Cheque dishonour and magistrate fine powers under the Negotiable Instruments Act depend on special statutory rules and bank evidence.

A cheque returned with the endorsement "refer to drawer" may indicate dishonour, but liability under Section 138 of the Negotiable Instruments Act still depends on proof that the cheque was returned for insufficiency of funds or for exceeding the bank arrangement, so further bank evidence may be required before final determination. The special scheme of the Negotiable Instruments Act also prevails over the general fine limit in Section 29(2) of the Code of Criminal Procedure, and a Judicial Magistrate of First Class trying a Section 138 prosecution can impose a fine exceeding Rs. 5,000. The matter was remitted for fresh disposal with limited additional evidence.

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Issues: (i) Whether a cheque returned with the endorsement "refer to the drawer" could be treated as dishonoured for the purpose of Section 138 of the Negotiable Instruments Act without further proof of insufficiency of funds. (ii) Whether a Judicial Magistrate of First Class trying an offence under Section 138 of the Negotiable Instruments Act is empowered to impose a fine exceeding Rs. 5,000 notwithstanding Section 29(2) of the Code of Criminal Procedure.

Issue (i): Whether a cheque returned with the endorsement "refer to the drawer" could be treated as dishonoured for the purpose of Section 138 of the Negotiable Instruments Act without further proof of insufficiency of funds.

Analysis: An endorsement of the bank such as "refer to drawer" is treated as evidence that the cheque was returned unpaid. At the same time, liability under Section 138 depends on the cheque having been returned for insufficiency of funds or for the amount exceeding the arrangement made with the bank. The complainant, therefore, had to be given an opportunity to adduce the bank manager's evidence on the question of insufficiency of funds.

Conclusion: The acquittal could not be sustained on this ground, and the matter required fresh examination of the bank evidence.

Issue (ii): Whether a Judicial Magistrate of First Class trying an offence under Section 138 of the Negotiable Instruments Act is empowered to impose a fine exceeding Rs. 5,000 notwithstanding Section 29(2) of the Code of Criminal Procedure.

Analysis: Section 142 of the Negotiable Instruments Act contains a non obstante clause and authorises cognizance by a Judicial Magistrate of First Class for offences under Section 138. Since Section 138 itself permits a fine up to twice the cheque amount, the special provision governs the sentencing power in such prosecutions and overrides the general limit under Section 29(2) of the Code of Criminal Procedure. The Magistrate may also resort to the other procedural provisions where appropriate.

Conclusion: A Judicial Magistrate of First Class is competent to impose a fine exceeding Rs. 5,000 in a prosecution under Section 138 of the Negotiable Instruments Act.

Final Conclusion: The appeal succeeded, the acquittal was set aside, and the case was remitted for fresh disposal after permitting limited additional evidence on the bank's endorsement and funds position.

Ratio Decidendi: In a prosecution under Section 138 of the Negotiable Instruments Act, the special statutory scheme prevails over the general sentencing limit in the Code of Criminal Procedure, and a bank return endorsement such as "refer to drawer" may require further evidence on insufficiency of funds before final determination.

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