Kanoria Industries Limited vs M/s. Basaveshwara Traders

Anand Byrareddy, J.—Heard the learned Counsel for the appellant and the learned Counsel for the respondent. The appellant was the complainant before the trial court alleging an offence punishable u/s 138 of the Negotiable Instruments Act, 1881 (Hereinafter referred to as the ''NI Act'', for brevity). The appellant is a company incorporated under the Companies Act, 1956 and the respondent was the proprietor running a business in cement. The cement was supplied by the appellant. A cheque bearing No. 514432 dated 16.6.2004 for a sum of Rs. 68,656/- had been issued for non-payment of certain monies due to the appellant not from the respondent, but on behalf of another. The same having been presented for collection, it was dishonoured for insufficient funds and therefore, a notice having been issued in terms of Section 138 of the NI Act and when there was noncompliance of the demand, a complaint was filed. A defence was raised to the effect that the cheque was not issued in discharge of any legally recoverable debt from the respondent and there was no contractual relationship between the appellant and the respondent and issuance of the cheque, even if on behalf of another, could not be enforced against the respondent. Therefore, the trial court accepted the said contention and in line with the decision rendered by the apex court in Krishna Janardhan Bhat Vs. Dattatraya G. Hegde, , proceeded to hold that the burden was on ''the appellant to establish that there was legally recoverable debt, in respect of which a cheque had been issued and since admittedly there was no contractual relationship between the appellant and the respondent, acquitted the accused. It is that which is under challenge in the present appeal.

The learned Counsel would firstly submit that the decision in Krishna Janardhana Bhat, supra, is no longer good law in the light of the decision of the apex court in Noorul Huda Maqbool Ahmed Vs. Ram Deo Tyagi and Others, . Secondly, it is contended that insofar as the claim that there was no contractual relationship between the appellant and the respondent is indeed true. The cheque in question had been issued by the respondent on behalf of another and that by itself would not enable the respondent to claim that there was no legally recoverable debt. It is perfectly valid for one to undertake on behalf of another to discharge a debt and therefore, the respondent had stepped into the shoes of the original debtor in issuing the cheque and hence was an enforceable instrument.

The learned Counsel for the respondent on the other hand, would yet seek to justify the judgment of the trial court. Given the above circumstances, as rightly pointed out, the judgment in Krishna Janardana Bhat, supra, is no longer good law. Secondly, it cannot be said that merely because the cheque had been issued for payment of debt due from another, which is not enforceable. It is valid and enforceable in law. Consequently, the court below was not justified in acquitting the accused. The ingredients of Section 138 of the NI Act, stood established in the above circumstances. One other contention that there is no service of notice insofar as the notice issued u/s 138 is concerned, is also not a tenable contention. When a notice is issued through registered post and there is proof of such issuance, the non-service of notice on the respondent when it has been issued to the correct address, is taken as sufficient compliance with Clause (b) to Section 138 of the NI Act. Consequently, the appeal is allowed. The judgment is set aside and the respondent is convicted for an offence punishable u/s 138 of the NI Act and is sentenced to pay a fine of Rs. 1,30,000/-, of which, Rs. 1,25,000/- is payable as compensation to the respondent u/s 357 of the Code of Criminal Procedure, 1973, within a period of four weeks and in default of payment of fine, the respondent shall undergo simple imprisonment for six months.