Recently, the Jammu & Kashmir and Ladakh High Court has reiterated that the Supreme Court has interpreted the provisions contained in Section 138 of the NI Act in a liberal manner so as to achieve the object for which the said provision has been enacted.
A single-judge bench of Justice Sanjay Dhar in this view observed that not only the cases of dishonour of cheques on account of insufficiency of funds or on account of exceeding of arrangement but the cases involving dishonour of cheques on account of "stop payment", "account closed" and "Signature Mismatch" also fall within the ambit of offence under the provision of Section 138 NI Act.
Brief Facts of the Case ;
The petitioner in the present case had challenged the complaint filed by the respondent against him for offence under Section 138 NI Act on two grounds, one that the complaint and the order of issuing process are not legally tenable as the dishonour of cheque was due to difference in drawer’s signatures and, as such, offence under Section 138 of NI Act is not made out against the petitioner. The other ground that has been urged by the petitioner was that the cheque in question was given by the petitioner to the respondent as a security pursuant to a memorandum of understanding executed by the parties on 30th November, 2017, and not in discharge of any legally outstanding amount or in discharge of any debt.
The cheque was returned unpaid by the concerned bank with the remarks “funds insufficient and drawer’s signature differs”. The respondent served a legal notice of demand upon the petitioner and when the petitionerfailed to make the payment within the statutory period, the complaint, which is subject matter of this petition, came to be filed before the trial Magistrate. The learned Magistrate, after recording the preliminary evidence, took cognizance of the offence and issued process against the petitioner.
The Court determined first question for its consideration was whether dishonor of a cheque for the reason that there was difference of signatures appearing on the cheque constitutes an offence under Section 138 of the NI Act?
The Court at the outset noted that an offence under Section 138 of the NI Act is constituted when a 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 of any debt, is returned by the bank unpaid either because 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.
It opined that although at first blush, it may appear that only in two
situations that Section 138 NI Act is attracted, the provision has been
interpreted by the Supreme Court in a number of judgments in a manner so
as to include within its ambit even the cases where the dishonor of
cheque has taken place for theTo substantiate, it referred to Nepc Micon Limited & Ors Vs. Magma Leasing Limited, 1999 Latest Caselaw 167 SC wherein the Supreme Court rejected the contention that Section 138 of the NI Act has to be interpreted strictly or in disregard of the object sought to be achieved by the Statute.
Relying upon its earlier judgment in the case of Kanwar Singh Vs. Delhi Administration, 1964 Latest Caselaw 169 SC and Swantraj & Ors Vs. State of Maharashtra, 1974 Latest Caselaw 21 SC, the Court held that a narrow interpretation of Section 138 would defeat the legislative object underlying the said provision. The Supreme Court relied upon its own decision in State of Tamil Nadu Vs. M. K Kandaswami, 1975 Latest Caselaw 128 SC, and it was observed that while interpreting a penal provision which is also remedial in nature a construction that would defeat its purpose or have the effect of scrapping it from the statute book, should be avoided and that if more than one constructions are possible, the Court should choose to adopt construction that would preserve the workability and efficacy of the Statute and avoid an interpretation that would render the provision sterile. The Court, accordingly, held that when a cheque is returned by the banker of a drawer with the comments “account closed” the same would constitute an offence under Section 138 of NI Act.
The Court also mentioned M/S. Modi Cements Ltd. Vs. Shri Kuchil Kumar Nandi, 1998 Latest Caselaw 138 SC. reasons other than the two primary ones.
On second question of consideration as to whether stop payment instructions, which result in dishonor of a cheque, would amount to an offence under Section 138 of the NIA Act, the Court mentioned SC ruling in M/S M. M. T. C. Ltd. & ANR Vs. M/S Medchl Chemicals & Pharma P. Ltd. & ANR, 2001 Latest Caselaw 611 SC wherein it was held that same would come within the ambit of definition of offence under Section 138 of the NIA Act.
"In the face of foregoing discussion, it is clear that the Supreme Court has interpreted the provisions contained in Section 138 of the NI Act in a liberal manner so as to achieve the object for which the said provision has been enacted. Not only the cases of dishonour of cheques on account of insufficiency of funds or on account of exceeding of arrangement but the cases involving dishonour of cheques on account of “stop payment” and “account closed” have also been brought within the ambit of offence under the aforesaid provision", the Court observed.
The Court went on to discuss various case laws under Section 138 NI Act.
CASE TITLE: MOHAMMAD SHAFI WANI vs. NOOR MOHAMMAD KHAN
CASE DETAILS: CRM(M) No.308/2021
CORAM: Justice Sanjay Dhar
Read Judgement;
Social media is bold.
Social media is young.
Social media raises questions.
Social media is not satisfied with an answer.
Social media looks at the big picture.
Social media is interested in every detail.
social media is curious.
Social media is free.
Social media is irreplaceable.
But never irrelevant.
Social media is you.
(With input from news agency language)
If you like this story, share it with a friend!
We are a non-profit organization. Help us financially to keep our journalism free from government and corporate pressure
0 Comments