V.S. Krishnan vs V.S. Narayan

Arunachalam, J.—The petitioner is the accused in C.C.No.2054 of 1989 on the file of the Judicial Magistrate No. II, Poonsmallee. The

proceeding were initiated on a private complaint filed by the respondent before the said magistrate for an offence u/s 138 of the Negotiable

Instruments Act, 1881. This petition has been filed u/s 482,Criminal Procedure Code, seeking to invoke the inherent powers of this court to quash

the proceedings pending before the trial Magistrate as an abuse of the court and not maintainable in law.

The brief facts which led to this prosecution can now be narrated .The respondent, who is the complainant has its factory at Porur. The

petitioner placed an order with the respondent for supply of number 22 KV outdoor V.C.B. by order dated July 11,1988. On receipt of the

order, the respondent manufactured the article and despatched the same to the petitioner on March 31,1989. In respect of the order so placed,

the petitioner issued of cheque dated March 28,1989, drawn on the State bank of India, Pondicherry in favor of the respondent for the sum of Rs.

3,56,349. The cheque on receipt by the respondent on April 1,1989, was sent for collection to the Indian Bank, Porur on April 3,1989. The

cheque was returned to the complaint on April 11,1989, with an endorsement ""refer to the drawer"" to use the words in the complaint ""thus the

cheque was dishonored ""Soon thereafter, the respondent gave a telegram to the petitioner about the cheque not having been honoured and

requested the letter to arrange for payment. In terms of the allegations in the complaint, a representative of the respondent also called on the

petitioner on April 12,1989, and insisted on a demand draft for the proceeds of the cheque and the petitioner is stated to have replied that he was

expecting funds from the Reserve Bank and on receipt of the amount, he would make payment. The respondent issued a notice to the petitioner on

April 17,1989,demanding payment. The notice was acknowledged by the petitioner who sent a reply on April 26,1989. According to the

averments in the complaints, the petitioner has admitted its liability in the reply notice and expressed inability to pay the amount and prayed for time

till May 6,1989, to discharge its liablity, which necessitated a private complaint being logged Sworn statement of the respondent was recorded by

the trial Magistrate on May 16,1989.

Mr. K. S. Dinakaran, learned counsel appearing for the petitioner, raised the following contentions: (1) Section 138 of the Negotiable

Instruments Act,1881,as amended by Act 66 of1988 came into the statue book only o Sworn statement n April 1,1989, while the cheque was

issued even on March 28,1989, before the coming into force of this penal provision. Therefore, the issuance of the cheque was not an offence on

March 28,1989. (2) The payment f the amount of money to another person must be for the discharge, in whole or in part, of any debt or other

liability to attract the provisions of section 138 of the Act. According to learned counsel, the goods were supplied only on March 31,1989,and

hence the liability had not arisen on March 28 1989, when the cheque was issued and therefore the prosecution will not be maintainable. (3) The

offence u/s 138 or the Negotiable Instruments Act will be attracted only if the cheque is returned by the bank unpaid either because the amount of

money standing to the credit of that account insufficient to honour the cheque or it exceeds the amount arranged to be paid from that account by an

agreement made by the bank. On facts, since the cheque had been returned with an endorsement ""refer the drawer"", it is his contention that the

return was not either due to insufficiency of funds in the account to honour the cheque or because the amount shown in the cheque exceeded the

arrangement and therefore even on this ground, no offence was made out.

Per contra, Mr. V. Sridevan, learned counsel appearing for the respondent, contended that a reading of the section, as a whole would positively

indicate that the offence will stand committed when the cheque had been presented to the bank within a period of six months from the date on

which it was drawn or within the period of its validity, whichever was earlier and it had been s far as the other two contingencies contemplated

under the proviso to the section they need not be gone into since they are not disputed. He would further contend that the word ""liability"" would

indicate the responsibility or an obligation in general and the meaning cannot be restricted, as contend by learned counsel for the petitioner. He

would also submit that the liability arose when the order was placed on July 11,1988, and therefore the cheque had been issued for the discharge

of a liability and the ingredients of the section are squarely attracted. As far as the last contention of the return of the cheque is concerned endorse

the term ""refer to drawer"" he would contained that in banking practice, the term ""refer to drawer ""is generally used for returning the cheques for

want of funds in the drawer account or because of service of a garnishee order. He has also produced before me the front sent by the bank along

with the cheques. This from does not contain the words used in section 138 of the Act, viz., (a) insufficient to honour the cheque; or (b) exceed the

amount arranged to be paid from that account.

I have carefully considered the rival contentions put forth before me by either counsel .While considering the first ground of challenge on the

non-availability of the penal provision on March 28, 1989, when the cheque was admittedly issued by the petitioner, the court must look into the

general scope and purview of the statue and the remedy sought to be applied must also be equally looked into. Laws made justly and for the

benefit of individual and for the community as a whole may relate to a time antecedent to their commencement. Even though the claim on which the

action is based may be of an anterior date and actions may have been earlier, the provisions of section 138 of the Act, taken as a whole, will be

sufficient to negative the contention of learned counsel for the petitioner. The issuing of a cheque is not an offence .An offence is committed on the

happening of certain contingencies contemplated by section 138 of the Act. Through the cheque might have been issued prior to the

commencement of the Act, it is valid for a period of six months, within which time those contingencies may arise.

Even if the cheque was issued prior to the commencement of the Act, if it was return by the banker on the twin grounds contained in the section,

the offence will be complete .The drawer of the cheque is given a further opportunity by the provisions of the section to make payment on a

demand being made after the return of the cheque and only if he fails to make payment within fifteen days of the receipts of the said notice, the

offence stands committed. Taking the scope and purport of the enactment and the provisions of section 138 of the Act, the first contention has

necessarily to be negatived.

As far as the second contention regarding liability is concerned, the Law Lexicon by P. Ramanatha Aiyar gives the meaning thus:

Liability"": A broad term; it may be employed as meaning the state of being liable, that for which one is responsible or libel ;obligation in general;

that condition of affairs which gives rise to an obligation to do a particular thing to be enforced by action; responsibility; legal responsibility. In

order words, the condition of one who is subject to a charge or duty which may be judicially enforced.

The word ""liability"" on facts may arises even when the order was placed by the petitioner on July 11,1988,on the respondent .I am not going

into the details of the meaning that may be assigned to the word ""liability"" at this stage since it is a matted of evidence and both parties will be at

liberty to adduce evidence on the question as to when exactly the liability would arise. At the moment, it may be difficult to restrict the meaning of

the word ""liability"" as contended by learned counsel for the petitioner to a date after March 31,1989, when the property was delivered, especially

when in the reply notice, he appears to have admitted his liability and had requested for time to make payment.

The last ground relates to the return of the cheque by the banker on the grounds completed in the section. Prima facie the arguments of learn

counsel for the petitioner was attractive since the return by the bank did not show that the money standing to the credit of the account was

insufficient to honour the cheque or that it exceeded the amount arranged to be paid. A reference to Cheque in Law and Practice by M.S

Parthasarathy (third edition) show that in banking parlance the reason ""refer to drawer"" when cheques are returned unpaid is used generally for

returning the cheques for want of funds in the drawer''s account or because of service of garnishee order. This again is a matter of evidence .The

bank would be able to justify before the court the reasons for which the cheque was returned. If in banking parlance, ""refer to the drawer"" is used

for the purpose aforementioned the ingredients of the section would be attracted. If the words ""refer to drawer"" cannot take in its fold the two

contingencies contemplated in the section, the offence cannot be stated to have been established. Learned counsel for the petitioner brought to may

notice a decision of the King''s Bench in Plunkett v. Braclays Bank Ltd.[1936] 2 KB 107; [1936] 1 ALL ER 653,wherein it has been observed

that the words ""refer to drawer"", in their ordinary meaning, amounted to a statement by the bank, ""we are not paying; go back to the drawer and

ask him why"", or else ""go back to the drawer and ask him to pay"". At this stage, offering of an penin will not be in the interest of justice since the

trial will have to be proceeded with in accordance with law.

I do not find any merits in this petition. It is accordingly dismissed. However the trial Magistrate will proceed with the conduct of the trial

influenced by any of the observations made in this order and decide the case on the merits of the evidence to be placed before him.