V S KRISHNAN Vs. V S NARAYANAN

JUDGEMENT

(1.) THE petitioner is the accused in C.C. No. 2054 of 1989 on the file of the Judicial Magistrate No. II, Poonamallee. THE proceedings were initiated on a private complaint filed by the respondent before the said Magistrate for an offence under section 138 of the Negotiable Instruments Act, 1881. This petition has been filed under section 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 process of 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 one 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 a cheque dated March 28, 1989, drawn on the State Bank of India, Pondicherry, in favour of the respondent for a 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 complainant on April 11, 1989, with an endorsement " refer to the drawer ", to use the words in the complaint " thus the cheque was dishonoured ". Soon thereafter, the respondent gave a telegram to the petitioner about the cheque not having been honoured and requested the latter to arrange for payment.

(2.) 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 complaint, 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 the liability. Even thereafter, the petitioner did not discharge its liability, which necessitated a private complaint being lodged. 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 of 1988 came into the statute book only on 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 of 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 under section 138 of 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 is 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 to 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.

(3.) EVEN if the cheque was issued prior to the commencement of the Act, if it was returned 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 receipt 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.