Goaplast Pvt. Ltd., Company ... vs Shri Chico Ursula Dsouza, ...
2002 Latest Caselaw 305 Bom

JUDGMENT

A.S. Aguiar, J.

1. Heard the learned Advocates. In this criminal appeal from order dated 18.10.1999, passed by the Judicial Magistrate, First Class, at Panaji, acquitting the accused of the offences under Section 138 of the Negotiable Instruments Act, 1881 (hereinafter called as "the Act") the main question that arises for consideration is whether Section 138 of the Act becomes applicable or not in case payment of post-dated cheque is stopped by the drawer instructing the Bank to do so between the date of issuance of the cheque and the date shown on the face of the cheque ?

2. In passing the impugned order acquitting the accused of the offence under Section 138 of the Act, the learned trial Judge has relied on the judgment in the case of Anil Kumar Sawhney v. Gulshan Rai, wherein the Supreme Court has observed as follows : ".... A "postdated cheque" is only a bill of exchange when it is written or drawn. It becomes a "cheque" when it is payable on demand. The postdated cheque is not payable till the date which is shown on the face of the said document. It will only become cheque on the date shown on it and prior to that it remains a bill of exchange under Section 5 of the Act."

The Apex Court in the said decision further held that a postdated cheque is not payable on demand till a particular date and it is not a cheque in the eyes of law till the date it becomes payable on demand. When a posted dated cheque is written or drawn, it is only a bill of exchange and as such, the provisions of Section 138 are not applicable to the said instrument.

3. To appreciate the controversy, reference may be made to the brief facts of the case.

The accused issued two postdated cheques dated 10.12.1994 and 10.4.1995 for Rs.40,000/- each. By letter dated 12.2.1993, the accused informed the complainant to treat the said cheques along with 8 other cheques as invalid for the reasons stated in the said letter. By letter dated 15.3.1993, the accused directed the Bank to stop payment of all the 10 cheques and further informed that he had already informed the complainant by letter dated 12.2.1993 not to present the said cheques. The said postdated cheques were presented for payment to the Bank and returned with the endorsement "present again". On 24.5.1995, a legal notice was sent to the accused under Section 138, proviso (b) of the Act. The notice was received by the accused on 26.5.1995. However, the accused did not make payment within 15 days. Hence, the complaint was filed on 7.7.1995.

4. Before the trial Court, Pw.1 Power of attorney holder on behalf of the complainant deposed that the accused was working as Managing Director of the complainant Company and when the accounts of the Company were checked, it was found that cash of Rs.7.17,171/- was withdrawn from the Bank. However, there was no cash in the petty cash box. The accused accepted his liability for Rs.4,00,000/- and accordingly, issued 10 cheques of Rs.40,000/- each. The said cheques were issued on 20.7.1992 which were spread over a period of three years, the first cheque being dated 10.1.1993 and the last dated 10.12.1995. The complaint pertains to the cheques dated 10.12.1994 and 10.4.1995 both of Rs.40,000/- each, which, on presentation, as stated above, were returned unpaid with the endorsement "present again". It is the case of the accused that he had issued the said 10 cheques under mistaken impression about his liability which impression was removed on his finding a note in the hand writing of the complainant from the records. It was only then he realised that he did not owe any money to the complainant since the record showed that one Rajan Kinnerkar was looking after the accounts of the Company directly under the complainant. Hence, the accused sent a letter to the complainant asking him not to deposit the cheques and also asked the Bank to stop payment.

5. Before the trial Court, learned Advocates for the respective parties relied upon various authorities on the question whether the two cheques involved in the case, were cheques covered under Section 138 of the Act. Learned Advocate for the accused placed reliance on the case of Anil Kumar Sawhney v. Gulshan Rai (supra); while learned Advocate for the respondents pointed out that the said Judgment is not applicable to the facts of the present case as the said decision is only an authority for what it actually decides. Reliance is placed by the learned Advocate on behalf of the complainant on the case of State of Orissa V. Sudhansu Sekhar Misra, , in which it is held : "A decision is only an authority for what it actually decides. What is of the essence in a decision is its ratio and not every observation found therein nor what logically follows from the various observations made in it".

It is the contention of the learned Advocate for the appellant that the trial Judge has not dealt with this objection. However, it is manifest from para 13 of the Judgment that the learned trial Judge has, in fact, considered the essence of Anil Kumar Sawhneys case as set out in para 12 of the said Judgment and, therefore, there is no substance in the ground taken up in the appeal memo. Before this Court, learned Advocate for the appellant has submitted that the Judgment of Apex Court in the case of Anil Kumar Sawhney (supra) relates to the point of limitation, namely whether the period of six months for the purpose of filing criminal complaint under Section 138 starts from the date when the cheque was received or from the date mentioned on the face of the cheque and that the Judgment in Anil Kumar Sawhneys case was not, therefore, applicable to the case in hand. Admittedly, the trial Court has not dealt with this limb of the objection. But the trial Court has considered Anil kumar Sawhneys case and the essence of the said judgment from which it is clear that the postdated cheque remains bill of exchange till the date shown on the cheque. Relying on the said observations of the Supreme Court in Anil Kumar Sawhneys case, the learned trial Judge has accepted the contention of the accused that the said cheques being bills of exchange and the same having been countermanded prior to the date on which they became payable on demand, Section 138 of the Act is not attracted. The learned trial Judge has held that the accused had issued the two cheques on 20.7.1992 and had stopped payment by his letter dated 12.2.1993 i.e. prior to the date when the cheques became payable on demand. When the cheques were presented for payment in May, 1995, the said cheques were not payable on demand. The accused stopped payment of the said cheques before they became payable on demand. Hence relying on the ratio in Anil Kumar Sawhenys case, the trial Court held that the said two cheques dated 10.12.94 and 10/4/95 were not cheques covered by provisions of Section 138, proviso (a) of the Act.

6. Learned Advocate for the appellant has contended that mere writing of letter to the Bank stopping payment does not take the case out of the purview of Section 138 of the Act and in support has referred to the case of Modi Cement Ltd., v. Kuchil Kumar Nandi, as well as in NEPC Micon Ltd., v. Magma Leasing Ltd., . The Judgment in Modi Cement Ltd., v. Kuchil Kumar Nandi (supra), was followed by the Supreme Court in NEPC Micon Ltd., v. Magma Leasing Ltd., (supra) wherein reference has been made to the decision of 3 Judge Bench of the Supreme Court in Modi Cements Ltd., V. Kuchil Kumar Nandi (supra) dealing with a similar contention and interpreting Section 138 of the Act. The Apex Court held :

"... In that case, the Apex Court referred to the earlier decisions in the case of Electronics Trade and Technology Development Corpn. Ltd., and K.K. Sidharthan V. T.P. Praveena Chandran and agreed that the legal proposition enunciated in the aforesaid decisions to the effect that if the cheque is dishonoured because of "stop payment" instruction to the bank, Section 138 would get attracted. It also amounts to dishonour of the cheque within the meaning of Section 138 when it is returned by the bank with the endorsement like (i) in this case, "referred to drawer"

(ii) "instructions for stoppage of payment" and stamped (iii) "exceeds arrangements". The Court observed that the object of bringing Section 138 on statute appears to be to inculcate faith in the efficacy of banking operations and credibility in transaction in business on negotiable instruments and to promote the efficacy of banking operations and to ensure credibility in transacting business through cheques. Thereafter, the Court disagreed with other views expressed in the aforesaid two cases and held that once the cheque is issued by the drawer a presumption under Section 139 must follow and merely because the drawer issues a notice to the drawee or to the bank for stoppage of the payment it will not preclude an action under Section 138 of the Act by the drawee or the holder of a cheque in due course. The Court further held that it will make Section 138 a dead letter if the contention that by giving instruction to the bank to stop payment immediately after issuing a cheque against the debt or liability, the drawer can easily get rid of the penal consequences notwithstanding the fact that deemed offence was committed. Finally the Court held that Section 138 of the Act gets attracted only when the cheque is dishonoured."

There can be no quarrel with the above proposition. However, the same applies to cheques and not to postdated cheques which from the date of issue of the cheque till the date of payment shown on the cheque, remain bills of exchange. Learned Advocate for the respondent has contended that Section 138 of the act is attracted only when a cheque is dishonoured on account of insufficiency of funds. Dishonour of bill of exchange will not attract the provisions of Section 138 unless such a bill of exchange is a cheque. Sections 5 and 6 of the Act define "bill of exchange" and "cheque" respectively, from which it is seen that the cheque is a particular type of bill of exchange. A cheque is a bill of exchange which contains an order to the banker and it is payable on demand. Any instrument which is not payable on demand or does not contain an order to a banker will, therefore, not be a cheque, but would fall within the definition of "bill of exchange" and dishonour of bill of exchange would not attract the provisions of Section 138 of the Act.

7. Therefore, it is necessary to find out what was the true nature, of the instruments dated 10.12.1994 and 10.4.1995 issued by the accused. As stated earlier, the instruments were not payable on demand and, therefore, they were not cheques but only bills of exchange. In Anil Kumar Sawhneys case which has been referred to and relied upon by the learned trial Judge, as well as in the subsequent Judgment of the Apex Court in the case of Ashok Yeshwant Babdave v. Surendra Madhavarao Nighojakar, , it is held :

"... When a post-dated cheque is written or drawn, it is only a bill of exchange and so long the same remains a bill of exchange, the provisions of Section 138 are not applicable to the said instrument."

8. Thus, it appears that the post-dated cheques dated 10.12.1994 and 10.4.1995 were mere bills of exchange and as long as they were bills of exchange, the provisions of Section 138 of the Act were in-applicable. By letter dated 15.2.1993, the accused expressly informed the complainant to treat the said cheques as invalid and had followed it up by letter dated 15.7.1993 to the Bank countermanding payment of the said cheques and, as a result of the countermanding of the said cheques, the said cheques stood cancelled. It is contended that the countermanding of bill of exchange is not prohibited under the Act and in fact Section 98(b) of the act itself refers to countermanding of bill of exchange in the context of giving notice of dishonour. Countermanding of bill of exchange is, therefore, an accepted possibility under the Act and once the bills of exchange are countermanded, they can never revive on or after the date of payment mentioned on the cheque and become cheques so as to attract Section 138 of the Act. In the present case, the countermanding of the post- dated cheques was done before they could become cheques and as a result of the countermanding or revocation or cancellation of the said bill of exchange, there was no cheque in existence which could be dishonoured so as to attract the provisions of Section 138 of the Act.

9. It is submitted by learned Advocate on behalf of the appellant that even if the said postdated cheques are held to be bills of exchange, even then the bill of exchange as per Section 5 of the Act is an unconditional undertaking to pay the amount. Section 138 of of the Act does not envisage a case of countermanding at all. The obligation attached to the negotiable instrument still subsists irrespective of any further letter written renouncing the liability to pay the amount in view of Section 118 of the Act. There is no provision in the Act authorising countermanding, so as to make negotiable instrument invalid. It is, therefore, contended that the letter dated 12.2.1993, Exhibit Pw.1/D written by the accused to the complainant and letter dated 15.3.1993, Exhibit 6 written to the bank to stop payment, are of no legal consequence, so long as the accused does not rebut the presumption arising under Section 118 of the Act.

10. The trial Judge has, in the impugned Judgment, correctly held that the accused has only countermanded the bills of exchange and as notice was given to the complainant way back in 1993 by letter dated 12.2.1993 to treat the said cheques as invalid, no cheques were in fact or in law, in existence as the same, while partaking the nature of bills of exchange, had been countermanded and which act of countermanding is permissible and recognized by Section 98(b) of the Act itself. In view of the fact that the said instruments dated 10.12.95 and 10.12.1995 were not cheques when they were presented for payment, the provisions of Section 138 are not attracted and the appellant cannot be deemed to have committed the offence.

11. Section 138 being a penal provision requires to be strictly construed. Since there were no cheques in existence which have been dishonoured, the provisions of Section 138 are not attracted. The trial Courts finding that the penal provisions under Section 138 are not attracted, does not mean that the accused is discharged of the liability under the postdated cheques that he had issued in favour of the complainant and in that connection, the submissions made by the learned Advocate on behalf of the appellant on the basis of Section 82, are wholly irrelevant. All that the trial Court has held is that since the post-dated cheques remained bills of exchange till they became payable on the date shown on the said cheques before which date they were countermanded, they ceased to be cheques as defined under Section 6 of the Act and hence the return of the said cheques by the Bankers unpaid, did not amount to dishonour of the cheques, so as to attract the deeming penal provision incorporated under Section 138 and, therefore, the question of rebutting the presumption under Section 139 did not arise. By the impugned order, the learned trial Judge has rightly held that the two cheques dated 10.12.1994 and 10.4.1995 were not cheques and, therefore, rightly acquitted the accused of the offence under Section 138 of the Act, without going into other aspects, namely whether the accused had committed an offence under Section 138 or whether he had rebutted the presumption under Section 139 of the Act.

12. In view of the above, the appeal stands dismissed and disposed of accordingly.