Object Underlying Section 138 of NI Act is to Promote & Inculcate Faith in the Efficacy of Banking System [Case Law]

Negotiable Instruments Act, 1881 - Section 138 – Code of Criminal Procedure Svt. 1989 - Section 561A - Quashing of Complaint - theft of cheques - legal notice on 01.02.2017 demanding an amount of 8, 00,000 - no complaint was filed within stipulated time on said cause of action - cutting and changing the date of 01.02.2017 by 10.03.2017, sent the second notice containing the same contents and again made the same demand for payment of the alleged amount within fifteen days from the receipt of the notice - These are disputed questions of facts, cannot be decided in this petition - These are defenses which petitioner has to prove before court below during trial.

HIGH COURT OF JAMMU AND KASHMIR AT JAMMU

Coram: Hon’ble Mr. Justice Sanjay Kumar Gupta, Judge

CRMC No. 717/2017 & IA No. 01/2017

Date of order: 03.11.2018

Kailash Kumar Vs Manoj Kumar

For Petitioner/appellant(s) : Mr. V. Bhushan, Advocate

1. In this petition filed under Section 561-A of the Code of Criminal Procedure Svt. 1989, the petitioner inter alia seeks quashing of complaint under Section 138 of Negotiable Instruments Act as well as order dated 18.04.2017 taking cognizance and issuance of process passed by the Special Mobile Magistrate, Passenger Tax, Jammu.

2. The facts giving rise to the filing of this petition briefly stated are that the petitioner while working as a Contractor (MATE) in the year 2015-16 in District Rajouri engaged the respondent to look after and maintain the record of the office, which was established at the residence of the petitioner in Ramkot. It is contended that in connection with his business, which in those days was in Rajouri, the petitioner mostly had to live out of his home. He whenever had to go out of his home, he used to keep some signed cheques in the drawer of the table of the office, so that if some payment was to be made in absence of the petitioner, the said signed cheques could be used. The keys of the drawer mostly remained with his wife. The respondent taking undue benefit of the absence of the petitioner and that of the simplicity of wife of the petitioner stole few signed cheques from the drawer of the office table of the petitioner and filled up the date and other contents as per his convenience.

3. It is further contended by the petitioner that he received a legal notice on 01.02.2017 from the respondent demanding an amount of 8,00,000/-. Thereafter, the petitioner contacted the respondent and expressed his anguish and dismay over his degraded act. Since the respondent had worked with the petitioner for some time, therefore, the petitioner expressed his willingness and readiness to finalize the account of respondent by paying him Rs. 50,000/- but he kept mum on this offer and sought some time for pondering upon the matter. The petitioner also reported the matter to the Police with regard to the theft of his cheques. Thereafter, the respondent again by cutting and changing the date of 01.02.2017 by 10.03.2017, sent the second notice containing the same contents and again made the same demand for payment of the alleged amount within fifteen days from the receipt of the notice.

4. It is case of the petitioner that since the respondent had already availed the cause of action by sending notice dated 01.02.2017, which was duly received by the petitioner and was also replied, therefore, sending of same notice by cutting/ changing the date and getting memos of bouncing from the Bank to avail the cause of action second time, is not permissible under law that the Court below while taking the cognizance of the matter on 18.04.2017 has not taken into account this aspect of the matter and passed the impugned order in haste and without application of mind. In the aforesaid factual background, the petitioner has approached this Court seeking the relief as stated above.

5. The respondent has not appeared despite service and was, accordingly, set ex parte vide order dated 04.07.2018.

6. Learned counsel for the petitioner has placed reliance on the judgments of the Supreme Court in the cases of Sadanandan Bhadran vs. Madhavan Sunil Kumar, (1998) AIR (SC) 3042; and Yogendra Partap Singh vs. Savitri Pandey and anr., 2015 AIR (SC) 157, wherein it is held that as per Section 2(d) of the Code defines 'complaint'. According to this definition, complaint means any allegation made orally or in writing to a Magistrate with a view to taking his action against a person who has committed an offence. Commission of an offence is a sine-qua-non for filing a complaint and for taking cognizance of such offence. A bare reading of the provision contained in clause (c) of the proviso makes it clear that no complaint can be filed for an offence under Section 138 of the NI Act unless the period of 15 days has elapsed. Any complaint before the expiry of 15 days from the date on which the notice has been served on the drawer/accused is no complaint at all in the eye of law.

7. I have considered the contentions of learned counsel for the petitioner.

8. First argument of counsel for petitioner is that a legal notice on 01.02.2017 from the respondent demanding an amount of 8, 00,000/- was given to him. Petitioner then met complainant and asked that he is ready to settle the claim for Rs.50,000/- ; but complainant did not respond; no complaint was filed within stipulated time on said cause of action. The petitioner also reported the matter to the Police with regard to the theft of his cheques. Thereafter, the respondent again by cutting and changing the date of 01.02.2017 by 10.03.2017, sent the second notice containing the same contents and again made the same demand for payment of the alleged amount within fifteen days from the receipt of the notice.

9. These are disputed questions of facts, cannot be decided in this petition. These are defenses which petitioner has to prove before court below during trial.

10. Next argument is that respondent had already availed the cause of action by sending notice dated 01.02.2017, which was duly received by the petitioner and was also replied; therefore, again sending of same notice by cutting/ changing the date and getting memos of bouncing from the Bank to avail the cause of action second time, is not permissible under law. That the Court below while taking the cognizance of the matter on 18.04.2017 has not taken into account this aspect of the matter and passed the impugned order in haste and without application of mind. Counsel for petitioner has relied upon 1998 (SCR ) 178 case titled Sadanandan v Madhavan Sunil Kumar; and 2015 AIR SC 157 case titled Yogendra Partap Singh v. Savitri Pandey, wherein it is held that no complaint is maintainable before the expiry of 15 days from the date on which the notice has been served on the drawer.

11. On two counts this argument is not tenable; firstly facts narrated in this petition were not before trial court at the time of taking cognizance; secondly in Msr Leathers vs S. Palaniappan And Anr. reported in (2013) 1 SCC 177 decided on 26 September, 2012, a three judge bench of Apex court after overruling the law made in Sadanandan v Madhavan Sunil Kumar, has held as under:-

“27. It is trite that the object underlying Section 138 of the Act is to promote and inculcate faith in the efficacy of banking system and its operations, giving credibility to Negotiable Instruments in business transactions and to create an atmosphere of faith and reliance by discouraging people from dishonouring their commitments which are implicit when they pay their dues through cheques. The provision was intended to punish those unscrupulous persons who issued cheques for discharging their liabilities without really intending to honour the promise that goes with the drawing up of such a negotiable instrument. It was intended to enhance the acceptability of cheques in settlement of liabilities by making the drawer liable for penalties in case the cheque was dishonoured and to safeguard and prevent harassment of honest drawers. (See Mosaraf Hossain Khan v. Bhagheeratha Engg. Ltd. (2006) 3 SCC 658, C.C. Alavi Haji v. Palapetty Muhammed & Anr. (2007) 6 SCC 555 and Damodar S. Prabhu v. Sayed Babulal H. (2010) 5 SCC 663). Having said that, we must add that one of the salutary principles of interpretation of statutes is to adopt an interpretation which promotes and advances the object sought to be achieved by the legislation, in preference to an interpretation which defeats such object. This Court has in a long line of decisions recognized purposive interpretation as a sound principle for the Courts to adopt while interpreting statutory provisions. We may only refer to the decisions of this Court in New India Sugar Mills Ltd. v. Commissioner of Sales Tax, Bihar (AIR 1963 SC 1207), where this Court observed: “It is a recognised rule of interpretation of statutes that expressions used therein should ordinarily be understood in a sense in which they best harmonise with the object of the statute, and which effectuate the object of the Legislature. If an expression is susceptible of a narrow or technical meaning, as well as a popular meaning, the Court would be justified in assuming that the Legislature used the expression in the sense which would carry out its object and reject that which renders the exercise of its power invalid.”

28. Reference may also be made to the decision of this Court in Deputy Custodian, Evacuee Property v. Official Receiver (AIR 1965 SC 951), where this Court observed: “The rules of grammar may suggest that when the section says that the property is evacuee property, it prima facie indicates that the property should bear that character at the time when the opinion is formed. But Mr. Ganapathy Iyer for the appellants has strenuously contended that the construction of s. 7(1) should not be based solely or primarily on the mechanical application of the rules of grammar. He urges that the construction for which Mr. Pathak contents and which, in substance, has been accepted by the High Court, would lead to very anomalous results; and his arguments is that it is open to the Court to take into account the obvious aim and object of the statutory provision when attempting the task of construing its words. If it appears that the obvious aim and object of the statutory provisions would be frustrated by accepting the literal construction suggested by the respondent, then it may be open to the Court to enquire whether an alternative construction which would serve the purpose of achieving the aim and object of the Act, is reasonably possible.”

29. The decision of this Court in Nathi Devi v. Radha Devi (2005) 2 SCC 271, reiterates the rule of purposive construction in the following words: “Even if there exists some ambiguity in the language or the same is capable of two interpretations, it is trite the interpretation which serves the object and purport of the Act must be given effect to. In such a case the doctrine of purposive construction should be adopted.”

30. To the same effect is the decision of this Court in S.P. Jain v. Krishan Mohan Gupta (1987) 1 SCC 191, where this Court observed:

“We are of the opinion that law should take a pragmatic view of the matter and respond to the purpose for which it was made and also take cognizance of the current capabilities of technology and life- style of the community. It is well settled that the purpose of law provides a good guide to the interpretation of the meaning of the Act. We agree with the views of Justice Krishna Iyer in Busching Schmitz Private Ltd’s case (supra) that legislative futility is to be ruled out so long as interpretative possibility permits.”

31. Applying the above rule of interpretation and the provisions of Section 138, we have no hesitation in holding that a prosecution based on a second or successive default in payment of the cheque amount should not be impermissible simply because no prosecution based on the first default which was followed by a statutory notice and a failure to pay had not been launched. If the entire purpose underlying Section 138 of the Negotiable Instruments Act is to compel the drawers to honour their commitments made in the course of their business or other affairs, there is no reason why a person who has issued a cheque which is dishonoured and who fails to make payment despite statutory notice served upon him should be immune to prosecution simply because the holder of the cheque has not rushed to the court with a complaint based on such default or simply because the drawer has made the holder defer prosecution promising to make arrangements for funds or for any other similar reason. There is in our opinion no real or qualitative difference between a case where default is committed and prosecution immediately launched and another where the prosecution is deferred till the cheque presented again gets dishonoured for the second or successive time.

32. The controversy, in our opinion, can be seen from another angle also. If the decision in Sadanandan Bhadran’s case (supra) is correct, there is no option for the holder to defer institution of judicial proceedings even when he may like to do so for so simple and innocuous a reason as to extend certain accommodation to the drawer to arrange the payment of the amount. Apart from the fact that an interpretation which curtails the right of the parties to negotiate a possible settlement without prejudice to the right of holder to institute proceedings within the outer period of limitation stipulated by law should be avoided we see no reason why parties should, by a process of interpretation, be forced to launch complaints where they can or may like to defer such action for good and valid reasons. After all, neither the courts nor the parties stand to gain by institution of proceedings which may become unnecessary if cheque amount is paid by the drawer. The magistracy in this country is over-burdened by an avalanche of cases under Section 138 of Negotiable Instruments Act. If the first default itself must in terms of the decision in Sadanandan Bhadran’s case (supra) result in filing of prosecution, avoidable litigation would become an inevitable bane of the legislation that was intended only to bring solemnity to cheques without forcing parties to resort to proceedings in the courts of law. While there is no empirical data to suggest that the problems of overburdened magistracy and judicial system at the district level is entirely because of the compulsions arising out of the decisions in Sadanandan Bhadran’s case (supra), it is difficult to say that the law declared in that decision has not added to court congestion.

33. In the result, we overrule the decision in Sadanandan Bhadran’s case (supra) and hold that prosecution based upon second or successive dishonour of the cheque is also permissible so long as the same satisfies the requirements stipulated in the proviso to Section 138 of the Negotiable Instruments Act. The reference is answered accordingly. The appeals shall now be listed before the regular Bench for hearing and disposal in light of the observations made above.”

12. After the reference was answered by three judge Bench of Apex Court, as above, a regular Bench decided the matter ‘Msr Leathers vs S. Palaniappan And Anr. (CRIMINAL APPEAL NOS. 261-264 of 2002)’ accordingly, on 10th September, 2013

13. In this way, Sadanandan v Madhavan Sunil Kumar’s case (supra) is of no help to the petitioner. So far as second law cited in Yogendra Partap Singh’s case (supra) is concerned, it is also not applicable in present set of circumstances, because as per complaint, cheque was dishonored on 04.03.2017 and notice of demand has been issued on 16.3.2017, which is within time and complaint has been lodged on 18.4.2017. In view of above, this petition is dismissed. Stay, if any, is vacated.