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2005 DIGILAW 386 (KER)

Arumughan Pillai v. State of Kerala

2005-06-17

K.THANKAPPAN

body2005
Judgment :- This appeal is filed by the complainant in C.C. No.167/2001 on the file of the Judicial Magistrate of the First Class-I, Punalur. The above said calander case was on the basis of a complaint filed by the appellant alleging that Ext.P1 cheque issued by the 2nd respondent for an amount of Rs.2,25,000/- in discharge of liability cast on him was dishonoured with the endorsement “funds insufficient”. After completing the statutory formalities, the appellant filed the complaint under section 138 of the Negotiable Instruments Act, 1981, hereinafter referred to as the ‘Act’. Before the trial court, prosecution examined PWs.1 and 2 Exts.P1 to P6 were marked. On the side of the defence DWs.1 and 2 were examined and Exts.D1 to D4 were marked. After closing the evidence, the 2nd respondent was questioned under section 313 Cr.P.C. He denied the entire incriminating circumstances. The trial court found that the appellant had failed to establish the charge under section 138 of the Act against the 2nd respondent and acquitted the 2nd respondent under section 255(1) Cr.P.C. 2. Learned counsel appearing for the appellant submits that the trial court misunderstood the scope of enquiry in a prosecution under section 138 of the Act. The learned counsel also submits that on the basis of the decisions of this Court as well as the Apex Court, the findings entered by the trial court are wrong. Learned counsel appearing for the 2nd respondent submits that the judgment under appeal requires no interference by this Court, as the trial court has considered the entire evidence in extenso. 3. Before considering the respective arguments of the learned counsel on both sides, it is advantageous to see the relevant provisions with regard to the liability creates in a cheque under the Act. “Cheque” is defined under section 6 of the Act, which reads as follows:- “A ‘cheque” is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand.” “Negotiable Instrument” is defined under section 13 of the Act, which reads as follows:- “13. “Negotiable instrument”. – (1) A “negotiable instrument” means a promissory note, bill of exchange or cheque payable either to order or to bearer. “Negotiable instrument”. – (1) A “negotiable instrument” means a promissory note, bill of exchange or cheque payable either to order or to bearer. Explanation (i) -–A promissory note, bill of exchange or cheque is payable to order which is expressed to be so payable or which is expressed to be payable to a particular person, and does not contain words prohibiting transfer or indicating an intention that it shall not be transferable. Explanation (ii)—A promissory note, bill of exchange or cheque is payable to bearer which is expressed to be so payable or on which the only or last endorsement is an endorsement in blank. Explanation (iii)—Where a promissory note, bill of exchange or cheque, either originally or by endorsement, is expressed to be payable to the order of a specified person, and not to him or his order it is nevertheless payable to him or his order at his option. (2) A negotiable instrument may be made payable to two or more payees jointly, or it may be made payable in the alternative to one of two, or one or some of several payees.” A reading of the above would clearly indicate that cheque also comes under the definition of “negotiable instrument”. Section 43 of the act deals with legal effect of a Negotiable instrument made, etc. Without consideration. Section 43 of the Act reads as follows:- “A negotiable instrument made, drawn, accepted, indorsed, or transferred without consideration, or for a consideration which fails, creates no obligation of payment between the parties to the transaction. But if any such party has transferred the instrument with or without endorsement to a holder for consideration, such holder, and every subsequent holder deriving title from him, may recover the amount due on such instrument from the transferor for consideration or any prior party thereto.” (2) A negotiable instrument may be made payable to two or more payees jointly, or it may be made payable in the alternative to one of two, or one or some of several payees.” A reading of the above would reveal the liability of a drawer of a promissory note, bill of exchange or cheque and the right of the holder in due course. 4. Section 138 of the Act reads as follows:- “138. 4. Section 138 of the Act reads as follows:- “138. Dishonour of cheque for insufficiency, etc., of funds in the account—Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account 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, such person shall be deemed to have committed an offence and shall, without prejudice to any other provision of this Act, be punished with imprisonment for a term which may extend to one year, or with fine which may extend to twice the amount of the cheque, or with both: Provided that nothing contained in this section shall apply unless— (a) the cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier. (b) the payee or thee holder in due course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving a notice in writing, to the drawer of the cheque, within fifteen days of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and (c) The drawer of such cheque fails to make the payment of the said amount of money to the payee or as the case may be, to the holder in due course of the cheque within fifteen days of the receipt of the said notice. Explanation—For the purposes of this section, “debt or other liability” means a legally enforceable debt or other liability” As per the Explanation, it can be seen that for the discharge of the debt or other liability as contemplated under section 138 of the Act, it should be proved that such debt or other liability amounts to a legally enforceable debt or other liability. 5. 5. The learned counsel for the appellant relies on two decisions of the Apex Court in Goa Plast (P) Ltd. V. Chico Ursula D’Souza ( (2004) 2 SCC 235) and I.C.D.S. Ltd. V. Beena Shabeer (2002 (3) KLT 218 (SC). In the former case the Apex Court considered the liability that could be legally enforceable by way of suit and held that the liability was a legally enforceable debt or liability as per the explanation to section 138 of the Act, therefore, the relationship between the appellant and the respondent was not at all a factor germane to the proceedings for an offence under section 138 of the Act. In the latter case the Supreme Court considered the issue with regard to the co-extensive liability of the guarantor and the principal debtor and held that there was a default on the part of one in favour of another and in the event of a cheque issued in discharge of any debt or other liability, there could not be any restriction or embargo in the matter of application of the provisions of section 138 of the Act. 6. Question now raised before this Court is whether under section 138 of the Act the appellant is proved that the cheque was issued or drawn in discharge of a legally enforceable debt or not. In this context, section 43 of the Act is relevant. It stipulates that a negotiable instrument made, drawn, accepted, indorsed, or transferred without consideration, or for a consideration which fails, creates no obligation of payment between the parties to the transaction. But if any such party has transferred the instrument with or without endorsement to a holder for consideration, such holder, and every subsequent holder deriving title from him, may recover the amount due one such instrument from the transferor for consideration or any prior party thereto. Under section 2 (d) of the Indian Contract Act, 1872 “consideration” is interpreted as “when, at the desire of the promisor, the promissee or any other person has done or abstained from doing or does or abstains from doing, or promises to do or to abstain from doing, something, such act or abstinence or promise is called a consideration for the promise. Reading of the above would show that at the desire of the promisor, the promise or any other person has done or abstained from doing or promises to do or to abstain from doing, is consideration. A cheque being an instrument, the drawer of the cheque is bound to pay the amount on demand. The question is whether the cheque was issued for consideration which creates an obligation on the part of the drawer of the cheque. If a holder of the cheque presents the same for encashment, it is his burden to prove that the cheque was issued in discharge of a legally enforceable debt or other liability. In this context, the evidence of the appellant as PW1 has to be looked into. The case of the appellant before the court below was that the 2nd respondent approached him for a loan of Rs.2,25,000/-. He along with the 2nd respondent approached PW2 for the same, the appellant received the amount from PW2 and handed over the same to the 2nd respondent and on receiving the amount the 2nd respondent issued Ext.P1 cheque for an amount of Rs.2,25,000/-. The defence case is that the cheque was issued by the 2nd respondent for and on behalf of DW1. It has come out in evidence that there were disputes between the appellant and DW1 and DW1 had won the case. In order to compromise the civil case, which is pending between the appellant and DW1, the 2nd respondent took stand as a mediator and Exts.P1 cheque was given to the appellant. Exts. D1 and D2 would reveal that there were civil disputes between the appellant and DW1. It is proved before the court that the above said civil case was not withdrawn and no consideration was given to DW1. That by itself shows that the amount so promised shall depend on some other complementary facts or fulfillment of yet another promise, i.e., withdrawal of the civil case pending in the civil court. If so any cheque was issued on that basis, it will not have any valid consideration under section 43 of the Act and it will not create any obligation on the part of the drawer of the cheque or any right which can be claimed by the holder of the cheque also. If so any cheque was issued on that basis, it will not have any valid consideration under section 43 of the Act and it will not create any obligation on the part of the drawer of the cheque or any right which can be claimed by the holder of the cheque also. The Apex Court in a decision reported in Hiten P.Dalal V. Bratindranath Banerjee ((2001)6 SCC 16) held that the burden was on the drawer of the cheque to disapprove the presumptions under sections 138 and 139 of the Act. The same view is taken by the Apex Court in K.N. Beena V. Muniyappan and another ((2001 (8) SCC 458). The above two decisions also considered the circumstances or factual matrix which constitutes the ingredients of an offence coming under sections 138 of the Act. Unless and until it is proved that an offence under section 138 of the Act is made out as per the statute, the presumptions under section 139 of the Act cannot be drawn. In the case in hand the facts now proved that Ext.P2 issued without any consideration and it will not create any obligation to pay or right to claim any payment between the parties to the transaction. It is the burden of the holder of the cheque to prove that the cheque was issued in discharge of a debt or legally enforceable debt. In this context the evidence of DW1 and DW2 is relevant. The trial court considered the evidence of these witnesses in extensor and found that the appellant had failed to prove his case beyond reasonable doubt. 7. In the above circumstances, this court holds that the appellant failed to prove that Ext.P1 cheque was issued in discharge of any legally enforceable debt or other liability. Hence, the appeal is dismissed confirming the impugned judgment.