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Smart Summary

Factual and Procedural Background

The appellant, who was the complainant in the lower court, filed an appeal challenging the acquittal of the respondent under section 138 of the Negotiable Instruments Act. The complaint was based on a cheque for Rs. 56,000 dated 3-10-1990 issued by the respondent, which was returned unpaid due to payment being stopped by the bank. The complainant issued a notice to the respondent, who replied but failed to pay within fifteen days, prompting the complaint. The lower court acquitted the respondent after evidence was taken.

The respondent's defense was that he did not owe any debt or liability to the complainant; rather, a third party (D.W. 1, Mohammad Yunus) owed money to the complainant. The respondent claimed to have issued the cheque to assist this third party. The lower court accepted this defense and held that since the respondent did not owe any debt or liability to the complainant, section 138 was not attracted.

Legal Issues Presented

  1. Whether section 138 of the Negotiable Instruments Act applies when a cheque is issued by a person to discharge a debt or liability owed by another person and not by the drawer himself.
  2. Whether the fact that the cheque was returned unpaid due to payment being stopped by the drawer constitutes an offence under section 138 of the Act.

Arguments of the Parties

Appellant's Arguments

  • Section 138 applies to cheques issued for discharge, in whole or in part, of any debt or liability, without restricting the debt or liability to that of the drawer.
  • The wording of section 138 does not require the debt or liability to be of the drawer towards the payee; if that were the intention, the statute would have explicitly stated so.
  • Section 139, which creates a legal presumption, similarly does not limit the debt or liability to that of the drawer.
  • The legislative purpose of section 138 is to enhance the credibility and acceptability of cheques, making it immaterial whether the cheque is issued for the drawer's own debt or for another person's debt.
  • Cited the Madras High Court decision in Krishna Bai v. Arti Press, which supports the view that the debt or liability may be that of another person and need only be legally enforceable.

Respondent's Arguments

  • The respondent did not owe any debt or liability to the complainant; the cheque was issued on behalf of a third party.
  • Even if the appellant's interpretation is accepted, the cheque was returned unpaid because payment was stopped by the drawer, which is not a ground constituting an offence under section 138.
  • This argument regarding the ground for dishonour was not addressed in the trial court and should be considered by the trial court on remand.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Krishna Bai v. Arti Press (Madras High Court) Interpretation that section 138 applies to cheques issued for legally enforceable debts or liabilities of another person, not limited to the drawer. The court respectfully agreed with the observations that the debt need not be that of the drawer and that the legislative intent supports this broader interpretation.

Court's Reasoning and Analysis

The court analyzed the language of section 138 and section 139 of the Negotiable Instruments Act, noting that the statute refers to "any debt or other liability" without specifying that it must be the drawer's own debt. This indicated a legislative intent to cover cheques issued to discharge debts or liabilities owed by others. The court relied on the precedent of Krishna Bai v. Arti Press, which held that the debt or liability must be legally enforceable but not necessarily of the drawer. The court found the trial court's reasoning—that the offence under section 138 does not apply because the respondent did not owe the debt—was incorrect based on this interpretation. However, the court noted that the respondent's argument that the cheque was dishonoured due to payment being stopped (a ground not covered under section 138) was not addressed below and should be examined by the trial court on remand. Consequently, the court set aside the acquittal and remitted the matter for fresh disposal on the existing evidence.

Holding and Implications

Appeal allowed and order of acquittal set aside.

The case is remitted to the trial court for fresh disposal on the evidence already on record, including consideration of the respondent's argument regarding the ground for dishonour of the cheque. The decision clarifies that section 138 applies to cheques issued for discharge of legally enforceable debts or liabilities of another person and not necessarily the drawer's own debt. No new precedent beyond the interpretation of section 138's scope is established; the direct effect is that the respondent's acquittal is overturned and the trial court is directed to reconsider the matter.

    Alexander v. Joseph Chacko

    K.T.Thomas, J.:-

    (1) appellant was the complainant in the lower court. He filed this appeal in challenge of the order of acquittal of the respondent of the offence under section 138 of the negotiable instruments act (for short the act).

    (2) appellant filed the complaint in the lower court based on ext. P1 cheque (for rs. 56,000/ - dated 3. 1 0. 1990) which was issued by the respondent. When the cheque was presented for encashment it was returned unpaid by the bank concerned on the ground payment stopped. Complainant then issued a notice to which respondent sent a reply. As the respondent failed to pay the amount within fifteen days of receipt of notice, Complaint was filed in the lower court. After taking evidence lower court acquitted the respondent.

    (3) the stand of the respondent in the lower court is this: respondent did not owe any liability or debt to the complainant. However one mohammad yunus (d. W. 1) owed some money to the complainant. As d. W. 1 was in impecunious condition and as the complainant insisted on repayment of the debt, Respondent went to the rescue of d. W. 1 and issued the cheque.

    (4) learned magistrate found that d. W. Its story is true and hence he expressed the opinion that since respondent did not owe any debt or liability to the complainant, Section 138 of the act is not attracted. It was on the said premise that respondent was acquired.

    (5) learned counsel for the appellant contended that even if the defence version is accepted respondent cannot escape from section 138 of the act. The section deals with a cheque drawn by a person for the discharge, In whole or in part, Of any debt or other liability. T the section does not say that the cheque should have been drawn for the discharge of any debt or other liability of the drawer towards the payee. If the intention of the parliament was otherwise the words of any debt or other liability would have been further qualified by adding the words of the drawer. Even in section 139 of the act, By which a legal presumption is created parliament has only fixed the presumption that the cheque was received for the discharge, In whole or in part, Of any debt or other liability. This means, The debt or other liability may be due from any person. It is not necessary that the debt or liability should be due from the drawer.

    (6) as the object of the legislature in bringing forth a new provision like section 138 is to enhance the credibility or acceptability of cheques, It is immaterial that the cheque was issued for discharge of his own debt or liability. It can issued for discharge of another mans debt or liability

    (7) a single judge of the madras high court has taken the same view. Vide krishna bai v. Arti press. The following observations of padmini jesudurai, J. Are useful in this context. The debt or liability towards which the cheque is issued, Should be a legally enforceable debt or liability. This would have reference to nature of the debt or liability and not to the person against whom the debt or liability could be enforced. This is clear by use of words any debt or liability which would include a cheque drawn by one person towards a legal enforceable debt or liability of another person. The significant omission of the words debt or other liability of that person (emphasis supplied) after the words any debt or liability would indicate the intention of the parliament. I am in respectful agreement with the aforesaid observations.

    (8) learned counsel for the respondent then contended that even if such a view is adopted the complainant cannot succeed as the cheque was returned due to the fact that payment was stopped by the drawer and that is not one of the grounds which could constitute the offence under section 138 of the act. Since the said argument was not addressed before the trial court that point has to be considered by the trial court.

    (9) i, Therefore, Set aside the order of acquittal and remit the case to the trial court for disposal of the case afresh on the evidence already on record. Cr1. Appeal is accordingly disposed of. Appeal allowed

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    Alexander v. Joseph Chacko
    (Jul 12, 1993)