Negotiable Instruments Act, 1881 – S. 138 & 139 – Post Dated Cheques – Whether would attract the penal provision of Section 138 – Held, Once a cheque is issued a presumption under Section 139 must follow – In view of the presumption and the object of Chapter XVII, countermanding payment of post dated cheques would not preclude an action under Section 138.
AIR 2003 SC 2035 : 2003 (2) SCR 712 : (2003) 3 SCC 232 : 2003 (3) SCALE 117 : JT 2003 (3) SC 42 : AIR 2003 SCW 1555 : 2003 (2) Supreme 536 : 2003 CriLJ 1723 : 2003 (2) Crimes 55 : 2003 SCC (Cri) 603 : 2003 (2) RCR (Criminal) 131 : 2003 (2) Mh.LJ 366 : 2003(2) ALL MR 750 : 2004 (1) Apex Criminal 55 : 2004 (1) LJR 383 : 2003 (2) DCR 1 : 2003 (114) Comp Cas 644 : 2003 Comp Cas 781 : 2003 (2) CurLJ 3 : 2003 (2) Cri.CC 450 : 2003 (2) CivCC 1 : 2003 (1) ISJ (Banking) 465 : 2003 (2) ICC 353 : 2003 (2) AICLR 429 : 2003 (2) MPHT 277 : 2003 (2) Comp L.J. 275 : 2002 (sup) ACrC 567 : 2003 (2) BC 71 : 2003 CalCriLR 447 : 2003 (2) BankJ 370 : 2003 (1) Andh LD (Criminal) 638 : 2003 (1) Andh LD 877 : 2003 (2) Bom.C.R (Cri.) 931 : 2003(2) ECrC 108 : 2003 (1) W.L.C. 514 : 2003 Cri. L.R. 257 : 2003 (2) JKJ 26 : 2003 (103) DLT 407 : 2003(2) M.P.L.J. 102 : 2003 (2) GujLH 75 : 2003 (51) ALR 52 : 2003 (1) CTC 752 : 2003 (2) GLR 1629 : 2003 (4) AIC 1 : 2003 (2) KLT 16 : 2003 (2) All WC 1429 : 2003 (1) CalLJ 450 : 2003 (2) RLW 208 : 2003 (2) RajCriC 425 : 2003 (1) CLJ (Criminal) 474 : 2003 (3) CivilLJ 553 : 2003 (2) SLT 410 : 2003 (5) SRJ 271 : 2003 (1) CCR 410 : 2003 (1) JCC 99 : 2003 (2) KHCACJ 474
IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION
M.B. SHAH & ARUN KUMAR, JJ.
Criminal Appeal No. 315 of 2003
(Arising out of SLP (Crl.) 2742/02) (Arising out of SLP(Crl.) No.3844/2002, SLP(Crl.) No.3907/2002, SLP(Crl.) No.3937/2002, SLP(Crl.) 3940/2002, SLP(Crl.) No.3944/2002 and SLP(Crl.)No.3950/2002)
From the Judgment and Order dated 16.3.2002 of the Mumbai High Court in Crl. A. No. 68 of 2000. WITH Crl. A. Nos. 316-321/2003.
Goaplast Pvt. Ltd. Vs. Shri Chico Ursula D’Souza & Anr.
ARUN KUMAR, J.
Leave granted in all the appeals.
These appeals involve a pure question of law as to applicability of Section 138 of the Negotiable Instruments Act, 1881 (hereinafter referred to as “Act”) to a case in which a person issuing a post dated cheque stops its payment by issuing instructions to the drawee bank before the due date of payment. The facts involved in all the appeals are almost similar except variations in dates and amounts of cheques involved in each case. For purpose of this judgment we have taken the facts in Criminal Appeal No._________/2003(arising out of SLP(Crl.)2742/2002. The facts are in a very narrow compass. Respondent No.1 addressed a letter to the appellant on 20th July, 1992 enclosing therewith ten post-dated cheques, each for an amount of Rs.40,000/- by way of refund of amount due from him to the appellant. The two cheques subject matter of the present appeal were dated 10.12.1994 and 10.4.1995. On 12th February, 1993 respondent No.1 again wrote to the appellant denying his liability to pay the amount under the aforesaid cheques on the ground that they were issued under a mistaken belief of liability and asked the appellant to treat the cheques as invalid. Respondent No.1 also wrote to the drawee Bank on 15th March, 1993 to stop payment of the aforesaid post-dated cheques issued by him. On 10th May, 1995, the appellant presented the two cheques dated 10.12.1994 and 10.4.1995 for payment but the said cheques were returned unpaid with the endorsement “present again” on 12.5.1995. On 24th May, 1995 the appellant issued notice under Section 138B of the Act demanding payment of the amount of Rs.80,000/- i.e. the total amount of the two cheques. On failure of the respondent No.1 to make the payment in pursuance to the notice, the appellant filed a complaint under Section 138 of the Act on 7th July, 1995. The concerned Magistrate dismissed the complaint vide order dated 18th October, 1999, taking the view that Section 138 of the Act was not attracted in these facts. The appellant filed an appeal against the said order of the Magistrate. The Goa Bench of the Bombay High Court dismissed the appeal on 16th March, 2002 upholding the view of the learned Judicial Magistrate. Both the courts primarily based their decision on a misreading of the judgment of this Court in
Anil Kumar Sawhney vs. Gulshan Rai, (1993) 4 SCC 424
They took the view that the accused had only countermanded a bill of exchange on the date the accused wrote the letter about stopping payment of the cheques. Before the due date the instruments were merely bills of exchange and not cheques. Therefore, no offence could be said to have been made out under Section 138 of the Act. According to the courts below the payment had been stopped before the cheques became payable.
The learned counsel for the appellant has submitted that mere writing of letter to the Bank stopping payment of the post-dated cheques does not take the case out of the purview of the Act. He has invited our attention to the object behind the provision contained in Chapter XVII of the Act. For appreciating the issue involved in the present case, it is necessary to refer to the object behind introduction of Chapter XVII containing Sections 138 to 142. This Chapter was introduced in the Act by the Banking, Public Financial Institutions and Negotiable Instruments Laws (Amendment) Act, 1988 (Acts 66 of 1998) with the object of inculcating faith in the efficacy of banking operations and giving credibility to negotiable instruments in business transactions and in order to promote efficacy of banking operations. With the policy of liberalisation adopted by the country which brought about increase in international trade and commerce, it became necessary to inculcate faith in banking. World trade is carried through banking operations rather than cash transactions. The amendment was intended to create an atmosphere of faith and reliance on banking system. Therefore, while considering the question of applicability of Section 138 of the Act to a situation presented by the facts of the present case, it is necessary to keep the objects of the legislation in mind. If a party is allowed to use a cheque as a mode of deferred payment and the payee of the cheque on the faith that he will get his payment on the due date accepts such deferred payment by way of cheque, he should not normally suffer on account of non payment. The faith, which the legislature has desired that such instruments should inspire in commercial transactions would be completely lost if parties are as a matter of routine allowed to interdict payment by issuing instruction to banks to stop payment of cheques. In today’s world where use of cash in day to day life is almost getting extinct and people are using negotiable instruments in commercial transactions and plastic money for their daily needs as consumers, it is all the more necessary that people’s faith in such instruments should be strengthened rather than weakened. Provisions contained in Sections 138 to 142 of the Act are intended to discourage people from not honouring their commitments by way of payment through cheques. It is desirable that the court should ban in favour of an interpretation which serves the object of the statute. The penal provisions contained in Sections 138 to 142 of the Act are intended to ensure that obligations undertaken by issuing cheques as a mode of payment are honoured. A post-dated cheque will lose its credibility and accepatibility if its payment can be stopped routinely. A cheque is a well recognized mode of payment and post-dated cheques are often used in various transactions in daily life. The purpose of a post-dated cheque is to provide some accommodation to the drawer of the cheque. Therefore, it is all the more necessary that the drawer of the cheque should not be allowed to abuse the accommodation given to him by a creditor by way of acceptance of post-dated cheque. If stoppage of payment of a post-dated cheque is permitted to take the case out of the purview of Seciton 138 of the Act, it will amount to allowing the party to take advantage of his own wrong.
The present case was decided by courts below mainly on the basis of the judgment of this Court in Sawhney’s case (supra). In that case this court noted that a cheque under Section 6 of the Act is a bill of exchange drawn on a banker and is payable on demand. From this it follows that a bill of exchange though drawn on a banker, if not payable on demand is not a cheque. A post-dated cheque is only a bill of exchange when it is written or drawn. It becomes a cheque when it is payble on demand. It is not payable till the date which is shown on the face of the document. It will become a cheque only on the date shown on it, prior to that it remains a bill of exchange. In Sawhney’s case this Court was concerned with the question of limitation as provided in proviso (a) to Section 138 of the Act. This proviso requires that a cheque should be 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. The cheques in question in Sawhney’s case (supra) were dated 15.12.1991 and 15.5.1991 totalling an amount of Rs.5,00,000/-. These cheques were returned by the Banker with the endorsement “not arranged for no fund”. The payee thereafter issued notice as contemplated under Section 138 of the Act followed by complaint under Section 138 being filed in the Court of the Chief Judicial Magistrate at Karnal. It appears from the judgment that these cheques were handed over to the payee in a settlement arrived at in a court case on 5th March, 1990. The question for consideration was as to the date on which the cheques in question could be taken as drawn, in other words, what is the starting point of limitation of six months provided in proviso (a) to Section 138 of the Act. According to the drawer the cheques were drawn in March, 1990 when they were written and handed over to the payee. The cheques were post-dated and bore the dates mentioned hereinbefore. Proviso (a) to Section 138 uses the words “the date on which it is drawn”. The cheques were drawn in March, 1990 and were presented for encashment in the year 1991 which was beyond the period of six months provided in proviso (a) to Section 138 and therefore, no offence was said to be made out under Section 138. Keeping in view the object of Section 138 i.e. to enhance the acceptability of cheques by making the drawer liable for penalty in case the cheque is dishonoured, it was felt that drawer of a post-dated cheque could defeat Section 138 of the Act by showing a date beyond six months of its delivery. An interpretation which supports the object of the provision had to be adopted. Therefore, it was held that a post dated cheque for purpose of clause (a) of the provision to section 138 has to be considered to have been drawn on the date it bears. On the basis of Sections 5 and 6 of the Act, it was observed that “post-dated cheque is only a bill of exchange when it is written or drawn, it becomes a cheque when it is payable on demand. The post-dated cheque is not payable till the date which is shown on the face of the document. It will only become cheque on the date shown on it and prior to that it remains a bill of exchange under Section 5 of the Act. As a bill of exchange a post-dated cheque remains negotiable but it will not become a cheque till the date when it becomes payable on demand.”
The ratio of the decision in Sawhney’s case is found in the following words: