in 2009, the Hon'ble SC has given strict interpretation to S.138 of NI Act in Raj Kumar Khurana's case.
Now, in case the cheque is returned for the reasons payment stopped or account closed then the provisions of S.138 NI will not come into play
IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPEAL NO. 913 OF 2009
[Arising out of SLP (Crl.) No. 8059 of 2007]
Raj Kumar Khurana ...Appellant
Versus
State of (NCT of Delhi) and Anr. ...Respondents
JUDGMENT
S.B. SINHA, J :
1. Leave granted.
2. Whether return of a cheque by the bank on the ground that it was
reported lost by the drawer would attract the penal provisions contained in
Section 138 of the Negotiable Instruments Act, 1881 (for short "the Act") is
the question involved in this appeal. It arises out of a judgment and order
dated 18.09.2007 passed by the High Court of Delhi in Criminal M.C. No.
2890 of 2007.
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3. The said question arises in the following factual matrix.
Appellant kept two blank cheques in his office along with some stamp
papers. They were said to have been stolen from his office. Information as
regards missing of the said cheques was also given to the bank. He lodged a
First Information Report with regard thereto, stating:
"...On my return to Digras, I found that the
cheques and the stamp worth Rs. 50 bearing only
my signatures had been stolen, therefore, to
prevent any misuse of my cheques, I sent a written
information to State Bank, Branch Digras and
subsequently on 21-04-01 I filed a complaint in
Police Station Digras...."
The blank cheques were allegedly filled up on 24.06.2001. They were
presented before the bank but the same were returned dishonoured with the
remarks "said cheque reported lost by the drawer".
Respondent No. 2 thereafter upon issuance of notices in terms of the
proviso appended to Section 138 of the Act filed a complaint petition in the
Court of Chief Metropolitan Magistrate, Delhi, inter alia, alleging:
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"5. That the above said cheque in question was
presented by the complainant for encashment
through its bearers, namely State Bank of India,
Azadpur Branch, Delhi - 33, but the same was
returned as dishonoured with the remarks "SAID
CHEQUE REPORTED LOST BY THE
DRAWER". This intimation was received by the
complainant from the bankers on 27.7.2001 and
accordingly a notice dt. 3.8.2001 was sent to the
accused requesting the accused to make payment
of the above said cheque amount and on 17.8.2001
the accused sent reply through his Advocate
denying his liability falsely taking the plea that the
cheque in question was lost as stolen by the
complainant...
6. That the accused has taken the above said
false pleas knowing it fully well that he does not
intend to make payment of the said cheque
amount, and the complainant is thus compelled to
file this complaint.
7. That the issuance of the cheque by the
accused and informing wrongly his own bankers
about the loss/ theft of the cheque, with no
intention to make payment thereof, rather showing
that right from the time he issued the cheque, he
had intention to cheat and defraud the complainant
by making false representations and thus the
accused has willfully committed an offence
punishable under Sections 138 and 142 of the
Negotiable Instruments Act read with Section 420
IPC and is liable to be punished accordingly."
4. It is not in dispute that the Superintendent of Police, Digras has issued
a certificate showing that FIR No. 57 of 2003 arising out of the First
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Information Report filed by the appellant before the Station House Officer,
Digras had been closed.
It is furthermore not in dispute that the appellant in the meanwhile
filed a complaint petition under Section 380 read with Sections 34, 467, 468
and 471 as also Sections 420 and 120B of the Indian Penal Code in the
Court of Judicial Magistrate First Class and the same is pending
adjudication.
Admittedly, the appellant had lodged a First Information Report under
Sections 369, 495, 498, 420 and 34 of the Indian Penal Code with the Police
Station Digras against the respondent No. 2 and his brother, wherein also a
closer report has been submitted.
Appellant has filed another criminal complaint against the respondent
No. 2 under Section 409 of the Indian Penal Code which has also been
dismissed on the ground that the dispute is of civil nature.
5. Appellant has moreover filed a suit for recovery of a sum of
Rs.31,40,131.43 in the Court of Civil Judge, Sr. Division, Darwha, Madhya
Pradesh against the respondent No. 2 and his brother. Several other
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applications were filed by the appellant before the said court to which we
need not advert to.
6. Appellant filed an application under Section 482 of the Code in the
High Court of Delhi praying for quashing of the proceedings under Section
138 of the Act on or about 6.09.2007 on the premise that the same was not
maintainable. By reason of the impugned judgment, the said application has
been dismissed.
7. Mr. M.N. Krishnamani, learned senior counsel appearing on behalf of
the appellant, would submit that the High Court committed a serious error in
passing the impugned judgment insofar as it failed to take into consideration
that the complaint petition even if given face value and taken to be correct in
its entirety does not disclose an offence under Section 138 of the Act.
8. Mr. Gulshan Rai Nagpal, learned counsel appearing on behalf of the
respondent No. 2, on the other hand, would contend that the appellant had
lodged a false First Information Report with regard to the purported theft of
the cheques which having been found to be not true and, thus, it is evident
that he had resorted to various proceedings to pre-empt the drawee of the
cheques to obtain lawful payments due from him.
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9. Section 138 of the Act reads as under:
"138 - Dishonour of cheque for insufficiency, etc.,
of funds in the account
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 account 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
provisions of this Act, be punished with
imprisonment for a term which may be extended to
two years, 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 thirty days of the receipt of
information by hi m 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
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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.
Explanation.-- For the purposes of this section,
"debt or other liability" means a legally
enforceable debt or other liability."
10. A bare perusal of the aforementioned provision would clearly go to
show that by reason thereof a legal fiction has been created. A legal fiction,
as is well known, although is required to be given full effect, has its own
limitations. It cannot be taken recourse to for any purpose other than the one
mentioned in the statute itself.
In State of A.P. and Anr. v. A.P. Pensioners Association and Ors.
[(2005) 13 SCC 161], this Court held:
"...In other words, all the consequences ordinarily
flowing from a rule would be given effect to if the
rule otherwise does not limit the operation thereof.
If the rule itself provides a limitation on its
operation, the consequences flowing from the legal
fiction have to be understood in the light of the
limitations prescribed. Thus, it is not possible to
construe the legal fiction as simply as suggested by
Mr. Lalit."
11. Section 138 of the Act moreover provides for a penal provision. A
penal provision created by reason of a legal fiction must receive strict
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construction. [See R. Kalyani v. Janak C. Mehta and Ors. (2009) 1 SCC 516
and DCM Financial Services Ltd. v. J.N. Sareen and Anr. (2008) 8 SCC 1].
Such a penal provision, enacted in terms of the legal fiction drawn would be
attracted when a cheque is returned by the bank unpaid. Such non-payment
may either be: (i) because of the amount of money standing to the credit of
that account is insufficient to honour the cheque, or (ii) it exceeds the
amount arranged to be paid from that account by an agreement made with
that bank.
Before a proceeding thereunder is initiated, all the legal requirements
therefor must be complied with. The court must be satisfied that all the
ingredients of commission of an offence under the said provision have been
complied with.
The parameters for invoking the provisions of Section 138 of the Act,
thus, being limited, we are of the opinion that refusal on the part of the bank
to honour the cheque would not bring the matter within the mischief of the
provisions of Section 138 of the Act.
12. The court while exercising its jurisdiction for taking cognizance of an
offence under Section 138 of the Act was required to consider only the
allegations made in the complaint petition and the evidence of the
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complainant and his witnesses, if any. It could not have taken into
consideration the result of the complaint petition filed by the respondent No.
2 or the closer report filed by the Superintendent of Police in the First
Information Report lodged by the appellant against him.
13. Before us a contention has been raised that the appellant did not have
sufficient funds in his bank account. Such an allegation has not been made
in the complaint petition. In any event, it was for the bank only to say so, as
the complainant is not supposed to have knowledge in regard to the amount
available in the account of the appellant.
14. Keeping in view the facts and circumstances of the case, we are of the
opinion that the complaint petition does not disclose an offence punishable
under Section 138 of the Act.
15. For the reasons aforementioned, the impugned judgment being
unsustainable is set aside. The appeal is allowed.
...............................J.
[S.B. Sinha]
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................................J.
[Dr. Mukundakam Sharma]
New Delhi;
May 5, 2009
Regards,
RAJESH CHOUDHARY
CAclubindia
