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2022 DIGILAW 586 (JK)

Reyaz Azad v. Mohammad Irfan

2022-10-21

SANJAY DHAR

body2022
Judgment The petitioner has challenged complaint filed by respondent against him for offence under Section 138 of Negotiable Instruments Act (for short NI Act), which is pending before the Court of Judicial Magistrate, 1st Class (City Munsiff), Srinagar. 2. As per the impugned complaint, respondent/ complainant had a business transaction with the petitioner. It is alleged that the petitioner issued six cheques for liquidating the liability towards the respondent/complainant. The details of the cheques are as under: – Cheque No. Dated Amount Bank 673430 01.02.2019 4,00,000/- YES Bank 619635 26.03.2019 1,50,000/- YES Bank 619636 26.03.2019 1,50,000/- YES Bank 175520 04.01.2019 3,00,000/- YES Bank 053177 02.03.2019 12,00,000/- YES Bank 053178 04.05.2019 4,50,000/- YES Bank 3. It is alleged that the aforenoted cheques, when presented before the banker for their encashment, were dishonoured for the reasons insufficiency of funds/ payees name required/account frozen by virtue of six separate memos of dishonour. The respondent/ complainant thereafter served a notice of demand for payment of total amount of Rs.26.50 lacs, which was sent through registered post on 10th May, 2019. Even after waiting for the prescribed period, the petitioner/ accused did not pay the cheque amount to the respondent/complainant, as a result whereof the impugned complaint came to be filed before the learned trial Magistrate. 4. Vide order dated 25.06.2019, the learned trial Magistrate issued process against the petitioner. After recording his plea, another order came to be passed by the learned trial Magistrate on 23.07.2021/29.07.2021, whereby interim compensation in terms of Section 143-A of the NI Act to the extent of 20% of the total cheque amount was awarded in favour of the respondent. 5. The petitioner has thrown challenge to the complaint as well as the orders dated 25.06.2019 and 23.07.2021/29.07.2021 by urging several grounds. It has been contended that some of the cheques, which are subject matter of the impugned complaint, were not presented for encashment within the period of their validity, as such, the impugned complaint could not have been lodged on the basis of these stale cheques. In this regard, reference has been made to cheques bearing No.673420 dated 01.02.2019 and 175520 dated 04.01.2019. It has been further contended that the order whereby the interim compensation has been awarded in favour of respondent/complainant bears the date 23.07.2021 when, in fact, on the said date, the learned Presiding Officer was on leave. In this regard, reference has been made to cheques bearing No.673420 dated 01.02.2019 and 175520 dated 04.01.2019. It has been further contended that the order whereby the interim compensation has been awarded in favour of respondent/complainant bears the date 23.07.2021 when, in fact, on the said date, the learned Presiding Officer was on leave. According to the petitioner, this exhibits lack of application of mind on the part of learned trial court and renders the impugned order illegal. It has also been contended that the impugned order awarding interim compensation in favour of respondent/complainant is devoid of any reasons and, as such, the same deserves to be quashed. 6. I have heard learned counsel for the parties and perused the material on record including the record of the trial court. 7. The first and foremost ground that has been urged by learned counsel for the petitioner is that some of the cheques which are subject matter of the impugned complaint were stale and, as such, prosecution on the basis of those cheques could not have been initiated. 8. As already noted, reference has been made to cheques dated 01.02.2019 and 04.01.2019. In this regard, a perusal of the record shows that cheque dated 04.01.2019 for an amount of Rs.3.00 lacs drawn on Axis Bank, Srinagar, has been presented for encashment on 2nd May, 2019. The validity of this cheque is three months from the date of its issue. Thus, the contention of the petitioner that this cheque had become stale prior to its presentation for encashment before the banker appears to be well-founded. 9. So far as the cheque dated 01.02.2019 for an amount of Rs.4.00 lacs drawn on YES Bank, Srinagar, is concerned, the same has been presented for encashment on 2nd May, 2019. The validity of this cheque is also three months from the date of its issue. 10. As per Section 24 of the NI Act, the day of the date of presentment for acceptances of a bill of exchange has to be excluded. When we exclude the day of presentment of cheque dated 01.02.2019 for its encashment, it appears that the same has been presented within the term of its validity. Thus, it cannot be stated that the said cheque had become stale. There is no dispute about the validity of other four cheques which are subject matter of the impugned complaint. 11. When we exclude the day of presentment of cheque dated 01.02.2019 for its encashment, it appears that the same has been presented within the term of its validity. Thus, it cannot be stated that the said cheque had become stale. There is no dispute about the validity of other four cheques which are subject matter of the impugned complaint. 11. The question that falls for determination is as to what would be the effect on the fate of the prosecution under Section 138 of NI Act in a case where one of the several cheques which are subject matter of the complaint had become stale. For finding an answer to this question, we need to analyze the facts relevant to the instant case. 12. The respondent/complainant has launched prosecution for offence under Section 138 of NI Act by filing a single complaint against the petitioner/accused in respect of six dishonoured cheques. As per the provisions contained in Section 138 of the NI Act, in order to constitute an offence under the said provision, it has to be shown that the accused has drawn a cheque in favour of the complainant on an account maintained by him for discharge of any debt or other liability. Secondly, the said cheque must have been returned unpaid, either because of the amount of money standing to the credit of the account of the accused is insufficient to honour the cheque or it exceeds the amount arranged to be paid. It has to be further shown that the cheque has been presented with the bank for its encashment within a period of six months or within the period of its validity, whichever is earlier. The third necessary condition for launching a prosecution against the accused in a cheque bounce case is that the complainant must make a demand for the payment of the cheque amount by giving a notice in writing to the accused within thirty days of receipt of memo of dishonour from the bank and lastly it has to be shown that in spite of the receipt of notice of demand, the accused failed to make the payment of cheque amount within fifteen days of receipt of the notice. 13. Unless all the aforesaid conditions are satisfied, the cause of action for launching a prosecution in a cheque bounce case would not arise. 13. Unless all the aforesaid conditions are satisfied, the cause of action for launching a prosecution in a cheque bounce case would not arise. Mere dishonor of cheque by the banker of the accused does not constitute an offence under Section 138 of NI Act. It is only if the accused fails to pay the amount of cheque despite having received the notice of demand that cause of action for launching prosecution against him arises in favour of the complainant. 14. Thus, even though in the instant case, the petitioner is alleged to have drawn six cheques in favour of the respondent/complainant on different dates which have been dishonoured, but because a single demand notice has been served by respondent/complainant upon the petitioner, a single cause of action has arisen in favour of the respondent/complainant for launching prosecution against the petitioner. Therefore, a single complaint in respect of all the six cheques is definitely maintainable against the petitioner/accused. Just because one of the cheques, which is subject matter of the impugned complaint, was stale and prosecution could not have been launched on its basis, it cannot be stated that the complaint is not maintainable. This is so because other five cheques have been presented for encashment before the banker within the period of their validity and after their dishonor, a single notice of demand has been issued by the respondent/complainant to the petitioner/accused, thereby giving cause of action to respondent/complainant against the petitioner/ accused. 15. The issuance of a number of cheques by the petitioner/accused in favour of the respondent/ complainant has to be considered as a bundle of facts giving rise to a cause of action. If one of the facts alleged is not found to be correct, it does not make the whole complaint false nor does it defeat the cause of action that has arisen in favour of the respondent/ complainant against the petitioner/accused. Thus, merely because one of the cheques, which is subject matter of the impugned complaint, had become stale before its presentation for encashment would not offer a ground for quashment of the impugned complaint as a whole. However, the impugned complaint has to be restricted only to the cheques that were valid as on the date of their presentation for encashment. This aspect of the matter has to be borne in mind by the learned trial Magistrate while trying the complaint. 16. However, the impugned complaint has to be restricted only to the cheques that were valid as on the date of their presentation for encashment. This aspect of the matter has to be borne in mind by the learned trial Magistrate while trying the complaint. 16. The second ground that has been urged by learned counsel for the petitioner is regarding validity of order dated 23.07.2021/29.07.2021. It has been contended by learned counsel for the petitioner that on 23.07.2021, the learned Presiding Officer was on leave and, as such, the fact that order bears the date 23.07.2021 shows not only non-application of mind but it also smacks of tampering of the record. 17. A perusal of the minutes of the proceedings reveals that on 07.07.2021, the learned Presiding Officer heard the arguments on the application for grant of interim compensation and reserved the matter for orders to be announced on 23rd July, 2021. It is also revealed that on the said date, the learned Presiding Officer was on leave. A perusal of order dated 29.07.2021, which was the next date fixed in the case, shows that the order impugned has been announced on the said date. It appears that the learned Magistrate has inadvertently skipped to change the date in the order and while announcing the order on 29.07.2021, the date has been recorded as 23.07.2021. This has resulted in confusion in actual date of the impugned order. It appears to be an inadvertent error and not a deliberate one. For this inadvertent error, the impugned order is not rendered illegal. 18. Next it has been urged by learned counsel for the petitioner that the impugned order has been passed by the learned Magistrate without giving reasons as to why interim compensation to the tune of 20% of the total cheque amount is being passed in favour of the respondent/complainant. 19. In order to test the merits of the contention of the learned counsel, the provisions of Section 143-A of the NI Act are required to be noticed. The said provision has been inserted by the Act of 20 of 2018 in the principal Act with effect from 01.09.2018. It reads as under: – “143-A. Power to direct interim compensation. 19. In order to test the merits of the contention of the learned counsel, the provisions of Section 143-A of the NI Act are required to be noticed. The said provision has been inserted by the Act of 20 of 2018 in the principal Act with effect from 01.09.2018. It reads as under: – “143-A. Power to direct interim compensation. – (1) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), the Court trying an offence under section 138 may order the drawer of the cheque to pay interim compensation to the complainant – (a) in a summary trial or a summons case, where he pleads not guilty to the accusation made in the complaint; and (b) in any other case, upon framing of charge. (2) The interim compensation under sub-section (1) shall not exceed twenty per cent. of the amount of the cheque. (3) The interim compensation shall be paid within sixty days from the date of the order under sub-section (1), or within such further period not exceeding thirty days as may be directed by the Court on sufficient cause being shown by the drawer of the cheque. (4) If the drawer of the cheque is acquitted, the Court shall direct the complainant to repay to the drawer the amount of interim compensation, with interest at the bank rate as published by the Reserve Bank of India, prevalent at the beginning of the relevant financial year, within sixty days from the date of the order, or within such further period not exceeding thirty days as may be directed by the Court on sufficient cause being shown by the complainant. (5) The interim compensation payable under this section may be recovered as if it were a fine under section 421 of the Code of Criminal Procedure, 1973 (2 of 1974). (6) The amount of fine imposed under section 138 or the amount of compensation awarded under section 357 of the Code of Criminal Procedure, 1973 (2 of 1974), shall be reduced by the amount paid or recovered as interim compensation under this section. 20. A bare perusal of the aforesaid provision makes it clear that a Court trying a complaint for offence under Section 138 of NI Act has discretion to order the drawer of the cheque to pay interim compensation to the complainant. 20. A bare perusal of the aforesaid provision makes it clear that a Court trying a complaint for offence under Section 138 of NI Act has discretion to order the drawer of the cheque to pay interim compensation to the complainant. This amount of compensation has not to exceed 20% of the amount of the cheque. Thus, grant of interim compensation is a discretionary power which has to be exercised by a Magistrate trying a complaint under Section 138 of NI Act and such order has to be based on reason and logic. 21. Although no guidelines for grant of interim compensation have been laid down in Section 143-A of the NI Act, yet it is a settled law that whenever a discretionary power is to be exercised by a Court, the same has to be exercised on well-recognized principles supported by reasons. The court has to spell out the reasons for grant of interim compensation in favour of the complainant and it has also to justify in its order with reasons the quantum of interim compensation that is being awarded by him as the said quantum can vary from 1% to 20% of the cheque amount. 22. It is not that just because the accused has put in his appearance before the Magistrate and has pleaded not guilty to the charges that the Magistrate has to pass an order of interim compensation in a routine and mechanical manner. The word “may” appearing in Section 143-A of the Act gives discretion to the trial court to direct the accused to pay interim compensation to the complainant. As already noted, the exercise of discretion must always be supported by reasons failing which exercise of discretion will become arbitrary. Some of the reasons for granting interim compensation may be that the accused absconds and avoids to appear before the Court despite service or there is overwhelming material on record to show that the accused is liable to pay an enforceable debt or that the accused is guilty of protracting the proceedings by avoiding to cross-examine the witnesses or producing his evidence. There can be so many other reasons for a Magistrate to grant interim compensation in favour of the complainant but these reasons have to be recorded in the order so that the validity of the order is tested by the superior court if and when such an order is challenged. 23. There can be so many other reasons for a Magistrate to grant interim compensation in favour of the complainant but these reasons have to be recorded in the order so that the validity of the order is tested by the superior court if and when such an order is challenged. 23. Coming to the impugned order, a perusal thereof reveals that the learned Magistrate has, after narrating the allegations made in the complaint, simply awarded the interim compensation of Rs.5,30,000/, which constitutes 20% of the total cheque amount, in favour of the complainant. The order impugned is devoid of any reasons and no discussion is made in the impugned order as to why interim compensation is being awarded. Simply narration of allegations made in the complaint does not make an order under Section 143-A of the NI Act a reasoned one. The fact that the learned Magistrate has included even the amount of stale cheque while calculating the cheque amount shows non-application of mind on his part. Therefore, the said order is not sustainable in law. 24. For the foregoing reasons, the petition is partly allowed and the impugned order dated 23.07.2021/29.07.2021 is quashed with a direction to the learned Magistrate to pass a fresh order in the light of the observations made hereinbefore after hearing the parties. It is further provided that the proceedings in the impugned complaint against the petitioner shall continue but the impugned complaint shall remain confined to only five cheques that have been presented for encashment within the period of their validity. 25. A copy of the order be sent to the learned Magistrate for information and compliance.