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Advocates
  • For the Appellant: M.K. Damodaran, Advocate.
  • For the Respondent: M.P. Ashok Kumar, Advocate.
Judges
  • K.P Balanarayana Marar, J.
Acts
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Citation Codes
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citation codes
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Advocates
  • For the Appellant: M.K. Damodaran, Advocate.
  • For the Respondent: M.P. Ashok Kumar, Advocate.
Judges
  • K.P Balanarayana Marar, J.
Acts
See more information ...
Smart Summary

Structured Summary of the Opinion — K.P. Balanarayana Marar, J.

Factual and Procedural Background

The appeal was filed by the complainant in C.C. 241/89 before the Judicial First Class Magistrate, Kannur, challenging an acquittal entered by the Sessions Court, Thalassery. The complaint was brought under Section 142 of the Negotiable Instruments Act alleging an offence under Section 138 of the Act.

Facts as set out in the opinion: the complainant (President of the Kannur District Motor Engineering Metal Workers Union) alleged that following conciliation proceedings before the District Labour Officer, Kannur, a sum of Rs. 1,50,583/- was agreed to be paid to workers by the accused (proprietor of T.K. Automobiles and other concerns). The full amount was not paid; Rs. 29,700/- was paid and a cheque for Rs. 1,17,000/- was issued for the balance. When presented, the cheque was returned with the endorsement "refer to the drawer." The complainant served a notice under the proviso (b) to Section 138; the accused received it but did not reply, and the complaint followed.

At trial the accused pleaded not guilty. The Magistrate convicted and sentenced him, imposing a fine of Rs. 1,57,000/- (directing Rs. 1,17,000/- to the complainant and Rs. 40,000/- under Section 357 Cr.P.C. as compensation) and ordered R.I. in default. On appeal the Sessions Court set aside the conviction and acquitted the accused. The complainant obtained special leave and brought this appeal.

Legal Issues Presented

  1. Whether the complainant had proved that the cheque was returned dishonoured for insufficiency of funds (or related grounds) given the endorsement "refer to the drawer" and the absence of the Bank Manager's evidence.
  2. Whether a Judicial First Class Magistrate is competent to impose a fine exceeding Rs. 5,000/- in proceedings under Section 138 of the Negotiable Instruments Act, read with Section 142 of the Act, notwithstanding Section 29(2) of the Code of Criminal Procedure.

Arguments of the Parties

Appellant's Arguments

  • The appellant (complainant) contended — through learned counsel — that Section 142 of the Negotiable Instruments Act contains a non obstante clause which enables a Metropolitan Magistrate or a Judicial Magistrate of the First Class to take cognizance and exercise powers in respect of offences under Section 138 notwithstanding anything contained in the Code of Criminal Procedure; thus a First Class Magistrate can impose a fine exceeding Rs. 5,000/-.

The opinion does not set out a detailed, itemised statement of the accused's counter-arguments beyond the fact that the accused pleaded not guilty and that the Sessions Court accepted two grounds for acquittal.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Thomas Varghese v. Jerome, 1992 (1) K.L.T. 812 Endorsements by a banker such as "refer to drawer", "account closed", "payment has been stopped" are effective to prove that a cheque has been bounced; if the cheque bounced for insufficiency of funds, the drawer is liable under Section 138. The court relied on this authority to accept that the endorsement "refer to the drawer" indicates the cheque was bounced, but held that the complainant nonetheless bears the burden to prove the reason for dishonour (insufficiency of funds) and should be given an opportunity to summon the Bank Manager to prove insufficiency on the date of presentation.
Mrs. Jaya Babu v. K.K. Vijayan, 1993 (2) KLT 769 : 1993 (2) KLJ 704 Indicates there is no merit in the contention that a complainant would be handicapped by the First Class Magistrate lacking power to impose a fine over Rs. 5,000; suggests alternative procedural measures (Section 325 Cr.P.C.) and use of Section 357(1) Cr.P.C. The court referred to this decision as an incidental support for the conclusion that a Magistrate of the First Class can provide adequate relief to complainants and is not strictly prevented from addressing fines or compensation above Rs. 5,000 in the context of Section 142 proceedings.
Prabakar v. Naresh Kumar N. Shah, 1994 M.L.J. Criminal 91 Interpreting Section 142 of the Negotiable Instruments Act vis-à-vis Section 29(2) Cr.P.C., the Madras High Court held that Section 29(2) Cr.P.C. is not applicable because Section 142 contains a "notwithstanding" clause; thus Section 142 confers power on the Magistrate irrespective of limitations in the Code. The court expressly agreed with the Madras High Court's view and held that a Judicial First Class Magistrate is empowered to impose a fine exceeding Rs. 5,000/- for an offence under Section 138 by virtue of Section 142's non obstante clause.

Court's Reasoning and Analysis

The Sessions Court had acquitted the accused for two reasons: (1) the cheque was not proved to have been returned for insufficiency of funds, and (2) the Magistrate lacked authority to impose a fine exceeding Rs. 5,000/-.

On the first point, the appellate court noted that the cheque was returned with the banker’s endorsement "refer to the drawer" but the Bank Manager was not examined to prove insufficiency of funds. Citing Thomas Varghese v. Jerome, the court accepted that endorsements like "refer to the drawer" are evidence that a cheque was bounced; however, the opinion emphasised that the complainant bears the burden of establishing that the dishonour was due to insufficiency of funds (or that the amount was not arranged to be paid). Because the complainant had not summoned the Bank Manager, the court concluded that an opportunity should be given to summon and examine the Bank Manager to prove insufficiency of funds on the date of presentation.

On the second point (competence of the Magistrate to impose a fine exceeding Rs. 5,000/-), the court analysed Section 142 of the Negotiable Instruments Act and its non obstante clause, the penal provision of Section 138 (which permits fine up to twice the amount of the cheque), and Section 29(2) Cr.P.C. The court accepted the appellant's argument and followed earlier authorities (including Mrs. Jaya Babu and Prabakar v. Naresh Kumar N. Shah) to hold that Section 29(2) Cr.P.C. does not restrict the power conferred by Section 142 of the Negotiable Instruments Act. Therefore, a Judicial First Class Magistrate is empowered to impose a fine exceeding Rs. 5,000/- in offences under Section 138 when proceedings are taken under Section 142.

The court synthesized these points to conclude that the Sessions Court's acquittal should be set aside and the matter remanded to the trial Magistrate for fresh consideration, permitting only limited additional evidence (the Bank Manager's evidence and bank documents relating to the return of the cheque).

Holding and Implications

APPEAL ALLOWED; ACQUITTAL SET ASIDE.

Direct consequences ordered by the court (as stated in the opinion):

  • The order of acquittal by the Sessions Court is set aside and C.C. 241/89 before the Judicial First Class Magistrate, Kannur is remitted to that Magistrate for fresh consideration in light of this judgment.
  • The Magistrate must give the complainant a sufficient opportunity to summon and examine the Bank Manager to prove that the cheque was returned dishonoured for insufficiency of funds on the date of presentation.
  • After examining the Bank Manager and relevant bank documents, the Magistrate shall decide the case afresh on the basis of that evidence together with the other evidence already on record. The only additional evidence permitted is (a) the evidence of the Bank Manager and (b) documents connected with the bank's return of the cheque; no other evidence shall be admitted by either party.
  • Both parties were directed to appear before the Judicial First Class Magistrate, Kannur on 8.1.1996.
  • The court explicitly held that a Judicial First Class Magistrate is empowered, under Section 142 of the Negotiable Instruments Act (read with Section 138), to impose a fine exceeding Rs. 5,000/-, notwithstanding Section 29(2) Cr.P.C.

The opinion does not purport to set out new, expansive law beyond these holdings; it follows and applies prior authorities to resolve the issues before it and to direct limited further proceedings at the trial level.

Disposition: Appeal allowed.

Show full summary ...

    Sahadevan v. Sreedharan .

    K.P Balanarayana Marar, J.:— Appeal against acquittal. The complainant in C.C 241/89 before Judicial First Class Magistrate, Kannur is the appellant.

    2. The complaint was one under Section 142 of the Negotiable Instruments Act alleging commission of offence under Section 138 of the Act. The complainant is the President of the Kannur District Motor Engineering Metal Workers Union. The accused was the proprietor of T.K Automobiles and General Engineering Service and two other concerns. His factory was closed with effect from 3.9.1987 In pursuance to conciliation proceedings initiated by District Labour Officer, Kannur, the disputes between the man agement and the union were settled and a sum of Rs. 1,50,583/- was agreed to be paid to the workers.

    3. The amount was not paid as agreed. Since then a sum of Rs. 29,700/- was paid. Towards the balance a cheque for Rs. 1,17,000 was issued which when presented in the Bank was returned with the endorsement “refer to the drawer”. Notice under proviso (b) to Section 138 was sent by the complainant. The accused received that notice, but did not send any reply. Hence the complaint.

    4. The accused pleaded not guilty to the charge. The Magistrate found him guilty, convicted him and sentenced him to pay a fine of Rs. 1,57,000/- and in default to undergo R.I for a period of one year. Out of the fine if realised a sum of Rs. 1,17,000/- was directed to be paid to the complainant as the amount due under the cheque and the balance of Rs. 40,000/- as compensation under Section 357 Criminal Procedure Code. On appeal, Sessions Court, Thalassery set aside the conviction and sentence and acquitted the accused. Hence this appeal after obtaining special leave.

    5. Heard Counsel on both sides.

    6. The two reasons given by the learned Sessions Judge for entering a verdict of acquittal are: (1) The cheque has not been proved to have been returned for insufficiency of funds. (2) The First Class Magistrate has no authority to impose fine exceeding Rs. 5000/-.

    7. The Manager of the Bank was not examined to speak about the insufficiency of amount in the account of the accused. The cheque was dishonoured with the endorsement “refer to the drawer”. A Division Bench of this Court in Thomas Varghese v. Jerome (1992 (1) K.L.T 812) held that endorsements like “refer to drawer”, “account closed”, “payment has been stopped” etc. made by the Banker at the time of the return of the cheque are having the effect of proving that the cheque has been bounced. It is observed that if the bouncing of the Cheque was on account of insufficiency of funds belonging to the drawer then the drawer will be subjecting himself to proceedings under Section 138 of the Act. The complainant is the President of an Employees Union and the amount covered by the cheque represents retrenchment compensation payable to them as per a conciliation agreement. The accused had no case that he was having sufficient funds in the Bank on the date on which the cheque was presented. The complainant has not summoned the Bank Manager to prove that the drawer was not having sufficient funds in the Bank. That the cheque was returned with the endorsement ‘refer to the drawer’ is not disputed. The burden is on the complainant to show that the cheque was returned either for insufficiency of fund or that the amount exceeds the amount arranged to be paid. Since the amount covered by the cheque is due to the workers by way of retrenchment compensation I am of the view that an opportunity has to be given to the complainant to summon the Bank Manager to prove the insufficiency of funds in the account on the date on which the cheque was presented.

    8. The other reason given by the Court below is the incompetency of the Magistrate to impose fine exceeding Rs. 5000/- by virtue of the powers conferred on a Magistrate of First Class under Section 29(2) of the Code of Criminal Procedure. In meeting this contention learned Counsel for the appellant draws attention to the non obstante clause contained in Section 142 of the Negotiable Instruments Act. The section enables a payee to file a complaint before a Court of Metropolitan Magistrate or a Judicial Magistrate of the First Class as thecase may be. This power is conferred on the Magistrate notwithstanding anything contained in the Code of Criminal Procedure. Section 138 of the Act makes the offence under that section punishable with imprisonment for a term which may extend to one year or with fine which may extend to twice the amount of the cheque or with both. The Legislature was therefore aware of the necessity of awarding fine in excess of Rs. 5000/- while conferring powers on a Judicial Magistrate of First Class to take cognizance of an offence under Section 138 of the Act. Specific powers had therefore been conferred on a Magistrate of the First Class under Section 142 to impose fine exceeding Rs. 5000/-. Though this aspect has not been decided in so many words a learned Judge of this Court had incidentally, referred to this aspect in Mrs. Jaya Babu v. K.K Vijayan (1993 (2) KLT 769 : 1993 (2) KLJ 704. It is observed therein that there is no merit in the contention that the complainant would be put to handicap due to want of powers for the Magistrate to impose a fine amount more than rupees five thousand. It is also seen observed that if such Magistrate is of the opinion that a more severe sentence is warranted he can resort to the steps envisaged in Section 325 of the Criminal Procedure Code. It is stated that even without resorting to such steps, a Magistrate can alleviate a complainant's grievance by resort to Section 357(1) of the Criminal Procedure Code.

    9. The Madras High Court had occasion to consider this aspect in Prabakar v. Naresh Kumar N. Shah (1994 M.L.J Criminal 91). Interpreting Section 142 of the Negotiable Instruments Act in the light of Section 29(2), Cr. P.C it was held that Section 29(2), Cr. P.C is not applicable in view of the primary clause Section 142, viz, notwithstanding anything contained in the Code of Criminal Procedure. Agreeing with the view of the Madras High Court I hold that the Magistrate of the First Class is empowered to impose a fine exceeding Rs. 5000/- for offence under Section 138 of the Negotiable Instruments Act.

    10. For the aforesaid reasons the appeal is allowed and the order of a acquittal is set aside. C.C 241/89 before Judicial First Class Magistrate, Kannur is sent back to the Magistrate for fresh consideration in the light of the observations contained in this judgment. The Magistrate shall give sufficient opportunity to complainant to summon the Bank Manager for proving that the cheque was returned dishonoured for insufficiency of funds. After examining the Manager, the Magistrate shall decide the case afresh on the basis of such evidence and the other evidence already available on record. It is made clear that the additional evidence to be added is only the evidence of the Bank Manager and documents in connection with the return of the cheque by the Bank. Neither party will be entitled to adduce any other evidence. The parties shall appear before Judicial First Class Magistrate, Kannur on 8.1.1996

    11. Appeal allowed.

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    Comments

    Sahadevan v. Sreedharan .
    (Dec 8, 1995)