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PETITIONER: M/S.ELECTRONICS TRADE & TECHNOLOGYDEVELOPMENT CORPORN. LTD.,

       Vs.

RESPONDENT:

DATE OF JUDGMENT:       22/01/1996

BENCH: RAMASWAMY, K. BENCH: RAMASWAMY, K. G.B. PATTANAIK (J)

CITATION:  JT 1996 (1)   643        1996 SCALE  (1)636

ACT:

HEADNOTE:

JUDGMENT:                         WITH               CRIMINAL APPEAL NOS. OF 1996     (Arising out of SLP (Crl) Nos.3009-13 of 1992)                       O R D E R      Leave granted.      We have heard the counsel on both sides.       The appellant laid the complaints under Section 138 of the Negotiable  Instruments Act, 1881 (for short, ’the Act’) for dishonor  of cheque  for insufficiency  of the funds in the accounts  of the accused. The complaint of the appellant read thus:      "The above  cheque was  presented by the      complainant on  28.1.1990, through their      Bankers M/s.  Hyderabad  Bank,  Sarojini      Devi Road, Secunderabad for realisation,      with the  promise by  the accused,  that      the   same   will   be   honored   when      presented. However,  the said cheque was      dishonoured    with     the     Banker’s      endorsement   dated    29.11.1990.   "1.      referred to  drawer. 2. instructions for      stopping payment  and 3. stamped exceeds      arrangements". It  is evident  from  the      Banker’s memo  dated 29.11.1990 that the      said cheque  was dishonoured by the Bank      for wants of funds only.      On  receipt   of  the  intimation  dated      29.11.1990   from    the    Bank,    the      complainant  has   issued  a  notice  on      6.12.1990 to  the accused  by Registered      Post Acknowledgement  Due, informing him      that the  cheque  dated  30.6  1996  was      dishonoured   by   their   bankers   and      demanded payment within 15 days from the      date of  receipt of the said notice. The      said    notice    was    received    and

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    acknowledged by the accused. No  Payment      has been made by the accused as required      under Section  138(C) of  the Negotiable      Instruments  Act.  The  accused  2  also      stood as  a guarantor  to the payment of      the   complainant, as  the proprietor of      M/s. V.V.  Rama Rao and Co., Saleemnagar      Colony Hyderabad.      The accused  2  has  issued  the  cheque      knowing fully  well that  he has no Bank      balance to  their credit  and he  cannot      honour the  cheque  for  want  of  funds      alone. He  has not  taken any  steps  to      honour the cheque and arrange payment as      required under  Section  138(C)  of  the      Negotiable    Instruments    Act.    The      accused  has   thereby   committed   the      offence  under   Section  138   of   the      Negotiable    Instruments    Act.    The      dishonesty intention  of the  accused in      instructing the  Bank to stop payment in      evident from the conduct of the accused.      He has  instructed their  Bank  to  stop      payment only with the malafide intention      of escaping  from  the  liability  under      Section   138    of    the    Negotiable      Instruments Act.  He has  so  instructed      their Bank   so he has no funds to their      credit. Hence  the accused is liable for      the offence  Under Section  138 of  ‘the      negotiable          lnstruments Act."      Section 138  of the  Act  was  brought  on  statute  by Central Act  66 of 1988 w.e.f. April 1, l989 with a  view to penalise the  accused  in  cases  of  dishonor  of  certain cheques for  insufficiency of  funds in  the accounts of the accused. It reads thus:      "138.   Dishonor    of    cheque    for      insufficiency, etc.,  of  funds  in  the      accounts. -  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 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, 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

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    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."      Explanation to  Section  138  amplifies  that  for  the purpose of  the Section,  "debt or  other liability" means a legally enforceable debt or other liability.      It would thus be clear that when a cheque is drawn by a person on  an account maintained  by him with the banker for payment of  any amount of money to another person out of the account for the discharge of the debt in whole or in part or other liability  returned by  the bank  with the endorsement like  (1)  in  this  case,  "I  refer  to  the  drawer"  (2) "instructions  for  stoppage  of  payment"  and  (3)  "stamp exceeds arrangement", it amounts to dishonor within the meaning of Section 138 of the Act. On issuance of the notice by the payee or the holder in due course after dishonor, to the drawer demanding payment within 15 days from the date of the receipt  of such a notice, if  he does not pay the same, the statutory  presumption of   dishonest intention, subject to any other liability,  stands satisfied.      Shri Nageswara  Rao, learned  counsel appearing for the respondents, contended  that  stoppage  of  payment  due  to instructions does not amount to an offence under Section 138 and that, therefore, the ingredients in Section 138 have not been satisfied.  We find  no force  in the  contention.  The object of  bringing Section  138 on statute appears to be to inculcate faith  in the efficiency of banking operations and credibility  in   transacting     business   on   negotiable instruments. Despite  civil remedy,  Section 138 intended to prevent dishonesty  on the  part of the drawer of negotiable instrument 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. Section 138 draws presumption that  one commits  the offence  if he issues the cheque dishonestly. It is seen that once the cheque has been drawn and  issued-to the  payee and  the payee has presented the cheque and thereafter, if any instructions are issued to the Bank  for non-payment  and the cheque is returned to the payee with  such an  endorsement, it amounts to dishonor of cheque and  it   comes within  the meaning  of Section  138. Suppose after   the  cheque is issued to the payee or to the holder in     due course  and before  it  is  presented  for encashment,  notice is issued to him not to present the same for   encashment and  yet the  payee or holder in due course presents the  cheque to the Bank for payment and when it  is returned  on   instructions,  Section   138  does   not  get attracted. Under  these circumstances, since the accused has

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not made  the payment  within 15  days from  the date of the receipt of  the notice issued by the  payee or the holder in due course, the dishonest  intention is inferable from those facts. Accordingly,  the ingredients as contained in Section 138 have  been   prima facie  made out in the complaint. The High     Court,  therefore,  was  wholly  incorrect  in  its conclusion that  the ingredients  have not been made out  in the complaint.  Tha orders  of the  High Court  quashing the complaints are  illegal. They  are accordingly set aside and the trial  Court is  directed to  disposed of the matters as expeditiously as  possible. It  is made clear that we do not intend to express any opinion on merits.      The appeals are allowed.