IMPORTANT POINT
Dishonour of cheque for reasons "account closed" also attracts offence under Section 138 of Negotiable Instruments Act.

ORDER

N.S. Veerabhadraiah, J. - The petitioner sought for quashing of the order of the learned Civil Judge and Judicial Magistrate of the First Class. Bellary in C.C. No. 167 of 2000 taking cognizance of the offence punishable under Section 138 of the Negotiable Instruments Act, 1881.

2. The petitioner 1 issued a cheque in favour of the respondent for a sum of Rs. 4,00,000/ - drawn on Vyshya Bank limited. Main Branch, Bangalore Road, Bellary. The respondent presented the cheque for realisation of the amount and the same was bounced with an endorsement "account closed". Thereafter, the respondent issued a legal notice on 20-4-2000 and presented a complaint under Section 200 of the Cr. P.C. for taking cognizance of the offence punishable under Section 138 of the Negotiable Instruments Act. The learned Principal Civil Judge and Judicial Magistrate of the First Class, Bellary, considering the materials on record held that the ingredients of Section 138 of the Negotiable Instruments Act are made out. Accordingly, he took cognizance of the offence punishable under Section 138 of the NI Act and registered a case. It is this order, which is now questioned in the present petition.

3. The learned Counsel Sri V.T. Rayareddy for the petitioners, firstly contended that there is no valid notice issued as required under Section 138 of the NI Act. Secondly, contended that there is no dishonour of cheque as contemplated under Section 138 of the NI Act. Thirdly, contended that the complaint is filed beyond the period of limitation i.e., the cause of action arose on 17-4-2000, but the complaint ought to have filed within 17-5-2000 whereas the complaint came to be filed on 30-5- 2000. Therefore, the complaint is barred by limitation. On these three grounds the Counsel prayed to quash the proceedings.

4: The learned Counsel, Sri Gode Nagaraj, for the respondent firstly contended that there is a valid notice and the Trial Court has also held that the registered notice sent was refused. Therefore, it is held that the notice issued is in accordance with law. Secondly, he contended that it is clear from the endorsement of the bank that the 'cheque came to be dishonoured and further submitted that even the endorsement issued shows "account closed". That means the cheque issued is with an intent to defraud the creditor. Therefore, it comes within the ingredients of Section 138 of the NI Act. Thirdly, he contended that the petition filed is within the period of limitation i.e., 30 days from the date of cause of action after excluding the period of 15 days. .

5. In the light of the submissions, the short point for consideration that arise.

(1) Whether the endorsement "account closed" gives rise to, a meaning amounting to dish on our of cheque or the amount is insufficient to honour the cheque?

(2) Whether the cause of action arises' from the date of dishonour of the cheque or after 15 days as is provided under' Section' 138, 138(b) and 138(c) of the NI Act?

6. In the case on hand the Trial Court on examining the record has come to the conclusion that a notice has been duly issued and the acknowledgement has been returned with an endorsement that the addressee refused to receive the notice. This being a finding of fact. I do not want to interfere insofar as the question of issue of notice is concerned. The next point that has to be considered is whether the cheque in question has been dishonoured within the meaning of Section 138 of the Negotiable Instruments Act. 1881 (in short 'NI Act'). Section 138 of NI Act thus reads:

"Section 138- 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