The main legal point established in the judgment is the requirement to prove insufficiency of funds for a bounced cheque and the authority of a Magistrate of the First Class to impose a fine exceeding Rs. 5000 for an offense under Section 138 of the Negotiable Instruments Act.

Appeal against acquittal. The complainant in C.C. 241/89 before Judicial First Class Magistrate, Kannur is the appellant.

2. The complaint was one under Section 142 of the Negotiable Instruements Act alleging commission of offence under Section 138 of the Act. The complainant is the President of the Kannur District Motor Engineering Metal Workers Union. The accused was the proprietor of T.K. Automobiles and General Engineering Service and two other concerns. His factory was closed with effect from 3-9-1987. In pursuance to conciliation proceedings initiated by District Labour Officer, Kannur the disputes between the management and the union were settled and a sum of Rs. 1,50,583/- was agreed to be paid to the workers. The amount was not paid as agreed. Since then a sum of Rs. 29,700/- was paid. Towards the balance a cheque for Rs. 1,17,000/- was issued which when presented in the bank was returned with the endorsement "refer to the drawer". Notice under proviso (b) to Section 138 was sent by the complainant. The accused received that notice, but did not send any reply. Hence the complaint.

3. The accused pleaded not guilty to the charge. The Magistrate found him guilty, convicted him and sentenced him to pay a fine of Rs. 1,57,000/- and in default to undergo R.I. for a period of one year. Out of the fine if realised a sum of Rs. 1,17,000/- was directed to be paid to the complainant as the amount due under the cheque and the balance of Rs. 40,000/- as compensation under Section 357 Criminal Procedure Code. On appeal, Sessions court, Thalassery set aside the conviction and sentence and acquitted the accused. Hence this appeal after obtaining special leave.

4. Heard counsel on both sides.

5. The two reasons given by the learned Sessions Judge for entering a verdict of acquittal are; (1) The cheque has not been proved to have been returned for insufficiency of funds. (2) The First Class Magistrate has no authority to impose fine exceeding Rs. 5,000/-.

6. The Manager of the Bank was not examined to speak about the insufficiency of amount in the account of the accused. The cheque was dishonoured with the endorsement "refer to the drawer". A Division Bench of this Court in Thomas Varghese v. Jerome, (1992 (1) Ker LT 812), held that endorsements like "refer to drawer", "account closed", "payment has been stopped" etc. made by the banker at the time of the return of the cheque are having the effect of proving that the cheque has been bounced. It is observed that if the bouncing of the cheque was on account of insufficiency of funds belonging to the drawer then the drawer will be subjecting himself to proceedings under Section 138 of the Act. The complainant is the President of an Employee Union and the amount covered by the cheque represents retrenchment compensation payable to them as per a conciliation agreement. The accused has no case that he was having sufficient funds in the bank on the date on which the cheque was presented. The complainant has not summoned the Bank Manager to prove that the drawer was not having sufficient funds in the bank. That the cheque was returned with endorsement 'refer to the drawer' is not disputed. The burden is on the complainant to show that the cheque was returned either for insufficiency of fund or that the amount exceeds the amount arranged to be paid. Since the amount covered by the cheque is due to the workers by way of retrenchment compensation I am of the view that an opportunity has to be given to the complainant to summon the Bank Manager to prove the insufficiency of funds in the account on the date on which the cheque was presented.

7. The other reason given by the Court below is the incompetency of the Magistrate to impose fine exceeding Rs. 5000/- by virtue of the powers conferred on a Magistrate of First Class under section 29(2) of the Code of Criminal Procedure. In meeting this contention learned counsel for the appellant draws attention to the non obstante clause contain