Reyaz Azad vs Mohammad Irfan
2022 Latest Caselaw 1821 j&K/2

IN THE HIGH COURT OF JAMMU & KASHMIR AND LADAKH
                   AT SRINAGAR


                                           Reserved on: 13.10.2022
                                           Pronounced on:21.10.2022


                        CRM(M) No.277/2021

REYAZ AZAD                                     ... PETITIONER(S)
                  Through: - Mr. Wajid Haseeb, Advocate

Vs.

MOHAMMAD IRFAN                               ...RESPONDENT(S)
                  Through: - Mr. M. Ashraf Bhat, Advocate.

CORAM:      HON'BLE MR. JUSTICE SANJAY DHAR, JUDGE

                            JUDGMENT

1) The petitioner has challenged complaint filed by

respondent against him for offence under Section 138 of

Negotiable Instruments Act (for short NI Act), which is

pending before the Court of Judicial Magistrate, 1st Class

(City Munsiff), Srinagar.

2) As per the impugned complaint, respondent/

complainant had a business transaction with the

petitioner. It is alleged that the petitioner issued six

cheques for liquidating the liability towards the

respondent/complainant. The details of the cheques are

as under:

     Cheque No. Dated               Amount               Bank
     673430     01.02.2019          4,00,000/            YES Bank
     619635     26.03.2019          1,50,000/            YES Bank
     619636     26.03.2019          1,50,000/            YES Bank
     175520     04.01.2019          3,00,000/            AXIS Bank
     053177     02.03.2019          12,00,000/           AXIS Bank
     053178     04.05.2019          4,50,000/            AXIS Bank

3) It is alleged that the aforenoted cheques, when

presented before the banker for their encashment, were

dishonoured for the reasons insufficiency of funds/

payees name required/account frozen by virtue of six

separate memos of dishonour. The respondent/

complainant thereafter served a notice of demand for

payment of total amount of Rs.26.50 lacs, which was

sent through registered post on 10th May, 2019. Even

after waiting for the prescribed period, the petitioner/

accused did not pay the cheque amount to the

respondent/complainant, as a result whereof the

impugned complaint came to be filed before the learned

trial Magistrate.

3) Vide order dated 25.06.2019, the learned trial

Magistrate issued process against the petitioner. After

recording his plea, another order came to be passed by

the learned trial Magistrate on 23.07.2021/29.07.2021,

whereby interim compensation in terms of Section 143-A

of the NI Act to the extent of 20% of the total cheque

amount was awarded in favour of the respondent.

4) The petitioner has thrown challenge to the

complaint as well as the orders dated 25.06.2019 and

23.07.2021/29.07.2021 by urging several grounds. It has

been contended that some of the cheques, which are

subject matter of the impugned complaint, were not

presented for encashment within the period of their

validity, as such, the impugned complaint could not have

been lodged on the basis of these stale cheques. In this

regard, reference has been made to cheques bearing

No.673420 dated 01.02.2019 and 175520 dated

04.01.2019. It has been further contended that the order

whereby the interim compensation has been awarded in

favour of respondent/complainant bears the date

23.07.2021 when, in fact, on the said date, the learned

Presiding Officer was on leave. According to the

petitioner, this exhibits lack of application of mind on the

part of learned trial court and renders the impugned

order illegal. It has also been contended that the

impugned order awarding interim compensation in

favour of respondent/complainant is devoid of any

reasons and, as such, the same deserves to be quashed.

5) I have heard learned counsel for the parties and

perused the material on record including the record of

the trial court.

6) The first and foremost ground that has been urged

by learned counsel for the petitioner is that some of the

cheques which are subject matter of the impugned

complaint were stale and, as such, prosecution on the

basis of those cheques could not have been initiated.

7) As already noted, reference has been made to

cheques dated 01.02.2019 and 04.01.2019. In this

regard, a perusal of the record shows that cheque dated

04.01.2019 for an amount of Rs.3.00 lacs drawn on Axis

Bank, Srinagar, has been presented for encashment on

2nd May, 2019. The validity of this cheque is three

months from the date of its issue. Thus, the contention of

the petitioner that this cheque had become stale prior to

its presentation for encashment before the banker

appears to be well-founded.

8) So far as the cheque dated 01.02.2019 for an

amount of Rs.4.00 lacs drawn on YES Bank, Srinagar, is

concerned, the same has been presented for encashment

on 2nd May, 2019. The validity of this cheque is also three

months from the date of its issue.

9) As per Section 24 of the NI Act, the day of the date

of presentment for acceptances of a bill of exchange has

to be excluded. When we exclude the day of presentment

of cheque dated 01.02.2019 for its encashment, it

appears that the same has been presented within the

term of its validity. Thus, it cannot be stated that the

said cheque had become stale. There is no dispute about

the validity of other four cheques which are subject

matter of the impugned complaint.

10) The question that falls for determination is as to

what would be the effect on the fate of the prosecution

under Section 138 of NI Act in a case where one of the

several cheques which are subject matter of the

complaint had become stale. For finding an answer to

this question, we need to analyze the facts relevant to the

instant case.

11) The respondent/complainant has launched

prosecution for offence under Section 138 of NI Act by

filing a single complaint against the petitioner/accused in

respect of six dishonoured cheques. As per the provisions

contained in Section 138 of the NI Act, in order to

constitute an offence under the said provision, it has to

be shown that the accused has drawn a cheque in favour

of the complainant on an account maintained by him for

discharge of any debt or other liability. Secondly, the said

cheque must have been returned unpaid, either because

of the amount of money standing to the credit of the

account of the accused is insufficient to honour the

cheque or it exceeds the amount arranged to be paid. It

has to be further shown that the cheque has been

presented with the bank for its encashment within a

period of six months or within the period of its validity,

whichever is earlier. The third necessary condition for

launching a prosecution against the accused in a cheque

bounce case is that the complainant must make a

demand for the payment of the cheque amount by giving

a notice in writing to the accused within thirty days of

receipt of memo of dishonour from the bank and lastly it

has to be shown that in spite of the receipt of notice of

demand, the accused failed to make the payment of

cheque amount within fifteen days of receipt of the

notice.

12) Unless all the aforesaid conditions are satisfied, the

cause of action for launching a prosecution in a cheque

bounce case would not arise. Mere dishonor of cheque by

the banker of the accused does not constitute an offence

under Section 138 of NI Act. It is only if the accused fails

to pay the amount of cheque despite having received the

notice of demand that cause of action for launching

prosecution against him arises in favour of the

complainant.

13) Thus, even though in the instant case, the

petitioner is alleged to have drawn six cheques in favour

of the respondent/complainant on different dates which

have been dishonoured, but because a single demand

notice has been served by respondent/complainant upon

the petitioner, a single cause of action has arisen in

favour of the respondent/complainant for launching

prosecution against the petitioner. Therefore, a single

complaint in respect of all the six cheques is definitely

maintainable against the petitioner/accused. Just

because one of the cheques, which is subject matter of

the impugned complaint, was stale and prosecution

could not have been launched on its basis, it cannot be

stated that the complaint is not maintainable. This is so

because other five cheques have been presented for

encashment before the banker within the period of their

validity and after their dishonor, a single notice of

demand has been issued by the respondent/complainant

to the petitioner/accused, thereby giving cause of action

to respondent/complainant against the petitioner/

accused.

14) The issuance of a number of cheques by the

petitioner/accused in favour of the respondent/

complainant has to be considered as a bundle of facts

giving rise to a cause of action. If one of the facts alleged

is not found to be correct, it does not make the whole

complaint false nor does it defeat the cause of action that

has arisen in favour of the respondent/ complainant

against the petitioner/accused. Thus, merely because

one of the cheques, which is subject matter of the

impugned complaint, had become stale before its

presentation for encashment would not offer a ground for

quashment of the impugned complaint as a whole.

However, the impugned complaint has to be restricted

only to the cheques that were valid as on the date of their

presentation for encashment. This aspect of the matter

has to be borne in mind by the learned trial Magistrate

while trying the complaint.

15) The second ground that has been urged by learned

counsel for the petitioner is regarding validity of order

dated 23.07.2021/29.07.2021. It has been contended by

learned counsel for the petitioner that on 23.07.2021, the

learned Presiding Officer was on leave and, as such, the

fact that order bears the date 23.07.2021 shows not only

non-application of mind but it also smacks of tampering

of the record.

16) A perusal of the minutes of the proceedings reveals

that on 07.07.2021, the learned Presiding Officer heard

the arguments on the application for grant of interim

compensation and reserved the matter for orders to be

announced on 23rd July, 2021. It is also revealed that on

the said date, the learned Presiding Officer was on leave.

A perusal of order dated 29.07.2021, which was the next

date fixed in the case, shows that the order impugned

has been announced on the said date. It appears that the

learned Magistrate has inadvertently skipped to change

the date in the order and while announcing the order on

29.07.2021, the date has been recorded as 23.07.2021.

This has resulted in confusion in actual date of the

impugned order. It appears to be an inadvertent error

and not a deliberate one. For this inadvertent error, the

impugned order is not rendered illegal.

17) Next it has been urged by learned counsel for the

petitioner that the impugned order has been passed by

the learned Magistrate without giving reasons as to why

interim compensation to the tune of 20% of the total

cheque amount is being passed in favour of the

respondent/complainant.

18) In order to test the merits of the contention of the

learned counsel, the provisions of Section 143-A of the NI

Act are required to be noticed. The said provision has

been inserted by the Act of 20 of 2018 in the principal

Act with effect from 01.09.2018. It reads as under:

"143A. Power to direct interim compensation.--(1) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), the Court trying an offence under section 138 may order the drawer of the cheque to pay interim compensation to the complainant--

(a) in a summary trial or a summons case, where he pleads not guilty to the accusation made in the complaint; and

(b) in any other case, upon framing of charge. (2) The interim compensation under sub-section (1) shall not exceed twenty per cent. of the amount of the cheque. (3) The interim compensation shall be paid within sixty days from the date of the order under sub-section (1), or within such further period not exceeding thirty days as may

be directed by the Court on sufficient cause being shown by the drawer of the cheque.

(4) If the drawer of the cheque is acquitted, the Court shall direct the complainant to repay to the drawer the amount of interim compensation, with interest at the bank rate as published by the Reserve Bank of India, prevalent at the beginning of the relevant financial year, within sixty days from the date of the order, or within such further period not exceeding thirty days as may be directed by the Court on sufficient cause being shown by the complainant. (5) The interim compensation payable under this section may be recovered as if it were a fine under section 421 of the Code of Criminal Procedure, 1973 (2 of 1974). (6) The amount of fine imposed under section 138 or the amount of compensation awarded under section 357 of the Code of Criminal Procedure, 1973 (2 of 1974), shall be reduced by the amount paid or recovered as interim compensation under this section.

19) A bare perusal of the aforesaid provision makes it

clear that a Court trying a complaint for offence under

Section 138 of NI Act has discretion to order the drawer

of the cheque to pay interim compensation to the

complainant. This amount of compensation has not to

exceed 20% of the amount of the cheque. Thus, grant of

interim compensation is a discretionary power which has

to be exercised by a Magistrate trying a complaint under

Section 138 of NI Act and such order has to be based on

reason and logic.

20) Although no guidelines for grant of interim

compensation have been laid down in Section 143-A of

the NI Act, yet it is a settled law that whenever a

discretionary power is to be exercised by a Court, the

same has to be exercised on well-recognized principles

supported by reasons. The court has to spell out the

reasons for grant of interim compensation in favour of

the complainant and it has also to justify in its order with

reasons the quantum of interim compensation that is

being awarded by him as the said quantum can vary

from 1% to 20% of the cheque amount.

21) It is not that just because the accused has put in

his appearance before the Magistrate and has pleaded

not guilty to the charges that the Magistrate has to pass

an order of interim compensation in a routine and

mechanical manner. The word "may" appearing in

Section 143-A of the Act gives discretion to the trial court

to direct the accused to pay interim compensation to the

complainant. As already noted, the exercise of discretion

must always be supported by reasons failing which

exercise of discretion will become arbitrary. Some of the

reasons for granting interim compensation may be that

the accused absconds and avoids to appear before the

Court despite service or there is overwhelming material

on record to show that the accused is liable to pay an

enforceable debt or that the accused is guilty of

protracting the proceedings by avoiding to cross-examine

the witnesses or producing his evidence. There can be so

many other reasons for a Magistrate to grant interim

compensation in favour of the complainant but these

reasons have to be recorded in the order so that the

validity of the order is tested by the superior court if and

when such an order is challenged.

22) Coming to the impugned order, a perusal thereof

reveals that the learned Magistrate has, after narrating

the allegations made in the complaint, simply awarded

the interim compensation of Rs.5,30,000/, which

constitutes 20% of the total cheque amount, in favour of

the complainant. The order impugned is devoid of any

reasons and no discussion is made in the impugned

order as to why interim compensation is being awarded.

Simply narration of allegations made in the complaint

does not make an order under Section 143-A of the NI

Act a reasoned one. The fact that the learned Magistrate

has included even the amount of stale cheque while

calculating the cheque amount shows non-application of

mind on his part. Therefore, the said order is not

sustainable in law.

23) For the foregoing reasons, the petition is partly

allowed and the impugned order dated 23.07.2021/

29.07.2021 is quashed with a direction to the learned

Magistrate to pass a fresh order in the light of the

observations made hereinbefore after hearing the

parties. It is further provided that the proceedings in the

impugned complaint against the petitioner shall continue

but the impugned complaint shall remain confined to

only five cheques that have been presented for

encashment within the period of their validity.

24) A copy of the order be sent to the learned Magistrate

for information and compliance.

(SANJAY DHAR) JUDGE

Srinagar, 21.10.2022 "Bhat Altaf, PS"

Whether the order is speaking: Yes/No Whether the order is reportable: Yes/No