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Andhra High Court · body

2008 DIGILAW 946 (AP)

Nirmala Deshpande v. State of A. P.

2008-11-05

P.SWAROOP REDDY

body2008
ORDER This petition is filed to quash the proceedings in C.C.No. 870 of 2007 on the file of the I Additional Chief Metropolitan Magistrate, Hyderabad. 2. The case of the petitioner is that the second respondent herein filed a private complaint against her under Section 138 of the Negotiable Instruments Act (for brevity 'the Act') claiming that the petitioner had issued cheque dated 2.8.2007 for Rs.15.00 Lakhs in favour of the second respondent drawn on First City Cooperative Urban Bank Ltd., King Koti, Hyderabad, which on presentation for encashment through the State Bank of Hyderabad, was returned with endorsement "not a clearing member the complainant got issued a notice and then filed the present complaint. 3. The contention of the learned counsel for the petitioner is that the allegations are false; the cheque in question was fabricated; the second respondent scrumptiously obtained signed cheque leaf belonging to petitioner, as he was working with the husband of the petitioner and had access to the records; the cheque was never presented to First City Cooperative Urban Bank Ltd., King Koti, Hyderabad; but was presented at State Bank of Hyderabad and as the drawee bank was not a member of the clearing house, the State Bank of Hyderabad did not present the cheque on the drawee bank; but returned to the presenter and in the circumstances the cheque was never presented on the concerned banker and for constituting an offence under Section 138 of the Act, the cheque must have been presented to the drawee bank and if that cheque is returned with an endorsement "insufficient funds" then only the offence would be constituted. Under section 64 of the Act, presentation of the cheque on the drawee bank is mandatory. 4. Though several pleas are raised in this petition, the main contention of the petitioner is that the cheque was not returned for want of sufficient funds; but it was returned by the State Bank of Hyderabad through whom it was presented stating that First City Cooperative Urban Bank Ltd., King Koti, Hyderabad, on whom the cheque was issued was not a member of the clearing house and as such no offence is constituted. In support of his contention, the learned counsel relied on a decision of this Court in Chairman, Jawahar Co-operative Urban Bank Ltd. v. Ramanjaneya Enterprises' . 5. In support of his contention, the learned counsel relied on a decision of this Court in Chairman, Jawahar Co-operative Urban Bank Ltd. v. Ramanjaneya Enterprises' . 5. The contention of the learned counsel for the second respondent-complainant is that the license of the First City Cooperative Urban Bank Ltd., King Koti, Hyderabad, was cancelled by the Reserve Bank of India on 5.4.2002; on 27.8.2002 a Liquidator was appointed and since then the bank was not at all functioning and the disputed cheque was issued on 2.8.2007, almost, five years after the bank stopped functioning and as such issuing of a cheque on a bank which is not functioning amounts to an offence under Section 138 of the Act. 6. Now the point that arises for consideration is whether there are any grounds for quashing the proceedings pending against the petitioner. 7. In the case Chairman, Jawahar Cooperative Urban Bank Ltd.,', the complaint was filed against the Chairman, Vice Chairman and some of the Directors of the Jawahar Cooperative Urban Bank Ltd. In that case, the cheques which were issued on the name of Jawahar Cooperative Urban Bank Ltd., were presented for collection through State Bank of India, returned with an endorsement "not a clearing member” a notice was issued to the Chairman, Vice-Chairman and directors of the Bank, degrading payment of the amounts covered by the cheques but they did not pay the amounts. Then the complaint under Section 138 of the Act was filed. The accused contended that "no Cooperative Urban Bank Ltd.," can be a clearing member of the Reserve Bank of India directly and such cooperative urban bank should take sub-membership with any nationalized bank and that the Jawahar Cooperative Urban Bank Ltd., had taken sub membership with Union Bank of India and on a letter given by the Union Bank of India, the Reserve Bank of India cancelled the clearing facility of the sub-member viz., the Jawahar Cooperative Urban Bank Ltd. and, therefore, it is not a case of violation of the provisions of Section 138 of the Act. 8 This court in paragraph-9 of the above judgment observed that little Moot question that arises for consideration is as to whether having regard to the endorsement to the effect 'not a clearing member', the offence under section 138 of the Act is attracted or not? 8 This court in paragraph-9 of the above judgment observed that little Moot question that arises for consideration is as to whether having regard to the endorsement to the effect 'not a clearing member', the offence under section 138 of the Act is attracted or not? and relying on a decision of the Hon'ble Supreme Court in Shri Ishar Alloys Steels Ltd. v. Jayaswats Neco Ltd., where the Hon'ble Supreme Court observed that "a combined reading of Sections 2, 72 and 138 of the Act would heave no doubt in our mind that the law mandates the cheque to be presented at the bank on which it is drawn if the drawer is to be held criminally liable". The Apex Court also formulated a point "to which bank the cheque is to be presented for the purpose of attracting the penal provisions of Section 138 of the Act" and answered the same saying "the cheque shall be presented with the bank on which it is drawn, as mandated by S. 72 of the Act." Basing on the above judgment, this Court held that in the case on hand, as the accused Jawahar Cooperative Urban Bank Ltd, is not a clearing member of the Reserve Bank of India, the later bank returned the cheque. It cannot, therefore, be held that the cheques have been returned for want of insufficiency of funds or for exceeding the arrangements made for any other reason. The cheques were not presented on the bank on which they had been drawn earlier. When there has been no valid presentation of the cheques in accordance with the provisions of S. 72 of the Act with 'the Bank", on which they have been drawn, drawer of those cheques cannot be held criminally liable." 9. A plain reading of the above judgment shows that, if we have to simply rely on the judgment of our Court, the present complaint has to be dismissed by allowing the criminal petition, as in this case also, the cheque was returned as the drawee bank was not a member of clearing house and there was no actual presentation of the cheuque to the bank on which the cheque was issued. 10. But, here, there are additional circumstances. 10. But, here, there are additional circumstances. As already referred, as per the complainant the licence of the drawee bank was cancelled on 5.4.2002; on 27.8.2002 a Liquid at or was appointed and since then the bank was not at all functioning and the disputed cheque was issued on 2.8.2007, almost, five years after the bank ceased functioning. 11. ln NEPC Micon Ltd. v. Magma Leasing Ltd.', the Hon'ble Supreme Court relying on other decisions and the circumstances like the intention of Legislature held that cheque issued of an account, which was closed is an offence under Section 138 of the Act, though the cheque is not returned for want of funds, though the question account closed is not covered under any of the contingencies referred under Section 138 of NI Act. In paragraph 9 of the decision (NEPC Micon's case, the Hon'ble Supreme Court repelling the contention that Section 138 of NI Act being a penal provision, it should be strictly interpreted and if there is any omission by the Legislature, wider meaning should not be given to the words than what is used in the Section. In our view even with regard to penal provision, any interpretation, which withdraws life and blood of the provision and milkes it ineffective and a dead letter should be averted. If the interpretation, which is sought for, were given, then it would only encourage dishonest persons to issue cheques and before presentation of the cheque close 'that account' and thereby escape from the penal consequences of Section 138, In paragraph 15 of the decision (NEPC Micon's case (Supra 3), the Hon'ble Supreme Court held that", even though Section 138 is a penal statute, it is the duty of the Court to interpret it consistent with the legislative intent and purpose so as to suppress the mischief and advance the remedy. As stated above, Section 138 of the Act has created a contractual breach as an offence and the legislative purpose is to promote efficacy of banking and of ensuring that in commercial or contractual transactions cheques are not dishonoured and credibility in transacting business through cheques is maintained to the date of issuance of the cheque. As stated above, Section 138 of the Act has created a contractual breach as an offence and the legislative purpose is to promote efficacy of banking and of ensuring that in commercial or contractual transactions cheques are not dishonoured and credibility in transacting business through cheques is maintained to the date of issuance of the cheque. However, it is for the complainant to prove by authentic material that the drawee bank - First City Cooperative Urban Bank Ltd., King Koti, Hyderabad, was not functioning prior to the issuance of the cheque and then only he would be entitled for the benefit of the position of the bank on which the cheque was issued being closed and for that reason the accused being liable inner Section 138 of the Act. 13. In the circumstances, I am of the opinion that the petition cannot be allowed and It is for the trial court to decide the issue on merits. 14. Accordingly, the Criminal Petition is dismissed. 12. When a cheque of an account, which was closed, is an offence under section 138 of the Act; why it is not an offence when the cheque issued is of a defunct bank. The learned counsel for the petitioner contends that there is no material on record about the bank ceasing to function and further the issuance of the cheque on such a bank might amount to an offence under some other provisions, but not under Section 138 of the Act. I am not inclined to accept this contention for the reason already referred i.e., when issuance of ache que of a closed account is an EVIDENCE ACT, 1872, Section 3 offence under Section 1380ftheAct, why it is Indian Penal Code, 1860, Sections 302 not an offence when a cheque of a defunct and 397 - Murder and robbery - bank is issued The cheque in question was Conviction of appellants-A-1 to A-3 for issued for a huge amount of RS.15.00 Lakhs. offences punishable under Section 302 There is absolutely no justification in driving and 397 IPC, for causing death of 0-1 and the complainant from pillar-to-post by 0-2 and for committing robbery - Entire dismissing the complaint for unsustainable case rests upon circumstantial evidence technical reasons, particularly in view of the Inquest mediators opining that both judgment of the Supreme Court in NEPC deceased died due to cut injuries on throat Micon's case (Supra 3). The decision of our Medical evidence According to High Court in Chairman, Jawahar Co-operative Urban Bank Limiter’s case (supra 1), is not evidence of doctors (P.Ws. 15 and 32) applicable in this case as facts here are cause of deaths of deceased due to cut distinguishable, as here, there is a contention throat injury - Medical evidence of the drawee bank not at all functioning prior 'unchallenged, leaving no room to doubt .