2014 (8) TMI 1265 - HC - Indian Laws

Blank security cheque dispute: wrong cheque number in s.138 demand notice bars prosecution; acquittal upheld

The dominant issue was whether the complaint under s. 138 NI Act was maintainable despite a defective statutory demand notice. The HC held that an ... Dishonour of Cheque - cheque given to the complainant by the accused was for a legally enforceable debt or was simplicitor a security cheque - acquittal of offence u/s 138 of the Negotiable Instruments Act, 1881 - HELD THAT:- It may be true, that there was a typographical error in the said legal notice while typing out the cheque number but such typographical error if any, does not meet the compliance of the mandatory provisions of Section 138 of the Negotiable Instruments Act and the only course left for the complainant was to give a fresh legal notice to the accused which admittedly has not been done in the present case and hence it is safe to conclude that for want of statutory compliance of the mandatory provisions of Section 138 of the Act, the present complaint is not maintainable. The Trial Court appreciated the said aspect of the case and rightly came to an irresistible conclusion that the complainant has miserably failed to establish the accusations against the accused and thus accordingly while dismissing the complaint filed by him, acquitted the accused. From the evidence brought on record, it is amply clear that the blank cheque was handed over to the complainant as a security cheque and was not meant for enforcement of a debt. The object of Section 138 of the Act is to avoid malignant trade practice of indiscriminately issuing cheques without sufficient funds. The facts and circumstances of the present case of this nature cannot be construed and brought within the gamut attracting the provisions of Section 138 of the Act. The findings recorded by the Additional Chief Judicial Magistrate, Panipat upheld - appeal dismissed. 1. ISSUES PRESENTED AND CONSIDERED (i) Whether the statutory demand notice satisfied the mandatory requirements of Section 138 of the Negotiable Instruments Act, 1881 when it mentioned a cheque number different from the cheque allegedly dishonoured. (ii) Whether, on the evidence, the cheque was issued towards a legally enforceable debt (part payment of the asserted bill) or was merely a security cheque, thereby taking the case outside Section 138. 2. ISSUE-WISE DETAILED ANALYSIS Issue (i): Validity of statutory notice under Section 138 in light of incorrect cheque number Legal framework: The Court treated service of a legally compliant demand notice as a mandatory precondition for maintaining a complaint under Section 138. Interpretation and reasoning: The Court found that the cheque in dispute on record bore one number, but the legal notice issued by the complainant demanded payment with reference to a different cheque number. Even if the discrepancy could be characterised as a typographical error, the Court held that such an error did not satisfy the mandatory statutory compliance required under Section 138. The Court reasoned that the proper course would have been issuance of a fresh notice correctly referring to the dishonoured cheque, which admittedly was not done. Conclusion: For want of compliance with the mandatory notice requirement, the complaint was held not maintainable, supporting the acquittal. Issue (ii): Whether the cheque represented a legally enforceable debt or was a security cheque Interpretation and reasoning: The Court assessed the evidence regarding the purpose for which the cheque was delivered. It noted material discrepancies undermining the complainant's claim that the cheque was issued as part payment of a specific bill; the authenticity of the asserted bill was found 'under a cloud' due to discrepancies revealed in evidence. The Court also relied on the complainant's own admission that the cheque might have been issued against a previous transaction, which strengthened the defence that a blank cheque was taken at the inception of business as security. On the totality of the evidence, the Court concluded that the cheque was handed over as a blank security cheque and later filled and presented by the complainant, and was not meant for enforcement of an existing debt. Conclusion: The Court held that the cheque was a security cheque and the facts could not be construed to attract Section 138, thereby affirming the acquittal and dismissing the appeal.