WHEN 420 ATTRACTS IN CHEQUE BOUNS CASE ?
THE HON'BLE SRI JUSTICE B. CHANDRA KUMAR
Criminal Petition No.5259 of 2007
J. Vidya Sagar S/o L.J. Rajam,
Aged 43 years, Occ: Service,
R/o 12-1/1, Plot No.1, Road No.1,
State of A.P. through Public Prosecutor,
High Court of A.P., Hyderabad and another
Counsel for petitioner: Mr.P. Shiv Kumar
Counsel for respondent: Public Prosecutor
This Criminal Petition has been filed to quash the proceedings in C.C.No.437 of 2005 on the file of the Additional Judicial First Class Magistrate, East & North, R.R. District, transferred to X Metropolitan Magistrate, Malkajgiri, R.R. District.
2. The brief facts of the case are as follows:
The second respondent herein filed a complaint alleging that he is one of the partners in M/s Sai Chakra Financers and M/s Yogeshwara Financers and that the partners were not in a position to uphold the trust of the managing partners and therefore, the firm was dissolved, accounts were settled and a memorandum of understanding was reached between the parties on 05-06-2001. Due amounts to be paid by the Firm and to be received by the Firm were distributed among the partners. In pursuance of the said memorandum of understanding, the second respondent approached the petitioner for the payment of the due amount to be paid to him and the petitioner issued a cheque bearing No.081308, dated 13-05- 2002 for Rs.3,85,000/- of Central Bank, Himayatnagar branch. When the said cheque was presented in the bank of the second respondent i.e., ICICI Bank, Vasavinagar branch, the second respondent received an intimation that the account was closed. The second respondent lodged a complaint against the petitioner alleging that the petitioner issued a false cheque and closed the account without any intimation with an intention to cheat him and to avoid the payment. Basing on the said complaint, a case was registered in Crime No.251 of 2002 on 05-06-2002 for the offences punishable under Sections 420 of IPC and 138 of the Negotiable Instruments Act, 1881 (for short 'the Act').
3. The stand of the petitioner is that he had approached M/s Sai Chakra Financers and M/s Yogeshwara Financers and availed the loan and executed the promissory note and issued a blank cheque and subsequently, he had paid the entire loan amount with interest within the stipulated time and when he requested to return the promissory note and blank cheque, the second respondent represented that the promissory note and the blank cheque were misplaced and assured that they will be returned to him as and when found.
4. The learned counsel for the petitioner submits that the police are not authorized to investigate into a case filed for the offence under Sections 138 of the Act. He further submitted that even if the allegations made in the complaint are taken at their face value and accepted in their entirety, they did not prima facie constitute any offence or make out a case against the petitioner.
5. No representation for the second respondent, though notice was served.
6. In the light of the facts and circumstances, the only points that arise for consideration are:
1. Whether the police are empowered to file charge sheet for the offence punishable under Section 138 of the Act? and
2. Whether the ingredients of Section 420 of IPC have been made out from the contents of the charge sheet?
7. Section 138 of the Act is as follows:
"Section 138. Dishonour of cheque for insufficiency, etc., of funds in the accounts.-
Where any cheque dr awn by a person on an account maintained by hi m 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 provisions of this Act, be punished with imprisonment for a term which may be extended to two years, 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 thirty 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."
8. A reading of the above provision makes it clear that the payee or holder of the cheque, as the case may be, makes a demand for payment of the amount of the cheque by giving a notice in writing to the drawer of the cheque within 30 days of the receipt of information from the bank regarding the return of the cheque as unpaid. It also provides an opportunity to the drawer and if the cheque amount is paid within 15 days of the receipt of the notice sent under Section 138 (b), the liability under Section 138 will seize. Of course it is the settled law that an offence under Section 138 of the Act is made out even if the cheque is returned on the ground of closure of the account. It is also settled law that a cheque can be presented any number of times during the time of its validity. Section 142 of the Act envisages that no Court shall take cognizance of an offence punishable under Section 138 of the Act except upon a complaint in writing made by the payee or the holder, as the case may be, in due course of the cheque and 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. For more clarity, Section 142 of the Act is extracted below: "142. Cognizance of offences - Notwithstanding anything contained in the Code of Criminal procedure, 1973-
(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 maybe, 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."
9. The scheme and provisions of the Act make it very clear that it is the payee, who has to make a complaint in writing, and upon such complaint, the Court is empowered to take cognizance. In the light of the above circumstances, giving a complaint to the police and registering a case for the offence under Section 138 of the Act appears to be not contemplated under the Act. The time limit prescribed for issuing a notice, on receipt of the information by the payee from the bank regarding the return of the cheque as unpaid, and the time limit given to the drawer to enable him to make payment, and the time limit prescribed to the payee to file a complaint, makes it very clear that no police investigation is contemplated under the provision of the Act.
10. In H. MOHAN & ANR. V. STATE OF KARNATAKA 1, it was held that:
"It is clear from the language employed in Section 142 of the Act that no Court shall take cognizance of any offence punishable under Section 138 except upon a written complaint made by the payee. It means that the payee has to file a private complaint under Section 200 Cr.P.C. before the competent Magistrate and the Police are not empowered to act upon a private complaint filed for an offence under Section 138 of the Act. I do not find any force in the argument of the learned High Court Government Pleader that Sections 4 and 5 Cr.P.C. empower the Police to entertain the complaint filed in respect of an offence under Section 138 of the Act as the said provisions are not attracted in view of the above extracted provisions of Section 142 of the Act."
11. In JAGARLAMUDI SURYA PRASAD AND OTHERS v. STATE OF ANDHRA PRADESH 2, it was held that:
"In view of S. 142 of the Act, when a complaint filed by the payee or the holder in due course of the cheque which was dishonoured, the Magistrate has necessarily to take cognizance if the other ingredients are satisfied. He has no right or power to refer it for investigation to the police just like a private complaint filed in accordance with the provisions of the Criminal P.C."
12. Similar view was taken by this Court in
Y. VENKATESWARA RAO v. MAHEE HANDLOOMS (P.) LTD. 3, wherein it was held that: "As evidenced by Sec. 142(a) of the negotiable Instruments Act no Court shall take cognizance of any offence punishable under Sec.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. In the present case, the case was taken cognizance on a police complaint and consequently, as rightly submitted by the learned counsel for the petitioner, the complaint is not taken on file properly. In view of the provisions of Sec.142 (a) of the negotiable Instruments Act, the proceedings in C.C.184/91 on the file of the VI metropolitan magistrate are quashed on and from referring the case by the learned magistrate under Sec. 156(3) of the Code and thereafter."
13. Similar view was taken in K. MAHADEVAN v. Y. VENKATESH AND ANOTHER 4, wherein two cheques were dishonoured and a private complaint was filed by payee of cheques which was forwarded by the Magistrate to police and after a charge sheet being filed by police, magistrate took cognizance of offence. In those circumstances, it was held that adopting such a procedure is a glaring defect in procedure because under Section 12 of the Negotiable Instruments Act, cognizance of an offence is dishonour of cheque (s) should be taken on a private complaint only.
14. In CENTRAL BANK OF INDIA AND ANOTHER v. M/s. SAXONS FARMS AND OTHERS 5, it was held that:
"Under Section 142 of the Act, Court can take cognizance of an offence punishable under Section 138 only on a complaint in writing made by the payee. Therefore, the police could not have started investigation under Section 138 of the Act. But if a cheque is dishonoured drawer may expose himself to prosecution under various sections of the Indian penal Code which are cognizable and police could take up investigation. What was indicated in the notice was that in addition to the legal action by the appellant-bank under the Act, option was kept open for taking action against the respondents under the provisions of Indian penal Code by informing the police. Therefore, the contention of the learned counsel for the respondents has no force."
15. Now the other question is when it is alleged that the Accused has not only committed the offence punishable under Section 138 of the Act, but also committed the offence under Section 420 of IPC, what has to be done? In such circumstances, in NEMICHAND SWAROOPCHAND SHAHA v. M/S. T.H. RAIBHAGI FIRM 6, it was held that it is absolutely necessary for the purpose of bringing in Section 415 IPC that the complainant should have been fraudulently or dishonestly induced by the petitioners to deliver the property concerned and unless the ingredients of cheating within the meaning of Section 415 of IPC are made out, no cognizance can be taken for the said offence.
16. In S. JAYASWAMI AND ANOTHER v. STATE OF ORISSA AND ANOTHER 7, the Orissa High Court observed as follows:
"The dishonour of the cheques by the Bank due to insufficient funds is squarely covered under the scope of Section 138 of the Act. The provision of Section 420, IPC is not attracted unless mala fide intention of the person issuing the cheque is established. Here, no specific instances have been pleading about the existence of mala fide intention. As has been said in the case of G. Sagar Suri (supra), dishonest intention and mis-representation are to be specifically indicated to attract the provisions of Section 406 or 420, IPC and if such specific allegations are not there and general allegations of dishonour of cheque is there, only Section 138 of the Act will be attracted. When same cheques are involved in the complaint case and in the G.R. Case and when the only allegation is bouncing of the cheques for insufficient funds or stop payment direction, the issue will be covered only under Section 138 of the Act. In such situation, the police investigation into the issue during pendency of the complaint cases would be abuse of the process of Law and Court."
17. In VEER PRAKASH SHARMA v. ANIL KUMAR AGARWAL 8, it was observed that:
"In law, only because he had issued cheques which were dishonoured, the same by itself would not mean that he had cheated the complainant. Assuming that such a statement had been made, the same, in our opinion, does not exhibit that there had been any intention on the part of the appellant herein to commit an offence under Section 417 of the Indian Penal Code."
18. In HRIDAYA RAJAN PRASAD VERMA AND OTHERS v. STATE OF BIHAR AND ANOTHER9, the Supreme Court held that:
"In determining the question it has to be kept in mind that the distinction between mere breach of contract and the offence of cheating is a fine one. It depends upon the intention of the accused at the time to inducement which may be judged by his subsequent conduct but for this subsequent conduct is not the sole test. Mere breach of contract cannot give rise to criminal prosecution for cheating unless fraudulent or dishonest intention is shown right at the beginning of the transaction, that is the time when the offence is said to have been committed. Therefore it is the intention which is the gist of the offence. To hold a person guilty of cheating it is necessary to show that he had fraudulent or dishonest intention at the time of making the promise. From his mere failure to keep up promise subsequently such a culpable intention right at the beginning, that is, when he made the promise cannot be presumed."
19. Now it has to be seen whether there is an allegation in the present case that the petitioner had induced the complainant on the date of issuing the cheque i.e., whether he had any fraudulent or dishonest intention at the beginning of the transaction. Unless it is specifically alleged that at the very inception the Accused has dishonest intention to cheat, the ingredients of Section 415 punishable under Section 420 of IPC have not been made out. A reading of the complaint makes it very clear that when the second respondent approached the petitioner with regard to the due amount, he promised to settle the accounts and having verified the accounts, he requested two weeks time and subsequently issued the cheque in dispute. Though it is the case of the second respondent that the petitioner had closed the Account without any intimation to him, it is not clear as to when the account was closed.
20. Another important fact pointed out by the learned counsel for the petitioner is that the reply notice sent on behalf of the petitioner is dated 27-04-2002, which reveals that the petitioner agreed to repay the due amount in instalments and the first instalment is payable on 23-04-2002 and the balance in due course. If that is the case, the issuance of the cheque, dated 13-05-2002 for the entire amount of Rs.3,85,000/- becomes doubtful. Though the documents filed by the petitioner cannot be looked into at this stage, having regard to the facts and circumstances of the case, it appears that since there is no allegation that the petitioner had fraudulent intention on the date of issuing the cheque and closed the account by the date of issuing the cheque, it appears that the ingredients of Section 420 of IPC have not been made out. In the above circumstances, the proceedings against the petitioner are liable to be quashed.
21. Accordingly, the Criminal Petition is allowed. The proceedings against the petitioner in C.C.No.437 of 2005 on the file of the Additional Judicial First Class Magistrate, East & north, R.R. District, transferred to X Metropolitan Magistrate, Malkajgiri, R.R. District, are hereby quashed.
?1 1991 (2) CRIMES 93
2 1992 CRI.L.J. 597
3 1992 (3) ALT 73
4 1993 CRI.L.J. 2659
5 1999 CRI.L.J. 4571
6 2002 (1) CIVIL L J 417
7 2005 CRI.L.J. 2896
8 2007 (9) SCALE 502
9 (2000) 4 SCC 168