TaxTMI 
TaxTMI 
2021 (6) TMI 222
X X X X Extracts X X X X
X X X X Extracts X X X X
....Ex.P2), drawn on Karur Vysya Bank, Main Branch in favour of the complainant and he assured her that the cheque would be honoured on presentation. The complainant believing his words, presented the cheque through her banker viz. Indian Overseas Bank, Namakkal on 24.09.2007, but the said cheque was returned by the banker of the accused with an endorsement "Account Closed" vide bank return memo dated 25.09.2007 (Ex.P3) and the same was intimated to the complainant through her banker on 26.09.2007 (Ex.P4). Therefore, the complainant issued a statutory demand notice dated 05.01.2007 by registered post (Ex.P5) but the accused even after getting the intimation from the postal department, refused to receive the legal notice sent by the complainant and the said notice (Ex.P6) was returned to her as unclaimed on 05.10.2007. The accused despite receiving the intimation from the postal department, refused to receive the same and the accused knowing well that his bank account has been closed had issued a cheque to the complainant with an intention to cheat her. The complainant has also filed a suit and the plaint dated 19.01.2009 has been marked as Ex.P1. Ex.P7 to Ex.P17 are the Income tax stat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he offence by paying twice the cheque amount which may be paid as compensation to the complainant u/s.357 Cr.P.C. along with Rs. 9,000/- towards cost in lieu of the imprisonment. He would further submit that the complainant even as per her own admission is a money lender. The cheque was issued by the petitioner as a security to the loan taken by the petitioner's brother in law from the complainant. He would submit that the complainant has also initiated a suit for recovery of the amount based on the promissory note in O.S.No.15 of 2019 on the file of the Sub Court, Namakkal. He would further submit that the petitioner is ready with demand draft for Rs. 7,50,000/- in total out of which, a sum of Rs. 7,41,000/- is paid towards twice the cheque amount and Rs. 9,000/- can be paid towards cost to the complainant. He would further reiterate that the petitioner is a School Teacher and that the conviction would carry a stigma of disqualification to his employment and thereby, would pray that the petitioner may be let off on admonition, invoking relevant provisions of the Probation of Offenders Act. 9.Per contra, learned counsel for the respondent / complainant would submit that the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... and thereafter, the respondent/complainant had issued a statutory notice and it had been returned. After complying with the legal formalities, the respondent / complainant had filed a complaint which had been taken up in STC No.348 of 2009. The trial Court had found the petitioner/accused guilty and convicted him under Section 138 of Negotiable Instruments Act and sentenced him to undergo Simple Imprisonment for a period of one year against the said conviction and sentence, the petitioner/accused had filed an appeal in C.A.No.73 of 2010 before the Appellate Court and the Appellate Court had also dismissed the appeal and confirmed the Judgment and order of the trial Court. Both the Courts have not ordered for payment of compensation or fine. The respondent/complainant has also not filed any appeal against non imposition of fine and non awarding of compensation. Further, the respondent/complainant admittedly has initiated O.S.No.15 of 2019 for recovery of money based on the pronote before the Sub Court, Namakkal and had obtained a decree. Now before this Court, the petitioner/accused has offered to pay twice the cheque amount as compensation in lieu of the sentence of imprisonment f....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t 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. Explanation.-For the purposes of this Section, "debt or other liability" means a legally enforceable debt or other liability." 40. Section 138 contains within it the ingredients of the offence made out. The deeming provision is important in that the legislature is cognizant of the fact that what is otherwise a civil liability is now also deemed to be an offence, since this liability is made punishable by law. It is important to note that the transaction spoken of is a commercial transaction between two parties which involves payment of money for a debt or liability. The explanation to Section 138 makes it clear that such debt or other liability means a legally enforceable debt or other liability. Thus, a debt or other liability barred by the law of limitation would be outside the scope of Section 138. This, coupled with fine that may extend to twice the amount of the cheque that is payable as compensation to the aggrieved party to cover both the amount of the cheque and the interest and costs thereupon, would show that it ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as a Section 138 proceeding against a corporate body would continue after initiation of the corporate insolvency resolution process, yet, the same proceeding against a firm, being interdicted by Sections 96 and 101, would not so continue. This startling result is one of the consequences of accepting the argument of Shri Mehta, which again leads to the position that inelegant drafting alone cannot lead to such startling results, the object of Sections 14 and 96 and 101 being the same, namely, to see that during the insolvency resolution process for corporate persons/individuals and firms, the corporate body/firm/individual should be given breathing space to recuperate for a successful resolution of its debts - in the case of a corporate debtor, through a new management coming in; and in the case of individuals and firms, through resolution plans which are accepted by a committee of creditors, by which the debtor is given breathing space in which to pay back his/its debts, which would result in creditors getting more than they would in a bankruptcy proceeding against an individual or a firm. 43. Section 142 is important and is set out hereunder: "142. Cognizance of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ecover money. Chapter XIII of the CrPC, consisting of Sections 177 to 189, is a chapter dealing with the jurisdiction of the criminal courts in inquiries and trials. When the jurisdiction of a criminal court is spoken of by these Sections, the expression "cause of action" is conspicuous by its absence. 45. By an Amendment Act of 2002, various other sections were added to this Chapter. Thus, under Section 143, it is lawful for a Magistrate to pass a sentence of imprisonment for a term not exceeding one year and a fine exceeding INR 5,000/- summarily. This provision is again an important pointer to the fact that the payment of compensation is at the heart of the provision in that a fine exceeding INR 5000/-, the sky being the limit, can be imposed by way of a summary trial which, after application of Section 357 of the CrPC, results in compensating the victim up to twice the amount of the bounced cheque. Under Section 144, the mode of service of summons is done as in civil cases, eschewing the mode contained in Sections 62 to 64 of the CrPC. Likewise, under Section 145, evidence is to be given by the complainant on affidavit, as it is given in civil proceedings, notwithstand....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on 138, the Appellate Court may order the appellant to deposit such sum which shall be a minimum of twenty per cent of the fine or compensation awarded by the trial Court: Provided that the amount payable under this sub-section shall be in addition to any interim compensation paid by the appellant under Section 143-A. (2) The amount referred to in sub-section (1) shall be deposited within sixty days from the date of the order, or within such further period not exceeding thirty days as may be directed by the Court on sufficient cause being shown by the appellant. (3) The Appellate Court may direct the release of the amount deposited by the appellant to the complainant at any time during the pendency of the appeal: Provided that if the appellant is acquitted, the Court shall direct the complainant to repay to the appellant the amount so released, with interest at the bank rate as published by the Reserve Bank of India, prevalent at the beginning of the relevant financial year, within sixty days from the date of the order, or within such further period not exceeding thirty days as may be directed by the Court on sufficient cause being shown by the complainan....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oceeding, in our judgment, depends not upon the nature of the tribunal which is invested with authority to grant relief, but upon the nature of the right violated and the appropriate relief which may be claimed. A civil proceeding is, therefore, one in which a person seeks to enforce by appropriate relief the alleged infringement of his civil rights against another person or the State, and which if the claim is proved would result in the declaration express or implied of the right claimed and relief such as payment of debt, damages, compensation, delivery of specific property, enforcement of personal rights, determination of status etc." (at pages 196-197) "A large number of cases have arisen before the High Courts in India in which conflicting views about the meaning of the expression "civil proceeding" were pressed. In some cases it was held that the expression "civil proceeding" excludes a proceeding instituted in the High Court for the issue of a writ whatever may be the nature of the right infringed and the relief claimed in other cases it has been held that a proceeding resulting from an application for a writ under Article 226 of the Constitution may in certain cases be deem....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oaplast (P) Ltd. v. Chico Ursula D'Souza, (2003) 3 SCC 232, the object sought to be achieved by Section 138 is succinctly set out in paragraph 3 thereof: "3. The learned counsel for the appellant has submitted that mere writing of letter to the bank stopping payment of the post-dated cheques does not take the case out of the purview of the Act. He has invited our attention to the object behind the provision contained in Chapter XVII of the Act. For appreciating the issue involved in the present case, it is necessary to refer to the object behind introduction of Chapter XVII containing Sections 138 to 142. This chapter was introduced in the Act by the Banking, Public Financial Institutions and Negotiable Instruments Laws (Amendment) Act, 1988 (Act 66 of 1988) with the object of inculcating faith in the efficacy of banking operations and giving credibility to negotiable instruments in business transactions and in order to promote efficacy of banking operations. With the policy of liberalisation adopted by the country which brought about increase in international trade and commerce, it became necessary to inculcate faith in banking. World trade is carried through banking oper....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Bank Ltd., (2008) 2 SCC 305, a Division Bench of this Court referred to the object of Section 138 thus: "16. Section 138 of the Act was inserted by the Banking, Public Financial Institutions and Negotiable Instruments Law (Amendment) Act, 1988 (Act 66 of 1988) to regulate financial promises in growing business, trade, commerce and industrial activities of the country and the strict liability to promote greater vigilance in financial matters. The incorporation of the provision is designed to safeguard the faith of the creditor in the drawer of the cheque, which is essential to the economic life of a developing country like India. The provision has been introduced with a view to curb cases of issuing cheques indiscriminately by making stringent provisions and safeguarding interest of creditors. 17. As observed by this Court in Electronics Trade & Technology Development Corpn. Ltd. v. Indian Technologists & Engineers (Electronics) (P) Ltd. [(1996) 2 SCC 739 : 1996 SCC (Cri) 454] the object of bringing Section 138 in the statute book is to inculcate faith in the efficacy of banking operations and credibility in transacting business on negotiable instruments. The provi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....unding of offences prescribed under the same Act, thereby serving as an exception to the general rule incorporated in sub-section (9) of Section 320 CrPC which states that "No offence shall be compounded except as provided by this Section". A bare reading of this provision would lead us to the inference that offences punishable under laws other than the Penal Code also cannot be compounded. However, since Section 147 was inserted by way of an amendment to a special law, the same will override the effect of Section 320(9) CrPC, especially keeping in mind that Section 147 carries a non obstante clause." xxx xxx xxx "15. The compounding of the offence at later stages of litigation in cheque bouncing cases has also been held to be permissible in a recent decision of this Court, reported as K.M Ibrahim v. K.P Mohammed [(2010) 1 SCC 798 : (2010) 1 SCC (Cri) 921 : (2009) 14 Scale 262] wherein Kabir, J. has noted (at SCC p. 802, paras 13-14): "13. As far as the non obstante clause included in Section 147 of the 1881 Act is concerned, the 1881 Act being a special statute, the provisions of Section 147 will have an overriding effect over the provisions of the Code relating to compou....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ttled' before the final judgment on one side and the cases which proceeded to judgment and conviction on the other, we will find that the bulk was settled and only a miniscule number continued." 18. It is quite obvious that with respect to the offence of dishonour of cheques, it is the compensatory aspect of the remedy which should be given priority over the punitive aspect. ..." (emphasis supplied) 52. This judgment was followed by a Division Bench of this Court in JIK Industries Ltd. v. Amarlal V. Jumani, (2012) 3 SCC 255, stating: "68. It is clear from a perusal of the aforesaid Statement of Objects and Reasons that offence under the NI Act, which was previously non-compoundable in view of Section 320 subsection (9) of the Code has now become compoundable. That does not mean that the effect of Section 147 is to obliterate all statutory provisions of Section 320 of the Code relating to the mode and manner of compounding of an offence. Section 147 will only override Section 320(9) of the Code insofar as offence under Section 147 of the NI Act is concerned. This is also the ratio in Damodar [(2010) 5 SCC 663 : (2010) 2 SCC (Civ) 520 : (2010) 2 SC....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ating the offences which were compoundable but the said section was only made applicable to compounding of offences defined and permissible under the Penal code. The present Code, which repealed the 1898 Code, contains Section 320 containing comprehensive provisions for compounding. 82. A perusal of Section 320 makes it clear that the provisions contained in Section 320 and the various sub- sections is a code by itself relating to compounding of offence. It provides for the various parameters and procedures and guidelines in the matter of compounding. If this Court upholds the contention of the appellant that as a result of incorporation of Section 147 in the NI Act, the entire gamut of procedure of Section 320 of the Code are made inapplicable to compounding of an offence under the NI Act, in that case the compounding of offence under the NI Act will be left totally unguided or uncontrolled. Such an interpretation apart from being an absurd or unreasonable one will also be contrary to the provisions of Section 4(2) of the Code, which has been discussed above. There is no other statutory procedure for compounding of offence under the NI Act. Therefore, Section 147 of the N....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t: (i) The provision for levy of fine which is linked to the cheque amount and may extend to twice the amount of the cheque (Section 138) thereby rendering Section 357(3) virtually infructuous insofar as cheque dishonour cases are concerned. (ii) The provision enabling a First Class Magistrate to levy fine exceeding Rs. 5000 (Section 143) notwithstanding the ceiling to the fine, as Rs. 5000 imposed by Section 29(2) of the Code. (iii) The provision relating to mode of service of summons (Section 144) as contrasted from the mode prescribed for criminal cases in Section 62 of the Code. (iv) The provision for taking evidence of the complainant by affidavit (Section 145) which is more prevalent in civil proceedings, as contrasted from the procedure for recording evidence in the Code. (v.) The provision making all offences punishable under Section 138 of the Act compoundable. 17. The apparent intention is to ensure that not only the offender is punished, but also ensure that the complainant invariably receives the amount of the cheque by way of compensation under Section 357(1)(b) of the Code. Though a complaint under Section 138 of t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....and expectations for the enactments. What is palpably clear is that Parliament was aware that they were converting civil liability into criminal content inter alia by the deeming fiction of culpability in terms of the pandect comprising Section 138 and the succeeding sections, which severely curtail defences to prosecution. Parliament was also aware that the offence of cheating, etc. already envisaged in IPC, continued to be available." xxx xxx xxx "17. The marginal note of Section 138 of the NI Act explicitly defines the offence as being the dishonour of cheques for insufficiency, etc. of funds in the account. Of course, the headings, captions or opening words of a piece of legislation are normally not strictly or comprehensively determinative of the sweep of the actual Section itself, but it does presage its intendment. See Frick India Ltd. v. Union of India [(1990) 1 SCC 400 : 1990 SCC (Tax) 185] and Forage & Co. v. Municipal Corpn. of Greater Bombay [(1999) 8 SCC 577]. Accordingly, unless the provisions of the section clearly point to the contrary, the offence is concerned with the dishonour of a cheque; and in the conundrum before us the body of this provisio....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Instruments Act, 1881, is not merely penal in nature but is to maintain the efficiency and value of a negotiable instrument by making the accused honour the negotiable instrument and paying the amount for which the instrument had been executed. 8. The object of bringing Sections 138 to 142 of the Negotiable Instruments Act on statute appears to be to inculcate faith in the efficacy of banking operations and credibility in transacting business of negotiable instruments. Despite several remedies, Section 138 of the Act is intended to prevent dishonesty on the part of the drawer of negotiable instrument to draw a cheque without sufficient funds in his account maintained by him in a bank and induces the payee or holder in due course to act upon it. Therefore, once a cheque is drawn by a person of an account maintained by him for payment of any amount or discharge of liability or debt or is returned by a bank with endorsement like (i) refer to drawer, (ii) exceeds arrangements, and (iii) instruction for stop payment and like other usual endorsement, it amounts to dishonour within the meaning of Section 138 of the Act. Therefore, even after issuance of notice if the payee or ho....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nna Nayak v. Ryot Sewa Sahakari Bank Ltd., (2008) 2 SCC 305 : (2008) 1 SCC (Civ) 542 : (2008) 1 SCC (Cri) 351] The offence was also described as "regulatory offence". The burden of proof was on the accused in view of presumption under Section 139 and the standard of proof was of "preponderance of probabilities". [Rangappa v. Sri Mohan, (2010) 11 SCC 441, p. 454, para 28 : (2010) 4 SCC (Civ) 477 : (2011) 1 SCC (Cri) 184] The object of the provision was described as both punitive as well as compensatory. The intention of the provision was to ensure that the complainant received the amount of cheque by way of compensation. Though proceedings under Section 138 could not be treated as civil suits for recovery, the scheme of the provision, providing for punishment with imprisonment or with fine which could extend to twice the amount of the cheque or to both, made the intention of law clear. The complainant could be given not only the cheque amount but double the amount so as to cover interest and costs. Section 357(1)(b) CrPC provides for payment of compensation for the loss caused by the offence out of the fine. [R. Vijayan v. Baby, (2012) 1 SCC 260, p. 264, para 9 : (2012) 1 SCC (Civ) ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ison sentence of more than one year may not be required in all cases. 18.5 Since evidence of the complaint can be given on affidavit, subject to the court summoning the person giving affidavit and examining him and the bank's slip being prima facie evidence of the dishonour of cheque, it is unnecessary for the Magistrate to record any further preliminary evidence. Such affidavit evidence can be read as evidence at all stages of trial or other proceedings. The manner of examination of the person giving affidavit can be as per Section 264 CrPC. The scheme is to follow summary procedure except where exercise of power under second proviso to Section 143 becomes necessary, where sentence of one year may have to be awarded and compensation under Section 357(3) is considered inadequate, having regard to the amount of the cheque, the financial capacity and the conduct of the accused or any other circumstances."2 (emphasis supplied) 61. In a recent judgment in M. Abbas Haji v. T.N Channakeshava, (2019) 9 SCC 606, this Court held: "6. It is urged before us that the High Court overstepped the limits which the appellate court is bound by criminal cases setting as....