The issuance of a cheque on a closed account still attracts Section 138 of the Negotiable Instruments Act, as the words 'an account maintained by him' imply that the account was opened by the accused and a cheque book was issued to him.

Shiv Narayan Dhingra, J.

By this appeal u/s 374 of code of Criminal Procedure, the appellant has assailed his conviction u/s 138 of Negotiable Instruments Act and order on sentence whereby he was sentenced to a fine of Rs. 40,000/-, in default of payment of fine, to undergo rigorous imprisonment for three months. Out of Rs. 40,000/-, Rs. 35,000/- was to be paid to the complainant as compensation.

2. The complaint against the petitioner was filed by the respondent/complainant u/s 138 of NI Act as a cheque of Rs. 25,000/- issued by the appellant was dishonoured and despite service of demand notice, the appellant failed to pay the amount. The complainant had examined himself and clerk of Dena Bank and proved issuance of cheque against supply of goods and dishonour of cheque. The notice of demand was proved as Ex.PW3/B. The postal receipt of notice is Ex.PW3/C and the acknowledgment received back showing receipt of notice as Ex.PW3/F. The appellant had not denied issuance of cheque and dishonour of cheque. He had not taken any defence at the time of accepting notice and simply pleaded not guilty. During cross examination, various defences were tried. One of the defences was that no goods were supplied despite assurance. The second defence was that the cheque was without consideration. The third was that the cheque was issued against membership of chit fund. The dishonoured memo showed that the cheque was issued by the appellant on a closed account. The learned trial court (in this case, the trial court was court of Sessions since by an administrative order of High Court, for some time, cases u/s 138 N I Act were sent for trial to the court of Sessions) held that even if the cheque was issued on a closed account, the provisions of Section 138 NI Act would be applicable and the offence u/s 138 was made out and convicted the appellant.

3. The counsel for the appellant argued that it was in the knowledge of complainant that the cheque was of a closed account since the earlier cheque issued by the appellant had come back with a dishonour memo saying that the account was closed. The second cheque was put by the complainant in the bank despite knowing that the account was closed and, therefore, no offence u/s 138 NI Act was made out.

4. It is submitted by the counsel for the appellant that Section 138 envisages that at the time of issuance of cheque, the account maintained by the accused should be a 'live' account. The counsel for the appellant argued that that 'the account maintained' only means that the 'account being maintained' on the date of issuance of cheque and if the cheque was issued on a closed account, Section 138 would not be attracted. I consider that this interpretation given by the counsel for the appellant of Section 138 is not a correct interpretation. In commercial transactions, cheques are exchanged in lieu of liabilities and are frequently given against the purchase of goods etc on the trust that the cheque would be encashed and it was a valid negotiable instrument. At the time when cheque is given by a person to another, the giver of cheque gives it as a valid negotiable instrument. If the cheque is given against a closed account, the holder of the cheque, to whom the cheque is given cannot be penalized for this dishonesty of the issuer of the cheque and it cannot be said that Section 138 would not be attracted. The words "on an account maintained by him" cannot be read as "on an account being maintained by him". The word "an account maintained by him" implies that the account was opened by him and for operation of the account of cheque book was issued to him.

5. I, therefore, find no force in the arguments advanced by the counsel for appellant. I consider that the appellant in the present case had no defence at all. He did not take the defence at the time of accepting notice. He did not lead defence evidence after statement u/s 281 of code of Criminal Procedure. The defence taken in statement u/s 281 or 313 of