A Court in Delhi in, Satish Kumar Jain v. M/s Pioneer Paper Agency held that liability under Section 138 of the Negotiable instruments Act will be attracted even if the reason for the dishonour of cheque is given as ‘account blocked’. The court also held that in the present case the accused has no intention to pay the amount he was liable to pay.
Facts
The complainant is in the business of papers, boards etc. Accused used to buy products from the complainant and used to make ad interim payments by cheques. Accused made his last payment on 30/07/2014 thereby enhancing the liability of the accused towards the complainant to Rs.1,20,57,398/-. The complainant filed a ledger account. For discharge, the accused issued 9 cheques and all of them were dishonored and for reason, account blocked on 15/11/2014. Complainant served legal notice 11/12/2014 intimating the accused about dishonour and gave 15 days to pay the amount and the accused failed to do the same upon which present complaint was filed.
Accused’s Contention
The accused said that the cheques in question were given as advance payment for goods to be provided in July 2014 and the same goods have defected and therefore the cheque was dishonoured. It was said that they entered into a settlement in December 2014 to return the defective goods and liabilities were settled at 40 lacs and a firm made a payment of the same in compliance of the settlement. They also claimed that the defective goods were not lifted by the complainants and upon asking to return the cheque of 40lacs they misused it.
Liability under Section 138
The complainant by showing relevant documents tried to prove that the ingredients of liability under Section 138 are met.
The accused accepted that the cheques in question were signed by them, which led to a presumption that it was made for discharging a legally sustainable debt under Section 118(a) and 139 and shifted the liability to the accused to disprove.
No liability defence by accused
The accused reiterated that the cheques in question were paid as advance. Further they claimed that no notice was received from the complainant and the complainant’s son was not authorised to give testimony. Further the ‘account blocked’ reason does not fall under the ambit of Section 138.
Complainant’s Reply
Offence under section 138 N.I. Act is complete only when the accused is unable to make payment before the expiry of 15 days’ notice period. He contends that there was nothing to stop the accused from making payment of the cheque amount to the complainant after receiving the notice under section 138 N.I. Act. There was no balance in the account of the accused and thus it implies that he had no intention to pay the same and is trying to evade liability.
Court’s Finding
The perusal of the testimonies showed that the accused had intentionally dishonoured the cheque due to the dispute of defect. The blocking of the account is merely incidental to his intention to not honour the cheques. The court also said that even if the account was blocked and cheques were returned unpaid, the accused could have made payment to the complainant after receiving the legal notice under section 138 N.I. Act. Disabling his account did not disable the accused from honouring his liability. Upon the question of liability to pay, the testimony in cross examination was relied on where the accused could not prove that how he arrived at the cost of the defective goods. Also the accused could not show any proof of the aforementioned settlement. Thus the court said that the story of defective goods seemed as a way to evade from the liability. The ledgers were also analysed and the court came to a conclusion that the accused was still liable to pay Rs. 76,57,398/- to the complainant. Thus the accused were convicted under Section 138 of the N.I Act.
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