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CASE NO.: Appeal (crl.) 293  of  2001

PETITIONER: ASHOK YESHWANT BADAVE

       Vs.

RESPONDENT: SURENDRA MADHAVRAO NIGHOJAKAR & ANR.

DATE OF JUDGMENT:       14/03/2001

BENCH: K.T. Thomas, R.P. Sethi & B.N. Agrawal

JUDGMENT:

L...I...T.......T.......T.......T.......T.......T.......T..J B.N.AGRAWAL,J.

Leave granted.

   Challenge  in  this  appeal has been  made  to  judgment passed  by the Bombay High Court dismissing writ application filed  by  the  appellant  upholding an order  passed  by  a Sessions  Court  in revision refusing to interfere with  the order   passed  by  a   Chief  Judicial  Magistrate   taking cognizance and issuing process against the appellant for the offence under Section 138 of the Negotiable Instruments Act, 1881 (hereinafter referred to as ‘the Act).

   Surendra Madhavrao Nighojkar  respondent No.  1 filed a petition  of  complaint  in  the  Court  of  Chief  Judicial Magistrate,  Satara  on  2.9.1996  for  prosecution  of  the appellant  under Section 138 of the Act besides Section  420 of  the Penal Code which was registered as Criminal Case No. 11348/96.   Case  of the complainant in, short, is  that  on 4.7.1993   an  agreement  to  sell   was  executed  by   the complainant  for  sale  of his 1/3rd share in CTS  No.   189 within  Pratapganj  Peth in the district of Satara  for  Rs. 2,21,000/-  and the said sale was required to be executed in the  name of mother and wife of the appellant.  At the  time of  agreement, Rs.  50,000/- was paid by the accused to  the complainant.  Thereafter on 10.11.1995 sale deed was scribed and  on that date a further sum of Rs.  1,25,000/- was  paid by  the  accused  to the complainant  besides  a  post-dated cheque  drawn on State Bank of India, Satara Branch, for Rs. 46,000/-  bearing the date as 20.1.1996 which was made  over by the accused to the complainant.  Later on, the accused on several  occasions made a request to the complainant for not presenting  the  cheque  in the bank as he  was  not  having sufficient  funds  in  his bank account  which  request  was acceded to by the complainant.  Ultimately, as the period of six months was going to expire on 19.7.1996, the complainant had  no  option  but to present the said cheque  before  his banker  for  encashment, but the same was  returned  without clearance  on  11-7-1996  with   the  endorsement   account closed.   From  these  facts complainant deduced  that  the accused  had  deceived  him which necessitated  issuance  of

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notice  by the complainant to the accused on 22.7.1996 which was  refused  by  him  on 6.8.1996  whereafter  the  present complaint was filed.

   Upon   the   filing  of   petition  of  complaint,   the complainant  was examined on solemn affirmation and by order dated 2.9.1996 the Magistrate took cognizance of the offence under  Section 138 of the Act and issued process against the accused.    The  said  order   having  been   unsuccessfully challenged  by the accused before the Sessions Court as well as  the  High Court, the present appeal by special leave  is before us.

   Prosecution  of  the  appellant for  the  offence  under Section  138 of the Act has been assailed on the sole ground that  even if the facts disclosed in the complaint are taken at  their face value and accepted in entirety, no offence at all  much  less the offence under Section 138 of the Act  is made  out  as  one  of  the  conditions  precedent  for  its applicability  is that cheque must be presented to the  bank within  a period of six months from the date on which it was drawn  or  within  the period of its validity  whichever  is earlier,  but  in the case on hand the cheque was  presented before  the banker for encashment after expiry of six months from  the  date  it  was made over by  the  accused  to  the complainant,  though within a period of six months from  the date  mentioned on the cheque.  As such, the question  which arises for our consideration is:

   whether period of six months for presentation of cheque to  the banker, as required under proviso (a) to Section 138 of  the  Act, should be reckoned from the date mentioned  on the  face  of the cheque or a date previous to that when  it was made over by the drawer to the drawee.

   The  question posed is no longer res integra as the same is  concluded by a two Judge Bench decision of this Court in the  case  of Anil Kumar Sawhney vs.  Gulshan Rai, 1993  (4) SCC 424 wherein in similar circumstances it was laid down by this  Court  that post-dated cheque shall be deemed to  have been drawn on the date it bears and not the previous date on which  it was made over by the drawer to the drawee, but  as the matter has been placed before this three Judge Bench, we find it expedient to consider the same.

   In   the  original  Act,   Chapter  XVII  contained  two sections:   Section  138  was related to  power  to  appoint Notary Public and Section 139 dealt with power to make rules for  Notary  Public.   But  with  the  introduction  of  the Notaries   Act,   1952  making   elaborate   provision   for appointment  of Notaries and their duties, functions,  etc., the aforesaid provision became redundant and consequently by Section  16 of the Notaries Act, 1952, Sections 138 and  139 were  repealed and thereby Chapter XVII was abolished w.e.f. 14th  February,  1956.   However,   Chapter  XVII  has  been re-introduced in the Act by Section 4 of the Banking, Public Financial  Institutions  and   Negotiable  Instruments  Laws (Amendment)  Act,  1988  (Act 66 of 1988) with  effect  from 1.4.1989  with  a  new nomenclature for  the  Chapter:   Of Penalties  in  case  of  Dishonour of  certain  Cheques  for insufficiency  of Funds in the Accounts.  This new  Chapter contains  five  sections, namely, Sections 138 to 142  which are altogether different from old Sections 138 and 139.  The object of bringing Section 138 by the aforesaid amending Act on  the  Statute  appears to be to inculcate  faith  in  the

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efficacy   of   banking  operations   and   credibility   in transacting  business  of negotiable  instruments.   Despite civil  remedy, Section 138 intends to prevent dishonesty  on the  part of the drawer of negotiable instruments to draw  a cheque without sufficient funds in his account maintained by him  in a bank and induces the payee or holder in due course to act upon it.

   Relevant  portion  of  Section 5 and the  provisions  of Sections  6,  19, 138, 139 and 140 of the Act may be  quoted hereunder:-

   S.5.   Bill  of  exchange.- ‘Bill of  Exchange  is  an instrument  in  writing containing an  unconditional  order, signed  by  the maker, directing a certain person to  pay  a certain  sum of money only to, or to the order of, a certain person or to the bearer of the instrument..

   S.6.  Cheque.   A ‘cheque is a bill of exchange drawn on  a  specified  banker  and not expressed  to  be  payable otherwise than on demand.

   S.19.   Instruments  payable on demand.-  A  promissory note  or  bill of exchange, in which no time for payment  is specified, and a cheque, are payable on demand.

   S.138.-  Dishonour of cheque for insufficiency etc., of funds in the account.- 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 provision of this Act, be  punished with  imprisonment for a term which may extend to one  year, 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 fifteen days of the receipt of information by him from the bank regarding the return of the cheque 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 purposes of this section, ‘debt or other  liability means a legally enforceable debt or  other liability.

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                                   -(emphasis added)

   S.139.-  Presumption in favour of holder.- It shall  be presumed,  unless the contrary is proved, that the holder of a  cheque  received the cheque of the nature referred to  in Section  138 for the discharge, in whole or in part, of  any debt or other liability.

   S.140.-  Defence  which  may  not   be  allowed  in  any prosecution under Section 138.- It shall not be a defence in a  prosecution  for  an offence under Section 138  that  the drawer  had  no reason to believe when he issued the  cheque that  the  cheque may be dishonoured on presentment for  the reasons stated in that section.

   The  concept of post-dated cheque was well known even in common  law and it was in effect a bill of exchange  payable on  demand with a post date upon which the demand was to  be made.   As far back as in 1776 and while the Law of Merchant was  then  in process of formation, it was held in Da  Silva vs.   Fuller,  Sel.  Ca.238 M.S.  referred to in  Chitty  on Bills of Exchange, 11th Edition, (188) that a banker was not justified  in  paying a post-dated cheque before its  actual date.   In  1868 nearly a hundred years later, the Court  of Queens  Bench in Emanuel vs.  Robarts, (1868) 9 B.&S.   121 observed  that a banker was justified in refusing payment of a  post-dated cheque before its due date and that the custom of  banker  to do so was a part of the contract between  the banker  and the customer.  In Bull vs.  O Sullivan, L.R.  6 Q.B.209 the Court laid down that a post-dated cheque payable to order was an instrument payable to order on demand on its date.   Later,  in 1877 in Gatty vs.  Fry, 2 Ex.D.  265  the Court  held  that a post-dated cheque is not payable on  the day  it  is  issued but on the day of its date.   All  these cases were decided before the law was codified in England by the  Bills  of  Exchange Act, 1882.  After  passing  of  the aforesaid  Act,  in the case of Palmer, (1882)  19  Chancery Division  409,  it has been decided by the Court  of  Appeal that  a  post-dated  cheque  was equivalent  to  a  bill  of exchange  payable on a future date, namely, the date of  the cheque.   In  the  case  of Hinchcliffe  vs.   The  Ballarat Banking  Company, 1 V.R.  (L) 229, the Court determined  the exact  point  in  question in the present case  against  the bank, holding that a post-dated cheque is a bill of exchange payable  at a future date and that the banker may be  liable to  an action by the customer for negligence if he pays such cheque before the day it bears date.

   In  the  high  authority of Royal Bank of  Scotland  vs. Tottenham,  (1894)  LXX1  Law   Times  Reports  168  similar question  was  subject  matter of consideration  before  the Court  of  Appeal  in  which Lord  Esher,  M.R.,  after  due consideration observed thus:-

   A  cheque is a contract between the parties, and it  is for  a  Judge  at  the trial to construe  that  contract  by reading  what is written upon it.  Reading this cheque, upon its  face  it  is dated the 10th August, and is  payable  to order.   What is the true construction of that contract upon reading  it?   It  is  simply an order to  pay  250l.   upon demand.  It is said that this is not the proper construction under  the  circumstances, because the cheque was signed  on the  3rd  August, and handed over to the payee upon the  8th August,  being  dated the 10th August.  It is said that  the cheque  was,  therefore,  a post-dated cheque.   Upon  those

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facts  being  proved before the Judge, what ought he to  do? Must  he  say  that, in construing  this  written  document, because  it  was  handed  over before the day  of  the  date written  upon it, he must put a different construction  upon it  and say that it is not a bill payable upon demand, but a bill  payable  two  days  after  the day  of  its  issue  or negotiation?   I  have  never  heard of a  cheque  being  so construed,  and  the argument of the appellant  is  entirely fallacious..It is not denied that, by the Bills of Exchange Act,  1882,  a post dated cheque is not made  invalid;..The objection  as  to post-dating a cheque is therefore  now  an obsolete  and useless objection.  If a cheque is dealt  with as  a bill of exchange before the date which it bears,  then it becomes a bill of exchange in the ordinary sense;  but it is  not  in  any  way  an  escrow.   All  the  defences  and objections are futile and must fail.

   In  the case of Pollock vs.  Bank of New Zealand  (1902) XX  New  Zealand  Law Reports 174, the Court of  Appeal  was considering  a case where bank had paid a post dated  cheque before expiry of its date and thereafter dishonoured another cheque  of  its  customer presented before the date  of  the post-  dated cheque on the ground that after payment of  the post-dated  cheque,  there were no funds to  honour  another cheque  and  consequently  the same  was  dishonoured  which necessitated  filing of a suit by the customer for  damages. The  suit  was  decreed  and when the matter  was  taken  in appeal,  the  Court  of  Appeal  while  upholding  the  same observed thus:-

   The  bank,  by paying the post-dated cheque before  its actual  date,  wrongfully  debited its  amount  against  the plaintiffs  account.   But for that debit there would  have been  sufficient funds to meet the cheque for Pound 38 11s., a  cheque which the bank ought to have paid, but which they, in  breach of their duty to the plaintiff, dishonoured.  The plaintiff  is therefore entitled to damages for the wrongful dishonour of this cheque.

   In  the case of Aylmer M.  Keyes Vs.  The Royal Bank  of Canada,  (1947)  SCR  377, the Supreme Court of  Canada  was considering  a case where payment of a post-dated cheque was made  before the date of issue due to oversight.  Thereafter the  drawer  countermanded  payment  of the  cheque  at  the opening  of business on the day of the date of cheque.  This necessitated filing of a suit by the drawer against the bank for realisation of the payments erroneously made by the bank under  post-dated cheque.  The suit was decreed by the trial court  but  on appeal being preferred the Supreme  Court  of Alberta  in  its  Appellate Division dismissed the  suit  by allowing  the  appeal whereafter on special leave to  appeal being granted, the matter was taken in appeal to the Supreme Court  of Canada which set aside the appellate judgment  and restored that of the trial court decreeing the suit and held that before the date of issue of the cheque the bank was not justified in honouring the same.

   In  the  case  of  Brien vs.  Dwyer &  Anr.,  (1979)  53 Australian   Law  Journal  Reports   123,  the  matter   was considered  by  the High Court of Australia and it was  laid down that a post-dated cheque was a bill of exchange payable at a future date.

   In  Halsburys  Laws of England, 4th  Edition  (Reissue) Volume  3(1),  at page 143, procedure to be adopted  by  the

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bank  in  relation to post-dated cheque has been  enumerated which reads thus:-

   Post-dated  cheques  are  not invalid, but  the  banker should not pay such a cheque if presented before the date it bears.   If,  therefore,  a  cheque dated  on  a  Sunday  is presented  on  the  previous  business  day,  it  should  be returned  with  the  answer  ‘post-  dated.   A  post-dated cheque,  however,  if presented at or after  its  ostensible date,  should  be  paid  though the banker knows  it  to  be post-dated,  and  even if it has been presented  before  the date and refused payment.

   In  Chalmers  & Guest on Bills of Exchange, Cheques  and Promissory  Notes, 15th Edition, at page 74, the concept  of ‘post-   dated  cheques  has   been  explained  as  under:- Post-dated  cheques.  Cheques are often issued  post-dated, that is to say, bearing a date later than that on which they are  in  fact issued.  The purpose of issuing a post-  dated cheque  is  to  prevent the drawee banker  from  paying  the cheque  to the payee or a holder before the date written  on the  cheque.   It is clear that the instrument is  a  cheque once  the  date  written on it arrives.  But its  status  is unclear  prior  to that date.  It is arguable that,  between the date of its issue and the date written on the cheque, it is  not  payable on demand and so cannot be a cheque but  an instrument  of a different kind.  The view has been  express that:   ‘so  far  as regards its practical effect,  a  post- dated  cheque is the same thing as a bill of exchange at  so many  days date as intervene between the day of  delivering the  cheque  and the date marked upon the cheque.   It  has also  been  stated that the effect of issuing  a  post-dated cheque is equivalent to giving a promissory note not payable until the date written on the cheque.

   In  Thomsons  Dictionary of Banking, 12th  Edition,  at page   463  ‘post-dated  has   been  defined  as  follows:-@@        JJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJ Post-dated.     A cheque which is dated subsequent to  the actual date on which it is drawn, and which is issued before the date it bears, is called a post-dated cheque.

   A  post-dated cheque should not be paid before the  date appearing thereon A cheque presented for payment before the date has arrived should be returned marked ‘post-dated

   F.E.   Perry in The law and practice relating to banking :   1, at pages 137 & 138 has dealt with ‘post-dated cheque as under:-

   A  cheque  must not be postdated, that is, dated  after the  day on which it is presented for payment to the  drawee branch.   Postdated cheques present far more difficulties to the  banker  than  antedated cheques:   they  are  practical difficulties  rather  than  legal   ones.But  a  cheque  is generally  postdated  because the drawer does not expect  to have  the funds to meet it until that date arrives.  It is a mandate  to  the banker to the effect that it should not  be paid before that date arrives.

   In  the  case  of Jiwanlal  Achariya  vs.   Rameshwarlal Agarwalla,  AIR 1967 SC 1118, a cheque dated 25th  February, 1954  was delivered on 4th February, 1954 and encashed  soon after  25th February, 1954.  This Court was considering  the question  of payment envisaged within the meaning of Section

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20  of  the Indian Limitation Act, 1908 and  delivering  the majority  judgment,  Wanchoo, J., speaking for  himself  and J.C.  Shah,J.,

observed thus:-

   Where,  therefore,  the  payment is by  cheque  and  is conditional, the mere delivery of the cheque on a particular date  does  not mean that the payment was made on that  date unless  the  cheque was accepted as  unconditional  payment. Where  the  cheque  is  not  accepted  as  an  unconditional payment,  it  can only be treated as a conditional  payment. In  such a case the payment for purposes of S.  20 would  be the  date  on which the cheque would be actually payable  at the  earliest,  assuming that it will be  honoured..As  the payment  was  conditional  it would only be  good  when  the cheque  is presented on the date it bears, namely,  February 25,  1954 and is honoured.  The earliest date, therefore, on which the respondent could have realised the cheque which he had  received as conditional payment on February 4, 1954 was the  25th February, 1954 if he had presented it on that date and it had been honoured.

   From  a  bare  perusal of Sections 5 & 6 of the  Act  it would  appear  that  bill  of   exchange  is  a   negotiable instrument  in writing containing an instruction to a  third party  to  pay a stated sum of money at a designated  future date  or on demand.  On the other hand, a ‘cheque is a bill of  exchange  drawn  on a bank by the holder of  an  account payable on demand.  Under Section 6 of the Act a ‘cheque is also  a  bill  of exchange but it is drawn on a  banker  and payable  on demand.  A bill of exchange even though drawn on a  banker,  if  it  is not payable on demand, it  is  not  a cheque.   A ‘post-dated cheque is not payable till the date which is shown thereon arrives and will become cheque on the said  date  and prior to that date the same remains bill  of exchange.

   For  prosecuting  a person for an offence under  Section 138  of  the  Act,  it  is inevitable  that  the  cheque  is presented  to the banker within a period of six months  from the  date  on which it is drawn or within the period of  its validity  whichever is earlier.  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.  The post-dated  cheque  becomes a cheque within the  meaning  of Section  138 of the Act on the date which is written thereon and  the 6 months period has to be reckoned for the purposes of proviso (a) to Section 138 of the Act from the said date. Thus  while respectfully agreeing with the law laid down  by this  Court in the case of Anil Kumar Sawhney, we hold  that six  months period shall be reckoned from the date mentioned on  the face of the cheque and not any earlier date on which the cheque was made over by the drawer to the drawee.

   In  the  case on hand, the cheque was prepared and  made over  by the drawer to the drawee on 10.11.1995 but the date mentioned  thereon was 20.1.1996 and it was presented before the banker for encashment on 7.7.1996, i.e., within a period of  six  months from 20.1.1996.  Thus we find no  ground  to quash prosecution of the appellant as, on the facts alleged, an offence under Section 138 of the Act is clearly made out.

   The appeal is accordingly dismissed.

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