2006 (6) TMI 539 - HC - Indian Laws

Court holds drawer liable for bounced cheque, overturns acquittal. Premature presentation dismissed.

Umaswamy Versus  K. N. Ramanath

The High Court overturned the acquittal order and found the accused guilty under Section 138 of the Negotiable Instruments Act. The court held that the ... - Issues:1. Dishonor of cheque issued as security.2. Premature presentation of cheque.3. Interpretation of terms of agreement.4. Postal cover discrepancy regarding notice.Analysis:Issue 1: Dishonor of cheque issued as securityThe accused argued that the cheque was issued as a security and not towards discharge of debt, contending that premature presentation of the cheque led to its dishonor. However, the court held that irrespective of the purpose of issuance, a negotiable instrument like a cheque remains encashable by the payee. The court emphasized that the reason behind issuing the cheque, whether for payment or security, does not absolve the drawer from penal liability under Section 138 of the Negotiable Instruments Act (N.I. Act).Issue 2: Premature presentation of chequeThe accused claimed that the cheque was issued tentatively with an understanding that it would be presented only after the settlement of accounts. The evidence presented by the accused, including endorsements and agreements, aimed to demonstrate that the cheque was to be presented post a specified date. However, the court found that the cheque was validly delivered to the complainant, and the liability reflected in the cheque was not proven to be incorrect or inflated. Therefore, the premature presentation argument was deemed insufficient to negate the liability under Section 138 of the N.I. Act.Issue 3: Interpretation of terms of agreementThe court examined the terms of the agreement between the parties, particularly focusing on documents like Ex.D.2 and Ex.D.7, which outlined the settlement of accounts and permission to present the cheque for encashment. The court emphasized that the terms were clear regarding the settlement date and the subsequent presentation of the cheque, ultimately leading to the rejection of the accused's contentions regarding unsettled accounts.Issue 4: Postal cover discrepancy regarding noticeA discrepancy arose concerning the postal cover related to the notice sent by the complainant. The accused argued that the cheque was presented despite the issuance of a notice, as indicated by Ex.D.6. However, the court noted that the postal cover marked at Ex.D.7 revealed that the notice was posted after the dishonor of the cheque, thereby dismissing the argument of presenting the cheque post-notice issuance.In conclusion, the High Court set aside the order of acquittal and convicted the accused under Section 138 of the N.I. Act, imposing a fine and compensation to be paid to the complainant.