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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CRIMINAL APPELLATE JURISDICTION
CRIMINAL WRIT PETITION NO.2243 OF 2009
Joseph Vilangadan ...Petitioner.
v.
Phenomenal Health Care Services Ltd. & Anr. ...Respondents.
Mr.B.K.Ashok i/by Bekay Legal, adv., for the petitioner.
Mr.Shivajirao Satpute i/by M/s.Satpute and Co., adv. for the
respondent no.1
Shri Y.S.Shinde, APP for the Respondent No.2/State.
CORAM : J.H.Bhatia, J.
DATE : 20th July, 2010
P.C.:
1 Rule. Rule made returnable forthwith. Heard the learned
counsel for the parties.
2 There is no dispute that the respondent no.1/complainant
and M/s. Encon Engineering and Contractors (Hereinafter referred to
as 'Contractors') had entered into an agreement on 28th January, 2005
whereby Contractors had undertaken to carry out certain works for the
respondent. As per the said contract, Contractors deposited the sum of
Rs.10 lacs by undated cheque no.027840 drawn against South Indian
Bank Ltd., Palarivattom Branch, Cochin branch with the respondent
no.1 as refundable security deposit for the due performance of the
agreement. The said undated cheque was in custody of the respondent
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no.1 and it appears that the respondent no.1 filled in the date on
undated cheque as "4.6.2008". The cheque was presented to the
drawee bank through the banker of the respondent no.1. Cheque was
returned unpaid on the ground that the drawer had stopped the
payment. Therefore, notice was issued by the respondent to the
contractor as well as it's managing partner for the payment of the
cheque amount . In spite of notice, payment was not made. Therefore,
the respondent no.1 filed complaint under Section 138 of the
Negotiable Instruments Act, in the Court of Metropolitan Magistrate
44th Court, Andheri. Process was issued against the accused, who is
the petitioner before this Court . Petitioner/accused challenged the
issuance of process by filing revision application no.789/2009 before
the Sessions Court, Gr. Bombay. By the impugned order dated 8th
June, 2009, the learned Additional Sessions Judge rejected the
revision application. Hence, this petition.
3 At the outset it may be stated that before the revisional
Court, petitioner had taken several grounds challenging the issuance of
process. However, during the arguments before this Court, the learned
counsel for the petitioner restricted the challenge only to one point.
According to him, cheque was not issued in discharge of any debt or
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liability and as the cheque was issued as security deposit, provisions of
Section 138 are not applicable. The learned counsel placed reliance
upon several authorities in support of his contention. The learned
counsel for the respondent/complainant contended that the said
cheque was deposited in lieu of the amount of Rs.10 lacs which would
be otherwise required to be deposited as security by the contractor
with the respondent for due performance of the contact and, therefore,
it must be held that the cheque was issued in discharge of “other
liability.”
4 Section 138 of the Negotiable Instruments Act provides
that where any cheque was drawn by a person on account maintained
by him with the banker for the payment of any amount of money to
another person for discharge in whole or in part of any debt or
other liability and it was returned by the drawee bank unpaid either
because the amount of money in the account is insufficient or it
exceeds the amount arranged to be paid, such person shall be deemed
to have been committed offence and shall be liable to punishment with
imprisonment or with fine or with both. Of course, before the offence
is committed, several other conditions are required to be fulfilled. We
are not concerned with the same for the decision of the present matter.
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Important ingredient for the offence punishable under Section 138 is
that cheque must have been issued for the discharge in whole or in
part of any debt or other liability. If the cheque is not issued for the
discharge of any debt or other liability, Section 138 can not be
invoked. It is now well settled legal position that if the cheque is issued
only as security for performance of certain contract or an agreement
and not towards the discharge of any debt or other liability, offence
punishable under section 138 is not made out. In Travel Force v.
Mohan N. Bhave and Another 2007 Mh.L.J.3339
, the cheque in
question was issued by the accused for investment in fixed deposit and
it was accepted by the complainant as fixed deposit in the scheme. As
the cheque was dishonoured, the complaint under Section 138 of the
Negotiable Instruments Act was filed. Process was issued by the
Magistrate. However, the Sessions Court set aside the order issuing the
process holding that the cheque was not issued for discharge in whole
or in part of any debt or other liability and, therefore, presumption
under Section 139 could not arise in favour of the complainant.
Revision application filed by the complainant was rejected by this
High Court holding that when the cheque was issued only as a deposit
and not in discharge of any debt or liability, offence under Section 138
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is not made out.
5 In M.S.Narayana Menon @ Mani v. State of Kerala and
Another (2006) 6 SCC 39, accused and the complainant were brokers
working in the stock exchange and the complainant was to enter into
certain transactions on behalf of the accused. The cheque was issued
for an amount of Rs.2,95,033/by
the accused in favour of the
complainant. On presentation, the cheque was dishonoured. After
notice also the payment was not made. In the case under Section 138
plea of the accused was that the complainant was in dire need of
financial assistance and the said cheque was issued so as to enable him
to tide over his financial difficulties and not in discharge of any debt
or liability payable to the complainant. During the trial, it was revealed
that there was discrepancy of more than Rs.14 lacs in the account
maintained by the complainant. Accused was convicted by the trial
Court but was acquitted by the appellate Court . High Court set aside
the acquittal and convicted the accused. Accused went to the Supreme
Court. After going to the facts and circumstances, the Supreme Court
observed thus in paragraph 52:
“52. We, in the facts and circumstances of this
case, need not go into the question as to
whether even if the prosecution fails to prove
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that a large portion of the amount claimed to
be a part of the debt was not owing and due to
the complainant by the accused and only
because he has issued a cheque for a higher
amount, he would be convicted if it is held that
existence of debt in respect of large part of the
said amount has not been proved. The
appellants clearly said that nothing is due and
the cheque was issued by way of security. The
said defence has been accepted as probable. If
the defence is acceptable as probable the
cheque therefore cannot be held to have been
issued in discharge of the debt as, for example,
if a cheque is issued for security or for any other
purpose the same would not come within the
purview of Section 138 of the Act.”
From these observations, it appears that if the cheque was not issued
for discharge of any debt or liability but as a security only, offence is
not made out under Section 138.
6 Coming to the facts of the present case from the complaint
as well as particulars of the agreement executed on 28.1.2005, it is
clear that cheque was issued as a security deposit at the time of
entering into contract for due performance of the terms of the
contract. Agreement shows that the contractor had deposited the
undated cheque no.027840 with the respondent as refundable security
deposit for due performance of the agreement. Even the allegations in
the complaint are not different. Admittedly, when this agreement was
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entered into, no debt or liability was in existence and under that
agreement, parties had entered into a contract whereby contractor was
to perform certain works for the respondent. Naturally, as per the
terms of the contract and the allegations made in the complaint if the
contractor would fail to perform the agreement, respondent could
encash the cheque and recover an amount of security deposit.
7 The learned counsel for the respondents vehemently
contended that the contractor was to perform so many works and in
respect of some works, his rates were higher and in respect of some
other, rates were lower than the other bidders. He was also advanced
certain amount for carrying out certain works from time to time.
Contractor had completed works in which higher rates were given to
him but he ignored to carry out those works where the rates were less
and thereafter he ignored to complete those particular works resulting
into the disputes between the parties. Admittedly, the disputes had
occurred in the year 2006 and the contractor filed a suit against the
respondent in the year 2006. Not only this, admittedly, matter was
also referred to arbitrator in respect of said disputes. The learned
counsel for the respondents pointed out that undated cheque was
lying with the respondent since 28.1.2005. However, for the first time
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a date “4.6.2008” was put on him and then cheque was presented for
encashment, which was returned unpaid with endorsement “payment
was stopped”. It shows that date was put on the cheque by the
respondents long after disputes had arisen between the parties. Proviso
(a) to Section 138 requires that the 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. In the present
case though the cheque was drawn and handed over on 28.1.2005,
date was not put on it. If the date would have been put, cheque would
have been valid for six months from 28.1.2005. However, the
respondent put the date 4.6.2008, i.e., almost three years after the
period of cheque was over. Thus, the cheque was not presented to the
drawee bank within six months from the date when it was actually
drawn. Anyhow, it is not necessary to enter into that controversy for
the purpose of deciding the present petition. Fact remains that the
cheque was issued towards the security deposit and not towards the
discharge of any debt or liability.
8 The learned counsel for the respondent contends that it is
not necessary that the cheque should be issued for discharge of a debt.
According to him, it may be issued towards the discharge of other
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liability also and in support of this, he placed reliance on ICDS Limited
v. Beena Shabeer and Another (2002) 6 SCC 426. In that case,
husband of the accused/respondent no.1 had obtained a car under hire
purchase agreement from the complainant. The accused was a
guarantor for payment of the amount by her husband and towards
the part payment of the said transaction, she had issued a cheque in
favour of the complainant. Cheque was dishonoured and the payment
was not made in spite of the notice. High Court quashed the complaint
on the ground that cheque from the guarantor could not be said to
have been issued for the purpose of discharge of any debt or liability.
However, the Supreme Court set aside the order of the High Court.
The Supreme Court observed thus in paragraphs 10 and 11
“10. The language, however, has been
rather specific as regards the intent of
the legislature. The commencement of
the section stands with the words
“Where any cheque”. The above noted
three words are of extreme significance,
in particular, by reason of the user of the
word “any”the
first three words
suggest that in fact for whatever reason
if a cheque is drawn on an account
maintained by him with a banker in
favour of another person for the
discharge of any debt or other liability,
the highlighted words if read with the
first three words at the commencement
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of Section 138, leave no manner of
doubt that for whatever reason it may
be, the liability under this provision
cannot be avoided in the event the same
stands returned by the banker unpaid.
The legislature has been careful enough
to record not only discharge in whole or
in part of any debt but the same includes
other liability as well. This aspect of the
matter has not been appreciated by the
High Court, neither been dealt with or
even referred to in the impugned
judgment.
11. The issue as regards the coextensive
liability of the guarantor and the
principal debtor, in our view, is totally
out of the purview of Section 138 of the
Act, neither the same calls for any
discussion therein. The language of the
statute depicts the intent of the lawmakers
to the effect that wherever there
is a default on the part of one in favour
of another and in the event a cheque is
issued in discharge of any debt or other
liability there cannot be any restriction
or embargo in the matter of application
of the provisions of Section 138 of the
Act. “Any cheque” and “other liability”
are the two key expressions which stand
as clarifying the legislative intent so as
to bring the factual context within the
ambit of the provisions of the statute.
Any contrainterpretation
would defeat
the intent of the legislature. The High
Court, it seems, got carried away by the
issue of guarantee and guarantor’s
liability and thus has overlooked the
true intent and purport of Section 138 of
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the Act. The judgments recorded in the
order of the High Court do not have any
relevance in the contextual facts and the
same thus do not lend any assistance to
the contentions raised by the
respondents.”
Supreme Court in ICDS Ltd. v. Beena Shabeer and Another (2002) 6
Supreme Court Cases 426 considered provisions of the law and held
that when the cheque is issued by the guarantor in discharge of such
other liability, provisions of section 138 are applicable. Infact, section
138 itself specifically provides that the cheque should have been issued
by a person for the discharge of any debt or other liability. The
guarantor may not be himself a debtor but he guarantees the
repayment of the loan taken by the principal debtor. By giving such a
guarantee, the guarantor incurs a liability towards the creditor and for
the discharge of that liability, if he issues cheque, he will be covered
by the provisions of Section 138. As the cheque was issued for the
discharge of “other liability” case would be covered by Section 138.
9 In the present case, there was no liability or debt towards
the complainant/respondent when the cheque was issued by the
contractor. From the language of the agreement as well as allegations
made in the complaint, it is clear that said cheque was issued as
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security deposit and not towards the discharge of any debt or lone. The
learned counsel for the respondent contended that in M.S.Narayana
Menon @ Mani (Supra), evidence was led by the parties and on the
basis of evidence, the Supreme Court came to conclusion that the
cheque was issued as a security and, therefore, Section 138 would not
be applicable. According to the learned counsel, in this case only
process has been issued and the parties are yet to go to the trial and,
therefore, said authority in M.S.Narayana Menon @ Mani (Supra)
would not be applicable. It would be difficult to accept this contention.
Ratio in M.S.Narayana Menon @ Mani (Supra), is applicable to the
facts of the present case. When on the face of the complaint itself, it is
clear that the cheque was issued as a security deposit and not towards
the discharge of any debt or other liability, case under Section 138 is
not made out. When the complaint itself does not make out criminal
case to issue the process, to force the accused to undergo trial would
be clear misuse of the process of the Court and this should not be
allowed. The Additional Sessions Judge while rejecting the revision
application dealt with the liability of the contractor on the basis of
terms of the contract and the cheque. The learned counsel for the
respondent also contended that the matter was referred to arbitrator
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and arbitrator also held that the contractor is liable to pay on the basis
of that cheque. As far as civil liability of the contractor/petitioner is
concerned, it is not necessary to look into the same in present matter.
Suit was filed in the year 2006 and the arbitrator was also appointed
in 2008, therefore, civil liability of the parties against each other can
be looked into the said litigation or arbitration proceedings. In the
present matter, we have only to see whether the offence under Section
138 of the Negotiable Instruments Act is made out or not. The learned
Revisional Court did not address to this question properly before
rejecting revision application.
10 In view of the facts and circumstances, I find that no case
to issue process under Section 138 was made out and, therefore,
process issued by the trial Court is liable to be quashed
11 For the aforesaid reasons, petition is allowed. The order
passed by the learned Metropolitan Magistrate to issue process under
Section 138 is hereby quashed. Rule made absolute accordingly.
(J.H.BHATIA, J.)
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