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1999 Supreme(Del) 1075
High Court Of Delhi
RAJINDER STILS LIMITED - Appellant
Versus
UNION OF INDIA - Respondent
CRIMINAL APPEAL 828 of 1998
Decided On : 12/03/1999
N.K.KAUL, S.K.MANIKTALA, S.N.Gupta, S.S.GANDHI
The Parliament has the competence to enact provisions relating to dishonor of cheques under Entries 45 and 46 of List I of the 7th Schedule to the Constitution, which deal with banking and bills of exchange. Mens rea is not an essential ingredient for an offense under Section 138 of the Negotiable Instruments Act, as the provisions create a strict liability offense in the interest of the nation.
Headnote:
NEGOTIABLE INSTRUMENTS ACT - Dishonour of Cheque - Constitutional Validity of Sections 138 to 142 - Whether ultra vires to the Constitution and rule making powers of the Legislature - Whether mens rea is an essential ingredient for an offence committed under Section 138 - Whether a person can be imprisoned for failure to comply with financial contractual liability which is purely of civil nature - Whether a person can be tried for an offence under Section 138 for dishonour of cheques which are issued beyond the period of six months from the date when those were drawn.
Fact of the Case:
Petitioners challenged the constitutional validity of Sections 138 to 142 of the Negotiable Instruments Act, 1881, contending that they are ultra vires to the Constitution and the rule-making powers of the Legislature. They argued that Section 140 takes away a reasonable defense of the accused, making the provisions unconstitutional. They also contended that the provisions do not provide adequate safeguards to protect honest drawers and that imprisonment for failure to discharge a contractual obligation violates Article 21 of the Constitution. Additionally, they questioned whether mens rea is an essential ingredient for an offense under Section 138 and whether a person can be tried for dishonor of cheques issued beyond six months from the date of issuance.
Finding of the Court:
The Court upheld the constitutional validity of Sections 138 to 142 of the Negotiable Instruments Act, 1881. It held that the Parliament has the competence to enact these provisions under Entries 45 and 46 of List I of the 7th Schedule to the Constitution, which deal with banking and bills of exchange. The Court found that the provisions do not deal with the subject of money lending and money lenders, which is a State subject under Entry 30 of List II of the 7th Schedule. It also held that mens rea is not an essential ingredient for an offense under Section 138, as the provisions create a strict liability offense in the interest of the nation. The Court further held that a person can be tried for dishonor of cheques issued beyond six months from the date of issuance, as the provisions apply to cheques presented within six months from the date of issuance or within the period of validity, whichever is earlier.
Issues: 1. Whether Sections 138 to 142 of the Negotiable Instruments Act, 1881, are ultra vires to the Constitution and the rule-making powers of the Legislature? 2. Whether Section 140 of the Act takes away a reasonable defense of the accused, making the provisions unconstitutional? 3. Whether the provisions provide adequate safeguards to protect honest drawers? 4. Whether imprisonment for failure to discharge a contractual obligation violates Article 21 of the Constitution? 5. Whether mens rea is an essential ingredient for an offense under Section 138? 6. Whether a person can be tried for dishonor of cheques issued beyond six months from the date of issuance?
Ratio Decidendi: 1. The Parliament has the competence to enact Sections 138 to 142 of the Negotiable Instruments Act, 1881, under Entries 45 and 46 of List I of the 7th Schedule to the Constitution, which deal with banking and bills of exchange. 2. The provisions do not deal with the subject of money lending and money lenders, which is a State subject under Entry 30 of List II of the 7th Schedule. 3. Mens rea is not an essential ingredient for an offense under Section 138, as the provisions create a strict liability offense in the interest of the nation. 4. A person can be tried for dishonor of cheques issued beyond six months from the date of issuance, as the provisions apply to cheques presented within six months from the date of issuance or within the period of validity, whichever is earlier.
Final Decision: The Court upheld the constitutional validity of Sections 138 to 142 of the Negotiable Instruments Act, 1881.
( 1 ) THE petitioners have filed this writ petition under Article 226 of the Constitution of India for issuance of an order/directions thereby holding that Chapter XVII of the Negotiable Instruments Act as incorporated by Section 4 of the Banking, Public Financial Institution and Negotiable Instrument Laws (Amendment Act) 1988 (66 of 1988) is ultra vires to the Constitution and rule making powers of the Legislature and/or in the alternative to issue an appropriate writ or order for direction holding that Section 138 of the Negotiable Instruments Act, 1881 (hereinafter called as Act) is ultra vires of objects of the amending Act and/or issue a declaration that Section 138 of the Negotiable Instruments Act, 1881 (hereinafter called as Act) is not applicable to the post-dated cheques which are issued beyond the period of six months from the date when it is drawn.
( 2 ) THE petitioners have approached this Court because a complaint under Section 138 of the Negotiable Instruments Act against them have been filed by respondent No. 3 before the Metropolitan Magistrate, Patiala House, New Delhi. In this petition the Court has been called upon to decide only the constitutional validity of these provisions, therefore, it is not necessary to recapitulate the detailed facts of this case. According to the petitioners this petition raises the following questions of law :
(I) Whether the provisions of Sections 138, 139, 140, 141 and 142 of the Negotiable Instruments Act, 1881, are ultra vires and violative of Article 21 of the Constitution of India?
(II) Whether the provisions of Sections 138 to 142 of the Negotiable Instruments Act, 1881, are ultra vires of the powers of the Central Government to enact laws in this direction on account of the fact that this subject of legislation can only be made by the State Governments in view of Article 246 (3) read with Entry 30 List II of the VII Schedule to the Constitution of India?
(III) Whether mens rea is an essential ingredient for an offence committed under Section 138 of the Negotiable Instruments Act?
(IV) Whether a person can be imprisoned and/or can be forced to face the rigour of criminal trial on account of his failure to comply with financial contractual liability which is purely of civil nature for reasons beyond his control and whether such imprisonment will be violative of the objects of Negotiable Instruments Act, 1881?
(V) Whether a person can be tried for an offence under Section 138 of the Negotiable Instruments Act for dishonour of the cheques which are issued beyond the period of six months from the date when those were drawn?
( 3 ) IF may be pertinent to mention that by the Banlong Public Financial Institutions and Negotiable Instrument Laws (Amendment Act) 1988 (66 of 1988) and new Chapter being Chapter XVII was added in the Negotiable Instruments Act, 1881 containing Section 138 to Section 142. For convenience, these sections are reproduced as under :
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 to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that Bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provision of this Act, be punished with imprisonment for a term which may extend to one year, or with fine which may extend to twice the amount of the cheque, or with both: Provided that nothing contained in this section shall apply unless - (a) the cheque has been presented to the Bank within a period of six months from the date on which it is drawn or within the period of its v
