Important Points
1. Once a cheque is issued by the drawer a presumption u/s 139 Negotiable Instruments Act, 1881 must follow and merely because the drawer issues a notice to the drawee (? Payee) or to the Bank for stoppage of payment it will not preclude an action u/s. 138 of the Act by the drawee (? Payee) or the holder in due course.
2. It is also wrong to say that Section 138 of Negotiable Instruments Act, 1881 draws presumption that one commits the offence if he issues the cheque dishonestly.

Headnote:(i) Negotiable Instruments Act, 1881-Section 138-Dishonour of cheque when offence-Cheque issued to meet a liability - Payment stopped after issue-Cheque dishonoured-Whether an offence? (Yes) -Contrary observations in earlier decisions disagreed.
       Held : Once the cheque is issued by the drawer a presumption under Section 139 must follow and merely because the drawer issues a notice to the drawee: (Payee) or to the Bank for stoppage of the payment it will not preclude an action under Section 138 of the Act by the drawee, (Payee) or the holder of a cheque in due course. (Para 16)
       Held also : (The contrary) propositions in both these reported judgments, in our considered view, with great respect are contrary to the spirit and object of Sections 138 and 139 of the Act. (Para 18)
       (ii) Negotiable Instruments Act, 1881 - Section 138 - Whether draws presumption that one commits the offence if he issues the cheque dishonestly? (No).
       Held : Section 138 of the Act is a penal provision wherein if a person draws a cheque on an account maintained by him with the 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, on the ground 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. The distinction between the deeming provision and the presumption is well discernible. To illustrate, if a person, draws a cheque with no sufficient funds available to his credit on the date of issue, but makes the arrangement or deposits the amount thereafter before the cheque is put in the bank by the drawee, and the cheque is honoured, in such a situation drawing of presumption of dishonesty on the part of the drawer under Section 138 would not be justified. Section 138 of the Act gets attracted only when the cheque is dishonoured. (Para 19)
       On careful reading of Section 138 of the Act, we are unable to subscribe to the view that Section 138 of the Act draws presumption of dishonesty against drawer of the cheque if he without sufficient funds to his credit in his bank account to honour the cheque issues the same and, therefore, amounts to an offence under Section 138 of the Act. For the reasons stated hereinabove, we are unable to share the views expressed by this Court in the above two cases and we respectfully differ with the same regarding interpretation of Section 138 of the Act to the limited extent as indicated above. (Para 20)
       (iii) Negotiable Instruments Act, 1881-Sections 138 and 139 -Cr.P.C., 1973 - Section 482-Offence u/s 138-Process issued-High Court dismissing at the threshhold as cheque dishonoured because payment was stopped-Whether correct? (No).
       Held : It is needless to emphasize that the Court taking cognizance of the complaint under Section 138 of the Act is required to be satisfied as to whether a prima facie case is made out under the said provision. The drawer of the cheque undoubtedly gets an opportunity under Section 139 of the Act to rebut the presumption at the trial. It is for this reason we are of the considered opinion that the complaints of the appellant could not have been dismissed by the High Court at the threshhold. (Para 21)
       In the result the appeals succeed and the common order dated 21.11.96 passed by the High Court in Criminal Revision Petition Nos. 2303-2304 of 1995 is quashed and set aside and the order passed by the Metropolitan Magistrate 11th Court. Calcutta on 6.4.95 is restored. It is made clear that all contentions are kept open. (Para 22)

Judgement Key Points

Key Dictum:

Once a cheque is issued by the drawer, a presumption under Section 139 of the Negotiable Instruments Act, 1881 arises, and the drawer issuing a notice to the payee or the bank for stoppage of payment does not preclude an action under Section 138 by the payee or holder in due course.[Important Points] (!) [1000027720015]
Section 138 does not draw a presumption of dishonesty or commission of an offence merely upon issuance of the cheque; it applies only when the cheque is dishonoured for insufficiency of funds or exceeding arrangement, deeming an offence upon such dishonour.[Important Points] (!) [1000027720017][1000027720018][1000027720019]
"Payment stopped by drawer" endorsement constitutes dishonour under Section 138, attracting its provisions.[1000027720008][1000027720009][1000027720010]
In complaints under Section 138, courts taking cognizance must assess if a prima facie case exists based on averments; dismissal at threshold under Section 482 Cr.P.C. is improper if presumption under Section 139 can be rebutted at trial.[1000027720020] (!)

Judgment

S.P. Kurdukar, J.-Leave granted.

2. These three appeals are filed by the appellants/complainants challenging the legality and correctness of the judgment and order dated 21.11.1996 passed by the High Court in Crl. Revision Petition Nos. 2303-04 of 1995.

3. The present proceedings arise out of a complaint filed by the appellant in the Court of Chief Judicial Magistrate, Calcutta under Section 138 of the Negotiable Instruments Act, 1881 (for short the ‘Act’) against the respondent. The appellant company is a public limited company manufacturing and selling cement under the brand name “Modi Cement” throughout India.

4. The respondent/accused carries on business in the name and style of “Dubey Construction, M/s. Nandi Traders, M/s. Nandi Concerns, M/s. Nandi and Co., M/s. Nandi Enterprises, M/s. S.K. Enterprises, M/s. S.K. Trading and M/s. Jupitor Art. The respondent/accused is sole proprietor of all these business concerns.

5. It is alleged by the appellant in the complaint that the respondent purchased from them non-levy Modi Cement on credit against the orders placed on behalf of his concerns. These orders were placed by the respondent with the Calcutta office of the appellant and it was agreed that the price of the consignments was to be paid by the respondent at the said office. After taking accounts it was found that on 23.2.1994 the respondent incurred a liability/debt of Rs. 1,10,53,520.30 payable to the appellant towards the purchased price of the cement supplied by them to the respondent. In partial discharge of the said liability/debt the respondent drew three cheques in favour of the appellant on 23.2.94, 26.2.94 and 28.2.94 bearing cheque Nos. 1308340-42 for a sum of Rs. 2,00,000/- each.

6. The appellant presented these three cheques on 9.8.1994 for encashment through their bankers, Bank of India, J.L. Nehru Road Branch, Calcutta. On 6.9.94 the Indian Bank Bankura, the Banker of the respondent returned the said cheques as unpaid with an endorsement “payment stopped by the drawer”. Lateron it transpired that vide his letter dated 8.8.94 the respondent had given such instruction. The appellant on 13.9.94 sent a legal notice in terms of Section 138 of the Act to the respondent demanding payment of the aforesaid amounts under the cheques. The said notice was duly served on the respondent on 17.9.94. Since the respondent failed and neglected to make the payment of the amount of the aforesaid three cheques within the stipulated period of 15 days which expired on 2.10.94, the appellant filed three criminal complaints against the respondent under Section 138 of the Act. After entering appearance in obedience to the processes issued in connection with the above three cases the respondent filed applications for staying the proceedings which were rejected.

7. The respondent then filed three petitions under Section 482 Cr.P.C. in the High Court of Calcutta for quashing the complaints. The Learned Single Judge vide his common judgment and order dated 21.11.96 allowed the petitions of the respondent and quashed the complaints. It is against this order passed by the High Court the appellant has filed these appeals.

Section 138 of the Act reads thus:-

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

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1998 Supreme(SC) 288

Cases Referred (2)