Negotiable Instruments Act, 1881 — Section 138 r/wss 118 & 139 —

June 22nd, 2013

Negotiable Instruments Act, 1881 — Section 138 r/wss 118 & 139 — Dishonour on account of stop payment — Effect of — Held, net effect is that dishonour on ground that payment has been stopped, regardless whether such stoppage is with or without notice to payee, and regardless whether stoppage of payment is on ground that amount lying in account was not sufficient to meet requirement of cheque, would attract S. 138 — However, accused issuing the cheque can prove to the contrary — Held, although a petition u/s 482 of Cr.P.C. may not be entertained by the High Court for quashing such proceedings, yet the judicious use of discretion by the trial judge whether to proceed in the matter or not would be enormous in view of S. 139 and, therefore, if the drawer of the cheque discharges the burden even at the stage of enquiry that he had bona fide reasons to stop the payment and not make the said payment even within the statutory time of 15 days, the trial court might be justified in refusing to issue summons to the drawer of the cheque by holding that ingredients to constitute offence u/s 138 is missing where the account holder has sufficient funds to discharge the debt.

Modi Cements Ltd. v. Kuchil Kumar Nandi, (1998) 3 SCC 249, M.M.T.C. Ltd. and Anr. vs. Medchl Chemical and Pharma (P) Ltd. And Anr., (2002) 1 SCC 234, Goaplast (P) Ltd. vs. Chico Ursula D’Souza And Anr., (2003) 3 SCC 231: (2004) Crl.LJ. 664, Relied on.

(Paras 16 and 19 to 28)

HELD: What is wished to be emphasized is that matters arising out of `stop payment’ instruction to the bank although would constitute an offence under Section 138 of the NI Act since this is no longer res-integra, the same is an offence subject to the provision of Section 139 of the Act and hence, where the accused fails to discharge his burden of rebuttal by proving that the cheque could be held to be a cheque only for discharge of a lawful debt, the offence would be made out. Therefore, the cases arising out of stop payment situation where the drawer of cheques has sufficient funds in his account and yet stops payment for bona fide reasons, the same cannot be put on par with other variety of cases where the cheque has bounced on account of insufficiency of funds or where it exceeds the amount arranged to be paid from that account, since Section 138 cannot be applied in isolation ignoring Section 139 which envisages a right of rebuttal before an offence could be made out under Section 138 of the Act as the Legislature already incorporates the expression “unless the contrary is proved” which means that the presumption of law shall stand and unless it is rebutted or disproved, the holder of a cheque shall be presumed to have received the cheque of the nature referred to in Section 138 of the NI Act, for the discharge of a debt or other liability. Hence, unless the contrary is proved, the presumption shall be made that the holder of a negotiable instrument is holder in due course. Thus although a petition under Section 482 of the Cr.P.C. may not be entertained by the High Court for quashing such proceedings, yet the judicious use of discretion by the trial judge whether to proceed in the matter or not would be enormous in view of Section 139 of the NI Act and if the drawer of the cheque discharges the burden even at the stage of enquiry that he had bona fide reasons to stop the payment and not make the said payment even within the statutory time of 15 days provided under the NI Act, the trial court might be justified in refusing to issue summons to the drawer of the cheque by holding that ingredients to constitute offence under Section 138 of the NI Act is missing where the account holder has sufficient funds to discharge the debt. Thus the category of `stop payment cheques’ would be a category which is subject to rebuttal and hence would be an offence only if the drawer of the cheque fails to discharge the burden of rebuttal.Thus, dishonour of cheques simpliciter for the reasons stated in Section 138 of the NI Act although is sufficient for commission of offence since the presumption of law on this point is no longer res integra, the category of `stop payment’ instruction to the bank where the account holder has sufficient funds in his account to discharge the debt for which the cheque was issued, the said category of cases would be subject to rebuttal as this question being rebuttable, the accused can show that the stop payment instructions were not issued because of insufficiency or paucity of funds, but stop payment instruction had been issued to the bank for other valid causes including the reason that there was no existing debt or liability in view of bona fide dispute between the drawer and drawee of the cheque. If that be so, then offence under Section 138 although would be made out, the same will attract Section 139 leaving the burden of proof of rebuttal by the drawer of the cheque. Thus, in cases arising out of `stop payment’ situation, Sections 138 and 139 will have to be given a harmonious construction as in that event Section 139 would be rendered nugatory.

(Paras 26, 27 and 28)

Laxmi Dyechem v. State of Gujarat[Bench Strength 2], Criminal Appeal Nos. 1870-1909/2012 (Arising Out S.L.P. (Crl.) Nos. 1740-1779/2011)(27/11/2012), 2012(12) JT 65: 2012(11) SCALE 365: 2012(8) Supreme 274: 2012(9) SLT 54: 2013(1) Crimes 101(SC): 2013(1) JCC 41(NI) [T.S. Thakur, J.: Gyan Sudha Misra, J.]

Entry Filed under: Consumer Laws