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2003 DIGILAW 486 (BOM)

Madan Govardhandas Goenka v. Union of India & another

2003-04-30

P.S.BRAHME, R.M.S.KHANDEPARKAR

body2003
JUDGMENT - KHANDEPARKAR R.M.S., J.:---Heard. Perused the records. 2. The petitioner seeks to challenge the proceedings initiated against him under the provisions of section 138 of the Negotiable Instruments Act, 1881 (hereinafter called as the said Act) as well as the provisions of section 138 of the said Act. 3. The petitioner is a businessman running a Dal Mill under the name and style of Goenka Industry at Akola. In the course of business certain transactions took place between the petitioner and the respondent No. 2. A complaint came to be filed by respondent No. 2 under section 138 of the said Act in the Court of Judicial Magistrate, First Class, Akola. According to the respondent No. 2 a sum of Rs. 3,00,000/- was found to be outstanding against the petitioner on 23-1-1999 and in respect thereof a post-dated cheque was issued on Akola Janata Commercial Co-operative Bank Ltd. The cheque was dated 28-12-1999. It was presented to the bank for encashment on 24-6-2000 but it was dishonoured and, therefore, a notice of 15 days was served upon the petitioner on 4-7-2000 and since the petitioner failed to pay the money within the stipulated time, a complaint came to be filed on 14-8-2000. Consequent thereto, the present petition has been filed challenging the said proceedings as well as the provisions of law contained in section 138 of the said Act on various grounds. 4. The first ground of challenge is that the law being well-settled by the Apex Court, that a post-dated cheque does not amount to a cheque within the meaning of the said expression under the said Act, but it would be a bill of exchange and if such a bill of exchange is dishonoured no offence can be said to have been committed under section 138 of the said Act. It is further submitted that the condition precedent for the prosecution under section 138 is that the dishonoured document must be a cheque and not a bill of exchange at the time of issuance or execution of such document. It is further submitted that the condition precedent for the prosecution under section 138 is that the dishonoured document must be a cheque and not a bill of exchange at the time of issuance or execution of such document. In support of the contentions, reliance is sought to be placed in the decision of the Apex Court in the matter of (Anil Kumar Sawhney v. Gulshah Rai)1, reported in 1993(4) S.C.C. 424 , (Ashok Yeshwant Badeve v. Surendra Madhavrao Nighojkar another)2, reported in 2001(5) Bom.C.R. (S.C.)456 and (Goaplast Private Ltd. v. Shri Chico Ursula D'Souza another)3, reported in 2003 Bom.C.R.(Cri.) (S.C.)931. 5. The contention that since the Apex Court has ruled that a postdated cheque is a bill of exchange, and therefore no prosecution under section 138 of the said Act can lie is totally devoid of substance. The Apex Court has in fact held that a postdated cheque continues to be a bill of exchange till the date of the day bearing on the said document and from that day it transforms into a cheque. The ruling of the Apex Court in that regard in Anil Kumar Sawhney's case is that: "A "post-dated cheque" is only a bill of exchange when it is written or drawn, it becomes a cheque when it is payable on demand. The post-dated cheque is not payable till the date which is shown on the face of the said document. It will only become cheque on the date shown on it and prior to that it remains a bill of exchange under section 5 of the Act. As a bill of exchange a post-dated cheque remains negotiable but it will not become a "cheque" till the date when it becomes "payable on demand"." Apparently, therefore, a document which is executed as a post-dated cheque will not be an enforceable cheque till the day which is disclosed as the date of the document. Being so, the petitioner would be right in contending that no proceeding under section 138 in relation to such document can be initiated before the date disclosed on such document. Being so, the petitioner would be right in contending that no proceeding under section 138 in relation to such document can be initiated before the date disclosed on such document. In other words, in order to enable the holder of such document to hold the drawer thereof to be responsible and liable for prosecution under section 138, the holder will have to wait till the expiry of the date which is disclosed on the face of the document and the proceedings under section 138 for enforcement of liability under such document can not be initiated prior to the said date. 6. The said conclusion is inevitable in view of the decision of the Apex Court in the matter of Ashok Yeshwant Badeve (supra) wherein it has been clearly held by the Apex Court that "A postdated cheque is not payable till the date which is shown thereon arrives and will become cheque on the said date and prior to that date the same remains bill of exchange." It has been further held that: "For prosecuting a person for an offence under section 138 of the Act, it is inevitable that the cheque is presented to the banker within a period of six months from the date on which it is drawn or within the period of its validity whichever is earlier. When a postdated cheque is written or drawn, it is only a bill of exchange and so long the same remains a bill of exchange, the provisions of section 138 are not applicable to the said instrument. The postdated cheque becomes a cheque within the meaning of section 138 of the Act on the date which is written thereon and the 6 months period has to be reckoned for the purposes of proviso (a) to section 138 of the Act from the said date." Thus in case of post-dated cheque "six months period shall be reckoned from the date mentioned on the face of the cheque and not any earlier date on which the cheque was made over by the drawer to the drawee." The decision of the Apex Court in Goaplast Private Limited's case has no application at all in relation to the arguments on the point in issue. The first ground of challenge, therefore is without any substance and is to be rejected. 7. The first ground of challenge, therefore is without any substance and is to be rejected. 7. The provisions under section 138 are sought to be challenged on the ground that it creates lot of problems in actual business transactions. Inconvenience in the business transactions to the parties can be no justification to strike down any statutory provision. Unless the petitioner discloses that the provision being ultra vires the Constitution of India, merely because it could cause hardship to the parties that cannot be a justification to strike down a statutory provision. It is sought to be contended that any person who takes a cheque or bill of exchange on a particular date knows that bill of exchange or cheque which is post-dated for more than 6 months cannot be presented to the bank for payment prior to the completion of due date mentioned in the document and therefore, nobody is expected to keep money in bank prior to the expiry of 6 months. It is also submitted that nobody can predict that the cheque will be honoured in all circumstances on its presentation and that in trade and commerce, the financial position of a trader or Industrialist it always uncertain and the fluctuations in the market may not permit even the honest trade from honouring the cheque. It is sought to be contended that cheque is always issued in good faith and with honest intention to honour the same in due course of time, however, it may be dishonoured on account of reasons beyond control of the drawer. The arguments are totally devoid of substance. In fact the decision in the matter of Goaplast relied by the petitioner is itself an answer to all these arguments. The Apex Court therein has observed that with the object of inculcating faith in efficacy of banking operations and giving credibility to negotiable instruments in business transactions and in order to promote efficacy of banking operations the provisions of Chapter XVII contained in sections 138 to 142 are introduced. It has been clearly held therein that:-- "With the policy of liberalization adopted by the country which brought about increase in international trade and commerce, it became necessary to inculcate faith in banking. World trade is carried through banking operations rather than cash transactions. The amendment was intended to create atmosphere of faith and reliance on banking system. It has been clearly held therein that:-- "With the policy of liberalization adopted by the country which brought about increase in international trade and commerce, it became necessary to inculcate faith in banking. World trade is carried through banking operations rather than cash transactions. The amendment was intended to create atmosphere of faith and reliance on banking system. Therefor while considering the question of applicability of section 138 of the Act to a situation presented by the facts of the case, it is necessary to keep the objects of the legislation in mind. If a party is allowed to use a cheque as a mode of deferred payment and the payee of the cheque on the faith that he will get his payment on the due date accepts such deferred payment by way of cheque, he should not normally suffer on account of non-payment. The faith, which the legislature has desired that such instruments should inspire commercial transactions would be completely lost if parties are as a matter of routine allowed to interdict payment by issuing instruction to bank to stop payment of cheques." It has been further observed that:-- "Provisions contained in sections 138 to 142 are intended to discourage people from not honouring their commitments by way of payment through cheques. It is desirable that the Court should lean in favour of an interpretation which serves the object of the statute. The penal provisions contained in sections 138 to 142 of the Act are intended to ensure that obligations undertaken by issuing cheques as a mode of payment are honoured. A postdated cheque will lose its credibility and acceptability its payment can be stopped routinely." It is then held that:-- "The purpose of the post-dated cheque is to provide some accommodation to the drawer of the cheque. Therefore, it is all the more necessary that the drawer of the cheque should not be allowed to abuse the accommodation given to him by a creditor by way of acceptance of post-dated cheque." We do not consider it necessary to deal with the point any further as the decision in Goaplast clearly negatives the contentions sought to be raised by the petitioner. 8. The third ground of challenge relates to liability of the drawer of the bill of exchange to pay proper stamp duty. 8. The third ground of challenge relates to liability of the drawer of the bill of exchange to pay proper stamp duty. The contention is that the bill of exchange is required to be stamped as per the provisions of the Stamp Act and if the stamp duty is insufficient the same cannot be even impounded and brought into evidence. It is further submitted that the post-dated cheque for more than six months, though interpreted by the Supreme Court as a bill of exchange, does not bear any stamp duty and therefore, cannot be admitted in evidence at all for want of stamp duty and such a document cannot be a foundation for prosecution under section 138 of the said Act. The contention is to be rejected as being without any substance. As already held above, the liability under postdated cheque arises on the day corresponding the date mentioned in the document and not prior to that day. In other words, the document becomes legally enforceable document on the day disclosed in the document and not prior to that. Stamp Act nowhere requires any cheque to carry any stamp duty. Moment document partakes nature of a cheque on the day mentioned in such document, it will not require any stamp duty to be paid thereon and therefore, such a document which does not warrant any payment of stamp duty can not be said to be inadmissible in evidence for want of payment of stamp duty. 9. The next ground of challenge is that the provisions of law contained in section 138 are contrary to Article 11 of International Covenant on Civil and Political Rights, 1966. It is the contention of the petitioner that the provisions of section 138 of the Negotiable Instruments Act are against human rights. The Government of India has enacted Protection of Human Rights Act, 1993. According section 2(i)(d) the term Human Rights has been defined to mean the rights relating to life, liberty, equality and dignity of the individual guaranteed by the Constitution or embodied in the International Covenants and enforceable by courts in India. Section 2(i)(f) defines the expression "international Covenants" to mean "International Covenants on Civil and Political Rights and the International Covenant on Economic, Social and Cultural Rights adopted by the General Assembly of the United Nations on the 16th December, 1966. Section 2(i)(f) defines the expression "international Covenants" to mean "International Covenants on Civil and Political Rights and the International Covenant on Economic, Social and Cultural Rights adopted by the General Assembly of the United Nations on the 16th December, 1966. In terms of Article 11 of the International Covenant on Civil and Political Rights, 1966, no one shall be imprisoned merely on the ground of inability to fulfil a contractual obligation. Being so, according to the petitioner no country is supposed to make a law which will provide for imprisonment merely because of breach of contractual obligation and therefore, the Parliament has no right to make any law contrary to said provision of Article 11 and considering section 138 of the said Act which imposes penal liability for failure of performance of contractual obligation, it is to be held as bad-in-law. In that connection reliance is sought to be placed in the matter of (Jolly George Varghese another v. Bank of Cochin)4, reported in A.I.R. 1980 S.C. 470, (Vishaka others v. State of Rajasthan others)5, reported in 1997(6) S.C.C. 241 , (People's Union for Civil Liberties v. Union of India another)6, reported in 1997(3) S.C.C. 433 and decision of the Division Bench of this Court in case of (Dnyaneshwar Baburao Gorel v. Kamal Dnyaneshwar Gorel others)7, reported in 1992(Supp.) Bom.C.R. 434. 10. In Jolly George Varghese's case (supra) the Apex Court was dealing with the matter pertaining to the scope of exercise of powers by Civil Court under section 51 of the Civil Procedure Code. 10. In Jolly George Varghese's case (supra) the Apex Court was dealing with the matter pertaining to the scope of exercise of powers by Civil Court under section 51 of the Civil Procedure Code. Taking not of 54th Report of the Central Law Commission in relation to section 51 of Civil Procedure Code to the effect the question to be considered is whether this mode of execution should be retained on the statute book, particularly in view of the provision in the International Convenant on Civil and Political Rights prohibiting of contract, it was ruled by the Apex Court that:-- "We concur with the Law Commission in its construction of section 51, C.P.C. It follows that quondam affluence and current indigence without intervening dishonesty or bad faith in liquidating his liability can be consistent with Article 11 of the Covenant, because then no detention is permissible under section 51, C.P.C." While giving above ruling, the Apex Court also observed that "Equally meaningful is the import of Article 21 of the Constitution in the context of imprisonment for non-payment of debts." It is needless to say that section 51 of Civil Procedure Code deals with powers of the Court to enforce execution of a degree. It does not relate to the rights of the parties to seek enforcement of contractual obligation through the Court by seeking adjudication in relation to such obligation and the order of the Court thereon. Stage of execution can arrive only after the Court adjudicates the disputes between the parties and arrives at a final decision on such dispute. The provision of law contained in section 51 of the C.P.C. is in relation to giving effect to such an order passed by the Court after adjudication of the dispute. Besides section 51 of the C.P.C. on the face of it provides for various modes to seek execution of a decree passed by the Court. The mode of arrest and detention, undoubtedly is provided as one of the modes for execution of the decree thereunder. However, the said mode is prescribed under Clause 'C' and prior to that Clause 'B' empowers the Court to execute the decree by way of attachment and sale of the property. The mode of arrest and detention, undoubtedly is provided as one of the modes for execution of the decree thereunder. However, the said mode is prescribed under Clause 'C' and prior to that Clause 'B' empowers the Court to execute the decree by way of attachment and sale of the property. In other words, it is not that only arrest and detention has been prescribed as the only mode for execution of a decree, but there are different other ways in which the decree holder can seek to satisfy the decree in its favour. Being so, and considering the provisions of Article 21 of the Constitution the Apex Court has held that the execution of a decree by way of detention of the judgment debtor in prison cannot be regular mode of execution of decree and without exhausting under remedies available for execution of decree. It is to be borne in mind that while arriving at the said decision the Apex Court has clearly taken note of the observation of the Kerala High Court to the effect that "Remedy for breach of International Law in general is not to be found in the law courts of the State because International Law per se or proprio vigore has not the force of authority of civil law, till under its inspirational impact actual legislation is undertaken". Further that "........ the basic human right enshrined in the international covenants above referred to, may at best inform judicial institutions and inspire legislative action within member States, but apart from such deep reverence, remedial action at the instance of an aggrieved individual is beyond the area of judicial authority "and then" its resolutions and convenants mirror the conscience of mankind and insominate, within the member States, progressive legislation; but till this last step of actual enactment of law takes place, the citizen in a world of sovereign State, has only inchoate right in the domestic courts under these international covenants" and therefore it was ruled that "The positive commitments of the States parties ignites legislative action at home but does not automatically made the covenant and enforceable part of the corpus juris of India." This observation will have to be read along with Article 253 of the Constitution of India. Article 253 provides:- "Notwithstanding anything in the forgoing provisions of this chapter parliament has power to make any law for the whole or any part of the territory of India for implementation in treaty agreement or covenant with any other country or countries or any decision made at any international conference association or other body." In this regard the Apex Court in (Maganbhai Ishwarbhai Patel v. Union of India another)8, reported in A.I.R. 1969 S.C. 783, had ruled that:-- "The power to legislate in respect of traties lies with the parliament under Entry 10 and 14 of List I of 7th Schedule. But making of law under that authority is necessary when the treaty or agreement operates to restrict the rights of citizens or others or modifies laws of State." It therefore, follows that in case the rights of the parties are to be affected or restricted in any manner on account of any article in the International covenant, it will be necessary for the Parliament to make proper law in respect thereof, otherwise enforcement of such covenants would not be permissible, certainly not at the instance of or by an individual. 11. Besides, it is not a mere transformation of civil obligation into a penal liability that has been sought to be introduced by section 138 as such. An act of not honouring the cheque issued in favour of others is otherwise liable to be dealt with under section 420 of Indian Penal Code and the Full Bench of Andhra Pradesh High Court in (OPTS Marketing Private Ltd. others v. State of Andhra Pradesh another)9, reported in 2001(105) Com.Cas. 794 has ruled that- "Even after introduction of section 138 of the Negotiable instruments Act, prosecution under section 420 of the Indian Penal Code is maintainable in the case of dishonour of cheques or post-dated cheques issued towards payment of price of the goods purchased or hand loan taken, or in discharge of an antecedent debt or towards payment of goods supplied earlier, if the charge-sheet contains an allegation that the accused had dishonest intention not to pay even at the time of issuance of the cheque and the act of issuing the cheque which was dishonoured, caused damage to his mind, body or reputation." We are in respectful agreement with the said decision of the Andhra Pradesh High Court. 12. 12. It is appropriate, at this stage, to take note of the decision of the Apex Court in (Trisuns Chemical Industry v. Rajesh Agrawal others)10, reported in 1999(8) S.C.C. 686 : 1999 All.M.R. (Cri.) 1916 (S.C.), wherein while rejecting the appeal for quashing of F.I.R. it was observed that "Merely because an act has a civil profile is not sufficient to denude it of its criminal outfit." 13. In Vishaka's case the Apex Court was dealing with a matter wherein enforcement of fundamental rights of working women under Articles 14, 19 and 21 of the Constitution were sought for in a situation where violation of those rights had become very common. The said petition was essentially brought as a class action by certain social activists and N.G.Os. with the aim of focusing attention towards the said societal abrasion and assisting in finding suitable methods for realization of true concept of gender equality and to prevent, sexual harassment of the working women in all work places, through judicial process to fill the vacuum in existing legislation. We fail to understand how the said decision can be of any help to the petitioner in the matter in hand. Attention was drawn to para 14 of the said decision in an attempt to persuade us that the international convenants are to be read in absence of enacted domestic laws. Undoubtedly the Apex Court in para 14 has observed that: "The meaning and content of the fundamental rights guaranteed in Constitution of India are of sufficient amplitude to encompass all the facts of gender equality including prevention of sexual harassment or abuse. Independence of judiciary forms a part of our constitutional scheme. The international conventions and norms are to be read into them in the absence of enacted domestic law occupying the field when there is no inconsistency between them. It is now an accepted rule of judicial construction that regard must be had to international conventions and norms for construing domestic law when there is no inconsistency between them and there is a void in the domestic law." Apparently, the Apex Court has ruled that in absence of enacted domestic law occupying a particular field and when there is no inconsistency between the international convenants and the domestic law, regard must be had to international conventions for construing such domestic law. That does not lead to the conclusion that a statutory provision which has been brought into force in exercise of powers bestowed upon the parliament under the Constitution is to be declared to be bad in law on the basis of international conventions. 14. Referring to People's Union for Civil Liberty's case and drawing attention to para 13 thereof it was sought to be argued that the provisions of international conventions can be relied upon to give effect to the fundamental rights. The Apex Court therein has held that: "Assuming that it has, the question may yet arise whether such approval can be equated to legislation and invests the Covenant with the sanctity of a law made by Parliament. As pointed out by this Court in (S.R. Bommai v. Union of India)11, 1994(3) S.C.C. 1 , every action of Parliament cannot be equated to legislation. Legislation is no doubt the main function of Parliament but it also performs many other functions all of which do not amount to legislation. In our opinion this aspect requires deeper scrutiny than the provisions of the covenant, which elucidate and go to effectuate the fundamental rights guaranteed by our Constitution, can certainly be relied upon by courts as facets of those fundamental rights and hence, enforceable as such." The Apex Court has ruled that, "In order to elucidate and to effectually implement the fundamental rights guaranteed by the Constitution reliance can also be placed to that extent on the provisions of such covenants and in that sense that can be enforceable". It has nowhere ruled that such covenants can be independently enforced ignoring provisions of Constitution or the statute framed by the parliament. It was also sought to be argued that the ruling in this case lends support to the petitioner's contention that the provision for imprisonment for non-payment of the money, the civil rights of the petitioner are affected or encroached upon, and to the extent that the petitioner being entitled to dignified life, the same is sought to be curtailed by the provisions of section 138 of the said Act. 15. The term dignity implies degree of excellence in life. Dignity lies in righteous conduct. 15. The term dignity implies degree of excellence in life. Dignity lies in righteous conduct. Person who has drawn a cheque with an assurance to comply with his obligation to pay the dues to the person in whose favour the cheque is drawn, if fails to comply with such obligation inspite of the said assurance, can it be said to be a righteous conduct? If not, how does the question of denial of dignified life on account of punishment being provided for non-compliance of such obligation can at all arise? 16. In Dnyaneshwar Baburao Gorel's case the Division Bench of this Court was dealing with the matter under the provisions of law contained in section 125(3) of Criminal Procedure Code. Referring to the said decision it was sought to be argued that the Division Bench has already held that in absence of means to pay the maintenance amount, the exercise of the power under section 125(3), Cri.P.C. by the Magistrate is unwarranted and for the same reason the powers of the similar nature in sub-section 138(3) of the said Act are also to be restricted to the cases where the drawer refused to pay inspite of ability to pay and not otherwise. At the outset it is to be noted that the point of exercise of power under section 138(3) can arise only after the party is allowed to file the complaint under the said provisions of law and the Court is allowed to invoke the jurisdiction thereunder and not prior to that. Being so, this decision is of no use to the petitioner to justify the contentions regarding vires of section 138 itself. Even otherwise section 125 of Cri.P.C. in sub-section (3) thereof itself provides that powers thereunder are to be exercised in cases where "any person so ordered fails without sufficient cause to comply with the order". In other words question of exercise of powers under section 125(3) would arise in case where the person to whom the direction is issued refuses to comply with the direction inspite of being able to comply with such direction and not in case where the person for any given reason is not in a position to comply with such directions. Hence the said decision is of no help to the petitioner in the case in hand. 17. Hence the said decision is of no help to the petitioner in the case in hand. 17. It is at this stage it will be also necessary to take note of the decision of the Division Bench of this Court in the matter of (Mayuri Pulse Mills others v. Union of India others)12, reported in 2000 DoCh. (Bom.)335, wherein the constitutional validity of the provisions of sections 138 to 142 in the said Act was upheld. It is also worthwhile to take note of a decision by learned Single Judge of Madras High Court in the matter of (B. Kannan v. B.C. Santhanam)13, reported 2000 DoCh. (Mad.)1128 , wherein it has been held that: "There is no prohibition either in the Insolvency Act or in the Negotiable Instruments Act for the complainant to approach the Criminal Court to take penal action against the accused for offence already committed under section 138 of the Negotiable Instrument Act either because the insolvency proceedings are pending or even he was declared as an insolvent. The protection given under sections 29 and 31 of the Provisional Insolvency Act is extended to the debtor in respect of civil detention and civil arrest alone. It would not cover the proceedings under section 138 of the Negotiable Instruments Act." 18. A bare perusal of section 138 would disclose that Legislature has taken every precaution to ensure not only the basic principles of natural justice are to be complied with before an action imposing any penalty upon the person who commits default in the matter of compliance of his obligation inspite of assurance given to the holder of the cheque, has prescribed elaborate procedure giving opportunity to defend the case at every stage and therefore by no stretch of imagination it can be said that the said provision in any manner violates the mandate of Article 20 or 21 of the Constitution of India. 19. As no other ground is disclosed for the challenge either to the validity of section 138 of the said Act or to the proceedings initiated under section 138 of the said Act, the petition merits no consideration and therefore is rejected with costs. Petition dismissed. -----