Lastly, we would refer to the decision by a Three-Judge Bench of this Court in the case of Modi Cements Ltd. Vs. Kuchil Kumar Nandi (1998) 3 S.C.C. 249 dealing with a similar contention and interpreting Section 138 of the Act. In that case, the Court referred to the earlier decisions in the case of Electronics Trade and Technology Development Corporation (1996) 2 SCC 739 and K.K. Siddharthan Vs. T.P. Praveena Chandran (1996) 6 S.C.C. 369 and agreed that the legal proposition enunciated in the aforesaid decisions to effect that if the cheque is dishonoured, because of stop payment instruction to the bank, Section 138 would get attracted. It also amounts to dishonour of the cheque within the meaning of Section 138 when it is returned by the bank with the endorsement like (I) in this case, referred to the drawer (ii) instructions for stoppage of payment and stamped (iii) exceeds agreement. The Court observed that the object of bringing Section 138 on statute appears to be to inculcate faith in the efficacy of banking operations and credibility in transaction in business on negotiable instruments and to promote the efficacy of banking operations and to ensure credibility in transacting business through cheques. Thereafter, the Court disagreed with other views expressed in aforesaid two cases and held that once the cheque is issued by the drawer a presumption under section 139 must follow and merely because the drawer issues a notice to the drawee or to the bank for stoppage of the payment it will not preclude an action under Section 138 of the Act by the drawee or the holder of a cheque in due course. The Court further held that it will make section 138 a dead letter if the contention that by giving instruction to the Bank to stop payment immediately after issuing a cheque against the debt or liability, the drawer can easily get rid of the penal consequences notwithstanding the fact that deemed offence was committed. Finally, the Court held that Section 138 of the Act gets attracted only when the cheque is dishonoured. 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 transactions cheques are not dishonoured and credibility in transacting business through cheques is maintained. The above interpretation would be in accordance with the principle of interpretation quoted above brush away the cobweb varnish, and 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.
Print Page
Supreme Court of India
Nepc Micon Limited And Others vs Magma Leasing Limited on 29 April, 1999
Bench: K.T.Thoms, M.B.Shah
Citation;AIR1999SC1952,1999(4)ALLMR(SC)367[1999]96CompCas822(SC), 1999CriLJ2883,
