ANDHRA PRADESH HIGH COURT
(D.B.)
M.N Rao and S.V. Maruthi, JJ.
B. Mohan Krishna and Ors. - Petitioners
versus
Union of India & Ors. - Respondents
Writ Petition No. 101 of 1990
Decided on 27.1.1995
Counsel for the parties:
For the Petitioners: M/s. S. Satyanarayan Prasad, Y.S. Srinivas, P. Venkateswarlu, Gopal Reddy & Anil Kumar.
For the Respondents: M/s. Innayya Reddy, Koti Reddy and M/s. C. Padmanaba Reddy and V.V.S. Rao.

Headnote:(i) Constitution of India 1950- Entries 45 & 46, List I - Negotiable Instruments Act, 1881 Sections 138 to 142 as inserted by Section 4 of the Banking, Public Financial Institutions and Negotiable Instruments Laws (Amendment) Act, 1988 - Legislative competency - Challenged- Whether impugned legislation is ultra vires powers of Union Parliament on ground of want of legislative competence? - (No).

       Held: The nature of the offence created by Section 138 of the Act although, incidentally, affects the relations between a debtor and a creditor, in its true nature and character - pith and substance - it does not encompass money-lending and money-lenders envisaged by entry 30 of list II. It does not concern, in general, with either the business of money-lending or persons who carry on the business of money-lending. A statutory offence is created by Section 138 of the Act when a person issues a cheque for the discharge of whole or in part of any debt or other liability and if it is returned by the bank unpaid either because the amount of money standing to the credit of the account of the drawer is insufficient or the amount covered by the cheque is in excess of the amount to be paid from the account of the drawer by an agreement with the bank. Thus the limited sphere within which Section 138 of the Act operates cannot, by any stretch of reasoning, be approximated to or equated with money-lending or activities concerned with money-lenders. The Section concerns with dishonour of cheques in certain circumstances and the resultant consequences. Banking and cheques (entries 45 and 46 of List I) are thus primarily the matters covered by Section 138. Although, incidentally, the impugned legislation trenches upon debtor and creditor relationship, which is but an aspect of money-lending and money-lenders, it cannot be said that in its true nature and character, the legislation concerns with money-lenders and money-lending.

       We, therefore, hold that the impugned legislation is not ultra vires the powers of Union Parliament. (Para 11)

       (ii) Negotiable Instruments Act, 1881 Section 138 - Strict liability - Whether a legislation creating a penal offence by excluding mens rea as a necessary ingredient is arbitrary, and, therefore, violative of Article 14 of Constitution of India? - (No).

       Held: Section 138 of the Act creates strict liability. When the two requirements constituting the offence, as specified in the section, are present, then the drawer of the cheque shall be deemed to have committed the offence. Section 140 in clear terms excludes the defence that the drawer had no reason to believe, when he issued the cheque, that it may be dishonoured on presentment for the reasons stated in Section 138. The exclusion of mensrea as a necessary ingredient of the offence under Section 138 is thus clear and explicit. There is no room for any ambiguity or doubt as regards the intention of the legislature in creating the offence in question. A statute creating an offence excluding means rea, in our considered view, cannot be said to be arbitrary falling within the inhibition of Article 14 of the Constitution of India. The impugned legislation was enacted in public interest; its objective is to enhance the acceptability of cheques in settlement of liabilities by making the drawer liable for penalties in certain cases while at the same time providing adequate safeguards' to prevent harassment of honest drawers". As the evil practice of issuing cheques in settlement of liabilities without there being adequate amount in the accounts became rampant, the Union Parliament though it fit to curb the same effectively by enacting a stringent law while at the same time taking care to safeguard the interests of honest drawers. An honest drawer can always avert the threat of prosecution by paying the amount due within 15 days from the date of receipt of notice from the payee or holder in due course in case the cheque issued by him was dishonoured on either of the grounds specified in Section 138. (Para 16)

       (iii) Constitution of India - Art. 14 - Negotiable Instruments Act, 1881 - Section 138 Offence of dishonour of cheque - Classification between companies and individuals for fastening criminal liability - Whether arbitrary? (No).

       Held: Article 14, it is a firmly settled legal position, forbids class legislation but does not forbid reasonable classification vide Ramakrishna Dalmia v. Justice S.R. Tendulkar, A.I.R. 1988 S.C. 538. A company, in law, is different from it, share-holders or members. It is legal person. When wrongful acts are attributed to a legal person, they are, in reality, the acts of its agents. The same in effect would be the case with regard to any body comprising a plurality of persons like a firm or association of persons, comprehended by the definition of 'company' under Section 141 (2). Recognising this reality, modem penal law makes a distinction between natural persons and legal persons in the matter of fastening criminal liability. When a Company is punished for an offence the persons that must be identified as the wrong doers are those who were incharge of the business of the company and responsible for the conduct of the company. If something was done without their knowledge and despite the diligence exercised by them, the offence had taken place, they cannot be rendered liable to punishment individually. This classification, therefore, cannot be termed either irrational or unreasonable. (Para 19)

       (iv) Negotiable Instruments Act, 1881 Section 138, proviso (c) - Words 'fails to make payment' - Whether words fails to make payment' occurring in proviso (c) to Section 138 imply 'failure without reasonable cause' ? (No).

       Held: There is no necessity to invoke the doctrine of reading down in view of the explicit language in which the proviso is couched, the principle of strict liability incorporated in the main enacting clause and also the specific exclusion, by Section 140, of any defence in respect of a prosecution under Section 138 that “the drawer had no reason to believe when be issued the cheque, that the cheque may be dishonoured on presentment for the reasons stated in that section". As we have already held that Section 138 is not unconstitutional, it is not permissible to hold that the failure contemplated in proviso (c) to Section 138 implies failure without reasonable cause. (Para 21)

       Further Held: It would not be open to an accused in a prosecution under Section 138 to lead evidence that he had reasonable cause for issuing the cheque of the nature referred to in Section 138; such a defence is excluded by Section 140. When the drawer of the cheque is not entitled to lead evidence that he had no reason to believe when he issued the cheque that it may be dishonoured on presentment for the reasons mentioned in Section 138, he cannot also lead evidence that he had reasonable cause for issuing such a cheque. "Reason to believe" is nothing but "reasonable cause". (Para 23)

       (v) Constitution of India - Art. 20 (3) Negotiable Instruments Act, 1881 - Sections 138 and 139 - Rebutable presumption incorporated in Section 139 - Whether presumption in favour of holder of a cheque is violative of fundamental right of an accused under Clause (3) of Art. 20 ? - (No).

       Held: It is incumbent on the Court, in a prosecution under Section 138, unless the contrary is proved, to draw the inference that the cheque received by its holder was a cheque of the nature referred to under Section 139 for the discharge, in whole or in part, of any debt or other liability. The presumption is displaced only when the truth of the inference is disproved on other evidence.

       The fundamental right in question - clause (3) of Article 20 of the Constitution of India - pressed into service for the petitioners incorporates the principle of immunity against self in crimination by laying down that no person accused of any Offence shall be compelled to be a witness against himself. Unless a person is compelled to be a witness against himself, this clause has no application. (Para 26)

       (vi) Negotiable Instruments Act, 1881 - Section 138 - Prosecution for dishonour of cheque - Petitioner Company declared as a sick unit. Whether Section 17 of Sick Industrial Companies (Special Provisions) Act, 1985 bar prosecution of such a company without express permission of Board? - (No) (Para 28)

       (vii) Negotiable Instruments Act, 1881 - Section 138 - Cheque given by way of a gift or present - Maker of cheque not liable for prosecution u/s. 138. (Para 31)

       (viii) Negotiable Instruments Act, 1881 Section 138 - Words 'another person' – Both payee and holder in due course are covered by expression but not a mere holder or endorsee without consideration. (Para 32)

       (ix) Negotiable Instruments Act, 1881 - Section 139 - Rebuttable presumption under Operates only in favour of payee or a holder in due course but not in favour of a person, who, without consideration, became holder of cheque. (Para 33)

       (x) Negotiable Instruments Act, 1881 Sections 138 & 139. Dishonour of cheque - Plea of innocence - Accused can rely upon other provisions of Act in support of his plea. Initial burden on complainant to show that cheque was issued for discharge of a legally enforceable debt or other liability. (Para 34)

       (xi) Negotiable Instruments Act, 1881 Sections 138 to 142 - Dishonour of cheque- Prosecution u/s. 138 – Sentence - Jurisdiction of Magistrate to impose fine in excess of Rs.5000/- if fact situation so warrants.

       Held: When Sec. 142 was enacted, the Union Parliament was aware of the fact that the jurisdiction of the Metropolitan Magistrate or a Judicial Magistrate of the First Class was limited to imposing a sentence of imprisonment for a term not exceeding three years and fine not exceeding Rs.5,000/-. That is why, the section beings with a non-obstante clause. Further, under Section 4 (2) of the Code of Criminal Procedure, offence under any law other than the Indian Penal Code, although to be tried in accordance with the provisions of the Code, the same shall be "subject to any enactment for the time being in force regulating the manner or place of investigation, inquiring into, trying or otherwise dealing with such offences". Therefore, a Judicial First Class Magistrate or a Metropolitan Magistrate trying an offence under Section 138 has power to impose tine in excess of Rs.5,000/- if the fact situation so warrants. (Para 35)

       Result: Writ Petitions dismissed.