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2015 Supreme(Raj) 721
RAJASTHAN HIGH COURT AT JAIPUR BENCH
M.N. Bhandari, J.
Rajasthan Small Scale Industries Corporation Limited, Kota - Petitioner
Versus
M/s. Agrawal Enterprises, Kota - Respondent
S.B. Criminal Misc. Petition No. 367 of 2004
Decided On : 13-2-2015
For the Petitioner:R.P. Garg, Advocate
For the State : Sudesh Saini, Public Prosecutor
Headnote:
Negotiable Instruments Act 1881 – Section 138 – Learned Magistrate – Legally Enforceable – Learned counsel petitioner submitted that on a complaint under Section 138 of Negotiable Instruments Act 1881 cognisance of offence was taken by the competent court and the case was then kept for framing of charges revision petition against said order was preferred by non-petitioner - accused and has been accepted proceedings under Section 138 of NI Act was challenged on the ground that cheque in question was given as guarantee, thus on offence under Section 138 of NI Act is not made out. A reference of complaint made by petitioner was given where it is admitted that cheques were given towards guarantee – Court below did not find those cheques towards debt or other liabilities complaint was accordingly quashed so as order passed by learned Magistrate – Held, Issuance of cheque should be towards debt or other liabilities issuance of cheque by guarantor would not be towards debt but against other liabilities Revisional Court committed illegality while quashing order of cognisance in reference to the judgment without making difference between issuance of cheque towards security and guarantee – Court below made a reference of statements of Hitesh Chand Vyas where he had stated about issuance of cheque towards guarantee of payment statement is taken on its face, it was for discharge of liability towards payment would be covered by Section 138 of NI Act reported in Honble Apex Court found issuance of cheque towards security – Petition allowed.
Certainly. Based on the provided legal document, here are the key points:
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The case concerns a complaint under Section 138 of the Negotiable Instruments Act, which deals with the dishonor of a cheque for insufficiency of funds or other reasons, and the legal requirements to establish an offense under this section (!) (!) .
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The petitioner argued that the cheque was issued as a guarantee, not towards a debt or other enforceable liability, and therefore the offense under Section 138 was not made out. The court below initially did not find those cheques to be towards debt or liabilities, leading to the quashing of the complaint (!) (!) .
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The revisional court quashed the order of cognizance, referencing a judgment that was interpreted to mean that cheques issued as security or guarantee do not constitute an offense under Section 138. This interpretation was challenged because it overlooked the specific language of Section 138, particularly the phrase "debt or other liability" (!) (!) .
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The Supreme Court clarified that the issuance of a cheque by a guarantor, even if given as security, can still be considered towards a legally enforceable debt or liability if it is issued for that purpose. The distinction between issuing a cheque as security versus towards a debt is crucial, and the latter falls within the scope of Section 138 (!) (!) (!) .
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The Court emphasized that the language of Section 138 is specific and inclusive of liabilities, whether they are debts or other enforceable liabilities. The phrase "any debt or other liability" indicates that the law applies broadly to enforceable obligations, not just direct debts (!) .
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The Court found that the revisional court failed to carefully consider the relevant judgment and the factual context, especially the fact that the cheque was issued by a guarantor for discharge of liability. The Court held that the issuance of a cheque as security is different from issuing it towards a debt or liability, and the latter is covered under Section 138 (!) (!) .
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The Court also noted that statements suggesting cheques given as security do not constitute an offense under Section 138 should not be applied when the cheque is issued for the discharge of a liability, as in this case. The proper legal interpretation requires examining the intent and purpose of issuance (!) (!) .
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The order of the revisional court was set aside, and the proceedings were restored to the Magistrate's court for expeditious disposal. The Court directed that the case should proceed, recognizing that the issuance of the cheque by the guarantor for the discharge of liability falls within the scope of Section 138 (!) .
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Overall, the judgment underscores the importance of distinguishing between cheques issued as security and those issued for the purpose of discharging a debt or liability, with the latter being prosecutable under the law (!) .
Please let me know if you need further elaboration or assistance with specific legal issues related to this case.
M.N. Bhandari, J.
By this criminal misc. petition, a challenge is made to the order dated 17th October, 2003 passed by the Revisional Court. By the aforesaid order, the revision filed by the non-petitioner was accepted.
2. Learned counsel for the petitioner submitted that on a complaint under Section 138 of Negotiable Instruments Act 1881 (for short "NI Act"), cognisance of the offence was taken by the competent court and the case was then kept for framing of charges. The revision petition against the said order was preferred by the non-petitioner - accused and has been accepted. The proceedings under Section 138 of NI Act was challenged on the ground that cheque in question was given as guarantee, thus on offence under Section 138 of NI Act is not made out. A reference of complaint made by the petitioner was given where it is admitted that cheques were given towards guarantee. The Court below did not find those cheques towards debt or other liabilities. The complaint was accordingly quashed so as the order passed by the learned Magistrate.
3. It is also submitted that impugned order was passed by the Revisional Court not only in ignorance of Section 138 of NI Act but the judgment of Hon'ble Apex Court in the case of I.C.D.S. Ltd. v. Beena Shabeer & Anr. reported in 2002(2) WLC (SC) Cri. 364 : AIR 2002 SC 3014. The judgment of aforesaid was given by the Hon'ble Apex Court on the similar facts. The cheque given by the guarantor was taken to be on offence under Section 138 of NI Act, if dishonoured by the Bank. The Hon'ble Apex Court did not approve the view taken by the High Court. The prayer is accordingly made to quash the impugned order in the light of the judgment supra.
4. None appears on behalf of the respondent, despite service of notice.
5. I have considered the submissions made by learned counsel and perused the record so as the judgment cited at bar.
6. The Revisional Court quashed the order of cognisance by referring Para No. 5 of the judgment in the case of ICDS Ltd. (supra). It is by ignoring other paras and specific finding as to when the offence under Section 138 of the NI Act would be made out. To appreciate the arguments, Section 138 of NI Act is quoted hereunder for ready reference :
"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, 5 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 provisions of this Act, be punished with imprisonment for 19 [a term which may be extended to two years], 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 validity whichever is earlier;
(b) the payee or the holder in due course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving a notice in writing, to the drawer of the cheque, 20 [within thirty days] of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and
(c) the drawer of such cheque fails to make the payment of the said amount of money to the payee or, as the case may be, to the holder in due course of the cheque, within fifteen days of the receipt of the said notice.
Explanation. - For the purposes of this section, "debt or other liability" means a legally enforceable debt or other liability."
7.
