Loading...

Sugesan Finance Investment vs Union Of India on 22 January, 1990

Madras High Court
Sugesan Finance Investment vs Union Of India on 22 January, 1990
Equivalent citations: 1992 75 CompCas 298 Mad
Author: Bakthavatsalam
Bench: Bakthavatsalam

JUDGMENT

Bakthavatsalam, J.

1. The petitioner has come up to this court praying for the issue of a writ of declaration declaring that section 138 of the Negotiable Instruments Act, 1881, introduced by the Banking, Public Financial Institutions and Negotiable Instruments Laws (Amendment) Act, 1988, (66 of 1988), is invalid and inoperative in so far as the post-dated cheques issued prior to the coming into force of the Act, that is, April 1, 1989, are concerned.

2. The petitioner is a firm carrying on a business in financing. The petitioner has to accept deposits from the public for a fixed period ranging from 6 months to 3 years. It is stated that the petitioner had a record performance with very good reputation and goodwill among the commercial and public sectors. Since 1976, when the petitioner-firm was started till 1982, the petitioner was very regular in the matter of payment if interest and also repayment of the deposit amounts and, during the said period, there was no allegation of any sort against the petitioner. It is further alleged that, in the recent past, some financial institutions have suddenly collapsed which created fear and panic among the public. As a result, the petitioner-firm had to face some financial strains in its liquidity position. It is further stated that, despite this fact, the petitioner has so far repaid a sum of Rs. 7,55,00,000, towards its liabilities during the period 1979 to February, 1980. The petitioners is obliged to delay repayments of the deposit amounts since repayments from the petitioner very much depend upon its recoveries from its debtors. In these circumstances, it is stated that some depositors of the petitioner not being able to wait for repayments, had exerted pressure on the petitioner to repay their deposit amounts. Under those circumstances, the petitioner, not being able to convince the depositors, had issued current and post-dated cheques to their depositors. It is further stated that the post-dated cheques have been issued with the consent of the concerned depositors only in anticipation of recovering monies from debtors of the petitioner. As such, it is stated that the issue of post-dated cheques and their subsequent dishonouring are not deliberate and without any male fide intention. The petitioner issued post-dated cheques in good faith. It is stated that all the monies collected by way of deposits had been reinvested on valid and valuable securities and for delay caused in recovering such reinvestments. The petitioner has also filed many suits on the file of this court for recovery of more than Rs. 130 lakhs. It is state that, if the cheques issued by the petitioner bounced, it cannot be construed as wilful or wanton and, therefore, no criminal intention of cheating can be inferred from the conduct and performance of the petitioner. The petitioner further alleges that, under the Amendment Act (Act 66 of 1988) which came into force on April 1, 1989, dishonouring of a cheque has been viewed as a serious offence. The petitioner relies on sections 138 to 142 in Chapter XVII of the Act and contends that the petitioner has issued the post-dated cheques in the years 1985, 1986 and 1987 long prior to the coming into force of the Amendment Act and at the time when the cheques were issued, the petitioner was not aware of the implication. It is further stated that section 138 of the Amended Act is silent in not specifying whether this section applies to the cheques already issued prior to April 1, 1989, or will it applies to the cheques to be issued on or after April 1, 1989. In order to make it clear, the petitioner has filed this petition for a writ of declaration. It is further stated that section 138 of the Act will have no retrospective effect to the cheques already issued prior to April 1, 1989. As such, the petitioner contends that section 138 of the Act affects the system of commercial practice which has been followed from time immemorial and punishing the drawers for dishonouring of post-dated cheques issued prior to April 1, 1989, violates the principles of natural justice. The petitioner further contends that section 138 of the Amended Act is a penal provision for punishing the drawer in case of dishonouring of the cheques and as such section 138 should not be enforced against the petitioner in so far as he has issued the post-dated cheques prior to April 1, 1989.

3. Learned counsel for the petitioner reiterates the contentions raised in the affidavit; he further contends that Chapter IV, which has been introduced in 1989, should not be considered in such a way as to affect the rights of the petitioner and the petitioner should not be held responsible under the new provisions for the post-dated cheques issued prior to April 1, 1989.

4. I am not able to agree with learned counsel for the petitioner since no question of retrospective effect arises in the petitioner’s case. Chapter XVII has been introduced by Act 66 of 1988 and sections 138 to 142 have been introduced. Section 138 is to be following effect :

“Dishonour of cheque for insufficiency, etc., of funds in the account. – Where any cheque drawn by a person on an 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 be 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 cheque 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.”

Section 140 reads as follows :

“Defence which may not be allowed in any prosecution under section 138. – It shall not be a defence in a prosecution for an offence under section 138 that the drawer had no reason to believe when he issued the cheque that the cheque may be dishonoured on presentment for the reasons stated in that section.”

Section 142 reads as follows :

“Cognizance of offence. – (1) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974) :

(a) no court shall take cognizance of any offence punishable under section 138 except upon a complaint, in writing, made by the payee or, as the case may be, the holder in due course of the cheque;

(b) such complaint is made within one month of the date on which the cause of action arises under clause (c) of the proviso to section 138;

(c) no court inferior to that of a Metropolitan Magistrate or a Judicial Magistrate of the First Class shall try any offence punishable under section 138.”

5. A reading of these sections clearly shows that the provisions provide that where any cheque drawn by a person for the discharge of any liability is returned by the bank unpaid either because the amount of money standing to the credit of that account is insufficient to honour the cheque or for the reason that it exceeds the amount arranged to be paid by an arrangement made with that bank, the drawer of such cheque shall be deemed to have committed an offence. In that case, the drawer, without prejudice to the other provisions of the Act, shall be punishable with imprisonment for a period which may extend to one year or with fine which may extend to twice the amount of the cheque, or with both. The provisions further provide that such cheques should have been presented to the bank within a period of six months from the date of its drawal or within the period of its validity, whichever is earlier. The payee or holder in due course of the cheque should have made a demand for payment of the said amount of money by giving a notice in writing to the drawer of the cheque within 15 days of the receipt of information from the bank regarding the return of the cheque as unpaid and the drawer of such cheque shall make payment to the payee or the holder in due course of the cheque within 15 days of the receipt of the said notice. As such, a reading of these sections clearly shows that the offence is committed only after the cheque is returned and 15 days’ notice has been given by the payee to the drawer. Even after that time, if the drawer fails to make the payment, section 142 of the Act attracts an offence. As such, it cannot be said that, once the cheques bounced, an offence is committed. Sufficient time is given by the Act for the drawer to set things right. When the drawer fails to make payment within 15 days of the receipt of notice, then only the drawer of the cheque shall be deemed to have committed an offence. As such, I do not see any point to the arguments of learned counsel for the petitioner that section 138 should not be made applicable to cheques issued before April 1, 1989. Even if the cheques were issued prior to April 1, 1989, the offences is committed only after the issue of notice under sub-sections (b) and (c) of section 138 of the Act. As such, I am unable to accept the contention of the petitioner that section 138 cannot be made applicable in so far as the petitioner is concerned, especially for the cheques issued prior to April 1, 1989. Hence, this writ petition is dismissed. No costs.

Leave a Comment

Your email address will not be published.

* Copy This Password *

* Type Or Paste Password Here *

Cookies help us deliver our services. By using our services, you agree to our use of cookies. More Information