Friday, 14 April 2017

Whether offence of cheating is made out if cheque is issued after closure of bank Account?

 There is apparent distinction between a situation wherein a person after issuing a cheque to another, closes that account, and a situation wherein a person after closing the account with the bank, manages to issue a cheque to another from that account he had already closed. In the former, apart from the fact that it may invite another offence, it would certainly be an offence under Section 138 of the N.I. Act.
15. The latter situation deals with two totally different situations. Firstly, the account is being closed by the bank on the demand of the account holder himself and thereafter the account holder manages to issue a cheque to another from that account he had already closed. Secondly, the bank on its own volition closes the account by itself, without the knowledge and consent of the account holder; say for example, by treating the account as a non-performing account, and without the knowledge that the account was closed by the bank, the account holder issues a cheque to another from that account. In the case covered by firstly as aforesaid, it would be the offence of cheating, since the cheque was intentionally issued to the payee to cheat him with the knowledge that there was no live account. In that case, it would not be an offence under Section 138 of the N.I. Act, since there was no live account at the time when the cheque is issued. In the case covered by secondly as aforesaid, it would not be an offence of cheating, since the cheque was issued bonafide by believing that the account remained alive; whereas, the dishonour of that cheque would invite an offence under Section 138 of the N.I. Act.
IN THE HIGH COURT OF KERALA AT ERNAKULAM
Crl. Appeal No. 141 of 2009
Decided On: 05.07.2016
 V. Muralidharan
Vs.
 V.A. Kumaran and Ors.

Hon'ble Judges/Coram:
B. Kemal Pasha, J.

Citation: 2017 CRLJ(NOC)69 Ker

1. (1) In the case of an offence under section 138 of the N.I. Act, is there any distinction between a situation wherein a person after issuing a cheque to another, closes that account, and a situation wherein a person after closing the account with the bank, manages to issue a cheque to another from that account he had already closed?
(2) In the case of an offence under section 138 of the N.I. Act, is there any distinction between a situation wherein a person after closing the account with the bank, manages to issue a cheque to another from that account he had already closed, and a situation wherein a person issues a cheque to another without the knowledge that the bank on its own volition had closed that account?
(3) What should be the extend of 'application of mind' by a Magistrate for invoking the power under section 156(3) Cr.P.C.?
2. The appellant is the complainant in C.C. No. 255 of 2002 of the Judicial First Class Magistrate's Court, Chavakkad, who has come in appeal by challenging the judgment of acquittal passed by the Additional Sessions Court (Adhoc-I), Thrissur, in Crl.Appeal No. 22 of 2006. The 1st respondent herein is the accused in C.C. No. 255 of 2002 of the Judicial First Class Magistrate's Court, Chavakkad. The said case was as a result of a private complaint filed by the appellant herein as complainant, against the 1st respondent herein as accused, alleging an offence under Section 420 IPC.
3. The trial court took cognizance of the offence under Section 420 IPC, conducted the trial and finally convicted the accused under Section 420 IPC and sentenced him thereunder, through judgment dated 31.12.2005. The same was taken up in appeal by the accused through Crl.Appeal No. 22 of 2006. The said Crl. Appeal was allowed of by the Additional Sessions Court (Adhoc-I), Thrissur, through judgment dated 07.06.2008, whereby acquitting the accused by finding that an offence under Section 420 IPC was not established and made out.
4. Heard the learned counsel for the appellant and the learned counsel for the 1st respondent.
5. The learned counsel for the appellant has pointed out that even though in the concluding portion of the complaint, the complainant had averred that the offence committed by the accused was one under Section 420 IPC, all the ingredients of an offence under Section 138 of the Negotiable Instruments Act were made out in detail in the complaint. According to the learned counsel for the appellant, on a perusal of the complaint and on conducting an inquiry, the trial court ought to have taken cognizance of the offence under Section 138 of the Negotiable Instruments Act instead of the offence under Section 420 IPC.
6. Per contra, the learned counsel for the 1st respondent/accused has argued that the complainant had knowingly invoked the provision under Section 420 IPC and had chosen to proceed against the accused for the offence under Section 420 IPC and therefore, presently he cannot be heard to say that he wanted to get the accused proceeded against for the offence under Section 138 of the Negotiable Instruments Act.
7. It seems that the complainant had pleaded all necessary averments and allegations to invite an offence under Section 138 of the Negotiable Instruments Act in the complaint. In the complaint he had averred that on 01.11.1997, the accused had borrowed an amount of ` 1,50,000/- from him and thereafter, when he demanded the amount, the accused, in discharge of that liability, issued Exhibit-P1 cheque on 10.01.2001. The said cheque when presented, returned dishonoured, with the dictum 'account not with us'. On getting back the cheque as dishonoured on 23.01.2001, the complainant caused to issue a demand notice within the meaning of Section 138(b) of the Negotiable Instruments Act on 24.01.2001. The accused received the notice on 25.01.2001. As the payment was not forthcoming within 15 days of the receipt of the notice, the cause of action had arisen. The complaint was filed on 22.02.2001, i.e., within the time as per Section 142 read with Section 138 of the Negotiable Instruments Act.
8. On getting the lawyer's notice, the accused had replied by taking up a contention that he had borrowed an amount of ` 10,000/- only and he had never borrowed an amount of `1,50,000/- from the complainant. It was also contented that the cheque was issued as a security at the time when the said amount of ` 10,000/- was borrowed.
9. On getting the complaint, the learned Magistrate had chosen to forward the same to the Police under Section 156(3) Cr.P.C. Initially, the Guruvayur Police registered Crime No. 86 of 2001 in the matter. On investigation, they had referred the matter and directed the complainant to approach the trial court, in case of any complaint. On getting the refer report, the complainant again approached the trial court and preferred a protest complaint on 09.08.2001. The trial court took cognizance of the offence under Section 420 IPC.
10. On the side of the complainant, PW-1 to PW-3 were examined and Exhibits P1 to P4 were marked. No defence evidence was adduced. The trial court found the accused guilty of the offence under Section 420 IPC, convicted him thereunder and sentenced him. In the appeal, the appellate court acquitted the accused.
11. This is a case in which the complainant had been pursuing his remedies before the trial court all along without any break. Even though he had filed the complaint originally on 22.02.2001, the court below instead of taking cognizance of the offence under Section 138 of the Negotiable Instruments Act, had chosen to forward the complaint under Section 156(3) Cr.P.C. to the Police, for investigation. The trial court has committed a grave error in not applying its mind on the facts contained in the complaint. The trial court had merely acted as a post office, by immediately forwarding the complaint to the Police. It has been pointed out that Exhibit-P1 cheque involved in the case was returned dishonoured with the dictum 'account not with us'. Probably because of that the complainant was misguided to misquote the provision of the offence committed as the one under Section 420 IPC in the complaint.
12. In NEPC Micon Ltd. and others v. Magma Leasing Ltd. [MANU/SC/1746/1999 : AIR 1999 SC 1952], it was held that even in a case, wherein the account is closed by the account holder, an offence under Section 138 of the Negotiable Instruments Act is legally sustainable. It was held therein that dishonouring the cheque on the ground that account is closed is the consequence of the act of the drawer rendering his account to a cipher. It was further held therein that,
"The expression "the amount of money standing to the credit of that account is insufficient to honour the cheque" is a genus of which the expression "that account being closed" is a specie. After issuing the cheque drawn on an account maintained, a person, if he closes 'that account' apart from the fact that it may amount to another offence, it would certainly be an offence under Section 138 as there was insufficient or no fund to honour the cheque in that 'account': Further, cheque is to be drawn by a person for payment of any amount of money due to him 'on an account maintained by him' with a banker and only on "that account" cheque should be drawn".
(Emphasis supplied)
13. It has become trite law that closure of an account at the instance of an account holder would be an eventuality after the entire amount in the account is withdrawn. It simply means that there was no amount in the credit of "that account" on the relevant date on which the cheque came up for collection.
14. There is apparent distinction between a situation wherein a person after issuing a cheque to another, closes that account, and a situation wherein a person after closing the account with the bank, manages to issue a cheque to another from that account he had already closed. In the former, apart from the fact that it may invite another offence, it would certainly be an offence under Section 138 of the N.I. Act.
15. The latter situation deals with two totally different situations. Firstly, the account is being closed by the bank on the demand of the account holder himself and thereafter the account holder manages to issue a cheque to another from that account he had already closed. Secondly, the bank on its own volition closes the account by itself, without the knowledge and consent of the account holder; say for example, by treating the account as a non-performing account, and without the knowledge that the account was closed by the bank, the account holder issues a cheque to another from that account. In the case covered by firstly as aforesaid, it would be the offence of cheating, since the cheque was intentionally issued to the payee to cheat him with the knowledge that there was no live account. In that case, it would not be an offence under Section 138 of the N.I. Act, since there was no live account at the time when the cheque is issued. In the case covered by secondly as aforesaid, it would not be an offence of cheating, since the cheque was issued bonafide by believing that the account remained alive; whereas, the dishonour of that cheque would invite an offence under Section 138 of the N.I. Act.
16. The trial court ought to have applied its mind to the facts narrated in the complaint. Had the complaint been at least properly perused, definitely, the trial court would have taken cognizance of the offence under Section 138 of the Negotiable Instruments Act, after recording the sworn statement of the complainant.
17. The learned Magistrate, by applying his mind ought to have considered whether the complaint is one mentioned as in Section 2(d) Cr.P.C. If it was found to be so, then the learned Magistrate ought to have considered whether it was a complaint of facts which constitute an offence. If it came to light that it was a complaint of facts which constitute an offence under Section 138 of the N.I. Act, the learned Magistrate ought to have proceeded to Chapter XV of the Code. In such case he ought not to have taken recourse to Section 156(3) Cr.P.C.
18. It is true that the Police referred the matter and consequently, a protest complaint was filed by the complainant before the trial court. At the same time, in this particular case, the second complaint could also be considered as a continuation of the original complaint. Immediately on getting the refer report, without any delay, the complainant had approached the trial court again and preferred the protest complaint.
19. It is true that this is a case wherein the account maintained by the 1st respondent was closed by the Bankers themselves, without the knowledge and consent of the account holder, the accused. When the account was closed without the knowledge and consent of the account holder, definitely, an offence under Section 138 of the Negotiable Instruments Act can be attracted. Even if the accused had issued the cheque and thereafter closed the account, it could be treated that the account holder did not want to continue with the account and to keep any money in his account so that he got back the entire amount from his account and closed the account. In either case, the offence under Section 138 of the Negotiable Instruments Act could be attracted.
20. From the records and from hearing either side, it has come out that illegality had crept in the matter right from the point of time at which the trial court had decided to forward the complaint under Section 156(3) Cr.P.C. The trial court ought not to have forwarded the complaint to the Police for investigation for an offence under Section 420 IPC, in the light of the decision in NEPC Micon Ltd.'s case (Supra). When there were specific allegations to invite the offence under Section 138 of the Negotiable Instruments Act and when there were all statutory compliance in it, the trial court ought to have applied its mind and taken cognizance of the offence under Section 138 of the Negotiable Instruments Act. Misquoting of a provision of law or an offence is not at all fatal to the complaint. It can never militate against a complainant. Of course, due to want of proper legal acumen, the complainant ought to have decided to invite the offence under Section 420 IPC to the notice of the trial court. The trial court was not bound to accept such an offence. It was the duty of the trial court to look into the matter, apply its mind and find out the actual offence, if any involved.
21. Section 2(d) Cr.P.C. says that a complaint means any allegation made orally or in writing to a Magistrate, with a view to his taking action under this Code, that some person, whether known or unknown, has committed an offence. For forwarding a complaint under Section 156(3) Cr.P.C. for investigation, the concerned Magistrate should apply his mind within the meaning of Section 190(1)(a) Cr.P.C. As per 190(1)(a) Cr.P.C. any Magistrate of the first class, may take cognizance of any offence (a) upon receiving a complaint of facts which constitute such offence. The same is required for taking cognizance of the offence. As per Section 156(3) Cr.P.C., any Magistrate empowered under Section 190 may order such an investigation as above-mentioned.
22. It goes without saying that only a Magistrate, who is empowered to take cognizance on a complaint, can forward the complaint for investigation under Section 156(3) Cr.P.C. The complaint within the meaning of Section 190(1)(a) Cr.P.C. as well as Section 156(3) Cr.P.C. is 'a complaint of facts which constitutes such offence.' Therefore, a mere complaint within the meaning of Section 2(d) Cr.P.C. will not serve the purpose. Such complaint should be a complaint of facts which constitute such offence. That is the reason why it should be held that the learned Magistrate ought to have applied his mind to find out whether it is a 'complaint of facts which constitute such offence'. The application of mind by the Magistrate is confined to the said aspect, when instead of taking cognizance, he is forwarding the complaint under Section 156(3) Cr.P.C. Here, in this particular case, the learned Magistrate had failed to exercise the said powers, which ought to have been exercised by him on getting the complaint.
23. If this Court permits to perpetuate the illegality once again by holding that the complaint was not maintainable for an offence under Section 420 IPC and therefore, the accused has not committed any offence, it would be a serious heartburn as far as the complainant is concerned, and he would be left without any remedy. Therefore, the mischief has to be undone.
24. This Court is of the view that the mischief can be undone by directing the trial court to have recourse to the provisions under Sections 190(1)(a) and 200 Cr.P.C., and to proceed with in accordance with law, and take cognizance of the offence under Section 138 of the Negotiable Instruments Act on the original complaint dated 22.02.2001, in case its ingredients are made out. The entire proceedings adopted by the learned Magistrate on the complaint, and on the protest complaint, as well as the judgments passed by the trial court and the appellate court are liable to be set aside.
In the result, this Crl.Appeal is allowed and the impugned judgment as well as the judgment passed by the trial court, are set aside. The private complaint dated 22.02.2001 taken on file by the trial court, as Crl.M.P. No. 2290 of 2001 is restored. The learned Magistrate is directed to have recourse to the provisions under Sections 190(1)(a) and 200 Cr.P.C., and to proceed with in accordance with law, and take cognizance of the offence under Section 138 of the Negotiable Instruments Act on the original complaint dated 22.02.2001, in case its ingredients are made out. The court below shall grant sufficient opportunity to the complainant as well as the accused in the matter. This Court has not made any opinion regarding the merits of the case. The learned Magistrate shall consider whether on merits, an offence under Section 138 of the Negotiable Instruments Act will lie or not.
Parties shall appear before the Judicial First Class Magistrate's Court, Chavakkad on 26.07.2016.
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