SIBA SHANKAR SAHU Vs. UTKAL ASBESTOS LTD

JUDGEMENT

(1.) A question of considerable importance as to the relative scope of Section 138 of the Negotiable Instruments Act, 1891 (hereinafter referred to as 'the Act') for launching prosecutions when cheques are dishonoured falls for decision in this case. A preamble of the facts is necessary to introduce the question. The petitioner is a proprietorship firm having business of supply of building materials and for the purpose, uses to get A. C. Sheets of different brands including Konark brand manufactured by the opposite party -company. The agreement for payment of the cost of A. C. Sheets was both cash and credit. There were some oustanding dues against the petitioner against 0. A. No. 367 of the opposite party and goods invoice No. DAD 535 dated 11 -11 -1892. It is the petitioner's case that against the amounts outstanding cash payment of Rs. 41,000/ - was made and after adjustment of a sum of Rs. 22,000/ - in the accounts, a sum of Rs. 19,000/ - was outstanding for payment for which he issued a cheque in favour of the opposite party bearing No. 827512, without entering any date thereupon. The under -standing between the parties was that the amount outstanding would be incorporated in the cheque. On 19 -5 -1993 the petitioner received voucher No 2294 from the opposite party for Rs. 75,483/ - instead of voucher for Rs. 19,000/ -. Since the voucher for such a large amount was sent, the petitioner instructed the Branch Manager, Bank of Baroda on 22 -5 -1993 not to cash the cheque No. 827512 drawn on his account No. 3226. The cheque was presented by the opposite party on that very day but was returned by the Bank on 26 -5 -1993/1 -6 -1993 with the endorsement 'payment stopped by the drawer'. Thereafter the opposite party through its letter dated 3 -6 -1993 requested the petitioner to clear up the outstanding dues within seven days of due receipt of the letter but he did not respond for which the opposite party filed the complaint in the Court with the allegation that the outstanding dues against the petitioner were Rs. 90,841.51 which he did not clear in spite of repeated verbal/written requests and had ultimately issued the cheque for Rs. 75,483/ - as part payment. Even though the cheque had been issued, yet on its presentation it was dishonoured and the petitioner having failed to pay the amount even after notice, was guilty of the offence Under Section 138 of the Act.

(2.) THE present application Under Section 482, Cr PC has been filed by the petitioner seeking quashing of the complaint and the notice issued to him for appearance on the submission that ingredients of Section 138 of the Act are not attracted to maintain the prosecution. It is the submission that since the petitioner had never issued the cheque for Rs. 75,483/ - and the arrangement between the parties was only to draw an amount of Rs. 19,000/ -, and that since stoppage of payment of a cheque is not refusal of payment on the cheque either due to insufficiency of funds or because of the fact that the amount mentioned exceeds the amount agreed to be paid by the Bank from the account on the petitioner's behalf, the move to pursue a charge Under Section 138 of the Act against the petitioner was misconceived. On notice being issued, the opp. party has appeared and contends that since the cheque was in fact made out for Rs. 75,483/ - and the Bank has refused to pay on it, whatsoever may be the reason, the petitioner has become liable for prosecution under the section and that at any rate, the complaint cannot be scuttled before trial as in course of the trial it may be possible for it to show that in fact the petitioner had not the requisite amount to his credit in his account in the Bank and that the real reason for refusal to draw upon the cheque was insufficiency of funds or that the figure on the cheque exceeded the amount agreed by the Bank to clear on cheques issued by the petitioner.

(3.) WHETHER or not refusal by the Bank to pay upon a cheque for whatsoever grounds would create a liability for prosecution and whether the provisions of Section 482, CrPC can be invoked to quash the prosecution so launched have engaged the attention of different High Courts of this country to which decisions my attention has been drawn by both the learned counsels for the parties. It is beneficial to deal with the citations before analysis of the provisions of the Act is made to reach a conclusion. Mr. Misra, the learned counsel for the petitioner has placed reliance on 1992 (2) Crime 215 (M/s. Union Road Ways(P) Ltd. and Anr. v. M/s. Shah Ramanlal Santosh Kumar and Anr.), Single Judge decision of the Andhra Pradesh High Court, which took the view that where payment on a cheque is refused by the Bank with the endorsement 'Refer to Drawer', a presumption drawn that the endorsement indicates insufficiency of funds or that the cheque had been issued without the necessary funds in the account is unwarranted and as the offence is not made out, the proceeding could be quashed. In taking the view, observation was made that the cheque might have been returned for various reasons and it was noticed that similar view had been taken by the Punjab and Haryana High Court in 1990 (2) Bank C. L. R. 416 (Abdul Samad v. Satya Narayan Kahewar) and 1991 (1) All. 37 (Hunasikattinath v. State of Karnataka). In 1992 (2) Crimes 919 (Thomas Karghesa v. P. Jerona), a Division Bench the Kerala High Court took the view that for an offence under the section the endorsement made by the banker while returning the cheque was not decisive and that irrespective of the endorsement, if it is established that in fact the cheque was returned unpaid either because the amount standing to the credit of the account of the drawer 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, the offence would be established. It was explained that an endorsement by the canker that the cheque is returned due to insufficiency of funds standing in the name of the drawer may tell upon the financial soundness of the drawer and may adversely affect his reputation and that sometimes the banker may be slow to use the words such as 'no sufficient fund in the account'. For such reason, the mere refraining by the banker from making the derogatory endorsement would not halt the object of the legislation to be carried out. Taking the view, the complaint was refused to be quashed. In 1992(2) Crimes 1047 (Thomas Gupta v. Bakeman's Home Products),a learned Single Judge of Punjab and Haryana High Court took the view that where the cheque had been issued not in discharge of payment of any goods purchased but in discharge of pre -existing liability and the payment of the cheque was stopped by the drawer, there would be no fraudulent or dishonest act of him to induce the complainant to deliver any property against the cheque and that the liability, if any, was only civil with the ingredients of the offence being absent. The Court directed quashing of the proceeding. In 1992(1) Crimes 5 (Mrs. I. Jayalakshmi v. Mrs. Isshida), a learned Single Judge of the Madras High Court held the view that a plain reading of Section 138 of the Act already indicates that only in those two contingencies viz.,when the cheque is returned unpaid because of insufficiency of funds and/or that it exceeds the amount arranged to be paid, the offence is committed and that whom the cheque is returned unpaid with endorsement 'refer to drawer' and 'payment countermanded by the drawer', the case would not come within the ambit and scope of Section 138 of the Act and the proceeding initiated would be liable to be quashed. In 1993 (1) Crimes 394 (M/s. Smbee Textiles Ltd. and Anr. v. Sadhu Ram), is a Single Judge decision of the Punjab and Haryana High Court which took the view, where there was no averment in the complaint that the cheques were dishonoured either due to inadequacy of funds or because of the amount mentioned in it exceeding the limit against the account if any, and where before filing the complaint, the respondent did not try to ascertain whether there were sufficient funds in the account of the drawer or whether the payment was stopped by the bank for the other reason, that the cheques were dishonoured not due to any of the grounds stated in Sec. 138 of the Act and the complaint was quashed. Another decisions, 1993(1) Crimes 679 (Prasanna v. Vijayalakshmi) relied upon by the learned counsel is of the same learned Single Judge of the Madras High Court that where the cheque was returned unpaid with the endorsement 'Account Closed,' the complaint did not fall within the ambit of Section 138 and was liable to be quashed.