IMPORTANT POINT
Provisions of sections 138 to 142 of the Negotiable Instruments Act, cannot be held to be unreasonable or arbitrary and these are constitutionally valid.

Headnote:(i) Negotiable Instruments Act, 1881 Sections 138,139,140 and 141- Constitutional validity - Challenged as ultra vires and violative of Arts. 14 and 21 of Constitution of India - Held, Parliament had power and competence to enact Chapter XVII containing Sections 138 to 142 under Entries Nos. 45 & 46 of List I of Seventh Schedule to Constitution – Sections 138 and 140 are constitutionally valid.
       Held, that Entry No. 45 which speaks of Banking and Entry No. 46 which provides for Bills of exchange, cheques, promissory notes and other like instruments are couched in widest form and are wide enough to include the power and competence of the Central Government to provide for penal action and penalties in case of dishonour of certain cheques for insufficiency etc. of the funds in the account. The provisions of penalties in case of dishonour of certain cheques for insufficiency of funds in the account, prosecution and punishment relating there to be ancillary and subsidiary to the provisions relating to cheque. Giving words "Banking, Bills of Exchange, Cheques, Promissory Notes and other like instruments" occurring in Entries Nos. 45 and 46 the meaning of widest amplitude, it can be safely said that the matters relating to penalties and prosecution in connection thereto are fairly and reasonably comprehended in such words. We have, therefore, no hesitation in holding that the Parliament had power and competence to enact Chapter XVII containing sections 138 to 142 in the Negotiable Instruments Act under Entries Nos. 45 and 46 of List First of the Seventh Schedule to the Constitution. (Para 9)
       Further Held: Next submission of the learned counsel for the petitioners that the provision contained in section 138 of the N.I. Act is rendered unconstitutional because of section 140 of the said Act, which provides that it shall not be a defence in a prosecution for an offence under section 138 that the drawer had no reason to believe when he issued the cheque that the cheque may be dishonoured on presentment for the reasons stated in that section, it may be observed that section 138 of the N.I. Act provides for an offence which is not based on mens rea. Normally in criminal law existence of guilty intent is an essential ingredient of a crime and the principle is expressed in the maxim "actus non facit rum nisi mens sit rea". This is a general principle. However, the Legislature can always create an offence of absolute liability or strict liability where mens rea is not at all necessary. Such a measure is resorted to in public interest and such laws of strict liability are justified and cannot be said to be unreasonable. (para 10)
       Consequently Held: Section 138 of the N.I. Act can be said to be falling either in the class of Acts which are not criminal in real sense, but are acts which in the public interest are prohibited under the penalty or those were although the proceedings may be criminal in form, they are really only a summary mode of enforcing a civil right. Enactment of sections 138, to 142 has been made to meet creditors concern in a growing and developing country with liberal economic policy and opening of more avenues for trade, commerce and industry. Creation of strict liability is an effective measure by encouraging greater vigilance to prevent usual callous or otherwise attitude of drawers of cheques in discharge of debts or otherwise. The legislative object and purpose of section 138 is clearly to regulate financial promises in growing business, trade, commerce and industrial activities of the country and the strict liability under section 138 promotes greater vigilance in the matters covered by it. The incorporation of the said provision is designed to safeguard the faith of creditor in the drawer of the cheque, which is essential to the economic life of developing country like India. Its purpose would be defeated if in the prosecution of offence under section 138 of the N.I. Act the accused is permitted to raise the defence that he had no reason to believe when he issued the cheque that the cheque may be dishonoured on presentment.
       (Para 12)
       According to section 26 of the Indian Penal Code, a person is said to have 'reason to believe' a thing if he has sufficient cause to believe that thing but not otherwise. This definition of 'reason to believe' is to be read Wherever in the Indian Penal Code the phrase 'reason to believe' occurs. Thus wherever knowledge or reason to believe of a particular thing makes an offence under the Indian Penal Code, it has to be read for sufficient cause to believe that thing, but not otherwise. As stated above, the offence under section 138 of the N.I. Act is committed by legal fiction on dishonour of cheque for insufficiency etc., of the funds in the account when the cheque had been drawn for the discharge, in whole or in part, of any debt or liability. The provision contained in section 140 fortifies the intention of the legislature that reasonable belief or state of mind of an accused person are not relevant for an offence under section 138 of the N.I. Act. (Para 15)
       (ii) Negotiable instruments Act, 1881 Sections 138 & 140 - Mere dishonour of cheque is sufficient for commission of crime u/s 138 Mens rea not essential- Section 138 brings into operation rule of strict liability. (para 13)
       Result: Petition dismissed.

JUDGMENT

RM. Lodha, J. - Constitutional validity of sections 138, 139, 140 and 141 in Chapter XVII of the Negotiable Instruments Act, 1881 (for short "the N.I. Act") as enacted by the Banking, Public Financial Institutions and Negotiable Instruments Laws (Amendment) Act, 1988 is under challenge in this bunch of six writ petitions, Since all these writ petitions involve the aforesaid common question of law, these petitions are decided by this common judgment.

2. Before we appreciate the submissions made by the learned counsel challenging the provisions of sections 138, 139, 140 and 141 of the N.I. Act as ultra vires and violative of Articles 14 and 21 of the Constitution of India, briefly the facts of Criminal Writ Petition No. 91 of 1994 may be adverted to.

3. It is alleged in Criminal Writ Petition No, 91 of 1994, M/s. Mayuri Pulse Mills and others v. Union of India and others, that the respondent No.4 Parmanand Mohanlal Rathi, Proprietor, M/s. Rathi Trading Company filed the complaint against the petitioners under section 142 of the N.I. Act alleging that the petitioners have committed offences under sections 138 and 141 of the N.I. Act. According to the complaint, the petitioners issued two cheques drawn on the State' Bank of Hyderabad, Amravati, dated 13.9.1991 and 18.9.1991 respectively towards payment of the bills amounting to Rs. 1,11,780/-. The said cheques were deposited for collection in the account of the complainant with the Punjab National Bank, Amravati Branch, but the said cheques were returned unpaid with an endorsement "exceeds arrangement". Thereafter the complainant served upon the notice in writing making a demand for payment of the said amount of money from the petitioners, but the petitioners failed to comply, compelling the complainant to file the complaint under section 138 read with section 141 of the N.I. Act. On the said compliant, which was registered as Complaint No. 136 of 1992 by the Chief Judicial Magistrate, Amravati, the process was issued to the petitioners. The petitioners moved an application before the Chief Judicial Magistrate, Amravati for dropping the criminal proceedings on the ground that they had not committed any offence within the meaning of section 13 8 of the N.I. Act. The Chief Judicial Magistrate by his order dated 25.1.1993 dismissed the application holding that no question to drop the criminal proceedings arises. The petitioners taking exception to the order passed by the Chief Judicial Magistrate, Amravati on 25.1.1993 rejecting the application to drop the criminal proceeding under sections 138 and 141 of the N.I. Act, preferred the revision petition before the Additional Sessions Judge Amravati, who by his order dated 24.12.1993 dismissed the revision petition filed by the petitioners holding that the Chief Judicial Magistrate was justified in rejecting the application of the accused.

In Criminal Writ Petitions Nos. 91 of 1994, 93 of 1994, 75 of 1994, 68 of 1994 and 94 of 1994 Mr. J.K. Gilda, learned counsel for respondent No. 4, has put in appearance. Rule was issued by this Court in Criminal Writ Petition No. 68 of 1994 and the Assistant Government Pleader took notice on behalf of the respondent No.2 State of Maharashtra. All the matters involving common questions of law have been heard together by us.

4 Mr. J. N. Chandurkar, learned counsel for the petitioners in Criminal Writ Petitions Nos. 91 of 1994, 75 of 1994, 93 of 1994, 68 of 1994 and 94 of 1994, urged before us that the provisions of sections 138 and 140 of the N .I. Act are unreasonable and, therefore, violative of Article 14 of the Constitution of India. The learned counsel submitted before us that section 140 of the N.I. Act takes away a very important right of defence of accused in a prosecution for an offence under section 138 of the N.I. Act and that by itself makes the provisions contained in sections 138 and 140 of the Act unconstitutional. A defence of an accused in. a prosecution for an offence under sectio

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Judicial Analysis

SupremeToday

IMPORTANT POINTProvisions of sections 138 to 142 of the Negotiable Instruments Act, cannot be held to be unreasonable or arbitrary and these are constitutionally valid.

Judicial Analysis

IMPORTANT POINT
Provisions of sections 138 to 142 of the Negotiable Instruments Act, cannot be held to be unreasonable or arbitrary and these are constitutionally valid.