A cheque issued without a legally enforceable debt does not attract penal consequences under Section 138 of the Negotiable Instruments Act.

JUDGMENT :

1. The complainant in S.T. No.128/2007 on the files of the Judicial First Class Magistrate Court-II, Thamarassery, has filed this appeal, with the leave of this Court, challenging the judgment of acquittal dated 31.03.2008, whereby the learned Judicial First Class Magistrate acquitted the accused in the above case, where the prosecution alleged commission of the offence punishable under Section 138 of the Negotiable Instruments Act, 1881 [hereinafter referred as ‘NI Act’ for short] by the accused. The 1^st respondent herein is the accused before the trial court and the 2^nd respondent herein is the State of Kerala, represented by the learned Public Prosecutor.

2. Heard the learned counsel for the appellant, the learned Public Prosecutor and the learned counsel appearing for the 1^st respondent, in detail. Perused the verdict under challenge and the records of the trial court.

3. Parties in this appeal shall be referred as ‘complainant’ and ‘accused’ hereafter.

4. In this matter, the case of the complainant, M/s Malabar Chit Funds (P) Ltd. is that, the accused joined in a chitty conducted by the complainant company and though, the accused bid the chitty and collected the prize amount, he failed to repay the installments due. Thereafter, the accused and one Mr. Binoy, his guarantor, undertook to repay the liability to the tune of Rs.82,500/-. In discharge of the said liability, Mr. Binoy issued a cheque in favour of the complainant and the same got dishonored for ‘insufficiency of funds’. Thus, the complainant launched prosecution against Mr. Binoy by filing S.T. No.80/2005 on the files of the Judicial First Class Magistrate Court-I, Thamarassery and the same was withdrawn, since Rs.50,000/- was paid by Mr. Binoy. Later, Ext.P3 cheque was issued by the accused in discharge of the balance liability. But, Ext.P3 cheque issued by the accused also got dishonored for want of funds. Then also, the accused failed to make the payment, though he accepted demand notice.

5. The trial court took cognizance of the matter and proceeded with trial. During trial, PWs 1 and 2 were examined and Exts.P1 to P14(a) were marked on the side of the complainant. After examination of the accused under Section 313(1)(b) of Cr.P.C, he himself got examined as DW1 and Exts.D1 to D3 were also marked.

6. On appreciation of evidence, the trial court acquitted the accused for the offence punishable under Section 138 of the NI Act, on the finding that the liability towards the complainant was discharged by the accused during the pendency of S.T. No.80/2005 on the files of the Judicial First Class Magistrate Court-I, Thamarassery, filed by the complainant against Mr. Binoy, who was the guarantor of the accused to the chitty transaction. Later, the said complaint was withdrawn.

7. While challenging the judgment of acquittal by the trial court, the learned counsel for the appellant/complainant argued that the accused joined a chitty run by the complainant company and received the chit prize money. But, he failed to repay the installments of the chitty. Later, Mr. Binoy, who is the guarantor of the accused to the chitty transaction issued a cheque for Rs.82,500/- and when the complainant presented the cheque for encashment the same got dishonored for want of funds. Thus, the complainant filed S.T. No.80/2005 before the Judicial First Class Magistrate Court-I, Thamarassery, alleging commission of offence punishable under Section 138 of the NI Act. During the pendency of S.T. No.80/2005, Rs.50,000/- was paid by Mr. Binoy and accordingly the said complaint was withdrawn. Later, the accused, the principal debtor himself issued the present cheque for Rs.37,919/- towards the balance outstanding amount and the said cheque also got dishonored for the reason ‘insufficiency of funds’. According to the learned counsel for the complainant, since the evidence given by PWs 1 and 2 clubbed with Exts.P1 to P14(a) would show the transaction led to execution of Ext.P3 cheque, which w