Andhra Pradesh High Court
B.Mohan Krishna - Appellant
Versus
Union of India - RESPONDENT
Decided On: 01-01-94

The absence of mens rea in a statutory provision creating an offence is not necessarily arbitrary and violative of article 14 of the Constitution of India, if the impugned legislation is enacted in public interest and provides adequate safeguards to prevent harassment of honest drawers.

Headnote:

NEGOTIABLE INSTRUMENTS ACT - SECTIONS 138 TO 142 - PENALTIES IN CASES OF DISHONOUR OF CERTAIN CHEQUES FOR INSUFFICIENCY OF FUNDS - CONSTITUTIONALITY - STRICT LIABILITY - PRESUMPTION - INTERPRETATION - GUIDELINES.

Fact of the Case:

The petitioners, facing prosecutions for offences punishable under section 138 of the Negotiable Instruments Act, 1881, challenged the constitutional validity of the provisions of Chapter XVII of the Act (sections 138 to 142), which were inserted by section 4 of the Banking, Public Financial Institutions and Negotiable Instruments Laws (Amendment) Act, 1988. The main contention was that section 138, which creates a statutory offence in the matter of dishonour of cheques on the ground of insufficiency of funds in the account maintained by a person with a banker, was arbitrary and violative of articles 14, 19(1), 20 and 21 of the Constitution of India, as it dispensed with the indispensable ingredient of mens rea.

Finding of the Court:

The Court held that the impugned legislation was not ultra vires the powers of the Union Parliament, as the true nature and character of section 138 did not encompass money-lending and money-lenders envisaged by entry 30 of List II of the Seventh Schedule to the Constitution of India. The Court further held that the absence of mens rea in section 138 for fastening criminal liability was not arbitrary and did not violate article 14 of the Constitution of India, as the impugned legislation was enacted in public interest 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.

Issues: 1. Whether the impugned legislation is ultra vires the powers of the Union Parliament on the ground of want of legislative competency? 2. Whether a statutory provision creating an offence without incorporating mens rea as a necessary ingredient is violative of article 14 of the Constitution of India? 3. Whether treating companies and individuals separately for fastening criminal liability is violative of article 14 of the Constitution? 4. Whether the words "fails to make payment" occurring in proviso (c) to section 138 imply "failure without reasonable cause"? 5. Whether the presumption in section 139 in favour of the holder of a cheque is violative of the guaranteed fundamental right of an accused person under clause (3) of article 20 of the Constitution of India? 6. Whether section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985, prohibits launching of prosecution under section 138 of the Act?

Ratio Decidendi: 1. The true nature and character of section 138 of the Act does not encompass money-lending and money-lenders envisaged by entry 30 of List II of the Seventh Schedule to the Constitution of India, and therefore, the impugned legislation is not ultra vires the powers of the Union Parliament. 2. The absence of mens rea in section 138 for fastening criminal liability is not arbitrary and does not violate article 14 of the Constitution of India, as the impugned legislation was enacted in public interest 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. 3. Treating companies and individuals separately for fastening criminal liability is not violative of article 14 of the Constitution, as a company, in law, is different from its shareholders or members and when wrongful acts are attributed to a legal person, they are, in reality, the acts of its agents. 4. The words "fails to make payment" occurring in proviso (c) to section 138 imply "failure without reasonable cause", as the principle of strict liability incorporated in the main enacting clause and 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 he issued the cheque, that the cheque may be dishonoured on presentment for the reasons stated in that section" preclude the interpretation that the failure contemplated in proviso (c) to section 138 implies failure without reasonable cause. 5. The presumption in section 139 in favour of the holder of a cheque is not violative of the guaranteed fundamental right of an accused person under clause (3) of article 20 of the Constitution of India, as the presumption is rebuttable and the accused is not compelled to be a witness against himself. 6. Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985, does not prohibit launching of prosecution under section 138 of the Act, as its sphere of operation is confined to proceedings for the winding up of an industrial company and it does not in any way bar prosecution of a company or any of its employees under the provisions of the Negotiable Instruments Act, or any other penal law.

Final Decision: All the writ petitions were dismissed, subject to the guidelines indicated in regard to the interpretation of the impugned provisions.