If the drawer intentionally tampers the cheque or issues the cheque with difference in signature etc., the cheques will be definitely returned. Even after service of statutory notice, if the amounts involved in the cheque are not paid by the drawer of the cheque, then his intentions are prima facie clear, to the effect that he would be tampering with the cheques only with an oblique motive. If, in such case, the person in whose favour the cheques are issued is not allowed to prosecute the matter under Section 138 of the Negotiable Instruments Act, the very purpose of enacting Section 138 of the N. I. Act would be frustrated. The drawer of the cheque will have to take abundant precaution while issuing the cheques so that the cheques should be honoured and contractual obligations are fulfilled. In case, if the drawer issues cheques as in the case on hand, he will be doing so in circuitous manner in order to save his skin, only to take advantage of the absence of specific words under Section 138 of the Negotiable Instruments Act.
Karnataka High Court
Dinesh Harakchand Sankla vs Kurlon Ltd. And Ors. on 27 September, 2005
Equivalent citations: IV (2006) BC 91, 2006 134 CompCas 295 Kar
1. Petitioner being accused No. 2 in C. C. Nos. 26054/2004, 26072/2004, 26053/2004, 26056/2004, 26055/2004, 26073/2004, and 26071/2004, pending on the file of 14th Addl. Chief Metropolitan Magistrate, Bangalore, has sought for quashing the said proceedings.
2. Based on the complaints lodged by respondent herein against the petitioner and two others alleging offence under Section 138 of Negotiable Instruments Act, the present proceedings are initiated. The complaints disclose that the cheques issued by the accused for repayment of the legally recoverable debts due to the complainant's company, were, on presentation, returned by the concerned Bank with an endorsement of "Alteration in date and drawer's signature differs". The statutory notices issued by the complainant to the petitioner herein returned with an endorsement of "not claimed". As the amounts involved in the cheques were not paid by the accused, complaints came to be filed. The principle contentions raised by the learned Counsel for the petitioner are as under :
(a) Petitioner is not the partner of the 1st accused firm and that he is not involved in day-to-day affairs of the firm.
(b) As the cheques are returned with an endorsement of "Alteration in date and drawer's signature differs", the petitioner cannot be prosecuted for the offence under Section 138 of the Negotiable Instruments Act.
3. Elaborating his contentions, Sri V. P. Shintre, learned Counsel appearing on behalf of the petitioner contends that, no where in the complaints and in the sworn statements it is disclosed that the petitioner is a partner and that he is actively involved in day-to-day affairs of the partnership firm.
The said contention of the learned Counsel for the petitioner cannot be accepted, inasmuch as, Paragraph 4 of the complaint discloses that the petitioner herein is the partner of the 1st accused-firm. The complaint further discloses that the accused had purchased materials from the complainant's company, and towards clearance of part payment of the outstanding balance amount, the accused had issued Account Payee cheques. Thus, the complaint prima facie discloses that the petitioner is a partner and is involved in day-to-day affairs of the business of the firm. Added to it, the question as to whether the petitioner is actively involved in the affairs of the firm or not, is a pure question of fact, which cannot be decided in this petition filed under Section 482 of Cr.P.C. The said question shall have to be decided based on the material to be collected during the course of the trial. The aforesaid view of mine is supported by the judgment of the Apex Court in the case of S.V. Muzumdar v. Gujarat State Fertilizer Co., Ltd., reported in 2005 SCR (Cri) 567, wherein it is observed thus :
Para 8 : We find that the prayers before the Courts below essentially were to drop the proceedings on the ground that the allegations would not constitute a foundation for action in terms of Section 141 of the Act. These questions have to be adjudicated at the trial. Whether a person is in charge of or is responsible to the company for conduct of business is to be adjudicated on the basis of materials to be placed by the parties. Sub-section (2) of Section 141 is a deeming provision which as noted supra operates in certain specified circumstances. Whether the requirements for the application of the deeming provision exist or not is again a matter for adjudication during trial. Similarly, whether the allegations contained are sufficient to attract culpability is a matter for adjudication at the trial.
Para 9. Under Scheme of the Act, if the person committing an offence under Section 138 of the Act is a company; by application of Section 141 it is deemed that every person who is in charge of and responsible to company for conduct of the business of the company as well as the company are guilty of the offence. A person who proves that the offence was committed without his knowledge or that he had exercised all due diligence is exempted from becoming liable by operation of the provision to Sub-section (1). The burden in this regard has to be discharged by the accused.
In view of prima facie material on record which shows that the petitioner is the partner of the 1st accused firm and is involved in day to day affairs of the company, and in view of the dictum laid down by the Apex Court in the case cited supra, the first contention of the petitioner must fall.
4. To decide the second contention of the petitioner, it is beneficial to refer to certain observations made by the Apex Court in the case of Nepc Micon Ltd. and Bothers v. Magma Leasing Ltd. (AIR1999 SC 952), wherein it is observed in paragraph 15 thus:
Para 15: In view of the aforesaid discussion we are of the opinion that even though Section 138 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 the mischief and advance the remedy. As stated above, Section 138 of the Act has created a contractual breach as an offence and the legislative purpose is to promote efficacy of banking and of ensuring that in commercial or contractual transaction cheques are not dishonoured and credibility in transacting business through cheque is maintained. The above interpretation would be in accordance with the principle of interpretation quoted above brust away the cobweb vanish, show the transactions in their true light (Wilmot C.J.) or (by Maxwell) "to carry out effectively the breach of the statute, it must be so construed as to defeat all attempts to do, or avoid doing, to an indirect or circuitous manner that it has prohibited." Hence, when the cheque is returned by a bank with an endorsement 'account closed', it would amount to returning the cheque unpaid because "the amount of money standing to the credit of that account is insufficient to honour the cheque" as envisaged in Section 138 of the Act.
5. It is clear from the said observations made by the Apex Court that it is the duty of the Court to interpret Section 138 of the Negotiable Instruments Act consistent with the legislative intent and purpose, so as to suppress the mischief and advance the remedy.
It is no doubt true in this case that various cheques involved in these matters are returned with an endorsement of "alternation in date and drawer's signature differs". The original dates mentioned in all the cheques involved in these are scored off and fresh dates are mentioned in the cheques. The signatures of the person who has issued the cheques are also found near the corrections so made. It is not uncommon to score out the date and to put fresh date by the person who issues the cheque in the normal course of business. Only thing that is required to be done is to endorse his signature on the alterations so made in the date. Admittedly, in this case, though the dates are altered, the said alterations are endorsed by the signature of the drawer of the cheque, beneath the said alterations.
6. The Bank has also returned the cheques on the ground that the drawer's signatures found on the cheques differ. It is, but, natural for the bank to return the cheques if the drawer's signature differs from the original signature found in the bank records. It is known only to the drawer as to why he made such signatures that too on series of cheques, which differ from the signature found in the original records of the bank. The reason is obvious. In this context, the contention of the learned Counsel for the respondent that intentionally the drawer must have changed his signature with the sole intention that the cheques should not be honoured, cannot be lightly brushed aside.
7. Learned Counsel for the petitioner relied upon various judgments in support of his contention that if the cheques are returned by the bank with an endorsement of "alteration in date and drawer's signature differs", the same will not come within the purview of Section 138 of the Negotiable Instruments Act. The judgments relied upon the by the petitioner's counsel are as under :
(a) 1998 (4) All MR 287 : (1998 Cri LJ 4750) (Shri Babulal Nainmal Jain v. Shri Khimji Ratanshi Dedhra)
(b) 2002 (4) Crimes 289 : (2002 Cri LJ 3255 (Ker)) (Rejikumar v. Sukumaran)
(c) 2001 (2) Crimes 273 (Mad) (T. Kalavathy v. Veera Exports)
(d) (1998) 94 Com Cas 549 (Guj) (Rameshchandra Rajnikant Kothari v. Gunvantlal Shivalal Shan)
(e) (1993) 78 Com Cas 797 (Bom) (Omprakash Bhojraj Maniyar v. Swati Girish Bhide)
(f) (1999) 97 Com Cas 13 : (1999 Cri LJ 1219) (G. Venkataramaniah v. Sillakollu Venkateswarlu)
In the aforesaid judgments, the High Courts have observed that, if a cheque is returned on account of any structural defect i.e. any defect in its form, want of signature, improper writing of date, over writing of the amount, or erasures in the drawer's name etc., the same will not amount to an offence punishable under Section 138 of the Negotiable Instruments Act. In other words, the High Courts in the aforecited judgments have held that, if the cheques are returned for any other reason, other than "insufficiency of funds and exceeds arrangement", no proceedings would lie under Section 138 of the N.I. Act. With great respect, I decline to subscribe to the aforesaid view.
As observed by the Apex Court in the case of Nepc Micon Ltd. , cited supra, it is the duty of the Court to
interpret Section 138 of the N. I. Act consistent with the legislative intent and purpose, so as to suppress the mischief and advance the remedy. Section 138 of the N. I. Act has created "contractual breach" as an offence and the legislative purpose is to promote efficacy of banking and for ensuring that in commercial or contractual transactions, cheques are not dishonoured and credibility in transacting business through cheques is maintained. It is no doubt true that Section 138 of the N. I. Act, if read plainly, would disclose that the drawer of the cheque would be responsible to be proceeded with for the offence under Section 138 of the N. I. Act if the cheque is returned with an endorsement of "insufficient funds" or the amount involved in the cheque exceeds the amount arranged to be paid from that account by an agreement made with that bank. To overcome the said provision in a circuitous way, the drawer of the cheque may find various ways of getting the cheques bounced or returned with the sole purpose of defeating the encashment of the cheques. In such a situation, the question is as to whether the Courts can shut their eyes? The answer would be obviously in the 'negative'. If the drawer intentionally tampers the cheque or issues the cheque with difference in signature etc., the cheques will be definitely returned. Even after service of statutory notice, if the amounts involved in the cheque are not paid by the drawer of the cheque, then his intentions are prima facie clear, to the effect that he would be tampering with the cheques only with an oblique motive. If, in such case, the person in whose favour the cheques are issued is not allowed to prosecute the matter under Section 138 of the Negotiable Instruments Act, the very purpose of enacting Section 138 of the N. I. Act would be frustrated. The drawer of the cheque will have to take abundant precaution while issuing the cheques so that the cheques should be honoured and contractual obligations are fulfilled. In case, if the drawer issues cheques as in the case on hand, he will be doing so in circuitous manner in order to save his skin, only to take advantage of the absence of specific words under Section 138 of the Negotiable Instruments Act.
8. Even when the cheque is dishonoured by the reason of "alteration in date and drawer's signature differs", the Court has to presume by virtue of Section 139 of the Negotiable Instruments Act that the cheques are received by the holder for the discharge, in whole or in part, of any debt or liability. Of course, this is a rebuttable presumption. The accused alone can show to the Court that the alterations in signature and date were not made because of insufficiency or paucity of funds. In this connection, a reference may be made to the judgment of the Apex Court in the case of M. M. T. C. Ltd. v. Medchi Chemicals and Pharma (P) Ltd. , wherein it is observed thus :
Para 18 : Just such a contention has been negatived by this Court has, in the case of Modi Cements Ltd. v. Kuchil Kumar Nandi . It has been held that even though the cheque is dishonoured by reason of 'stop payment' instruction, an offence under Section 138 could still be made out. It is held that presumption under Section 139 is attracted in such a case also. The authority shows that even when the cheque is dishonoured by reason of stop payment instructions, by virtue of Section 139 the Court has to presume that the cheque was received by the holder for the discharge, in whole or in part, of any debt or liability. Of course that is a rebuttable presumption. The accused can thus show that the 'stop payment' instructions were not issued because of insufficiency or paucity of funds. If the accused shows that in his account there were sufficient funds to clear the amount of the cheque at the time of presentation of the cheque for encashment at the drawer bank and that the stop payment notice had been Issued because of other valid causes including that there was no existing debt or liability at the time of presentation of cheque for encashment, then offence under Section 138 would not be made out. The important thing is that the burden of so proving would be on the accused. Thus Court cannot quash a complaint on this ground.
Thus, it is clear from the aforesaid observations made by the Apex Court that the accused can show that the alterations in dates or signatures are made not because of insufficiency or paucity of funds. If the accused shows that in his account there were sufficient funds to clear the amount of cheques at the time of presentation of cheques for encashment at the drawer's bank and that the cheques are returned for the valid cause, then the offence under Section 138 of the Act would not be made out. The important thing is that the burden of so proving would be on the accused. Thus, the Court cannot quash the complaint on this ground.
9. Even otherwise, the drawer of the cheque may also come within the purview of Section 420 of IPC in these cases as he would be committing the offence of cheating, if he intentionally issued the cheques in question. As the criminal cases are still in the preliminary stage and charges are yet to be framed, it is always open for the Court below to frame charge for the offence under Section 420 of IPC, if the material on record at that stage of the proceedings discloses such offence. It is to be noted that the first information or complaint is not an encyclopedia to contain all the particulars and the sections under which the offences are committed. Mere omission to mention any or more penal Sections in FIR would not ipso facto deter the concerned court to proceed further for the concerned offences. It is always open to the Court to frame charges for different offences, other than and in addition to the offences which are mentioned in the FIR, if ultimately the material on investigation discloses such offences. Thus the criminal proceedings cannot be scuttled, on that technical score, at this initial stage. If the process is stopped at this stage, it may lead to travesty of justice. The substance of the allegations found in the first information or complaint is relevant and not mere format or the sections, for the purposes of proceeding further. In view of the same, there is no bar for the court below to proceed further as the complaint also discloses the offence punishable under Section 420 of Indian Penal Code along with the offence under Section 138 of the Negotiable Instruments Act.
10. It is also not necessary that the complainant should reproduce in the body of his complaint verbatim of all the ingredients of the offence he is alleging. Nor is it necessary that the complainant should state in so many words that the intention of the accused was dishonest or fraudulent. In this context, it is relevant to note the observations made by the Apex Court in the case of Rajesh Bajaj v. State NCT of Delhi , wherein it is observed thus :
It is not necessary that a complainant should verbatim reproduce in the body of his complaint all the ingredients of the offence he is alleging. No is it necessary that the complainant should state in so many words that the intention of the accused was dishonest on fraudulent. Splitting up of the definition into different components of the offence to make a meticulous scrutiny, whether all the ingredients have been precisely spelled out in the complaint, is not the need at this stage. If factual foundation for the offence has been laid in the complaint, the Court should not hasten to quash criminal proceedings during investigation stage merely on the premise that one or two ingredients have not been stated with details. For quashing an FIR (a step which is permitted only in extremely rare cases) the information in the complaint must be so bereft of even the basic facts which are absolutely necessary for making out the offence.
On facts, this Court finds that the complaints in question are not bereft of basic facts which are necessary for making out the offence of cheating.
11. The question as to whether the accused had got criminal intention, while issuing the cheques in question, of getting the cheques dishonoured by acting in circuitous manner to overcome grounds which are mentioned in Section 138 of N. I. Act, or not, is a pure question of fact and that has to be decided based on the material to be collected during the course of the trial. In view of the same, this Court is of the considered opinion that even if the cheques are returned with an endorsement of "alternation in date and drawer's signature differs", the prosecution cannot be scuttled at this stage by quashing the complaints, inasmuch as, the mens rea behind issuing such cheques will have to be determined based on the material to be collected during the course of trial. In view of the same, I do not find any merit in these criminal petitions.
Criminal Petitions are accordingly rejected.
The prayer sought for by the petitioner for staying the orders for a period of six weeks, is rejected.
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