S.K. Jain vs Narinder Singh

P.K. Jain, J.—This petition has been filed u/s 482 of the Code of Criminal Procedure (hereinafter referred to as the Code) for quashing the complaint (Annexure P-6) and the summoning order dated 1-3-1995 (Annexure P-7) passed by the Chief Judicial Magistrate, Ludhiana.

Shri Narinder Singh (respondent herein) alleging himself to be Director of M/s. Genuine Wheels (India) Private Limited, Ludhiana, filed a complaint for the offences u/s 420 of the Indian Penal Code read with Section 138 of the Negotiable Instruments Act (hereinafter referred to as the Act) against the petitioner Shri S. K. Jain who is stated to be proprietor of M/s. Mahaveer Agro Agencies, Indore. The allegations in the complaint, in brief, are that the petitioner used to purchase agricultural implements from time to time from the respondents and a sum of Rs. 1,37,205/- became due from the petitioner. In partial discharge of his liability the petitioner issued cheque bearing No. 962229 dated 15-9-1993 for Rs. 1,15,205/- drawn on Allahabad Bank, Indore. It is alleged in the complaint that the petitioner had given assurance that the cheque would be encashed on presentation through clearing. Accordingly the cheque was presented by the respondent to its bankers at Ludhiana but the cheque was returned with the memo, "payment stopped by the drawer". It is then alleged that the petitioner with mala fide intention issued the cheque to cheat the complainant (respondent herein) and he had no funds in the bank and as such he intentionally got the payment of the cheque stopped. A notice dated 1 -2-1994 was sent to the petitioner but he failed to remit the amount of the said cheque. Consequently the respondent filed a complaint before the Chief Judicial Magistrate Ludhiana for the offences stated above. After recording preliminary evidence in support of the complaint, the Chief Judicial Magistrate passed the impugned summoning order (Annexure P-7).

It has been stated that in the present petition that the cheque in question was handed over to the respondent in blank by way of security against documents, that no goods were ever received by the petitioner as alleged nor any such amount was due from the petitioner and cheque has been forged and fabricated. It is further stated that since there was no buyer of the goods manufactured by the respondent, the petitioner had intimated the respondent accordingly, vide letter (Annexure P-2) and requested not to utilise the blank cheque. It is also stated that since the payment of the cheque had been stopped, the essential ingredient of the offence u/s 138 of the Negotiable Instruments Act are not made out and the summoning order (Annexure P-7) is against law and the same be quashed.

In his reply filed by the respondent it has been reiterated that the cheque in question had been issued by the petitioner in discharge of the part liability towards the price of the goods supplied to him; that the petitioner has concealed all the material facts inasmuch as he had sent the letter dated 27-5-1993 promising to pay the balance amount that a legal notice was served upon the petitioner before filing of the present petition but he kept sum and did not send any reply. Under these circumstances it is pleaded that exercise of the powers u/s 482 of the Code prior to the commencement of the trial and leading of evidence is not desirable.

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

Shri A. S. Sandhu learned counsel for the petitioner has argued that to constitute an offence u/s 138 of the Act; it is essential to allege and prove that (i) the cheque had been issued in discharge of some debt or liability, and (ii) the cheque is returned by the bank unpaid either because of the amount of money standing to the credit of that account being insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an arrangement made with that bank. It has been further argued that in the present case the petitioner got the payment of the cheque stopped inasmuch as the cheque was not given to the respondent in discharge of any debt or liability but was given in blank by way of security and that bank has not dishonoured the cheque for want of sufficient funds. Thus, it is contended that no offence u/s 138 of the Act is disclosed and as such the complaint Annexure P. 6 and summoning order Annexure P. 7 are liable to be quashed. Reliance has been placed upon two judgments of the Kerala High Court reported as Bhageerathy v. V. Beena 1992 C LJ 3946 (Ker) and Dr. P.K. Mohammed Rasheed v. State of Kerala 1994 CLJ 674 (Ker).

On the other hand the learned counsel for the respondent has argued that the cheque in question was issued in partial discharge of the liability of the petitioner towards the price of the goods supplied to him and that the necessary ingredients of an offence u/s 138 of the Act are contained in the legal notice (Annexure R-4) served upon the petitioner as well as the complaint Annexure P. 6. It is thus argued that once the necessary facts constituting the offence are pleaded the complaint cannot be quashed on the basis of the endorsement of the bank to the effect ''payment stopped''. Reliance has been placed upon two decisions of this Court reported as Kishore Lahoti v. Mahabir Prasad Maheshwari 1992 ISJ 334 (P & H) and Uggar Sain v. State of Punjab 1993 ISJ 511. Reliance has also been placed upon a decision of the Karnataka High Court in Pappachan v. Joy 1993 ISJ 126(Ker) and a judgment of the Kerala High Court in Thomas Varghese v. Jerome 1992 ISJ 517 (Ker).

I have given my careful thought to the respective contentions advanced... and have also gone through the various precedents cited at the Bar.

It is correct that all dishonour to cheques are not made punishable u/s 138 of the Act. Only the dishonour of the cheque on account of the circumstances mentioned in Section 138 of the Act is made punishable. Conditions stipulated in the section is that "the cheque is returned by the bank unpaid either because of the amount of the money standing to the credit on that account being insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an arrangement with that bank." Therefore unless the said condition is satisfied, an offence u/s 138 of the Act could not be constituted. In Dr. P.K. Mohammed Rasheed Vs. State of Kerala and Another, , relied upon by the learned counsel for the petitioner the Division Bench of the Kerala High Court stated the law as under:-

"Where a cheque was dishonoured and the bank returned the cheque with the endorsement ''payment stopped,'' and a complaint was filed without alleging the circumstances leading to such dishonour of the cheque, the complaint would not be maintainable in the absence of allegations of ingredients of the offence and under the circumstances, cognizance also cannot be taken of the offence." In the aforesaid case, the only allegation in the complaint was that the cheque was dishonoured and the bank returned the cheque with the endorsement ''payment stopped''. There were no allegations constituting the ingredients of the offence u/s 138 of the Act and as such the complaint was quashed. Earlier, another Division Bench of the same High Court in Thomas Varghese''s case 1992 ISJ 517 (Ker) (supra), stated the law as under:-

"The offence u/s 138 cannot depend on the endorsement made by the banker while returning the cheque. Irrespective of the endorsement made by the banker, if it is established that in fact the cheque was returned unpaid either because the amount of money standing to the credit of the account of the drawer 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, the offence will be established. The endorsement made by the banker while returning the cheque cannot be the decisive factor."

In para 9 of the judgment the said Division Bench proceeded further to observe as under:-

"If the circumstances contemplated by Section 138 of the Act are made out, the Court has to examine whether the return of the cheque was on account of insufficiency of funds belonging to the drawer. This can be done even without reference to the endorsement made by the banker. Endorsement like "refer to drawer", "account closed", "payment has been stopped" etc. made by the banker at the time of the return of the cheque are having the effect of proving that the cheque has been bounced. If the bouncing of the cheque was on account of insufficiency of the funds belonging to the drawer, then the drawer will be subjecting himself to proceedings u/s 138 of the Act."

This judgment was noticed in Dr. P. K. Mohammed Rasheed''s case (supra).

While noticing the view expressed by Kerala High Court in Thomas Varghese''s case 1992 ISJ 517 (Ker) (supra), Karnataka High Court in Pappachan''s case 1993 ISJ 126 (Ker)observed as under :-

"The decision of a Division Bench of this Court in Thomas Varghese v. Jerome 1992 (1) KLT 812 : 1992 ISJ 517, also has to be noticed. It is difficult to say that in all cases where payment is stopped by the drawer (as in this case), the offence will not arise. In every case of insufficiency of funds, it will be open to the drawer to stop payment and keep the statute at bay. That is not intended. The matter will have to be examined, with reference to the facts of the case, and this the Magistrate will do. The tendency to move this Court u/s 482 of the Code of Criminal Procedure in cases u/s 138 of the Negotiable Instruments Act, is so common now."

Similar views have been expressed by this Court in Kishore Lahoti''s case 1992 ISJ 334 (P & H) (supra) and Uggar Sain''s case 1993 ISJ 511 (P & H) (supra).

From the above decision it is clear that the mere fact that the payment of a cheque has been stopped by the drawer or the bank has returned the cheque with the endorsement ''payment stopped'' is not enough to hold that a complaint u/s 138 of the Act should be thrown out at the threshold. Countermanding of a cheque by stop memo hardly affects rights of the respondent to initiate the proceedings under the Act. If the circumstances contemplated by Section 138 of the Act are made out, the Court has to examine whether the return of the cheque was on account of insufficiency of funds belonging to the drawer. All these are questions of facts to be decided after taking evidence.

In the case in hand para 3 of the impugned complaint (Annexure P. 6) reads as under:-

"3. That the complainant presented the cheque with his banker - Punjab and Sind Bank, Miller Ganj, Ludhiana, and sent the same through clearing, but to the utter surprise, the cheque returned back with the memo, "payment stopped by the drawer" and the accused with mala fide intentions, issued the cheque to cheat the complainant and further as he has no funds in the Bank. As such, he has committed an offence u/s 420 of the Indian Penal Code read with Section 138 of Negotiable Instruments Act." In the legal notice (Annexure R-4) send to the petitioner, after the return of the cheque from the bank with the endorsement "the payment stopped by drawer", it is specifically alleged as under:-

"My client presented the said cheque through his banker Punjab and Sind Bank, MillerGanj, Ludhiana and the cheque was sent to your banker through clearing but to the utter surprise the cheque was returned back with the memo "payment stopped by the drawer" and on that day when the cheque was presented to your banker, you have got no sufficient funds for honouring the cheque and further you stopped the payment of the cheque. As such, you have committed an offence u/s 138 of the Negotiable Instrument Act along with Section 420 of the Indian Penal Code." Thus from a bare reading of para 3 of the complaint read with the above averment in the legal notice, it is evident that the necessary ingredients to constitute an offence u/s 138 of the Act have been expressly pleaded. The question as to whether there were sufficient funds in the bank account of the petitioner at the time when the cheque was presented to its bankers for payment or not, is a pure question of fact which can be decided only after taking evidence by the trial Magistrate. Thus the present case is fully covered by the two judgments of this Court, the judgment of the Kerala High Court in Thomas Varghese''s case 1992 ISJ 517 (Ker) (supra) and the judgment of the Karnataka High Court in Pappachan''s case 1993 ISJ (Banking) 126 (Ker) (supra).

As a result of the above discussion, I do not find any merit in the present petition nor any justification in invoking the inherent jurisdiction of this Court u/s 482 of the Code. Accordingly the petition is hereby dismissed. Interim stay of the proceedings before the trial Court is hereby vacated. The parties are directed to appear before the Chief Judicial Magistrate, Ludhiana on 24-1-1996.