The closure of an account before or after the issuance of a cheque is an offence under Section 138 of the Negotiable Instruments Act.

1. Rule. By consent heard forthwith.

2. The only question that arises in this Revision Application is whether the prosecution under Section 138 of the Negotiable Instruments Act against the drawer of a post-dated cheque who, after issuing the cheque closed the account in the Bank, is sustainable, in the event of the cheque being dishonoured.

3. The bare facts of the case are that accused (the petitioner herein) was engaged in the distribution of liquors and wines to retailers and he used to purchase from the complainant (the respondent herein) bulk quantities of various types of liquors on credit basis from 1991 onwards. When the accounts between the petitioner and the respondents struck, the petitioner and the respondents struck, the petitioner was liable to pay a balance of Rs. 6,03,893 as on 4-7-1992 towards the transactions of purchase of liquors and wines on credit basis. On a settlement arrived between the parties, towards the part payment of the said dues, 3 cheques were issued by the petitioner, one of the cheques being cheque No. 0057511 dated 5-9-1992 drawn on the Goa Urban Co-operative Bank Ltd. for a sum of Rs. 2,00,000/-. The respondent presented the cheque for encashment on 10-9-1992 but the same was returned by the Bank with the endorsement "account closed". A lawyer's notice dated 14-9-1992 was followed in pursuance of Section 138 of the Negotiable Instruments Act calling upon the petitioner to pay the said amount within a period of 15 days. The petitioner received the said notice on 14-9-1992. On failure to make payment in consistence with Section 138 of the Negotiable Instruments Act, the respondent preferred a complaint before the learned Judicial Magistrate, First Class, at Quepem. The representative of the Bank and the complainant were examined. It has come out in evidence that the Bank returned the cheque with an endorsement : "Account closed on 3-9-92". None was examined on behalf of the petitioner, but it was apparent in the context of the cross-examination of the prosecution witnesses by and on behalf of the accused that the petitioner was trying to make out a case that the cheque was issued as a security, that though in fact on amount was due to the respondent, that the said cheques were obtained from him on the understanding that the goods of the said amount would be supplied by the respondent to the petitioner in future and in the event the respondent makes such supplies, he could encash the said cheque. It was further contended on behalf of the petitioner before the learned Magistrate that since the account was closed before the cheque was issued, the transaction will not come under Section 138 of the Negotiable Instruments Act. However, the learned Magistrate rejected all the contentions of the petitioner and convicted him for an offence under Section 138 of Negotiable Instruments Act and sentenced him to pay a fine of Rs. 5,000/- and to undergo simple imprisonment for 1 year and in default of payment of fine to undergo additional imprisonment for a period of 3 months.

4. The matter was taken in appeal by the petitioner before the District and Sessions Judge, South Goa, Margao as Criminal Appeal No. 2 of 1994 which was also dismissed by the learned District Judge by his Judgement dated 6th March, 1995. It is in this context that the petitioner approached this Court for setting aside the impugned judgements of the Court below.

5. The learned counsel for the petitioner, Mr. Thali, reiterated all the contentions which were raised by his counterparts in the lower Courts on behalf of the petitioner. Relying upon the wording of Section 138 he contended that the transaction will not come under the mischief of Section 138. Great emphasis has been laid by the counsel for the petitioner on the words occurring in Section 138 : "funds in the account", "an account maintained by him", "out of that account", "to the credit of that account". Emphasizing on these words he argued that in order to attract Secti