Dismissed

D.K.Rajendran v. P.K.Sajeendran

Kerala HC13 Jul 2009Crl.Rev.Pet/2204/2009

Case brief

AI extract

What is this about?

The High Court of Kerala dismissed the criminal revision, holding that dishonour of a cheque due to account closure attracts Section 138 of the Negotiable Instruments Act regardless of who initiated the closure. The Court distinguished superior precedent and affirmed the lower court's conviction.

What did the court decide?

Revision dismissed. Time granted until 30-12-2009 to deposit the fine in the trial court.

D.K.Rajendran Vs P.K.Sajeendran — Cheque Dishonour | Kerala HC (2009)

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IN THE HIGH COURT OF KERALA AT ERNAKULAM

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PRESENT :

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THE HONOURABLE MR. JUSTICE THOMAS P.JOSEPH

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MONDAY, THE 13TH JULY 2009 / 22ND ASHADHA 1931

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Crl.Rev.Pet.No. 2204 of 2009()

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-----------------------------CRA.781/2003 of ADDL.SESSIONS COURT (ADHOC)-III, THALASSERY CC.441/2000 of JUDL.MAGISTRATE OF FIRST CLASS COURT-I, KANNUR

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REVN. PETITIONER/APPELLANT/ACCUSED:

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D.K.RAJENDRAN, S/O.KUNHIRAMAN, AGED 62 YEARS, LEENA NIVAS, MUZHAPPILANGAD, KANNUR DISTRICT.

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BY ADV. SRI.C.P.PEETHAMBARAN

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RESPONDENTS/ RESPONDENT/COMPLAINANT & STATE:

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P.K.SAJEENDRAN, S/O.KRISHNAN VAIDYAR, KUTTIYIL, PARASSINIKKADAVU, KANNUR.

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STATE OF KERALA, REPRESENTED BY THE PUBLIC PROSECUTOR,

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HIGH COURT OF KERALA, ERNAKULAM.

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PUBLIC PROSECUTOR : SRI JAYAKRISHNAN

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THIS CRIMINAL REVISION PETITION HAVING COME UP FOR ADMISSION ON 13/07/2009, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:

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'CR'

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THOMAS P JOSEPH, J

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---------------------------------------Crl.R.P.No.2204 of 2009

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Dated this 13^th day of July 2009

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ORDER

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Would closure of an account at the instance of the drawee bank before issuance of cheque take the subsequent dishonour of that cheque as account closed outside the purview of Sec.138 of Negotiable Instruments Act (for short, “the Act”)?

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Petitioner before me faced trial in the court of learned Judicial Magistrate of First Class-1, Kannur in C.C.No.441 of 2000 for offence punishable under Sec.138 of the Act. According to respondent No.1, petitioner borrowed Rs.90000/- from him on 20-03-00 and for repayment of that amount issued Ext.P2, cheque dated 22-05-2000. That cheque was dishonoured on 25-05-2000 as account was closed as proved by Exts.P1 and P3 and evidence of PW.1, manager of the drawee bank. As per his evidence account was closed on 03-08-1999. Respondent No.1 issued notice to the petitioner on 08-06-2000 intimating dishonour and demanding payment of the amount. That notice was served on petitioner on 08-06-2000. Respondent No.1 gave evidence as PW.2 and testified to his case. According to the petitioner, he had given a signed blank cheque to one Ramesan in the year, 1997 in connection with a transaction with him and that cheque was misused.

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There is a contention in this revision that due execution of

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Crl.R.P.No.2204 of 2009 2

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the cheque is not proved. Regarding the transaction leading to execution of the cheque respondent No.2 gave evidence as PW.2. He asserted that petitioner borrowed Rs.90000/- from him on 20-03-00 and issued the cheque. Though it is contended by petitioner that he had no transaction with respondent No.2 and instead given signed blank cheque to Ramesan in the year, 1997 he neither produced any evidence, nor brought out circumstance to prove or probabilise that contention. It is admitted that Ext.P2 contained signature of petitioner. It is not disputed that the cheque was drawn on the account which petitioner had maintained with the drawee bank. Petitioner did not reply to the notice served on him. In the circumstances courts below have accepted the evidence of respondent No.2 and found in favour of due execution of the cheque. I do not find reason to interfere with that finding .

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It is contended by learned counsel that in so far as it is not shown that closure of account was on the request or due to any act of petitioner, dishonour of the cheque as account was closed does not come within the purview of the Sec.138 of the Act. Learned counsel has placed reliance on a decision of the Karnataka High Court in Nagaraja Upadhya V M Sanjeevan ( 2008 (1)KLD 543 (Kart.)).

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Sec.138 of the Act states thus:

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“Where any cheque drawn by a person on an account

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Crl.R.P.No.2204 of 2009 3

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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 provision of this Act, be punished with imprisonment for (a term which may be extended to two years), or with fine which may extend to twice the amount of the cheque, or with both.....”

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To constitute the offence it has to be shown that the cheque 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 exceeded the amount arranged to be paid. In this case, it is not disputed that the account was closed on 03-08-1999 and the case of respondent No.2 which the courts below accepted and which I found, required no interference is that petitioner borrowed the amount from respondent No.2 on 20-03-2000 and in repayment of that amount issued cheque dated 25-05-2000. In short, petitioner has issued the cheque after the account was closed on 03-08-1999. Question is whether in the absence of evidence that closure of the account was on the request or due to any act of the petitioner it can be

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Crl.R.P.No.2204 of 2009

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said that the dishonour attracted Sec.138 of the Act.

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The Supreme court in NEPC Micon Ltd V Magma Leasing Ltd. (AIR 1999 SC 1952) has stated that

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“Cheque is dishonoured as the amount standing to the credit of 'that account' was 'nil' at the relevant time apart from it being closed. Closure of the account would be an eventuality after the entire amount in the account is withdrawn. It means that there was no amount in the credit of 'that account' on the relevant date when the cheque was presented for honouring the same. The expression “the amount of money standing to the credit of that amount is insufficient to honour the cheque” is a genus of which the expression “that account being closed” is specie. After issuing the cheque drawn on an account maintained, a person if he closes 'that account' apart from the fact that it may amount to another offence, it would certainly be an offence under Sec.138 as there was insufficient or no fund to honour the cheque in ' that account'. Reading Secs. 138 and 140 together, it would be clear that dishonour of the cheque by a bank on the ground that account is closed would be covered by the phrase “the amount of money standing to the credit of that account is insufficient to honour the cheque”. When the cheque is returned by a bank with an endorsement 'account closed' i, it would amount of money standing to the credit of that account is insufficient to honour the cheque” as envisaged in Sec.138 of the Act.

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Crl.R.P.No.2204 of 2009

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As per the above decision closure of the account is an eventuality after the entire amount is withdrawn and it meant that there was no amount in the credit of that account. This court in Salim V Thomas (2004(1) KLT 816) considered the case where account was closed before the issuance of the cheque. Relying on the decision above referred this court held that in such situation also the dishonour attracted Sec.138 of the Act.

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In Nagaraja Upadhya's case referred Supra, the Karnataka High Court held that,

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“.... in any view of the matter, in view of the fact that on the date of issuance of the cheque, Ext.P1, ie., 03/06/1997, even according to the complainant, the account of the accused in the Bank had been closed and the account of the accused was closed on 25-061996 at the instance of the Bank and not at the instance of the accused, provision of Sec.138 of the Negotiable Instruments Act is not attracted in this case.....”

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It is not clear on what reasoning the view was taken that when the account was closed at the instance of the Bank, Sec.138 of the Act is not attracted. I have referred to the decision of the Supreme Court in NEPC Micon Ltd's case where it is held that “the expression “the amount of money standing to the credit of that account is insufficient

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Crl.R.P.No.2204 of 2009 6

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to honour the cheque” is a genus of which the expression “that account being closed” is specie”

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When an account is closed it meant that there is no money standing to the credit of the holder of that account in the bank concerned. Tannan's Banking-Law and practice in India (Vol-I) states that an account could be closed in the following circumstances:

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Notice given by the account holder to the banker of his intention to close the account.

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Closure by the bank in special cases.

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Death of the account holder

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Insanity of account holder

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Insolvency of account holder

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Order of the court

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Notice received by the banker of an assignment made by the account holder of his credit balance.

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When the account holder closes his account, the contract is terminated. The bank pays the balance amount in the bank to the account holder on his closing the account. After the closure of the account the relationship of the banker and account holder comes to an end and neither party is under any obligation to the other, except the banker's duty of secrecy. When the account holder closes his account, he is generally not bound to give any special notice of his intention to

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Crl.R.P.No.2204 of 2009 7

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close the account. But when the banker choses to close the account on its own, notice to the account holder is needed. The bank has to honour the cheques drawn by the account holder before he receives such notice. Even when the account is closed at the instance of the banker, the latter has to return the money standing to the credit of the account holder, and he is asked to return the unused cheque leaves suppled to him. When the account is closed due to the death of the account holder the balance amount in the account is paid to the nominee of the account holder and if there is no nomination, to the legal representative. In the case of closure of account due to insanity of the holder of the account, the balance amount is paid to the guardian if any appointed for the property of the account holder.

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Thus when the account is closed, be it at the instance of the banker or at the instance of the holder of the account, the balance amount if any standing to the credit of the holder of the account is to be returned to him or other person entitled to receive the same on his behalf. Hence if a cheque is issued whether before or after the account is closed and whether the closure is at the instance of the holder of the account or at the instance of the bank, the cheque cannot be honoured as there is no money standing to the credit of the drawer of the cheque and necessarily the cheque will be dishonoured for the reason that account is closed which meant that the drawer of the cheque has no money

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Crl.R.P.No.2204 of 2009 8

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standing to his credit in that bank. In the above view of the matter, I am unable to share the view expressed by the Karnataka High Court in Nagaraja Upadhya's case. So far as offence punishable under Sec.138 of the Act is concerned it makes no difference whether the account was closed at the instance of or due to any act of drawer of the cheque or at the instance of the bank. I am not referring to a situation where account was closed at the instance of the banker, there was sufficient fund in the account, the cheque was issued before the Banker served notice on the holder of the account regarding closure of account and the cheque was dishonoured as account was closed. As such it was not necessary for respondent No.1 to show that account was closed at the instance of petitioner. Dishonour of the cheque as account was closed, closure of the account being prior to issuance of the cheque notwithstanding attracted sec.138 of the Act. On going through the judgments under challenge I find no reason to interfere with the conviction of the petitioner.

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Learned magistrate sentenced the petitioner to undergo simple imprisonment for one year and directed payment of compensation of Rs.100000/- (Rupees One Lakh Only) to respondent No.2. Default sentence of imprisonment for three months was also provided. Learned Additional Sessions Judge while confirming conviction modified the sentence as fine of Rs.1,00,000/- and provided

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Crl.R.P.No.2204 of 2009 9

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default sentence of imprisonment of three months. Having regard to the nature of offence and object of legislation I do not find reason to interfere with the sentence as modified by the appellate court.

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Learned counsel requested that petitioner may be granted six months' time to deposit the fine in the trial court. Learned counsel says that petitioner, on account of financial difficulties is unable to raise the amount immediately. Having regard to the circumstances stated by learned counsel and the amount involved I am inclined to grant time till 30-12-09 to deposit fine in the trial court as ordered by the appellate court.

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Resultantly this revision fails and it is dismissed. Petitioner is granted time till 30-12-09 to deposit the fine in the trial court. Petitioner shall appear in the trail court on 31-12-09 to receive the sentence. Execution of warrant if any against the petitioner will stand in abeyance till 31-12-09.

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Sbna/

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THOMAS P JOSEPH, JUDGE

D.K.Rajendran v. P.K.Sajeendran

Case brief

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D.K.Rajendran v. P.K.Sajeendran

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