JUDGMENT
Mahmood Ali Khan, J.
1. Failing in its all previous attempts in
scuttling the criminal proceedings launched by the
respondent for prosecution of the petitioner under
Section 138 of the Negotiable Instruments Act (the
Act) the petitioners in this criminal revision have
now sought quashing of the notice served by the trial
court upon them on 3.5.2002 under Section 251 of the
Cr.PC.
2. Briefly stated that facts are that the
respondent has filed a criminal complaint against the
petitioner on the averment, in short, that the
petitioner No.1 in the course of its business had
taken a loan of Rs. 25 lakhs from the respondent No.1
bearing interest at the rate of 14% per annum and the
petitioner No.1 company in discharge of its debts had
issued two cheques one dated 20.2.1996 for Rs. 25
lakhs and the other dated 8.11.1995 for Rs. 89,753/-.
The first cheque was towards repayment of the
principal amount. The second cheque was towards the
amount of interest at the rate of 14% per annum
accruing on the principal sum up to 20.2.1996. Both
these cheques were post dated. The petitioner
company allowed the encashment of the cheque of
Rs. 89,753/- which was towards interest but did not
allow encashment of the cheque of Rs. 25 lakhs which
was towards the repayment of the principal sum. The
respondent No.1 has filed a winding up petition
against the petitioner No.1 company. Within the
prescribed period of 15 days from the date of
bouncing of the cheque of Rs. 25 lakhs notice of
demand dated 18.3.1996 was served upon the petitioner
No.1 which has failed to make the payment within 15
days from the date of the receipt of the notice. The
respondent complaint alleged that the petitioner
had committed an offence under Section 138 and should
be punished for it.
3. The petitioner challenged the order of
summoning before this court which petition was
dismissed by order dated 11.8.2000. It was pursued
in an SLP which was also dismissed by the Supreme
Court on 13.9.2000. The petitioner moved another
application before the Additional Sessions Judge who
was trying the case for dismissing the complaint on
the ground that on the date of bouncing of the cheque
there was no existing debt or liability against the
accused and this ground was not taken in the earlier
petition, therefore, the summoning order must be
recalled. The application was dismissed. The notice
under Section 251 Cr. PC has now been framed and
served on the respondent on 3.5.2002. The petitioner
has challenged this notice as well in the instant
proceedings.
4. The contentions in this petition are two
fold. Firstly that an agreement-cum-pledge was
executed between the petitioner and the complaint
in pursuance to which short term loan facility of
Rs. 25 lakhs was granted to the petitioner on certain
terms and conditions. Paragraphs 5, 6, & 7 of that
agreement clearly show that the petitioner company
had deposited certain security with the respondent
complainant and in terms of that agreement the
respondent was authorised to dispose of those
securities and adjust the money realised towards the
satisfaction of the loan outstanding against the
petitioner. It is argued that in view of this
agreement the respondent complainant had the
discretion to sell and realise any or all the
securities for any loss or damage or diminution in
value sustained by him. Therefore, the criminal
complaint under Section 138 of the Negotiable
Instruments Act is an abuse of the process of the
court and the notice in question should be set aside.
The second contention of the petitioner is that the
petitioner had always been ready and willing to pay
the amount in Installment and had in fact paid two
cheques of Rs. 1 lakhs each during the pendency of the
winding up petition which the respondent No.1 had
encashed in compliance to the order of the court. It
was further submitted that thereafter the petitioner
had paid Rs. 22 lakhs more and as such out of Rs. 25
lakhs a sum of Rs. 24 lakhs in all has already been
paid to the respondent but the respondent wanted to
coerce the petitioner to pay interest at the rate of
75% per annum.
5. The counsel for the petitioner has fairly
conceded that mere payment of the amount of the
cheque during the pendency of the criminal complaint
will not absolve the petitioner of the offence which
has been committed by him as drawer of the cheque.
He has however, challenged the service of the notice
under Section 251 Cr.PC upon the petitioner firstly
on the ground that in terms of the
agreement-cum-pledge executed between the parties the
petitioner No. 1 had pledged certain securities with
the complainant and the complainant had a right to
sell and dispose of those securities, realise the
amount and adjust the net proceeds towards the
satisfaction of the loan amount outstanding against
the petitioner. It is argued that in the presence of
such an agreement between the parties the respondent
had no right to file a criminal complaint against t he
petitioner under Section 138 of the Act. The
respondent had right to dispose of the securities and
adjust and amount received against the outstanding
dues from the petitioner. Since this has not been
done the criminal complaint is not maintainable in
law and the notice served in it is liable to be set
aside.
6. The argument of the counsel for the
petitioner is unsustained in law. The proceedings
pending against the petitioner are not of civil
nature. Section 138 of the Act has made the bouncing
of the cheque issued by a drawer of a cheque on his
own account for insufficiency of funds etc an
offence. To be precise Section 138 is as under:-
“138:- Where any cheque drawn by a
person on a account maintained by
him with a banker for payment of any
amount of money to another person
from out of that account for the
discharge, in whole or in part, of
any debt or other liability, is
returned by the bank unpaid, either
because of the amount of money
standing to the credit of that
account is insufficient to honour
the cheque or that it exceeds the
amount arranged to be paid from that
account by an agreement made with
that bank, such person shall bee
deemed to have committed an offence
and shall, without prejudice to any
other provision of this Act, be
punished 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;
Provided that nothing contained in
this Section shall apply unless:-
a) the cheque has been 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.
b) the payee or the holder in due
course of the cheque, as the case
may be, makes a demand for the
payment of the said amount of money
by giving a notice, in writing, to
the drawer of the cheque, within
fifteen days of the receipt of
information by him from the bank
regarding the return of the cheques
as unpaid, and
c) the drawer of such cheque fails
to make the payment of the said
amount of money to the payee or, as
the case may be, to the holder in
due course of the cheque, within
fifteen days of the receipt of the
said notice.”
7. It is clear from this provision that the drawer
of the cheque will be guilty of the offence in terms of
the cheque is not issued for discharging a debt or
liability e.g. as a gift, present or by way of security
and not otherwise.
8. The only question which calls for consideration
in the criminal proceedings is whether the offence as
embodied in Section 138 of the Act is made out or not.
If all the requirement of the ingredients of this
Section are fulfillled and satisfied the offence is
complete and trial and punishment of the accused will
be perfectly legal. The payment of the amount of
cheque after the institution of the criminal complaint
would not wipe of the offence. For instance if the
amount of the cheque has not been paid by the drawer of
the cheque within 15 days from the date of the receipt
of the notice of demand from the payee offence is
complete even if it was paid on 16th day. It is a
different question as to what punishment the court will
deem proper to be awarded for small abrasion with the
requirement of law or in certain other mitigating
circumstances. Therefore, existence of an agreement
between the parties by which certain securities were
given by the borrower to the lender which could be
disposed of by the borrower for Realizing its
outstanding amount of debt would not deprive the payee
of the cheque from taking resort to the provision of
Section 138 simply because he has other remedies or
mode available for recovery of the debt. The provision
of Section 138 is specifically enacted to give sanctity
to the cheques issued for payment of debts and
liabilities. In a proceeding under Section 138 what
the court is required to satisfy itself is the
existence of all the necessary ingredients which
constitute the offence. There is presumption in law
under Section 139 of the Act that the cheque has been
drawn by its drawer for discharging a legal debt or
liability. This presumption is rebuttable and the
drawer of the cheque is at liberty to prove at the
trial that the cheque is without consideration.
Consequently neither existence of agreement between the
parties giving right to the respondent to recover the
amount due by sale of security etc nor payment of the
amount of cheque during the pendency of criminal
compliant will absolve the petitioner of criminal
liability under Section 138 of the Act. No other
defect or infirmity has been pointed out in the notice
which is impugned in this revision petition.
9. Having regard to the above discussion it must be
held that the petitioner has failed to show that the
notice dated 3.5.2001 served by the trial court on the
petitioner in the criminal proceedings under Section
138 of the Act suffer from any illegality or
impropriety which could warrant interference by this
court to prevent abuse of the process of the court and
miscarriage of justice. Petition has no merit. It is,
therefore, dismissed.