Bharat Enterprises and Another vs Jocil Ltd. and Another

This is an application filed u/s 482 Cr.P.C. to quash the proceedings in C.C,No.63/94 on the file of the VII Additional Munsif Magistrate Court, Guntur.

The facts in brief are as follows:

The 1st respondent herein is a registered Company selling Glycerine through its depot at Bombay. The 1st petitioner is the firm, and 2nd petitioner is its proprietor and they are having dealings with the 1st respondent in purchasing the Glycerine. With respect to the amount due to the 1st respondent, the petitioners herein issued three cheques bearing Nos.

Cheque No.457230,

dated 30-11-93for Rs.50,000/- 2. Cheque No.457231,

dated 7-12-93 for Rs.l,00,000/- 3. Cheque No.457232,

dated 15-12-93 for Rs.1,00,000/- ---------------- Rs.2,50,000/- ----------------

The said cheques were issued towards part payment of debt due to the 1st respondent, on the Union Bank of India, Bombay. The said cheques were presented to the Union Bank of India through the Andhra Bank Main Branch, Guntur for encashment. But the said cheques were dishonoured by the Union Bank of India, with an endorsement "Sales Tax Notice'''' and the same was intimated to the 1st respondent by the Andhra Bank through its letter, dated 3-3-94. The 1st respondent, thereupon, issued a registered notice through his advocate on 17-3-1994 to the petitioners herein demanding payment of the amounts covered by (he cheques. Inspite of the said notice, the petitioners failed to pay the amount. Hence, the 1 st respondent filed the complaint in C.C.No.63/94 against these petitioners for the offence punishable u/s 138 and 142 of the Negotiable Instruments Act.

It may also be stated here that the petitioners-accused filed Crl.M.P.No.1256/96 before the trial Court for their discharge on the ground that they could not make (he payment because their bank account was attached by the Sales Tax Authorities and as there was no fraudulent intention on their part. That petition was contested by the 1st respondent-complainant. The learned Magistrate by his order, dated 26-11-1996, dismissed that application. Thereafter, the petitioners-accused have come up with this application u/s 482 Cr.P.C. to quash the said proceedings.

Heard the learned Counsel on either side.

The learned Counsel for the petitioners raised the contentions that the three cheques issued by the petitioners could not be honoured by their Bank as the amount existing to their credit was attached by the Sales Tax Authorities and (he bank also informed this fact while returning the cheques. The learned Counsel further contends that the petitioners also informed the 1st respondent by their letter, dated 25-1-1994 about the attachment of their account by the Sales Tax Authorities and requested not to utilise the cheques until further notice and thus, there is no mala fide intention on the part of the petitioners in issuing the cheques and as such, no offence u/s 138 of the Negotiable Instrument Act is made out. The learned Counsel for the petitioners also relied on the decision in '' ''M/s. Sri Manufacturing Company Lid. Hyderabad Rep. by Us Commercial Manager Mr. Murakhar v. Dinesh Gupta and others" (1995 (1) AWR 373. The learned Counsel for the 1st respondent, on the other hand, submits that there was no funds to the credit of the account of the petitioners in the bank and in collusion with the bank authorities, an endorsement to the effect that ''''Sales Tax Notice" was made while returning the cheques and that inspite of the notice, issued, subsequent to the return of the cheques, the petitioners failed to make the payment and as such, the dishonest intention on the part of the petifioners is crystal clear and therefore, the petitioners are liable for punishment u/s 138 of the Negotiable Instrument Act and the proceedings cannot be quashed u/s 482 Cr.P.C. at this stage, and that there is no abuse of process of the Court.

For proper appreciation of the rival contentions of the Counsel, it is necessary to look into Sections 138 and 142 of the Negotiable Instrument Act.

Section 138 reads as follows

"158. 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 provision of this Act, be punished with other provision of this Act, be punished with imprisonment for a term which may extend To one year, or with fine which may extend to twice the amount of the cheque, or with both:

Provided that nothing contained in this section 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 fifteen days of the receipt of information by him 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, 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.

Explanalion:--For the purposes of this Section, "debt or other liability" means a legally enforceable debt or other liability.

Section 142 of the Act reads as under :

"Cognizance of offences:-Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974),--

(a) no Court shall take cognizance of any offence punishable u/s 138 except upon a complaint, in writing, made by the payee or, as the case may be, the holder in due course of the cheque;

(b) such complaint is made within one month of the date on which the cause of action arises under clause (c) of the proviso to Section 138 ;

(c) no Court inferior to that of a Metropolitan Magistrate or a Judicial Magistrate of the First Class shall try any offence punishable u/s 138."

It is clear from the above provisions that to constitute an offence u/s 138 of the Act (a) the cheque in question should have been presented to the bank within a period of six months of the dale of its drawal and within the period of its validity whichever is earlier; (b) the payee or holder in due course of such cheque should have made a demand for the payment of the said amount of money by giving notice in writing to the drawer of the cheque within 15 days from the date of receipt of information from the bank regarding the return of the cheque unpaid, (c) the drawer of such cheque should have failed to make the payment of the said amount to the payee or the holder in due course of the cheque within 15 days of the receipt of the said notice, (d) The complaint is made within one month from the date on which the cause of action arises under clause (c) of proviso, to Section 138 of the Negotiable Instruments Act.

It is not disputed that clauses (a) and (b) of proviso to Section 138 have been complied with in this case by the payee under the cheques and the petitioners failed to make the payment of the amount drawn under the three cheques to the payee within 15 days of the date of receipt of Ihe notice issued by the 1 st respondent, thus, the petitioners failed to comply with clause ''C'' to proviso of Section 138 of the Act. It is contended by the learned Counsel for the appellants that the cheques issued by the petitioners were dishonoured by the bank for the reason that Ihe Sales Tax Authorises issued a notice to the bank and therefore, there is no dishonest intention on the part of the petitioners in issuing the cheques and as such, no offence is made out u/s 138 of the Act. Further relying on the qualifying provisions u/s 138 which uses the phrase "insufficiency of funds" or "exceeding arrangement" the learned Counsel for the petitioners submits that the ground of dishonour in this case not being of "insufficiency of funds" or "exceeding the arrangement", the offence u/s 138 of the Act is not attracted. In other words, his contention is that Section 138 of the Act does not apply in a case where a cheque was returned unpaid with the endorsement "Sales Tax Notice". This to my mind, is too narrow a construction of Section 138 and fails to lake into consideration the objects and reasons behind in introducing Section 138 - 142 by the Amendment Act. There can be little doubt that Sections 138 - 142 were introduced with an intention to curb the practice of issuance of dishonoured cheques. It will have to be presumed that the multifarious grounds on which a cheque would be dishonoured are not made any exceptions for such situations. The legislative intent behind Section 138 was that the case of dishonour of a cheque would constitute a criminal offence unless the payment was forthcoming within the prescribed period under clause (c) of proviso to Section 138. Section 6 of the Negotiable Instruments Act defines a cheque as a bill of exchange drawn on a specified banker. A Bill of Exchange is defined u/s 5 which reads as follows :

"A Bill of Exchange is an instrument in writing containing an unconditional order signed by the maker directing certain person to pay a certain sum of money only to, or, to the order of, a certain person or bearer of the instrument''''

The reference to the term "insufficiency of funds" or "exceeding arrangement" in Section 138 is obviously a qualifying clause which only reflects the basic principle that an order to the bank conveyed through a cheque to make a prescribed payment, would only fail in a situation where the bank could not implement that direction for want of requisite funds. The circumstances that may contribute to that situation would, therefore, be irrelevant. In Pawankumar Vs. Ashish Enterprises and others, where Ihe cheque was returned with the endorsement "suit filed by bank against account holder",

Bombay High Court held that the dishonour had occasioned because of insufficiency of funds and that, criminal proceedings u/s 138 were justified regardless of the plea that civil action for recovery had been initiated. In my considered view, if the object of introducing Section 138 on the statute book is to be achieved, it will have to be meaningfully enforced, brushing aside technical and frivolous pleas.

That apart, this petition is also not maintainable for the reason lhat the entire amount standing to the credit of the petitioners was not attached by the Sates Tax Authorities. The copy of the letter dated: Nil said to have been addressed to the Manager, Union Bank of India, Kanth Bazar, Bombay by the Sales Tax Officer (C360, Mandivi Division, Bombay) is enclosed alongwith this petition. Based on this letter, the learned Counsel for the petitioners contended that the account of the petitioner in the Union Bank of India has been seized by the Sales Tax Authorities- It is significant to note that there is a reference in this letter that only asum of Rs.74,250/- was due from the 1st petitioner herein to the said Sales Tax Authorities. Therefore, even if this letter is true, the attachment was only with respect to Rs.74,250/- only. If the amount to the credit of the 1st petitioner''s account was more than that amount of Rs.74,250/-, the Bank could not have refused to honour the cheques issued by the petitioners. Admittedly, the petitioners issued three cheques in favour of the 1st respondent as detailed above, to a total amount of Rs.2,50,000/-. All the three cheques were presented for encashment and all the three cheques were dishonoured. If there had been sufficient cash beyond the attachment amount of Rs.74,250/-, the bank could have honoured some of these cheques and the same could not have been returned. Therefore, it follows that the petitioners had issued these cheques fraudulently without having sufficient amount to their credit in the bank. It is also significant to note that subsequent to the dishonour of the cheques, a legal notice, dated-17-3-1994 was issued to the petitioners 1 and 2 demanding the payment of the amounts covered by the dishonoured cheques. Having received the same, the petitioners failed to pay the amount. It is submitted across the Bar, that even till today the petitioners failed to pay the amount due under the dishonoured cheques. Hence, I do not find any grounds to quash the proceedings as prayed for.

It is true that in 1995 (1) ALWR 373, Justice Radhakrishna Rao, by a short judgment at the stage of admission in Crl. Appeal u/s 378(4) Cr.P.C. against the order in C.C.No.458/89, dated 16-7-92 on the file of the IV Metropolitan Magistrate, Hyderabad observed that when the account was seized by the Sales Tax Authorities by the time when the cheque was presented it cannot be said that the accused had committed an offence punishable u/s 138 of the Act on the ground that there is insufficiency of funds or that he has not arranged for honouring the cheque. But, the facts in that case are not before us. It is not known how much amount which stood in the name of the accused was attached by the Sales Tax Authorities in that case. It is also not known whether subsequent to the dishonour of the cheque, any demand notice was issued to the accused in that case to pay the amount due under the dishonoured cheque. Further, it cannot be said by that decision, the learned Judge intended to lay down the law that by mere attachment or seizure of account of the accused by any statutory authority, no offence u/s 138 of the Act is made out. Therefore, the decision in 1995 (1) An.W-R.. 373 has no application to the facts in this case.

For the afore-said reasons, I do not find any justifiable reasons to quash the proceedings in C.C.No.63/94 on the file of the VII Additional Magistrate, Guntur.

In the result, the petition is dismissed.