any ledger folio account number and as observed by the lower court this would create doubt whether Ext.P1 wasissuedontheaccountcoveredbyExt.P8.

The learned counsel for the appellant strongly contended that even if the account was closed before the issuance of the cheque, drawer of the cheque would be subjected to the penalty as provided u/s 138 of the Negotiable Instruments Act. He invited my attention to the decision of the Supreme Court in NEPC Micon Ltd. vs. Magma Leasing Ltd., 1999 (2) KLT 39. No doubt, in the decision referred to by the learned counsel, it has been held that when the cheque is returned by a bank with an endorsement "account closed", it would (the?) amount of money standing to the credit of that account is insufficient to honour the cheque as envisaged in Section 138 of the negotiable Instruments Act. It was also observed by the Supreme Court in that case that the expression "the amount of money standing to the credit of that account is insufficient to honour the cheque" is a genus of which the expression ''that account being closed" is specie. But, the said decision is not applicable to facts of this case. In that case, the account was closed after issuing the cheque. But. in this case as noticed earlier, the account was closed long prior to the issuance of the cheque. The decision reported in Thomas Varghese vs. Jerome, 1992(1) KLT 812 also would not help the appellant in this case. Since long prior to the drawl of the cheque in question, the accused had closed the account with the bank. I see no infirmity in the finding of the learned Sessions Judge that the accused in this case has not committed the offence punishable u/s 138 of the Negotiable Instruments Act. This appeal is groundless and is liable to be dismissed.

In the result, the appeal is dismissed.