Date of judgment:
28th December 2021
Bench:
Justice Sanjay Dhar
Parties:
Appellant – Parviz Ahmad Bhat and Anr
Respondent – Fida Mohammad Ayoub
Subject
The petition was filed for setting aside the charges applied under section 138 of NI Act. However the appeal was dismissed by the Court.
Legal provisions
- Section 138 of NI Act- Cheque dishonour due to insufficient money in the account, etc.
Overview
- The complainant/respondent alleged that the petitioners were fully aware that the cheques needed to be signed by both the partners of the firm but still only the signature of one of the partners was there, as a result three cheques amounting Rs 10.00 lacs, 15.00 lacs and 10.00 lacs were dishonoured by the banker and were returned unpaid with the remarks “drawers signature incomplete”.
- The respondent sent a legal notice to the petitioners but when they did not respond to it the respondent filed the petition before the trial magistrate.
- The complaint was filed by the respondent against the petitioner under section 138 of NI Act read with section 420 IPC. The order passed by the Magistrate was also challenged by the respondent where the magistrate after taking cognizance of the offences, issued process against petitioners.
- The counsel from petitioners relied upon the judgment of Vinod Tanna v Zaheer Siddiqui, 2002, arguing that mismatch of signature or incomplete signature does not constitute an offence under section 138 of NI Act.
Issue
- Whether dishonour of cheque as a result of incomplete signature constitute an offence under section 138 of NI Act.
Judgment analysis
- The appeal in this case by the petitioners was dismissed.
- After referring to section 138 of NI Act, the Court observed that the conditions which attract this section are- there must be insufficient funds in the account of person who is drawing the cheque and it must surpasses the amount set to be paid from that account under a bank arrangement.
- Referring to the judgment of case Laxmi Dyechem v State of Gujarat 2012, the Court noted that the case referred by the petitioners was per incuriam. Also the Laxmi Dyechem’s case was the latest hence its ratio was to be followed.
- According to the ruling in Laxmi Dyechem's case, the petitioners argument that an infraction under Section 138 of the NI Act has not been committed because the cheques were dishonoured due to missing signatures rather than insufficient cash or exceeding the arrangement, deserves to be dismissed.
Conclusion
The NI Act is primarily a civil law, but in order to assure that the drawer fulfils his responsibility, a touch of criminal law has been added, making it quasi-criminal law. Failure on the part of the drawer to pay the cheque amount may subject him to the Act's criminal provisions. To safeguard the honest drawer and provide him an opportunity to correct his omission, a clause pertaining to'notice' has been inserted. This demonstrates that the legislature's primary goal was not to make it a criminal legislation. When a drawer fails to discharge his duty within fifteen days of "reception of the notification," the complainant has a cause of action to file the complaint.
The court decided in P Mohanraj V. Shah Brothers that the fundamental purpose of Section 138 of the NI Act is to pay the victim, not to punish the criminal.
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