AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2004 (6) TMI 644
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....uot;the accused" whereas respondent No. 2 is referred to as "the complainant" hereinafter in this judgment. 3. As per the averments made in the petition, the accused came in contact with the complainant and therefore as and when the accused was in need of money he used to borrow money from the complainant. The transaction started between both of them since 1992-93 and the last transaction between them took place in the year 1998. In that connection the accused was asked to issue blank cheques for the purpose of surety and security. The accused was having his account Nos. 201534 and 3546583 with Bank of Baroda. The accused accordingly issued blank cheques in favour of the complainant as per the demands made by him. It was agreed between them that the complainant shall not deposit the said cheques without prior intimation to the accused. It is pleaded by the accused that according to the complainant the accused was required to pay Rs. 2,70,000/- towards the outstanding dues including interest. Therefore, in that connection, the accused had approached the complainant to settle his account on 15.8.2002 and had accepted his liability, though according to the accused all ....
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....ble on 2.4.2004. 5. In response to the service of notice, Mr. Vipul M. Pancholi, learned APP has appeared for respondent No. 1 State and Mr. GM Amin, learned advocate has filed his appearance on behalf of respondent No. 2- complainant. 6. Mr. Mahendra Patel, learned advocate of the petitioner, strenuously contended that after closure of the account maintained by the accused with his banker the cheques were drawn and issued to the complainant and therefore as on the date of issuance of cheques no account was maintained by the accused with his banker and hence offence in terms of Section 138 of the Act is not made out as a result of which the complaint deserves to be quashed and accordingly it is urged that the complaint may be quashed. 7. Besides this, he has also raised several other contentions which do not deserve consideration and, therefore, they are not referred to in this judgment. 8. In support of the aforesaid contention, Mr. Mahendra Patel, learned advocate of the petitioner, has placed heavy reliance on the decision of learned Single Judge of this Court in the case of Urban Co-operative Credit Society, Borsad v. State of Gujarat and another, 2003 (3) GLR 2207. 9. In ....
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....ated with a view to encourage the culture of use of cheques and enhancing the credibility of the instrument. 13. The Supreme Court has noticed the object of section 138 of the Act in Goaplast's case (supra) and has held in para 3 of the reported decision as under: "...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 operations rather than cash transactions. The amendment was intended to create an atmosphere of faith and reliance on banking system. Therefore, while considering the question of ap....
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....ing operation. The negotiable instrument should inspire faith in commercial transaction. This faith would stand destroyed if parties to the negotiable instrument are permitted to play fraud. It is common knowledge that people are using the instrument in commercial transaction postdated cheques and therefore provisions of section 138 of the Act should be interpreted in a manner which discourages people from not honouring the commitment by way of payment through cheque. 16. The word "account" which has been mentioned in the opening words of Section 138 of the Act only relates to the fund and not to the cheque and the Section only recognises a facility of discharging a debt by issuing a cheque. An account holder alone will be able to utilise that facility, if the drawer issues a cheque from a cheque book which was issued to him by the bank on the strength of the account which he had opened then it can definitely be said that the drawer perpetrated an evil design by closing the account and issuing the cheque. The Section takes care of all dishonest acts likely to be committed by the drawer of the cheque as the main purpose of the Section being to bring in the acceptability t....
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....ion Act. At any stretch of reasoning, it cannot be said that such misuser of cheque is not liable under Section 138 of the Negotiable Instruments Act. To hold otherwise will render the whole object of the legislation infructuous". 18. Viewed in the light of the object with which Section 138 of the Act was introduced by legislature, there is no manner of doubt that the phrase "any cheque drawn by a person on an account by him with banker" will have to be construed to mean that "any cheque drawn by a person on an account maintained and closed by him". The words "on an account maintained" do not suggest that cheque must be drawn on an account which is in operation. The words "account maintained" would include "an account maintained and closed in past". 19. In this connection, it would be appropriate to refer to the observations made by Lord Denning, L.J., on the interpretation of statutes, which has been reproduced by the Supreme Court in the case of N.K. Jain v. C.K. Shah, reported in AIR 1991 SC 1289, to fully understand the implication of Section 138 of the Act, as interpreted by the superior Courts of jurisdiction, which rea....
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....icient to honour the cheque" is a genus of which the expression "that account being closed" is specie. The Supreme Court has held for the guidelines of the Courts in the country that even though Section 138 of the Act is a penal statute, it is the duty of the Court to interpret it consistent with the legislative intent and purpose so as to suppress mischief and advance remedy. 21. The above referred to principles have been laid down by the Supreme Court while examining the effect of closure of account after issuance of cheque. The principle laid down by the Supreme Court would apply with all force to a case where the account is first closed and thereafter cheque is issued. The interpretation sought to be placed by this Court is not only consistent with the legislature intent and purpose but suppress mischief and advance the remedy. 22. What is important to notice is that dishonour of a cheque on the ground other than those enumerated in section 138 of the Act can be culpable where dishonest intention can be presumed. The object for enacting Section 138 of the Act makes it clear that the intention of the parliament was that honest drawer should not suffer at the mac....
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...., that the legislature has opted for a non-nonsense situation. The possibility has not been overlooked whereby an account may inadvertently be overdrawn or a dishonour may be for technical reasons or where a genuine mistake has occurred and the grace period provided for by the Legislature after service of notice on the drawer is in order to afford an opportunity for the drawer to rectify these. Unfortunately, even when the dishonour has taken place due to the dishonesty of the depositor, the drawer is still given a last chance to act otherwise. Consequently, the reasons for dishonour even if they be very valid as was sought to be pointed out in this case, should not and cannot be taken into account by a Magistrate when such complaint is presented". The Division Bench, referring to the word 'etc.' appearing in the marginal note to Section 138 of the Act came to the conclusion that 'the overriding clause in section 138 revolved around the concept of inability to obtain payment, the manifold situations giving rise to that result being secondary. The Bench critically commenting the decision of the single Judge to the effect that Section 138 would not be applicable to ....
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....ken the view that when the bank account is closed prior to issuance of cheque to the complainant, the requirement occurring in Section 138 of the Act in words "any cheque drawn on an account maintained" is not satisfied and no offence is committed. However, on the close scrutiny of the said decision, it becomes manifest that the learned Single Judge had no occasion to consider the object and reason which prompted the legislature to introduce Section 138 in the statute and before distinguishing the law laid down by the Supreme Court in NEPC Micon Ltd. (supra) has not noticed and ignored pertinent observation made by the Supreme Court in paragraph 7 of the reported decision. The relevant portion of paragraph 7 which is ignored by the learned Single Judge is as under: "Further, the offence will be complete only when the conditions in the provisos (a), (b) and (c) are complied with. Hence, the question is, in a case where cheque is returned by the bank unpaid on the ground that the 'account is closed', would it mean that cheque is returned as unpaid on the ground that 'the amount of money standing to the credit of that account is insufficient to honour the ....