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1999(4) Supreme 378
SUPREME COURT OF INDIA
(From Calcutta High Court)
K.T. Thomas & M.B. Shah, JJ.
NEPC Micon Ltd. & Ors. -Appellants
versus
Magma Leasing Ltd. -Respondent
Criminal Appeal No. 481 of 1999
(Arising out of SLP (Crl.) No. 1096 of 1999)
Decided on 29-4-1999
Counsel for the Parties :
For the Appellants : Raju Rama Chandran, Sr. Advocate, Ms. Vinita Sinha, Suchit Mohanty, (Mrs. Sarla Chandra) Advocate (NP).
For the Respondent : Srenik Singhavi, Ms. S. Janani, Advocates.
Held : From Section 138, it is apparent that (i) cheque should be 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"; (ii) the cheque should be returned by the bank unpaid either because:--
(a) the amount of money standing to the credit of that account is insufficient to honour the cheque; or
(b) it exceeds the amount arranged to be paid from that account by a person with the bank.
(iii) In such a situation, such person (drawer of cheque) shall be deemed to have committed an offence.
Further, the offence will be complete only when the conditions in the proviso (a), (b) and (c) are complied with. Hence, the question is, in a case where cheque is returned by the bank unpaid on the ground that the account is closed , would it mean that cheque is returned as unpaid on the ground that the amount of money standing to the credit of that account is insufficient to honour the cheque . In our view, the answer would obviously be in the affirmative because cheque is dishonoured as the amount of money standing to the credit of that account was nil at the relevant time apart from it being closed. Closure of the account would be an eventuality after the entire amount in the account is withdrawn. It means that there was no amount in the credit of "that account" on the relevant date when the cheque was presented for honouring the same. The expression "the amount of money standing to the credit of that account is insufficient to honour the cheque" is a genus of which the expression "that account being closed" is specie. After issuing the cheque drawn on an account maintained, a person, if he closes that account apart from the fact that it may amount to another offence, it would certainly be an offence under Section 138 as there was insufficient or no fund to honour the cheque in that account ; Further, cheque is to be drawn by a person for payment of any amount of money due to him on an account maintained by him with a banker and only on "that account" cheque should be drawn. This would be clear by reading the Section along with provisos (a), (b) and (c). Secondly, proviso (c) gives an opportunity to the drawer of the cheque to pay the amount within 15 days of the receipt of the notice as contemplated in proviso (b). Further, Section 140 provides that it shall not be a defence in prosecution for an offence under Section 138 that the drawer has no reason to believe when he issued the cheque that the cheque may be dishonoured on presentment for the reasons stated in that Section. Dishonouring the cheque on the ground that account is closed in the consequence of the act of the drawer rendering his account to a cipher. Hence, reading Section 138 and 140 together, it would be clear that dishonour of the cheque by a bank on the ground that account is closed would be covered by the phrase the amount of money standing to the credit of that account is insufficient to honour the cheque . (Paras 6, 7 & 8)
Even though Section 138 is a penal statute, it is the duty of the Court to interpret it consistent with the legislative intent and purpose so as to suppress the mischief and advance the remedy. As stated above, Section 138 of the Act has created a contractual breach as an offence and the legislative purpose is to promote efficacy of banking and of ensuring that in commercial or contractual transactions cheques are not dishonoured and credibility in transacting business through cheques is maintained. The above interpretation would be in accordance with the principle of interpretation quoted above brush away the cobweb varnish, and show the transactions in their true light (Wilmot C.J.) or (by Maxwell) "to carry out effectively the breach of the statute, it must be so construed as to defeat all attempts to do, or avoid doing, to an indirect or circuitous manner that it has prohibited". Hence, when the cheque is returned by a bank with an endorsement account closed , it would amount to returning the cheque unpaid because "the amount of money standing to the credit of that account is insufficient to honour the cheque" as envisaged in Section 138 of the Act. (Para 14)
(ii) Interpretation of Statutes-Penal provision-Any interpretation which withdraws life and blood of provision and makes it ineffective and dead letter should be averted. (Paras 9 & 14)
JUDGMENT
Shah, J.-Leave granted.
2. NEPC Micon Limited, Appellant No. 1 and its directors approached the High Court for quashing the proceedings in Case No. C-494 of 1997 pending on the file of the Metropolitan Magistrate, Calcutta, initiated by Magma Leasing Limited, Respondent-Company under Section 138 of the Negotiable Instruments Act, 1881 (hereinafter referred to as "the Act"). It was alleged by the complainant that in discharge of its existing liability, the appellant-Company had given five cheques dated 1st January, 1997 for various amounts totalling to Rs. 58,25,980/- drawn on Canara Bank, Broadway Branch, Madras, in favour of the Respondent-Company. Those cheques were duly tendered to the bankers, Punjab National Bank, Calcutta for encashment, but were returned by the banker of the accused persons, that is, Canara Bank, Madras with the remark "account closed". Appellants have also challenged before the High Court the order dated 10.12.1997 passed by the Metropolitan Magistrate rejecting their application under Section 258, Criminal Procedure Code for dropping the proceedings. In that application before the Metropolitan Magistrate, appellants have stated that before closing the account on behalf of appellant No. 1, a letter dated 3rd August 1996 was sent by the second accused to the Chief Manager, Canara Bank, Madras informing them to close their group company s accounts; in case, any of the cheque by mistake comes to the Canara Bank, Madras, then the same be sent back with the note "account closed-payment stopped". That Revision Application under Section 482, Criminal Procedure Code was rejected by High Court by its judgment and order dated 15th June, 1998. Against that Order, the present appeal is filed by special leave in which this Court issued notice on 26th March, 1999 for final disposal.
3. At the time of hearing of this matter, learned Counsel for the appellants submitted that complaint, on the face of it, does not make out any offence punishable under Section 138 of the Negotiable Instruments Act and, therefore, it deserves to be quashed. He submitted that cheques were returned by the bank with an endorsement "account closed" which is not covered by the section. He submitted that Section 138 envisages only two situations, which would fall within its purview, namely,
(i) the amount of money standing to the credit of the account is insufficient to honour the cheque; or
(ii) that it exceeds the amount arranged to be paid from that account by an agreement made with with bank.
4. It is his contention that there are more than 40 kinds of eventualities where the bank may return the cheque but the legislature in its wisdom has specified only the aforesaid two situations and, therefore, return of the cheque on the ground that the account being closed would not fall within Section 138. He has fairly pointed out the conflicting views expressed by the various High Courts on the aforesaid question. He referred to the decisions in the case of G.F. Hurasikattimath v. Sr. of Kant.1, S. Prasanna v. R. Vijayalakshmi2 and Om Prakash Bharadwaj Maniyar v. Swati Girish Bhide & Ors. wherein the Courts have taken the view that Section 138 would not be attracted in a case where cheque is dishonoured on the ground of closure of account by the drawer of the cheque in the particular bank on which he has drawn the cheque as Section 138 is a penal provision and should be construed strictly. He has also pointed out the decisions in Shivendra Samsguiri v. M/s. Adrnio & Anr.3, Veeraraghavan v. Lalita Kr.4, M/s. Dada Silk Mills v. Indian Overseas Bank Banking Co.5, M/s. G.M. Mittal Stainless Steels Ltd. v. M/s. Nagarjuna Investment Trust Ltd.6, Japahari v. Priya7 and Rakesh Porwal v. Varayan Joglekar8 wherein a contrary view has been taken and the Courts have held that Section 138 would be applicable in a case where cheque is dishonoured on the ground that account by the drawer is closed.
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