Devi Tyres, Bangalore vs Nawab Jan

M.F. Saldanha, J.-The facts and the dates relating to this case are characteristic of the tactics adopted before the Trial Courts in order to frustrate and defeat the provisions of Section 138 of the Negotiable Instruments Act, 1881. The statement of objects and reasons makes it crystal clear that the Legislature engrafted Sections 138 to 142 of the Negotiable Instruments Act into the statute by Act 66 of 1988 which became effective from 1-4-1989. A clear reading of these provisions will indicate that the legislative intent was in order to put a full and complete stop to the dishonest practice of issuance of cheques which are subsequently dishonoured. Under most of the legal systems prevalent in different parts of the world the issuance of such a cheque which is subsequently dishonoured is not only a criminal offence but has very serious repercussions with regard to the creditworthiness and even the capacity to maintain a bank account. In India, unfortunately, cheques were being indiscriminately issued which were dishonoured with impunity and the poor victim was left with no option except to pay a heavy Court fee and file a summary suit, thereby adding injury to insult. Then came stage 2 wherein all sorts of involved and dishonest defences were pleaded and the contention was raised that triable issues arise as a result of which the proceeding was transferred to the list of contested suits and if the proceeding was ultimately disposed of during the lifetime of the plaintiff, it was considered merciful! There was a serious fall-out on the economic repercussions but more importantly, on the aspect of business integrity and it was for this reason that the Act was amended and Section 138 was introduced. The Courts have defined this section as a "no nonsense provision" and the scheme of the law is that the Criminal Court is required to do only a summary investigation and if it is disclosed that the cheque was issued, it was dishonoured and the accused has failed to make payment within the stipulated period pursuant to a notice of demand, a conviction is inevitable. Unfortunately, the Criminal Courts have permitted themselves to be drawn into all sorts of specious debates as a result of which these proceedings have got elongated on the same lines as happens to civil suits. The present case is illustrative of what is happening before the Criminal Courts.

On 4-11-1991, the plaintiff who deals in tyres filed a complaint against the accused who is alleged to have purchased tyres from him, and issued a cheque against part-payment for a sum of Rs. 16,250/- which cheque was dishonoured and the accused had not made the payment as demanded despite a registered acknowledgement due notice served on him within the prescribed period of time. The case was numbered as CC. No. 21331 of 1991. The plea was recorded on 3-8-1993 and the evidence of the complainant was recorded on 18-3-1994. The accused statement was recorded on 13-4-1994 and by judgment dated 16-6-1994 the Court convicted the accused and sentenced him to undergo simple imprisonment for six months and to pay a fine of Rs. 32,500/- in default, simple imprisonment for three months. It is necessary to observe here that the face value of the cheque was Rs. 16,250/- and the Trial Court imposed a fine which was equivalent to twice the amount of the cheque. I need to clarify here that there is a specific purpose behind this provision having been incorporated in the section insofar as the Legislature took cognizance of the fact that there would be a certain time-lag between the filing of the complaint and its disposal and it was very clear that the Legislature took note of the fact that the complainant who is the aggrieved party would have lost by way of interest and furthermore, that the complainant would have also incurred considerable costs both of which required to be off-set which was why, the Court was permitted to impose a fine equivalent to twice the face value of the cheque.

For further Dictation on 14-3-2000

M.F. Saldanha, J., 14-3-2000

The respondent-accused filed Criminal Appeal No. 88 of 1994 before the Court of sessions. It is unnecessary for me to deal with the contents of the rather lengthy order which has been passed by the Sessions Court but suffice it to say that the appeal came to be disposed of through a final order on 13-9-1994 and the appeal Court has effectively set aside the order of the Trial Court principally on the ground that this is a case in which the cheque was originally issued on 1-6-1991 and was subsequently revalidated on three occasions and furthermore, that the cheque in question was for an amount of Rs. 16,250/- whereas the complainant has contended that the outstandings to him was of the order of Rs. 18,500/-. The Court came to the conclusion that the order of conviction against the accused was unjustified. Strangely enough, the Court has not addressed itself to the all important question namely, the fact that there is no dispute about the cheque having been issued by the accused, the fact that the face value of the cheque namely Rs. 16,250/- has not been paid up despite the dishonour and a notice calling upon the accused to pay up the amount and as often happens, the appeal Court was swayed by several arguments that were obliterating the main issue namely, the undisputed liability and in the process, overlooked the basics. The present appeal has been directed against the order of the Sessions Court dated 13-9-1994.

We are now in the year 2000 and the criminal proceedings instituted on 4-11-1991 are just about to be disposed of. The main contention raised on behalf of the appellant is that at no stage has the accused denied the fact that goods had been purchased from the complainant and that the cheque was issued against the outstanding dues. Secondly, what is pointed out is that the issuance of the cheque by the accused is not disputed and thirdly, the fact that the cheque in question was dishonoured when presented for payment is also a matter that is not in dispute. Lastly, appellant''s learned Advocate Mr. Naidu submits that even on the question of service of notice that the record very clearly indicates that the notice was served within the prescribed period of time and that the same was not even replied. It is his submission that on this record having regard to the framework of the law, that the Trial Court was fully justified in having recorded a straight conviction. His submission is that none of the points raised before the appeal Court in any manner cast any doubt or ambiguity with regard to the aforesaid issues and that the appellate order is therefore incorrect and is liable to be set aside.

Certain interesting submissions were canvassed on behalf of the respondent-accused by his learned Counsel. What was submitted in the first instance was that irrespective of the fact that a cheque may be issued, that the Trial Court is required to embark on an enquiry into question as to whether the cheque was issued against an "enforceable claim". His submission was that there are times when cheques are issued even as a collateral security or pursuant to various business understanding and that these cheques are not a manifestation of liability nor are they intended to be encashed and that therefore, the Court cannot presume that the issuance of a cheque is synonymous with the liability to pay. As far as these two arguments are concerned, they do not require any elaborate consideration for the simple reason that in law, a cheque is an irrevocable order to the banker to make the payment to the payee. The issuance of a cheque ipso facto raises certain presumptions, the first being that the drawer has the capacity to honour the cheque or in other words, that on the date when the cheque has been issued, adequate provision has been made for the cheque to be honoured. The scheme of the section presupposes that the issuance of the cheque is an instruction to the banker to pay over the amount on presentation of the cheque and it is therefore condition precedent for the drawer to have made necessary provision for the cheque to be honoured and if that has not been done, the drawer would come squarely within the mischief as contemplated under Section 138. There is a presumption that when a cheque is issued, that the amount is payable and no Criminal Court is required to embark upon any enquiry that goes behind the act of issuance of the cheque. If the drawer contends that there were certain special reasons whereby a cheque was issued and that the cheque was not intended to be encashed or honoured, the onus of establishing this shifts squarely to the accused. I need to add here that in the absence of cogent and conclusive defence evidence, no Court is required to either even entertain or uphold any such plea, the reason being that a cheque is not intended to be used for any such purposes and if there are special reasons for what has happened, then the law will take cognizance of them.

As far as the aspect of enforceable claim or debt is concerned again, the law proceeds on the basis of certain well-defined presumptions and the issuance of the cheque is adequate proof of the fact that the debt or claim is enforceable and is liable to be discharged and if there is evidence to the contrary, then it is for the defence to place such evidence before the Court. The duty of the prosecuting authority ends when it is demonstrated to the Criminal Court that the cheque was issued, it was dishonoured thereafter and that the amount was not paid despite service of notice within the prescribed period of time. It is essential for this Court to lay down these guidelines because it is a sad reflection on the manner in which these cases are being dragged on before the Criminal Court, that thousands of these prosecutions are kept pending merely because the accused try to plead defences that are more involved and more complicated than what are pleaded in civil proceedings. To my mind, it is very necessary to cut across all these time wasting and obstructionist tactics.

For further dictation on 20-3-2000

M.F. Saldanha, J., 20-3-2000

The Trial Court should never lose sight of the fact that the sole purpose behind the amendment of the law was directed specifically to ensure that in all cases of dishonour of cheques, a quick and effective remedy is available through the machinery of the Criminal Courts. The law Commissions report itself indicates that this step became necessary because the aggrieved party namely the one who has to receive the money was being virtually penalised in the earlier situation by having to pay a heavy Court fee, incur legal expenses and thereafter go through protracted agony spread over decades of a civil proceeding. It is therefore of paramount importance that the Criminal Courts give effect to the letter and spirit of the provision and one of the effective means of doing this is to ensure speedy disposal of these proceedings.

Coming back to the facts of the present case, the order of conviction recorded by the Trial Court after a careful consideration of the evidence on record in terms holds that the accused is liable to be convicted for the offence punishable under Section 138 of the Negotiable Instruments Act. The Trial Court had taken note of the fact that the cheque had been revalidated on three occasions which does not change the complexion of the legal liability at all and thereafter, the Court had taken cognizance of the fact that despite the service of notice within the prescribed period of time the amount had not been paid up. It is equally true that the cheque was issued for a figure that was lower than the total liability of the accused but this again does not make any difference. It was vehemently submitted before me that the cheque does not represent the debt as outstanding but to my mind, this argument is a super technicality and is liable to be downright rejected because what the law takes cognizance of is the question as to whether the cheque covers the whole or part of an outstanding debt. If the cheque is issued for an amount higher or larger, then the complexion of the case may be altered but this is not such an instance.

In this regard, the appellant''s learned Counsel relied on a decision of the Punjab and Haryana High Court in 1992 Cri. L.J. 1044 (P and H) , wherein precisely this aspect of the case was gone into and the Court has in terms held that the date of issue of the cheque is immaterial for purposes of constituting the offence. With regard to the aspect of revalidation and multiple signatures, the appellant''s learned Advocate has drawn my attention to a decision of the Allahabad High Court in Babban (deceased) by L.Rs v Shiv Nath and Others, AIR 1986 All. 185, wherein the Court held that multiple signatures as long as they are all proved to be genuine does not in any way affect the validity of the document.

One of the submissions canvassed before me as also before the appeal Court on behalf of the accused was that admittedly there were several transactions between the parties and several payments and the contention raised was that the complainant ought to have produced the statement of accounts in order to establish that the amount in question was in fact due and outstanding. As far as this aspect of the matter is concerned, the Trial Court was clearly in error in having upheld his submission because a perusal of Section 138 and in particular, Section 145 of the Act make it clear that the defences available in these proceedings are extremely restricted and the most important aspect of the legal position that has been overlooked is that once a cheque has been issued for a prescribed amount, the Criminal Court is not obliged or for that matter totally precluded from going behind that issue insofar as it is presumed that the cheque was issued against the amount that was outstanding and if any false statements have been made before the Court or if the Court has been misled by the complainant, the onus of establishing this shifts to the accused. The scheme of the law is to the effect that when a cheque has been issued, the presumption arises that there was an outstanding debt and that this cheque was issued against discharging the whole or part of it.

On behalf of the complainant, it was submitted by Mr. Naidu that the appeal Court totally overlooked the legal consequences of the fact that the accused had not disputed the contents of the notice to pay, that had been served on him within the prescribed period of time. This is an important aspect of the law insofar as if the liability is non-existent and if the demand is unjustified, the law enjoins upon the respondent-accused to clarify this position or dispute the liability at the point of time when the notice has been served. If this is not done, not only does the earlier presumption get fortified but the Trial Court will also take note of the fact that the accused did not dispute the factual and legal position at the time when the notice was served and has come out with an explanation or a defence at a belated stage and the Court will draw appropriate inferences therefrom.

I need to mention in passing that the appeal Court has upheld a technical submission canvassed on behalf of the respondent-accused wherein it was contended that in the notice of demand the accused was called upon to pay up a sum of Rs. 18,500/- whereas, the subject-matter of the cheque is Rs. 16,250/-. The learned Judge has held that the divergence of the two figures which do not generally tally is fatal to the prosecution. I fail to see the logic behind this reasoning insofar as some time had elapsed particularly since this was an old liability and if the outstanding debt was higher than the face value of the cheque, there would be no irregularity in the notice which was for an amount which included the face value of the cheque.

It has been brought to the notice of this Court that one of the reasons for the abnormal delay in the prosecutions in this category of cases is because the Court processes, be they summons or warrants are required to be executed through the police machinery. The learned Advocate appearing for the complainant stated at the bar that the police show very little inclination as far as executing these processes are concerned or that they are downright in collusion with the accused as a result of which the entire effort is frustrated. From the number of cases that are pending and the order sheets, it is very clear that its grievance is well-founded. The amounts involved in these cases are not trivial or petty amounts and it would therefore be in the fitness of things for the Trial Court to ensure the presence of the accused by issuing a bailable warrant in the first instance. The office of the Court should take the precaution of ensuring that the warrant is forwarded to the Circle Inspector or Superintendent of Police of the concerned area with a specific direction that the same be executed on a time-bound basis and if for any reason the execution has not taken place that a report indicating the reasons for the same to be sent to the Court. Where it appears to the Court that the accused is evading the Court process, the Court shall then issue a non-bailable warrant and ensure that the same is served through the same means. The Courts are also not powerless and must in appropriate cases wherever the police are found to be negligent or dishonest take appropriate action against the Police Officers concerned in order to bring about a general improvement.

Another aspect of the procedures relating to these cases that has directly fallen for determination from what has happened in this appeal is with regard to the procedure that the Appellate Courts should adopt in relation to this class of cases. It is true that every aggrieved party has a right of appeal but the law does not prescribe every appeal that is filed is required to be entertained irrespect of merits and consequently, the appeal Court will have to carefully scrutinise as to whether at all where the defence itself is limited in the Trial Court, any valid point has been made out for entertaining of the appeal. If no valid point is made out, the appeal will have to be dismissed at the admission stage. In those of the cases where the Court admits the appeal, and ground may exist for suspending the sentence it would be a correct and salient practice hereinafter for the appeal Court to ensure that the whole of the fine amount is deposited in Court and, the Court shall direct the investment in the bank of that amount so that it can be disbursed or refunded to whichever of the parties who is successful in the appeal. This last aspect of the matter is of some consequence because the appellant''s learned Counsel raised a serious grievance before me when he pointed out that even having succeeded in the present appeal, the appellant may run into difficulties even on the question of recovery of the fine amount whereas if the appeal Court had taken the precaution of insisting on the deposit of the amount, at least that money would have been secured. This is a very valid aspect of the law which the Appellate Courts must bear in mind.

Viewed at from any angle, this is not a case in which the appeal Court ought to have interfered with the decision of the Trial Court. The appeal accordingly succeeds. The order of the lower Court is set aside and the order of the Trial Court is restored. The appeal to stand disposed of with the aforesaid directions. Since the accused has been convicted, a copy of this order to be transmitted to the Trial Court by fax and the same to be furnished also to the learned Advocates. The Trial Court to issue a non-bailable warrant against the accused, secure his presence and give effect to the order of conviction.

In the course of the hearing of this appeal, a statement was made at the Bar that the accused has died. No death certificate has been produced and consequently, this Court cannot take cognizance of that statement and the Court has accordingly directed that the sentence imposed on the accused be carried out. More importantly, there is a fine imposed on the accused and the Trial Court shall take steps as prescribed for under Section 421 of the Cr. P.C. to ensure recovery of the fine amount. The in-default sentence awarded by the Trial Court of simple imprisonment for three months is set aside. The Courts must always bear in mind the fact that invariably the accused will prefer to opt for the in-default sentence and avoid paying fine in which case the purpose of imposing fine is frustrated. In cases where the accused is convicted under Section 138 of the Negotiable Instruments Act, I have already indicated that the Legislature has provided for a fine that would extend upto twice the amount of the face value of the cheque and the reason for this is obvious insofar as with the passage of time, the amount recoverable by the complainant is appreciably higher than the face value of the cheque. In this case, the Trial Court has prescribed that as against the face value of the cheque which was Rs. 16,250/- that the accused shall pay a fine quantified at Rs. 32,500/- which is double the face value. However, the Trial Court has prescribed that out of the fine amount, a sum of Rs. 16,250/- shall be payable to the complainant. This direction is modified and it is directed that out of the amount recovered, the whole of the fine amount of Rs. 32,500/- shall be paid over to the complainant. I need to clarify here that the Trial Court, even if the accused has died, will have to take steps to recover the fine amount out of his assets or as arrears of land revenue and the Trial Court shall, if it is established that the accused has died and the jail sentence cannot be carried out still ensure that the fine amount is recovered.

Before parting with this case, this Court deems it necessary to lay down certain guidelines for the conduct of this class of cases. There has been an almost universal grievance projected by the complainants in this class of cases that whereas the objective of engrafting Section 138-A on the statute book was in order to provide an effective and expeditious remedy in cases of dishonour of cheques, that experience has shown that the criminal proceedings are now being dilated and dragged on for a period of time that are almost co-extensive with civil proceedings. This has happened only because the Courts have lost sight of the fact that in this class of cases the scope of defence is very very limited and it is therefore, literally for ulterior purposes that the accused who is the person sitting with the money and the one who has refused to part with it, gets the maximum mileage through protracted litigation. This Court therefore considers it necessary to lay down certain broad guidelines for the conduct of this class of cases. Firstly, the Court will ensure if necessary by having resort to the coercive steps provided for under the Criminal Procedure Code that the appearance of the accused is secured without any undue delay. Necessary steps shall then be taken to ensure the presence of the accused when required and it will be desirable that the learned Magistrate should record the plea of the accused on the first date when the accused appears or on the very next date of hearing. The evidence required in these cases is again minimal and the complainants shall be required to keep the evidence ready so that the recording can commence on the next date of hearing. The Presiding Officer shall also take special care to ensure that long adjournments are not granted, that time is not wasted in irrelevant cross-examination, that the arguments are confined to the aspects of the case that are strictly relevant for decision and that the proceeding is disposed of within an outer limit of six months from the date on which the accused appears before the Court. It is necessary that the message goes out loud and clear that the Courts mean business and that while the Court will not come in the way of any genuine bona fide settlement or compromises, that they will at the same time not permit any situation whereby the aggrieved party is subjected to harassment at the expense of the one who is benefiting from the delays. What also needs to be noted is the fact that while the time factor is probably the most oppressive aspect that it is equally important for the Courts to take note of the fact that the aggrieved party who has approached the Court should not be punished for doing so by being subjected to heavy expenditure and harassment. Furthermore, this Court has observed that in as many as 92 per cent of this class of cases that have been decided in this State that unfortunately, the Trial Courts have been upholding quite unfair, unjust and totally untenable defences and technical pleas that are totally unjustified. In these instances, the Trial Judges seem to have forgotten that it is their basic duty to decide the case according to law, they have been bending over backwards to virtually assist the accused and the orders passed are nothing short of a travesty of justice. Bad enough, the complainant who has approached the Court for legal redressal has been dragged through extensive, onerous and time consuming litigation and is then required to go in appeal or revision because of an unsatisfactory order. There is another set of situations in which the accused have been convicted and awarded such light sentences which this High Court had occasion to define as flea-bite punishments which, instead of acting as a deterrent and bringing down the number of dishonoured cheques, only acts as an incentive or encouragement to the accused and send out the wrong signals by infusing a confidence that even if one is on the wrong side of the law, the Courts will let the offender off very lightly. The primary purpose of prescribing a fine equivalent to double the face value is in order to ensure that not only the amount but the outstanding interest thereof is recovered and can be awarded to the complainant. The Trial Courts shall take serious note of these observations.

The Registrar General to circulate a copy of this judgment to the District Judges and to all Judges and the Magistrates entrusted with this class of cases.