Delhi High Court

M/S The Jammu & Kashmir Bank vs Abhishek Mittal on 26 May, 2011

Author: A. K. Pathak

         IN THE HIGH COURT OF DELHI: NEW DELHI

+             CRL. A. No. 294/2011

%             Judgment decided on: 26th May, 2011

M/s THE JAMMU & KASHMIR BANK                        ....Appellant

                           Through:   Mr. N.S. Ahluwalia and
                                      Mr. Brijesh Choudhary,
                                      Advs.
                           Versus
ABHISHEK MITTAL                                   ...Respondent

                           Through:   Mr. A.K. Tiwari, Adv.
Coram:
HON'BLE MR. JUSTICE A.K. PATHAK

       1. Whether the Reporters of local papers                 No
          may be allowed to see the judgment?

       2. To be referred to Reporter or not?                    No

       3. Whether the judgment should be                        Yes
          reported in the Digest?

A.K. PATHAK, J. (Oral)

1. This appeal is directed against the judgment dated 16th

August, 2010 passed by the Trial Court whereby respondent

has been acquitted of the offence under Section 138 of the

Negotiable Instruments Act, 1881 (for short hereinafter

referred to as „the Act‟).

2. It is the case of the appellant that M/s Akansha

Machine Tools, a sole proprietorship firm of respondent‟s

father, was enjoying temporary overdraft facility from the

appellant. Shri Jitender Sharma was the then Branch

Manager of the appellant. Respondent, in discharge of liability

of M/s Akansha Machine Tools, issued three cheques bearing

numbers 224600 dated 06.03.2006 for `2,25,000/-, 224598

dated 10.03.2006 for `1,00,000/- and 224599 dated

06.03.2006 for `1,00,000/- all drawn on Bank of Punjab Ltd.

Noida, U.P., in favour of appellant. On presentation, cheques

were returned dishonored for the reason "insufficient funds".

The amount involved in the cheques was not paid by the

respondent within the statutory period despite service of

demand notice. Thus, respondent had committed offence

under Section 138 of the Act.

3. At the pre-summoning evidence appellant examined Mr.

Jitender Sharma as CW1. He tendered his evidence by way of

affidavit. Trial Court took cognizance of offence and

summoned the respondent. Notice under Section 251 Cr.P.C.

was framed against him. He pleaded not guilty and claimed

trial. During the trial, Shri Devender Kumar Magotra,

Authorized Representative of appellant, was examined as

PW1. He filed his affidavit in his examination-in-chief,

reiterating the averments made in the complaint. He has

fully supported the appellant‟s version. He proved the

cheques in question as Ex. PW1/2 to PW1/4. Cheque

returning memos have been proved as Ex. PW1/5 to PW1/7.

Demand notice was proved as PW1/8. Postal receipts were

proved as PW1/9 and PW1/10. This witness was cross-

examined by the respondent‟s counsel at length.

4. After appellant concluded its evidence, statement of

respondent under Section 313 Cr.P.C. was recorded by the

Trial Court on 31st July, 2010. So far as issuance of cheques

in question are concerned, respondent stated that he was

having personal relations with Shri Jitender Sharma and,

therefore, had given the cheques in question to him in good

faith. He admitted his signatures on these cheques. However,

he took a plea that particulars in the said cheques were not

filled up by him. He also admitted that the cheques had been

returned dishonored due to the reason "insufficient funds".

In answer to a question that whether he wanted to lead any

evidence in his defence, he replied in negative.

5. Trial Court has taken note of the fact that neither the

issuance of cheques nor its dishonorment for the reason

"insufficient funds" was in dispute, inasmuch as, the cheque

amount had not been paid despite service of notice. At the

same time, it has returned a finding that ingredients of

offence under Section 138 of the Act were not attracted since

the cheques had not been issued by the respondent towards

discharge of his personal liability. This view has been taken

by the Trial Court in para nos. 8 and 9 of the judgment which

reads as under:-

"8. One of the ingredients of offence u/s 138 NI Act is the legal liability of the accused to pay the cheque amount. CW/1/AR of complainant in his cross

examination has admitted that the accused was not having any legal liability towards the complainant. Therefore, in view of provisions of Section 138 NI Act, the complainant has not fulfilled the requirement of Section 138 NI Act.

9. In view of my above mentioned observations, this Court is of the opinion that the accused did not any have legally enforceable liability to pay any amount to the complainant, therefore, no offence u/s 138 NI Act has been committed by the accused. In view of my above mentioned findings, accused stands acquitted."

6. In this case, issuance of cheque, its presentation and

dishonorment are not in dispute, inasmuch as, the same has

been duly proved on the basis of cogent evidence. In his

statement under Section 313 Cr.P.C., respondent has

admitted having handed over the cheques to Shri Jitender

Sharma with whom he has alleged that he was having friendly

relations. It may be noted here that Shri Jitender Sharma

was Branch Manager of the appellant. The plea taken by the

respondent that the blank cheques had been given by him is

of no consequence. Respondent has admitted his signatures

on the cheques. There is no law that a person drawing the

cheque has to necessarily fill it up in his own handwriting.

Respondent has not denied his signatures on the cheques.

Once he has admitted his signatures on the cheques he

cannot escape his liability on the ground that the same has

not been filled in by him. When a blank cheque is signed and

handed over, it means that the person signing it has given

implied authority to the holder of the cheque, to fill up the

blank which he has left. A person issuing a blank cheque is

supposed to understand the consequences of doing so. He

cannot escape his liability only on the ground that blank

cheque had been issued by him. As regards handing over of

the cheques to the appellant is concerned, same is not in

dispute since respondent has admitted that he had handed

over the cheques to Shri Jitender Sharma, who happens to be

Branch Manager of the appellant at the relevant time.

Cheques had been drawn in favour of "J & K Bank Ltd. A/c

Akansha Machine Tools". This shows that cheques had been

issued to discharge liability of the said firm.

7. Once issuance of the cheque has been admitted or

stands proved, a presumption arises in favour of the holder of

the cheque that he had received the cheque of the nature

referred to under Section 138 of the Act for the discharge, in

whole or in part of any debt or any other liability. This

presumption arises in favour of the holder under Section 139

of the Act which envisages that it shall be presumed unless

the contrary is proved that the holder of a cheque received the

cheque of the nature referred to under Section 138 of the Act

for discharge, in whole or in part of any debt or any other

liability. Of course, this presumption is a rebuttable

presumption and same can be rebutted only by the person

who had drawn the cheque. Accordingly, a presumption

arises in favour of the appellant and against respondent that

the cheque had been issued in discharge of any debt or other

liability. It was for the respondent to rebut this presumption

which he has miserably failed to do so.

8. Trial Court has acquitted the respondent solely on the

ground that the cheques had not been issued by him in

discharge of his any legally enforceable liability. Trial Court

was carried away from the answers given by the PW1, in his

cross-examination, that the respondent had no relations with

M/s Akansha Machine Tools nor was he the actual recipient

of the loan; that he did not have any personal liability to pay

any amount to the appellant. Thus, sole question which

needs to be redressed is whether the ingredients of Section

138 of the Act would get attracted even in such cases where

drawer has issued a cheque not in discharge of his own

liability but in order to discharge any debt or other liability of

someone else.

9. Section 138 of the Act reads as under:-

"138. Where 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 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 extend to two years, or with fine which may extend to twice the amount of the cheque, or with both:

Provided that nothing contained in this section shall apply unless-

(a) The cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier.

(b) The payee or the holder in due course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving a notice, in writing, to the drawer, of the cheque, within thirty days of the receipt of information by him from the bank regarding the return of the cheques as unpaid, and

(c) The drawer of such cheque fails to make the payment of the said amount of money to the payee or, as the case may be, to the holder in due course of the cheque, within fifteen days of the receipt of the said notice.

Explanation: For the purpose of this section, "debt or other liability" means a legally enforceable debt or other liability."

10. The language employed in Section 138 of the Act makes

it ample clear that this Section does not confine its operation

to the cases where cheque had been issued by a person in

favour of other in discharge of his own personal debt or other

liability. Section 138 of the Act is attracted in relation to

cheque issued by a person to another for discharge of any

debt or other liability. The explanation further specifies that

such debt or other liability shall be legally enforceable. This

Section provides for discharge of debt or other liability by a

person even if it is a debt or other liability of another.

11. In ICDS Ltd. Vs. Beena Shabeer & Another (2002) 6

SCC 426, cheque issued by the guarantor to discharge the

debt of principal borrower was in question. High Court held

that being a cheque from the guarantor it could not be said to

have been issued for the purpose of discharging any debt or

liability. Supreme Court while reversing this finding held as

under:

"10. 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 use 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.

11. The issue as regards the coextensive liability of the guarantor and the principal debtor, in our view, is totally out of the purview of Section 138 of the Act, neither the same calls for any discussion therein. The language of the statute depicts the intent of the law-makers to the effect that wherever there is a default on the part of one in favour of another and in the event a

cheque is issued in discharge of any debt or other liability there cannot be any restriction or embargo in the matter of application of the provisions of Section 138 of the Act. "Any cheque" and "other liability" 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. Any contra- interpretation would defeat the intent of the legislature. The High Court, it seems, 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. The judgments recorded in the order of the High Court do not have any relevance in the contextual facts and the same thus do not lend any assistance to the contentions raised by the respondents."

12. In Komalam Gopi vs. T.K. Mohankumar and Anr.

MANU/KE/0504/2008, wife had issued a cheque in favour of

payee in discharge of liability of her husband. Plea taken by

her that ingredients of offence under Section 138 of the Act

were not attracted, since she had not issued the cheque in

discharge of her liability, was rejected. It was held as under:-

"3..........It needs to be noticed that Section 138 of the N.I. Act comes into play in relation to cheques issued by a person to another person for the discharge, in whole or in part, of any debt or other liability. The explanation at the foot of that section provides that "debt or other liability" means a legally enforceable debt or other liability. Neither does that explanation, nor the charging provision in Section 138 confines its operation to be only in relation to cases where cheques are issued in discharge of debt or liability of the person issuing the cheque. The law provides for discharge of debt by a person, even if it s a debt of another. Such transactions, where one

discharges debt of another, is an instance of discharge of debt or other liability. If „A‟ discharges a legally enforceable debt or other liability of „B‟, by making a payment to „C‟, then, if that is done by „A‟ issuing a cheque to „C‟, it becomes a cheque issued in discharge of the legally enforceable debt or other liability of „B‟ and is therefore, debt or other liability for the purpose of Section 138 of the N.I. Act. So much so, the arguments on behalf of the accused that she issued the cheque for discharge of liability of her husband DW4 would not save her from the penal provision of Section 138 of the N.I. Act."

13. It is, thus, clear that for whatever reason if a cheque is

drawn on an account maintained by a drawer with its bank in

favour of any person for the discharge of "any debt or other

liability" the ingredients of offence under Section 138 of the

Act gets attracted in case the cheque is returned dishonored

for insufficiency of funds and the cheque amount remains

unpaid within the statutory period, despite service of notice.

Legislature has been careful enough to record not only

discharge in whole or in part of any debt but the same also

includes other liability as well. The words „any‟ and „other

liability‟ used in the Section assumes importance in the sense

that if a cheque is issued by a person to discharge any debt or