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IN THE HIGH COURT OF ALLAHABAD
ARUN KUMAR SINGH DESHWAL, J.
Vijay Kumar – Appellant
Versus
State of Uttar Pradesh and Another – Respondents
Application U/s 482 No. 17464 of 2024
Decided On : 23-05-2024
N.I. Act - Dishonour of Cheque - Section 138, Section 139 - The court discussed the provisions of Section 138 of the Negotiable Instruments Act, which penalizes the dishonour of cheques due to insufficient funds or other reasons. The court emphasized that a cheque returned with the endorsement 'account closed' constitutes dishonour under Section 138, and the statutory presumption of liability under Section 139 applies unless rebutted. The court also referenced previous judgments to reinforce that the dishonour of a cheque, regardless of the reason, can lead to legal consequences if the drawer fails to make payment after receiving a demand notice.
Fact of the Case:
The applicant sought to quash a summoning order related to a complaint filed under Section 138 of the N.I. Act, alleging that a cheque issued by him was dishonoured due to the account being closed. The applicant contended that the cheque was missing and had been misused, and that the dishonour did not arise from insufficient funds.
Finding of the Court:
The court found that the issues raised by the applicant regarding the missing cheque and the reason for dishonour were disputed questions of fact that could not be resolved at the quashing stage. The court held that the cheque's return with the endorsement 'account closed' was sufficient to attract liability under Section 138 of the N.I. Act.
Issues: Whether the cheque was issued in discharge of a liability and whether the endorsement 'account closed' constitutes dishonour under Section 138 of the N.I. Act.
Ratio Decidendi: The court reiterated that a cheque returned with the endorsement 'account closed' is treated as dishonoured under Section 138 of the N.I. Act. The presumption of liability under Section 139 applies unless the drawer can rebut it during trial. The court emphasized the importance of maintaining the efficacy of banking operations and the credibility of transactions involving cheques.
Final Decision: The application to quash the summoning order was dismissed, allowing the complaint under Section 138 of the N.I. Act to proceed.
Key Points: - The cheque returned with endorsement "account closed" constitutes dishonour under Section 138, with liability presumption under Section 139 unless rebutted (!) (!) - The court held that the question of missing cheque and the reason for dishonour are disputed facts suitable for trial, not for quashing at the pre-trial stage (!) - The cheque in question was returned with "account closed" endorsement, which attracts liability under Section 138 (!) - The presumption of liability under Section 139 applies unless the drawer can rebut it during trial (!) (!) - The application to quash summoning order was dismissed; proceeding under Section 138 N.I. Act to continue (!) (!) - Endorsements such as (i) refer to drawer, (ii) stoppage of payment, (iii) exceeds arrangement, (iv) insufficient funds, (v) signature mismatch, (vi) account closed collectively establish prima facie case for process under Section 138 (!) (!) (!) (!) (!) (!)
JUDGMENT :
ARUN KUMAR SINGH DESHWAL, J.
1. Heard learned counsel for the applicant and Sri Raj Bahadur Verma, learned A.G.A. for the State.
2. The present 482 Cr.P.C. application has been filed to quash the summoning order dated 07.02.2024 as well as entire proceeding of Complaint Case No. 6594 of 2023 (Rahul Vs. Vijay Kumar), under Section 138 of N.I. Act, Police Station Kotwali, District Ghaziabad, pending in the court of learned Civil Judge (S.D.) F.T.C., Ghaziabad.
3. Opposite party no. 2 had filed a complaint against applicant under Section 138 N.I. Act with the allegation that opposite party no. 2 had given Rs.3,00,000/-on the request of applicant in the month of October, 2022, thereafter, just to repay that amount applicant issued a Cheque No. 737727 dated 04.07.2023 of Rs.3,00,000/-from his account maintaining by him in Shivalika Mercantile Co-operative Bank Ltd. Branch Bhatiya Road, Ghaziabad, same was presented before the bank on 11.07.2023, but the same was returned by the bank on 12.07.2023 with the endorsement 'account closed'. Thereafter, opposite party no. 2 sent registered notice on 09.08.2023 to the applicant demanding the payment of cheque amount within 15 days, but applicant has not paid any amount, therefore, the complaint was filed and statement under Section 200 Cr.P.C. was also filed on affidavit and the learned Magistrate on the basis of material on record, summoned the applicant by order dated 07.02.2024 after condoning the delay in filing the complaint by order dated 08.11.2023 which is impugned in the present case.
4. Contention of learned counsel for the applicant is that the cheque in question was missing cheque for which the applicant has already filed a police report on 13.07.2022 and also filed complaint for stopping the payment, but the opposite party no. 2 has misused the cheque and filed the complaint, therefore, the cheque cannot be said to be issued in discharge of any liability. The impugned proceeding deserves to be quahsed on this ground itself. Second contention of learned counsel for the applicant is that the cheque in question was returned by the bank with the endorsement 'account closed', not for insufficiency of fund, therefore, no liability under Section 138 of N.I. Act is attracted.
5. Per contra, learned A.G.A. for the State has submitted that the defence raised by learned counsel for the applicant are disputed question of fact, same can be decided during the trial and on this ground proceeding cannot be quashed.
6. After considering the rival submissions of learned counsel for the parties and on perusal of record, this Court is of the view, whether the cheque was missing cheque, this question is disputed question of fact, same can be decided during trial. Even otherwise police complaint regarding missing of cheque was not lodged as per the procedure but a simple application was submitted before S.H.O. of the concerned police station.
7. So far as the second contention of learned counsel for the applicant is concerned, the cheque has been bounced and returned by the bank with the endorsement of 'account closed'.
8. Hon'ble the Apex Court in the case of Electronics Trade and Technology Development Corporation, Ltd. Secunderabad Vs. Indian Technologists and Engineers (Electronics) Pvt. Ltd. and another, 1996 (2) SCC 739, observed that if cheque is returned by the bank which was issued in discharge of any liability with the endorsement, (1) 'refer to the drawer of cheque' (2) 'instructions for stop payment' and (3) 'exceeds arrangements'. Even then same will amount to dishonour within the meaning of Section 138 N.I. Act., if the drawer of cheque fails to pay the cheque amount within 15 days from the receiving of demand notice. Paragraph no. 5 of judgment passed in the case of Electronics Trade And Technology Development Corporation, Ltd. Secunderabad (supra) is being quoted as under:
A cheque returned with the endorsement 'account closed' constitutes dishonour under Section 138 of the N.I. Act, and the statutory presumption of liability under Section 139 applies unless rebutted b....
The dishonour of a cheque due to 'Account Closed' falls within the parameters of Section 138 of the N.I. Act, and the presumption under Section 139 applies.
The legal presumption under Section 139 of the NI Act favors the complainant, and factual disputes must be resolved at trial, not pre-trial.
The burden to prove that a cheque was not issued in discharge of any debt or liability lies on the issuer during the trial, and the presumption in favor of the holder of the cheque can be rebutted by....
The presumption of liability under Section 139 of the Negotiable Instruments Act applies despite account seizure; the burden to disprove liability lies with the accused.
Cheques post-bank merger returned 'Funds Insufficient' attract Section 146 presumption; validity expiry defence triable at trial, not quashable under Section 482 CrPC despite potential non-compliance....
Issuance of summons without conducting inquiry under Section 202 of the Cr.P.C. is impermissible, making the cognizance under Section 138 of the N.I. Act unsustainable.
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