Manoj Kumar Goyal and Others vs Vikas Gupta and Others

Sujoy Paul, J—The singular question involved in these cases is that whether the return of cheque/s by the bank on the ground that account of drawer/applicant is closed, falls within the ambit of Section 138 of Negotiable Instruments Act (NI Act)?

Since the aforesaid singular question is involved in these batch of matters, on the joint request of parties, matters were analogously heard and decided by this common order.

Facts are taken from M.Cr.C. No. 3325/15.

The respondent No. 1/complainant filed a complaint under Section 138 of NI Act. It is alleged in the said complaint that the present petitioner had issued two cheques on 24.6.2013. The complainant, in turn, submitted those cheques for encashment before the bank. The cheques were bounced and the same were returned with the remark that "account is closed". Thereafter, complainant sent legal notice on 26.7.2013 by registered post. The present petitioner neither sent reply to the notice, nor paid the amount. Hence, the complaint was filed. The petitioner filed an application dated 2.4.2014 (Annexure A-4) to reject the complaint. The singular ground taken in this application is that on the date of issuance of cheque, no bank account of petitioner was existing. Hence, Section 138 NI Act cannot be applied. This application of petitioner was rejected by the court on 17.7.2014. Feeling aggrieved by the said order, petitioner preferred a Criminal Revision No. 14/15. This revision was also dismissed by Court below by order dated 20.2.2015.

Shri S.S. Bansal, learned counsel for the petitioner criticized the said orders by contending that Section 138 of NI Act is a penal provision. It must be strictly construed. To attract Section 138, certain ingredients must be satisfied. By placing reliance on Jugesh Sehgal Vs. Shamsher Singh Gogi, (2009) CLT 1451 : (2009) 9 JT 292 : (2009) 9 SCALE 455 : (2009) 14 SCC 683 : (2009) 10 SCR 857 , it is contended that Section 138 has many ingredients which are described in para 13 of said judgment. One of such ingredient is that a person must have drawn a cheque on an account maintained by him in a bank for payment of certain amount of money to another person from out of that account. Reliance is placed on para 13 to contend that the ingredients (i and iv) are not satisfied. Hence, proceedings under Section 138 of NI Act are not maintainable. He relied on Mrs. Aparna A. Shah Vs. Sheth Developers Pvt. Ltd. and Another, (2013) 5 ABR 119 : (2013) 10 AD 505 : AIR 2013 SC 3210 : (2013) 3 BC 491 : (2014) 118 CLA 366 : (2013) 3 CompLJ 449 : (2013) CriLJ 3743 : (2013) 3 JCC 169 : (2013) 9 JT 258 : (2013) 3 RCR(Civil) 680 : (2013) 3 RCR(Criminal) 686 : (2013) 8 SCALE 140 : (2013) 8 SCC 71 and Yogendra Pratap Singh Vs. Savitri Pandey, AIR 2015 SC 157 : (2014) AIRSCW 5751 to submit that the ratio of Jugal Sahgal was followed in these cases.

The learned counsel for the complainant on the other side, supported the order. They submit that the revisional court considered all the relevant judgments on the point and the said order does not suffer from any legal infirmity. They also relied on certain judgments.

No other point is pressed by the learned counsel for the parties.

I have heard the learned counsel for the parties and perused the record.

The petitioner, at present, has not filed his reply in Section 138 of NI Act proceedings. He simply filed Annexure A-4 dated 2.4.2014 in which he has only stated that Section 138 cannot be invoked because there existed no account on the date of issuance of cheque. Before dealing with this aspect, I deem it apposite to quote relevant provisions from the NI Act. Section 118 reads as under:--

"118. Presumptions as to negotiable instruments.--Until the contrary is proved, the following presumptions shall be made:

(a) of consideration: that every negotiable instrument was made or drawn for consideration, and that every such instrument when it has been accepted, endorsed, negotiated or transferred, was accepted, endorsed, negotiated or transferred for consideration;

Section 139 of NI Act reads as under:--

"139. Presumption in favour of holder.--It shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque, of the nature referred to in Section 138 for the discharge, in whole or in part, of any debt or other liability."

(Emphasis Supplied).

Section 138 of NI Act finds place in Chapter XVII of the NI Act. The object behind introducing this chapter is to instill faith in the efficacy of banking operations and giving credibility to negotiable instruments in business transactions. These provisions were introduced in order to discourage people from not honouring their commitments by way of payment through cheques. This is trite law that Court should lean in favour of an interpretation which serves the object of the statute. [See: Goaplast Pvt. Ltd. Vs. Shri Chico Ursula D''Souza and Another, AIR 2003 SC 2035 : (2003) 114 CompCas 644 : (2003) 2 CompLJ 275 : (2003) CriLJ 1723 : (2003) 3 SCALE 117 : (2003) 3 SCC 232 : (2003) 44 SCL 472 : (2003) 2 SCR 712 : (2003) 1 UJ 691 : (2003) AIRSCW 2035 : (2003) 2 Supreme 536 ].

The Apex Court considered Section 139 in Hiten P. Dalal Vs. Bratindranath Banerjee, AIR 2001 SC 3897 : (2001) 2 BC 773 : (2001) 106 CompCas 574 : (2001) 3 CompLJ 313 : (2001) CriLJ 4647 : (2001) 3 Crimes 220 : (2001) 5 JT 386 : (2001) 4 SCALE 275 : (2001) 6 SCC 16 : (2001) 3 SCR 900 : (2001) 2 UJ 1384 : (2001) AIRSCW 3861 : (2001) 5 Supreme 49 . It was held that because both Sections 138 and 139 require that the court ''shall presume'' the liability of the drawer of the cheques for the amounts for which the cheques are drawn. It is obligatory on the court to raise this presumption in every case where the factual basis for the raising of the presumption had been established. It introduces an exception to the general rule as to the burden of proof in criminal cases and shifts the onus on the accused. Such a presumption is a presumption of law, as distinguished from a presumption of fact which describes provisions by which the court ''may presume'' a certain state of affairs. Presumptions are rules of evidence and do not conflict with the presumption of innocence, because by the latter, all that is meant is that the prosecution is obliged to prove the case against the accused beyond reasonable doubt. The obligation on the prosecution may be discharged with the help of presumptions of law or fact unless the accused adduces evidence showing the reasonable possibility of the non-existence of the presumed fact.

In Mallavarapu Kasivisweswara Rao Vs. Thadikonda Ramulu Firm and Others, AIR 2008 SC 2898 : (2008) 3 BC 416 : (2008) CLT 1063 : (2008) 11 JT 43 : (2008) 8 SCALE 680 : (2008) 7 SCC 655 : (2008) AIRSCW 4777 : (2008) 4 Supreme 79 the Apex court opined that under Section 118(a) of the Negotiable Instruments Act, the court is obliged to presume, until the contrary is proved, that the promissory note was made for consideration. It is also a settled position that the initial burden in this regard lies on the defendant to prove the non-existence of consideration by bringing on record such facts and circumstances which would lead the court to believe the non-existence of the consideration either by direct evidence or by preponderance of probabilities showing that the existence of consideration was improbable, doubtful or illegal.

In NEPC Micon Ltd. Vs. Magma Leasing Ltd. , the Apex Court dealt with the said issue. The Apex Court noticed that various High Courts in Shivendra Sansguiri Vs. M/s. Adineo and another, (1997) 1 CompCas 348 : (1996) CriLJ 1816 , Veeraraghavan Vs. Lalith Kumar, (1995) CriLJ 1882 , M/s. Dada Silk Mills v. India Overseas Bank Banking Co., Dada Silk Mills and Others Vs. Indian Overseas Bank and Another, (1995) 82 CompCas 35 : (1994) CriLJ 2874 , M/s. G.M. Mittal Stainless Steel Ltd. v. M/s. Nagarjuna Investment Trust Ltd., 1995 (4) Crimes 379 (Andhra Pradesh) , Japahari Vs. N.S. Priya and Another, (1999) 96 CompCas 818 and Rakesh Nemkumar Porwal Vs. Narayan Dhondu Joglekar, (1994) 3 BomCR 355 : (1993) 78 CompCas 822 : (1993) CriLJ 680 : (1993) 1 MhLj 630 and opined that Section 138 of NI Act would be applicable in cases where cheque is dishonoured on the ground that account by the drawer is closed. In the said judgment, the Apex Court opined as under:--

"7. Further, the offence will be complete only when the conditions in provisos (a), (b) and (c) are complied with. Hence, the question is, in a case where a cheque is returned by the bank unpaid on the ground that the "account is closed", would it mean that the cheque is returned as unpaid on the ground that "the amount of money standing to the credit of that account is insufficient to honour the cheque"? In our view, the answer would obviously be in the affirmative because the cheque is dishonoured as the amount of money standing to the credit of "that account" was "nil" at the relevant time apart from it being closed. Closure of the account would be an eventuality after the entire amount in the account is withdrawn. It means that there was no amount in the credit of "that account" on the relevant date when the cheque was presented for honouring the same. 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 a specie. After issuing the cheque drawn on an account maintained, a person, if he closes "that account" apart from the fact that it may amount to another offence, it would certainly be an offence under Section 138 as there was insufficient or no fund to honour the cheque in "that account". Further, the cheque is to be drawn by a person for payment of any amount of money due to him "on an account maintained by him" with a banker and only on "that account" the cheque should be drawn. This would be clear by reading the section along with provisos (a), (b) and (c).

Secondly, proviso (c) gives an opportunity to the drawer of the cheque to pay the amount within 15 days of the receipt of the notice as contemplated in proviso (b). Further, Section 140 provides that it shall not be a defence in prosecution for an offence under Section 138 that the drawer has no reason to believe when he issued the cheque that the cheque may be dishonoured on presentment for the reasons stated in that section. Dishonouring the cheque on the ground that the account is closed is the consequence of the act of the drawer rendering his account to a cipher. Hence, reading Sections 138 and 140 together, it would be clear that dishonour of the cheque by a bank on the ground that the account is closed would be covered by the phrase "the amount of money standing to the credit of that account is insufficient to honour the cheque".

Learned counsel for the appellants, however, submitted that Section 138 being a penal provision, it should be strictly interpreted and if there is any omission by the legislature, a wider meaning should not be given to the words than what is used in the section. In our view even with regard to penal provision, any interpretation, which withdraws the life and blood of the provision and makes it ineffective and a dead letter should be averted. If the interpretation, which is sought for, were given, then it would only encourage dishonest persons to issue cheques and before presentation of the cheque close "that account" and thereby escape from the penal consequences of Section 138."

In para 15 of the judgment, the Supreme Court opined that even if Section 138 is a penal statute, court must interpret it in consonance with legislative intent and purpose in order to suppress the mischief and advance the remedy, which reads as under:--

"15. 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 ''brush away the cobweb varnish, and show the transactions in their true light'' (Wilmot C.J.) of (by Maxwell) "to carry out effectively the breach of the statute, it must be also 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."

It is seen that this judgment of Apex Court in NEPC Micon Ltd. has not been considered by Supreme Court in later judgment of Jugesh Sehgal (supra). As per a special bench judgment (five Judge) of this Court in Jabalpur Bus Operators Association and Others Vs. State of M.P. and Another, AIR 2003 MP 81 : (2003) 4 JCR 325 : (2003) 1 JLJ 105 : (2003) 1 MPHT 226 : (2003) 1 MPJR 158 : (2003) 1 MPLJ 513 , this Court opined that if earlier judgment of Supreme Court has not been considered and distinguished in later judgment, the earlier judgment would be binding.

Apart from this, it is seen that in Jugal Sehgal (supra), the facts were totally different. In the said case, the stand of drawer was that cheque was issued by him but account was not maintained by him rather it was in the name of one Ms. Shilpa Choudhary. The Apex Court opined that as per para 3 of complaint itself, cheque in question was issued from an account which was not held in the name of appellant and, therefore, one of the requisite ingredients of Section 138 of Act was not satisfied. This is trite law that a judgment has to be considered on the basis of factual backdrop of a matter. The said fact that account was not in the name of drawer is not applicable in the present case. It is not the case of the present petitioner that at no point of time, the account was in his name. The Supreme Court in Laxmi Dyechem Vs. State of Gujarat and Others, (2013) 4 ABR 956 : (2013) 1 BC 140 : (2013) 1 CompLJ 137 : (2013) CriLJ 3288 : (2013) 1 Crimes 101 : (2012) 6 CTC 690 : (2013) 1 JCC 41 : (2012) 1 JCC 41 : (2012) 12 JT 65 : (2013) 1 RCR(Civil) 353 : (2013) 1 RCR(Criminal) 260 : (2012) 11 SCALE 365 : (2013) 117 SCL 93 : (2013) AIRSCW 3468 : (2012) 8 Supreme 274 again considered this aspect and judgment of NEPC Micon Ltd. Para 15 of this judgment reads as under:--

"We find ourselves in respectful agreement with the decision in Magma case [ NEPC Micon Ltd. Vs. Magma Leasing Ltd. that the expression "amount of money ... is insufficient" appearing in Section 138 of the Act is a genus and dishonour for reasons such "as account closed", "payment stopped", "referred to the drawer" are only species of that genus. Just as dishonour of a cheque on the ground that the account has been closed is a dishonour falling in the first contingency referred to in Section 138, so also dishonour on the ground that the "signatures do not match" or that the "image is not found", which too implies that the specimen signatures do not match the signatures on the cheque would constitute a dishonour within the meaning of Section 138 of the Act:

This Court has in the decisions referred to above taken note of situations and contingencies arising out of deliberate acts of omission or commission on the part of the drawers of the cheques which would inevitably result in the dishonour of the cheque issued by them. For instance, this Court has held that if after issue of the cheque the drawer closes the account it must be presumed that the amount in the account was nil hence insufficient to meet the demand of the cheque. A similar result can be brought about by the drawer changing his specimen signature given to the bank or in the case of a company by the company changing the mandate of those authorised to sign the cheques on its behalf. Such changes or alteration in the mandate may be dishonest or fraudulent and that would inevitably result in dishonour of all cheques signed by the previously authorised signatories. There is in our view no qualitative difference between a situation where the dishonour takes place on account of the substitution by a new set of authorised signatories resulting in the dishonour of the cheques already issued and another situation in which the drawer of the cheque changes his own signatures or closes the account or issues instructions to the bank not to make the payment. So long as the change is brought about with a view to preventing the cheque being honoured the dishonour would become an offence under Section 138 subject to other conditions prescribed being satisfied."

As analyzed above, Section 138 of NI Act needs to be interpreted in order to ensure credibility of negotiable instruments in business transactions. The attempt should be to curb the mischief. It is also settled in law that in view of Section 118 and 139 of NI Act, there is a presumption of issuance of cheque. However, this presumption is rebuttable one. The drawer may rebut it at appropriate stage by filing reply and leading evidence. Initially there exists a presumption of issuance of a valid cheque. If argument of petitioner is accepted, it will amount to give stamp of approval to a new method of mischief. As per this methodology, one may issue cheque to the other party and prior to or subsequent to it close his account. This device to wriggle out of Section 138 NI proceedings is impermissible because this eventuality is also covered under section 138 of NI Act. In order to give full effect to the legislative intent, the Apex Court opined that "account closed" also falls within the ambit of Section 138 NI Act.

In view of aforesaid analysis, in my view, the Courts below have not committed any legal error which warrants interference by this Court under Section 482 Cr.P.C.

Petitions are bereft of merits and are hereby dismissed.

Registry is directed to keep a true copy of this order in all the connected matters.