Appellate court convicts accused under Section 138 for bounced cheque, emphasizes underlying debt proof

The appellate court overturned the trial court's acquittal and convicted the accused under Section 138 of the Negotiable Instruments Act. The accused was directed to pay a compensation of Rs. 1,00,000/- to the complainant within sixty days, with a consequence of six months of simple imprisonment in case of non-compliance. The court emphasized that security cheques can attract liability if the underlying debt is proven, and subsequent payments made by the accused do not absolve liability under Section 138.

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Issues Involved:
1. Whether the complaint is maintainable under Section 138 of the Negotiable Instruments Act when the cheque was given as security.
2. Whether the subsequent payments made by the accused affect the liability under Section 138.
3. Whether the complaint was filed by the proper party.
4. Whether the cheque was presented within the statutory period.

Detailed Analysis:

Issue 1: Maintainability of Complaint under Section 138 for Cheque Given as Security
The trial court acquitted the accused on the grounds that the cheque was issued as security, not for the discharge of any liability. The appellate court, however, found this view unreasonable. The complainant's letter dated 16-3-1999, which the accused did not respond to, indicated an outstanding liability of Rs. 9,69,647.05. The accused's silence implied consent to the terms, allowing the complainant to complete and present the cheque. The appellate court emphasized that security cheques can be enforced if the underlying liability is established. The court cited the Supreme Court's decision in I.C.D.S. Ltd. v. Beemna Shabeer, which clarified that cheques given as security can attract liability under Section 138 if they are dishonored due to insufficient funds.

Issue 2: Impact of Subsequent Payments on Liability
The trial court noted that the accused made payments post-dishonor of the cheque. The appellate court acknowledged these payments but held that they do not absolve the accused of liability under Section 138, as the offence is complete upon failure to comply with the demand notice. Subsequent payments can only mitigate the sentence, not negate the offence. The court referred to William Rosario Fernandes v. Cabral & Co., which supports this view.

Issue 3: Proper Party to File Complaint
The accused argued that the cheque was issued to a proprietorship concern, not the complainant company. The appellate court dismissed this contention, noting that the accused continued business with the company formed by the original proprietors and made payments to the company. This indicated a continuation of business relations, justifying the company's right to file the complaint.

Issue 4: Presentation of Cheque Within Statutory Period
The accused contended that the cheque was not presented within six months from the date it was issued. The appellate court rejected this argument, stating that the cheque was completed and presented within six months from the date it was filled by the complainant. The court referred to Purushottam Maniklal Gandhi v. Manohar K. Deshmukh, which supports the view that the date on the cheque, filled by the holder, is the relevant date for calculating the statutory period.

Conclusion:
The appellate court set aside the trial court's acquittal and convicted the accused under Section 138 of the Negotiable Instruments Act. The court directed the accused to pay a compensation of Rs. 1,00,000/- to the complainant within sixty days, failing which the accused would undergo six months of simple imprisonment. The court emphasized that securities are meant to be enforced and the complainant followed the correct procedure in enforcing the security given towards the accused's liability.

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