Negotiable Instruments Act, 1881 — Sections 138 & 139 — Quashing of complaint — Justification — High Court quashed several

June 22nd, 2013

Negotiable Instruments Act, 1881 — Sections 138 & 139 — Quashing of complaint — Justification — High Court quashed several complaints by holding that dishonour of a cheque on ground that signatures of drawer of cheque do not match specimen signatures available with bank, would not attract S. 138 — Said conclusion arrived at by the High Court held to be not justified — Contention raised that the respondent-company had offered to issue new cheques to the appellant upon settlement of the accounts and that a substantial payment has been made towards the outstanding amount — Same held to be immaterial, as such an offer would not render illegal a prosecution that is otherwise lawful — Fact that dishonour took place after signatories of cheques had resigned from their positions also held to be immaterial — Resultantly, quashing of complaint held to be not justified — Particularly, when legal presumption available u/s 139 remained unrebutted.

NEPC Micon Ltd. v. Magma Leasing Ltd. (1999) 4 SCC 253, Kanwar Singh v. Delhi Administration AIR 1965 SC 871, Swantraj v. State of Maharashtra, (1975) 3 SCC 322, State of Tamil Nadu v. M.K. Kandaswami, (1975) 4 SCC 745, Seaford Court Estates Ltd. v. Asher 1949 2 All E.R., Modi Cements Ltd. v. Kuchil Kumar Nandi, (1998) 3 SCC 249, K.K Sidharthan v. T.P. Praveena Chandran, (1996) 6 SCC 369, M.M.T.C. Ltd. and Anr. v. Medchl Chemicals and Pharma (P) Ltd. and Anr., (2002) 1 SCC 234, Goaplast (P) Ltd. v. Chico Ursula D’souza and Anr., (2003) 3 SCC 232 and Rangappa v. Sri Mohan, (2010) 11 SCC 441, National Small Industries Corporation Limited v. Harmeet Singh Paintal and Anr., (2010) 3 SCC 330 and S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla & Anr., (2005) 8 SCC 89, Relied on.

(Paras 15, 17, 18, 19 and 29)

HELD: We find ourselves in respectful agreement with the decision in NEPC Micon Ltd. (supra) that the expression “amount of money Act is a genus and dishonour for reasons such “as account closed”, “payment stopped”, “referred to the drawer” are only species of that genus. Just as dishonour of a cheque on the ground that the account has been closed is a dishonour falling in the first contingency referred to in Section 138, so also dishonour on the ground that the “signatures do not match” or that the “image is not found”, which too implies that the specimen signatures do not match the signatures on the cheque would constitute a dishonour within the meaning of Section 138 of the Act. This Court has in the decisions referred to above taken note of situations and contingencies arising out of deliberate acts of omission or commission on the part of the drawers of the cheques which would inevitably result in the dishonour of the cheque issued by them. For instance this Court has held that if after issue of the cheque the drawer closes the account it must be presumed that the amount in the account was nil hence insufficient to meet the demand of the cheque. A similar result can be brought about by the drawer changing his specimen signature given to the bank or in the case of a company by the company changing the mandate of those authorised to sign the cheques on its behalf. Such changes or alteration in the mandate may be dishonest or fraudulent and that would inevitably result in dishonour of all cheques signed by the previously authorised signatories. There is in our view no qualitative difference between a situation where the dishonour takes place on account of the substitution by a new set of authorised signatories resulting in the dishonour of the cheques already issued and another situation in which the drawer of the cheque changes his own signatures or closes the account or issues instructions to the bank not to make the payment. So long as the change is brought about with a view to preventing the cheque being honoured the dishonour would become an offence under Section 138 subject to other conditions prescribed being satisfied. There may indeed be situations where a mismatch between the signatories on the cheque drawn by the drawer and the specimen available with the bank may result in dishonour of the cheque even when the drawer never intended to invite such a dishonour. We are also conscious of the fact that an authorised signatory may in the ordinary course of business be replaced by a new signatory ending the earlier mandate to the bank. Dishonour on account of such changes that may occur in the course of ordinary business of a company, partnership or an individual may not constitute an offence by itself because such a dishonour in order to qualify for prosecution under Section 138 shall have to be preceded by a statutory notice where the drawer is called upon and has the opportunity to arrange the payment of the amount covered by the cheque. It is only when the drawer despite receipt of such a notice and despite the opportunity to make the payment within the time stipulated under the statute does not pay the amount that the dishonour would be considered a dishonour constituting an offence, hence punishable. Even in such cases, the question whether or not there was a lawfully recoverable debt or liability for discharge whereof the cheque was issued would be a matter that the trial Court will examine having regard to the evidence adduced before it and keeping in view the statutory presumption that unless rebutted the cheque is presumed to have been issued for a valid consideration.

(Para 15)

The offer made by the respondent-company was in any case conditional and subject to the settlement of accounts. So also whether the cheques were issued fraudulently by the authorised signatory for amounts in excess of what was actually payable to the appellant is a matter for examination at the trial. That the cheques were issued under the signature of the persons who were authorised to do so on behalf of the respondent-company being admitted would give rise to a presumption that they were meant to discharge a lawful debt or liability. Allegations of fraud and the like are matters that cannot be investigated by a Court under Section 482 Cr.P.C. and shall have to be left to be determined at the trial after the evidence is adduced by the parties.

(Para 17)

On behalf of the signatories of the cheques dishonoured it was argued that the dishonour had taken place after they had resigned from their positions and that the failure of the company to honour the commitment implicit in the cheques cannot be construed an act of dishonesty on the part of the signatories of the cheques. We do not think so. Just because the authorised signatories of the cheques have taken a different line of defence than the one taken by by the company does not in our view justify quashing of the proceedings against them.

(Para 18)

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