John v. Alosious

1. The 1st respondent herein prosecuted the revision petitioner before the Judicial Magistrate of the First Class-II, Kollam in C.C No. 733 of 2003 alleging offence u/S. 138 of the Negotiable Instruments Act. It was contended that the revision petitioner owed a sum of Rs. 3,71,734/- and in discharge of the said liability a cheque-which was marked as Ext. P1 was issued. When Ext. P1 was presented for collection, the same was dishonoured for insufficiency of funds and that despite the demand to discharge the liability, no payment was made.

2. The revision petitioner in response to the process issued entered appearance and pleaded not guilty when the particulars of the offence was read over and explained. Hence he was sent for trial. On the side of the respondent, he was examined as PW 1 and Exts. Pl to P6 were marked. When questioned u/S. 313 of the Code of Criminal Procedure, he denied the incriminating evidence. On his side two witnesses were examined as DWs. 1 and 2 and Exts. D1 and D2 were marked. The learned Magistrate on appraisal of evidence, arrived at a conclusion of guilty. Consequently the revision petitioner was convicted for offence u/S. 138 of the Negotiable Instruments Act and sentenced to simple imprisonment for eight months and a fine of Rs. 5,000/- with a default sentence of simple imprisonment for two months. The fine amount if realized was ordered to be paid to the first respondent as compensation u/S. 357(1) of the Code of Criminal Procedure. Feeling aggrieved by the above conviction and sentence, Criminal Appeal No. 313 of 2006 was preferred before the Sessions Judge, Kollam. The learned Additional Sessions Judge to whom the appeal was made over, by judgment dated 13.2.2007 confirmed the conviction and sentence.

3. Assailing the legality, correctness and propriety of the above conviction and sentence as confirmed in appeal, this Revision Petition was filed.

4. Having heard the learned counsel on either side and perusing the judgments ot the courts below, I find that Ext. P1 cheque for Rs. 3,71,734/- dated 30.6.2002 drawn on Federal Bank, Thiruvananthapuram was issued by the revision petitioner to the first respondent. At the time when Ext. P 1 cheque was issued, there was liability amounting to Rs. 3,71,734/-. Thereafter on 24.7.2002, the revision petitioner paid a sum of Rs. 1,00,000/- It is admitted by PW 1 during the cross examination. Though Rs. 1,00,000/- out of the amount covered by Ext. P1 cheque was received on 24.7.2002, the 1st respondent presented the cheque for collection on 10.12.2002 for the entire amount. On that date there was no sufficient funds in the account of the revision petitioner to cover the full amount. Hence it was returned with Ext. P2 memo for reason “funds insufficient”. Thereupon the first respondent, on 20.12.2002 caused a notice demanding discharge of Rs. 3,71,734/- though Rs. 1,00,000/- out of the said amount was paid by the revision petitioner. On receipt of Ext. P3, the revision petitioner sent Ext. D2 reply. In Ext. D2 it is specifically mentioned that out of the amount covered by Ext. P1 cheque, Rs. 1,00,000/- was paid and it was acknowledged by the first respondent. It was further stated that the revision petitioner was ready to settle the dispute within a reasonable time and not to initiate unnecessary litigation. A reading of the complaint filed by the first respondent would show that there is no mention regarding the acknowledgment of Rs. 1,00,000/- on 24.7.2002 The complaint was also filed as if the entire amount as per Ext. P1 was due and there is refusal to discharge the liability. The admission of PW 1 would show that in fact on the date of presentation of Ext. P1 that much amount was not due. On the date of issuance of Ext. P3 notice also such amount was not due. Suppressing all these facts, complaint was filed. There is total lack of bonafides. Since the respondent did not care to make endorsement under S. 56 of the Negotiable Instruments Act, I find that the cheque was presented for collection of an amount higher than the amount actually due. The notice demanding the discharge of liability was also for an amount higher than the amount actually due. Hence it cannot be said that the offence under S. 138 of the Negotiable Instruments Act has been committed by the revision petitioner.

5. The Explanation to S. 138 of the Negotiable Instruments Act would show that the debt or liability mentioned in S. 138 is legally enforceable debt or liability. When there is part payment before presenting the cheque, it could not be said that there is legally enforceable debt or liability to the extent shown in the instrument. When the amount shown in the cheque is more than what is legally due or enforceable, no offence u/S. 138 is made out, unless the cheque is presented with endorsement regarding partial discharge.

6. In an identical case, a Division Bench of this Court in Joseph Sartho v. Gopinathan Nair (2008 (4) KLT 509) at para. 8 held as follows:

“In this case, admittedly, the cheque was for an amount higher than the amount due on the date it was presented for encashment. The law contemplates making of an endorsement by the drawee on the back of the cheque regarding the part payment received. So, we are of the view that the 1st respondent cannot be found guilty of the offence under S. 138 of the Act, for not making arrangement to honour the cheque for an amount more than what is due from him. If he had made arrangement for honouring the cheque, he would have to go after the appellant to get back the substantial amount paid by him earlier. Therefore, we find-it difficult to subscribe to the view that the accused has committed the offence, as he failed to pay the balance amount, on issuance of notice by the appellant”.

7. I find that the ratio of the above decision is squarely applicable to the case on hand. On the other hand the learned counsel also brought to my attention the decision reported in Ancon Engineering Co. (P) Ltd. v. Amitava Goswami (1994 (2) Crimes 769). That is a case where after the dishonour of cheque and notice demanding discharge of the liability, the drawer had made part payment in response to the notice. Para. 7 reads as follows:—

“It has been next argued by the learned advocate for the petitioners that the petitioners had made part-payment in response to the notice of the payee dated the 14th July 1992 for Rs. 5,000/- the cause of action for the payee to lodge a complaint is no more available xxx xxx xxx”

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“If part-payment could protect the drawer of the cheque from prosecution under S. 138 this would have been a very hand and convenient device for an unscrupulous person to frustrate the very purpose of S. 138. In that case tender of any paltry and insignificant amount of say Rs. 10/- or Rs. 5/- even against a demand for any huge amount mentioned in the cheque could frustrate the coercive remedy which the legislature has thought fit to make available under S. 138 to a duped payee coming within the ambit of the said section. Anything short of payment of the whole of the amount within the time limit mentioned in clause (c) of the proviso to S. 138 generates the cause of action for making a complaint under S. 142(b).”

8. It being a case of partial discharge after notice, and the case on hand being partial discharge before presentation of the cheque, the ratio of the latter decision has no application to the case on hand. At the same time, the ratio of the former decision is squarely applicable to the case on hand. The courts below failed to take note of the fact that on the date of presentation of the cheque there was no liability outstanding to the extent to which the cheque was drawn. There was lack of bonafides in presenting the cheque without making endorsement under S. 56 ofthe Negotiable Instruments Act. Toconstitute offence u/S. 138 of the Negotiable Instruments Act, there would be debt or liability to the extent to which the cheque was drawn. If there is part payment it should have been endorsed and the claim should be limited to the extent of liability. No man shall be prosecuted for non payment of an amount which he did not owe. Here when the cheque was drawn the liability was Rs. 3,71,734/- and cheque was drawn for that amount. Subsequently one lakh rupees were paid. Suppressing that payment, the cheque was presented for the entire amount, discharge was demanded for entire amount and prosecution was launched. Therefore no offence u/S. 138 of the Negotiable Instruments Act is established. Prosecution is an abuse of process. The conviction and sentence under challenge are not sustainable.

9. In the result, the Revision Petition is allowed. While setting aside the conviction and sentence under challenge, the revision petitioner is acquitted and set at liberty. The bail bond, if any, executed by him would stand cancelled.