Dismissed

Anil Sachar and Anr. v. M/S Shree Nath Spinners Pvt. Ltd. & Ors.

Punjab & Haryana HC12 Dec 2008CRM-A/379/2007

Case brief

AI extract

What is this about?

The High Court dismissed appeals against a conviction under Section 138 of the Negotiable Instruments Act. The Apex Court principles regarding cheques issued by non-parties were acknowledged, but the complaint failed to specifically aver that the cheques discharged the liability of the first respondent, leading to exoneration.

What did the court decide?

Both Criminal Misc. petitions (A-379-MA and A-381-MA of 2007) dismissed.

Anil Sachar and Anr. Vs M/S Shree Nath Spinners… — Cheque Dishonour | Punjab & Haryana HC (2008)

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Criminal Misc. No.A-379-MA of 2007

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IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH

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Criminal Misc. No.A-379-MA of 2007 Date of decision : 16.12.2008

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Anil Sachar and another

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. ....Appellants

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Versus

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M/s Shree Nath Spinners Pvt. Ltd. And others

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...Respondents

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2. Criminal Misc. No.A-381-MA of 2007

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Anil Sachar and another

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. ....Appellants

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Versus

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M/s Shree Nath Spinners Pvt. Ltd. And others ...Respondents

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CORAM : HON'BLE MR. JUSTICE S. D. ANAND

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Present: Mr. Punit Kansal, Advocate for the appellants

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Mr. Yogesh Goel, Advocate for the respondents

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S. D. ANAND, J.

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The appellants filed a complaint under Section 138 of the Negotiable Instruments Act (hereinafter called as “the Act') against the respondents/accused on allegations which may be indicated as under:-

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M/s Shree Nath Spinners Pvt. Limited and M/s A.T. Overseas Limited are independent partnership concerns. There is an apparent and conceded commonness between the two inasmuch as both have same set of persons constituting the respective Board of Directors.

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Appellant/applicants are running business under the name and style of M/s Ratti Woollen Mills. Anil Sacher is one of its active partner who is competent to file that complaint. Respondent no.1 M/s Shree Nath Spinners Pvt. Limited placed an order for the supply of goods with the

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appellants. The supply was made and respondent no.1- M/s Shree Nath Spinners Pvt. Limited issued two cheques in favour of the appellantscomplainant through their sister concern M/s A.T.Overseas (respondent no.2) under signature of respondent-accused Munish Jain. The cheques bounced for want of sufficiency of funds. The appellants/complainant served a statutory notice upon the respondents/accused requiring them to pay up but notice did not evoke any favourable response. The appellants/complainant were thereby impelled to file the impugned (private) complaint under Section 138 of the Act.

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The learned Trial Magistrate, on appraisal of the evidence, exonerated the respondents/accused by observing that there was no contractual liability, as between the complainant and respondent no.2; that there was neither averment nor proof that any goods had been supplied by the complainants to respondent no.2 and that the cheques had been issued at the most as a measure of security.

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Learned counsel for the appellants/complainants argues that learned Trial Court did not, at all, appreciate the provisions of law by not noticing that a liability under Section 138 of the Act would arise when the cheque is issued by even a non party to the contract but for the discharge of a debit/liability. The attention of this Court, in support of the above averment, is invited towards the underlined portion of Section 138 of the Negotiable Instruments Act, which reads as under:-

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“ 138. Dishonour of cheque for insufficiency, etc. of funds

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in the account:- Whereby 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

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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 provisions 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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The plea raised thereby is that if the law makers wanted that the cheque must compulsively be issued by a party to the contract,(and under a liability) the provision would have stated so. The statute, the argument proceeds, consciously provided that a liability under Section 138 of the Act would arise even when a third party issued a cheque for the discharge, in whole or in part, of any debt or other liability.

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Learned counsel, in support of the view, draws sustenance from the judicial pronouncements reported as Devendra Kumar Rai Vs. Ram Gopal Rai 1999 (2) R.C.R. (Criminal) 217 and S.S.Ummul Habiba Vs. B. Rajendran 2005 (1) RCR (Criminal) 352.

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The plea is resisted by the learned counsel for the respondents-accused by relying upon M/s Ancient Investment Pvt. Ltd. Vs. Kotak Securities 1999 (4) R.C.R. (Criminal) 446.

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Before proceeding to appreciate the respective contentions of the parties, it would be appropriate to have a glance at the averments made in the course of the complaint, the evidence adduced in support thereof and also the statutory legal notice served on behalf of the petitioner upon the respondents.

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It is apparent from a perusal of the complaint that the appellants/complainant had made a precise averment ( in para 3 thereof) that “in order to discharge the liability of making the payment, the accused issued following two cheques in favour of the complainant through their sister concern M/s A.T. Overseas Limited i.e. accused no. 2 and the cheques were duly signed by Mr. Munish Jain one of its Director.” That position was reiterated in the course of the evidence at the trial. Likewise, in the course of para 2 of the impugned notice, all that was averred was that two respondents( M/s Shree Nath Spinners Pvt. Limited and M/s A.T. Overseas Limited) issued two relevant cheques “in order to discharge the liability of making the payment, you issued following two cheques in favour of my client through your sister concern”.

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Though in the context of the maintainability of proceedings under Section 138 of the Act viz-a-viz guarantor. This very short (though interesting) question came up for consideration before the Apex Court in ICDS Ltd. Vs. Beena Shabeer and another (2002) 6 Supreme Court Cases 426 , which observed as under:-

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“The words “any cheque” and “other liability” occurring in Section 138 are the two key expressions which stand as clarifying the legislative intent so as to bring the factual context within the ambit of the provisions of the statute. These expressions leave no manner of doubt that for whatever reason it may be, the liability under Section 138 cannot be avoided in the event the cheque stands returned by the banker unpaid. Any contra-interpretation would defeat the intent of the legislature. The High Court got carried away by the issue of guarantee and guarantor's liability and thus has overlooked the true intent and purport of Section 138 of the Act.”

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In that case, the following observations were made by the Apex Court:-

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“The language, however, has been rather specific as regards the intent of the legislature. The commencement of the section stands with the words “Where any cheque”. The above noted three words are of extreme significance, in particular, by reason of the user of the word “any”- the first three words suggest that in fact for whatever reason if a cheque is drawn on an account maintained by him with a banker in favour of another person for the discharge of any debt or other liability, the highlighted words if read with the first three words at the commencement of Section 138, leave no manner of doubt that for whatever reason it may be, the liability under this provision cannot be avoided in the event the same stands returned by the banker unpaid. The legislature has been careful enough to record not only discharge in whole or in part of any debt but the same includes other liability as well. This aspect of the matter has not been appreciated by the High Court, neither been dealt with or even referred to in the impugned judgment.”

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In the light of the above ruling rendered by the Apex Court, the only finding that can be recorded is that a cheque issued by even a nonparty to a contract would render the person issuing it liable to prosecution under Section 138 of the Act, if it had been issued for the discharge of any debt or other liability and the cheque bounced on account of insufficiency of funds which did not come to be paid by the person issuing the cheque even after the service of statutory notice had been effected upon it.

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However, even the adoption of that view does not solve the

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riddle for the appellants/complainant in the case before this Court. The reason therefor are as under:-

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In para 1 of the complaint, the appellants/complainant only averred that he is running a business under the indicated name and style. In para 2, the averment made was that the appellants/complainants had business dealing with respondent/accused M/s Shree Nath Spinners Pvt. Limited. In para 3, the averment made was that “the accused issued following two cheques in favour of the complainant through their sister concern M/s A.T. Overseas Limited i.e. accused no. 2 and the cheques were duly signed by Mr. Munish Jain one of its Director.” The averment in the context was that the cheques aforementioned were issued “in order to discharge the liability of making the payment”.

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As already indicated, this averment was reiterated in the course of the evidence adduced at the trial and also in the statutory notice. There was no averment that the indicated Director (who happened to be (the Director of both the concerns otherwise) issued that cheque in order to discharge the liability which respondent no.1/accused M/s Shree Nath Spinners Pvt. Limited had incurred. The averment that cheques were issued through its sister concern is neither here nor there. In order to attract the applicability of the provisions of Section 138 of the Act, it was incumbent upon the appellants/complainant to make a precise averment that the commonness of the Board of Directors between the two indicated concerns notwithstanding, the cheques under reference had been issued by the indicated Director for discharge of the liability incurred by the other concern. A loose interpretation, for fixture of criminal liability, cannot be said to be justified in the peculiar facts and circumstances of the case.

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It can, thus, be safely culled out from the above discussion that though the legal proposition expounded on behalf of the

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appellants/complainants deserves affirmation, it does not advance its case for invalidation of the impugned finding of exoneration.

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The plea on behalf of the appellants/complainants being completely denuded of merit, both the petitions are ordered to be dismissed.