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CHEQUE BOUNS CASE

When the cheque was bounced one has to file a private complaint for cheque bounces case but not police complaint. For attracting 420 cheating, there must be proper pleading and material of evidence to show that at the very inception malafide intention was existed.

THE HON’BLE SRI JUSTICE B. CHANDRA KUMAR

icici bank

icici bank (Photo credit: Wikipedia)

Criminal Petition No.5259 of 2007

28-04-2010

J. Vidya Sagar S/o L.J. Rajam,
Aged 43 years, Occ: Service,
R/o 12-1/1, Plot No.1, Road No.1,
Ramakrishnapuram, Dilsukhnagar,
Hyderabad.

State of A.P. through Public Prosecutor,
High Court of A.P., Hyderabad and another

Counsel for petitioner: Mr.P. Shiv Kumar

Counsel for respondent: Public Prosecutor

:ORDER:

This Criminal Petition has been filed to quash the proceedings in
C.C.No.437 of 2005 on the file of the Additional Judicial First Class
Magistrate, East & North, R.R. District, transferred to X Metropolitan
Magistrate, Malkajgiri, R.R. District.
2. The brief facts of the case are as follows:
The second respondent herein filed a complaint alleging that he is one of the
partners in M/s Sai Chakra Financers and M/s Yogeshwara Financers and that the
partners were not in a position to uphold the trust of the managing partners and
therefore, the firm was dissolved, accounts were settled and a memorandum of
understanding was reached between the parties on 05-06-2001. Due amounts to be
paid by the Firm and to be received by the Firm were distributed among the
partners. In pursuance of the said memorandum of understanding, the second
respondent approached the petitioner for the payment of the due amount to be
paid to him and the petitioner issued a cheque bearing No.081308, dated 13-05-
2002 for Rs.3,85,000/- of Central Bank, Himayatnagar branch. When the said
cheque was presented in the bank of the second respondent i.e., ICICI Bank,
Vasavinagar branch, the second respondent received an intimation that the
account was closed. The second respondent lodged a complaint against the
petitioner alleging that the petitioner issued a false cheque and closed the
account without any intimation with an intention to cheat him and to avoid the
payment. Basing on the said complaint, a case was registered in Crime No.251 of
2002 on 05-06-2002 for the offences punishable under Sections 420 of IPC and 138
of the Negotiable Instruments Act, 1881 (for short ‘the Act’).
3. The stand of the petitioner is that he had approached
M/s Sai Chakra Financers and M/s Yogeshwara Financers and availed the loan and
executed the promissory note and issued a blank cheque and subsequently, he had
paid the entire loan amount with interest within the stipulated time and when he
requested to return the promissory note and blank cheque, the second respondent
represented that the promissory note and the blank cheque were misplaced and
assured that they will be returned to him as and when found.
4. The learned counsel for the petitioner submits that the police are not
authorized to investigate into a case filed for the offence under Sections 138
of the Act. He further submitted that even if the allegations made in the
complaint are taken at their face value and accepted in their entirety, they did
not prima facie constitute any offence or make out a case against the
petitioner.
5. No representation for the second respondent, though notice was
served.
6. In the light of the facts and circumstances, the only points that arise
for consideration are:
1. Whether the police are empowered to file charge sheet for the offence
punishable under Section 138 of the Act? and
2. Whether the ingredients of Section 420 of IPC have been made out from the
contents of the charge sheet?

7. Section 138 of the Act is as follows:
“Section 138. Dishonour of cheque for insufficiency, etc., of funds in the
accounts.-
Where any cheque dr awn by a person on an account maintained by hi m with a
banker for payment of any amount of money to another person from out of that
account for the discharge, in whole or in part, of any debt or other liability,
is returned by the bank unpaid, either because of the amount of money standing
to the credit of that account is insufficient to honour the cheque or that it
exceeds the amount arranged to be paid from that account by an agreement made
with that bank, such person shall be deemed to have committed an offence and
shall, without prejudice to any other provisions of this Act, be punished with
imprisonment for a term which may be extended to two years, or with fine which
may extend to twice the amount of the cheque, or with both: Provided that
nothing contained in this section shall apply unless–
(a) the cheque has been presented to the bank within a period of six months from
the date on which it is drawn or within the period of its validity, whichever is
earlier;
(b) the payee or the holder in due course of the cheque, as the case may be,
makes a demand for the payment of the said amount of money by giving a notice in
writing, to the drawer of the cheque, within thirty days of the receipt of
information by him from the bank regarding the return of the cheque as unpaid;
and
(c) the drawer of such cheque fails to make the payment of the said amount 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.”
8. A reading of the above provision makes it clear that the payee or holder
of the cheque, as the case may be, makes a demand for payment of the amount of
the cheque by giving a notice in writing to the drawer of the cheque within 30
days of the receipt of information from the bank regarding the return of the
cheque as unpaid. It also provides an opportunity to the drawer and if the
cheque amount is paid within 15 days of the receipt of the notice sent under
Section 138 (b), the liability under Section 138 will seize. Of course it is
the settled law that an offence under Section 138 of the Act is made out even if
the cheque is returned on the ground of closure of the account. It is also
settled law that a cheque can be presented any number of times during the time
of its validity. Section 142 of the Act envisages that no Court shall take
cognizance of an offence punishable under Section 138 of the Act except upon a
complaint in writing made by the payee or the holder, as the case may be, in due
course of the cheque and such complaint is made within one month of the date on
which the cause of action arises under clause (c) of the proviso to Section 138.
For more clarity, Section 142 of the Act is extracted below:
“142. Cognizance of offences – Notwithstanding anything contained in the Code of
Criminal procedure, 1973-

(a) No Court shall take cognizance of any offence punishable under Section 138
except upon a complaint in writing made by the payee or , as the case maybe, the
holder in due course of the cheque.
(b) Such complaint is made within one month of the date on which the cause of
action arises under clause (c) of the proviso to Section 138.
(c) No Court inferior to that of a metropolitan magistrate or a Judicial
Magistrate of the First Class shall try any offence punishable under Section
138.”

9. The scheme and provisions of the Act make it very clear that it is the
payee, who has to make a complaint in writing, and upon such complaint, the
Court is empowered to take cognizance. In the light of the above circumstances,
giving a complaint to the police and registering a case for the offence under
Section 138 of the Act appears to be not contemplated under the Act. The time
limit prescribed for issuing a notice, on receipt of the information by the
payee from the bank regarding the return of the cheque as unpaid, and the time
limit given to the drawer to enable him to make payment, and the time limit
prescribed to the payee to file a complaint, makes it very clear that no police
investigation is contemplated under the provision of the Act.
10. In H. MOHAN & ANR. V. STATE OF KARNATAKA 1,
it was held that:
“It is clear from the language employed in Section 142 of the Act that no Court
shall take cognizance of any offence punishable under Section 138 except upon a
written complaint made by the payee. It means that the payee has to file a
private complaint under Section 200 Cr.P.C. before the competent Magistrate and
the Police are not empowered to act upon a private complaint filed for an
offence under Section 138 of the Act. I do not find any force in the argument
of the learned High Court Government Pleader that Sections 4 and 5 Cr.P.C.
empower the Police to entertain the complaint filed in respect of an offence
under Section 138 of the Act as the said provisions are not attracted in view of
the above extracted provisions of Section 142 of the Act.”

11. In JAGARLAMUDI SURYA PRASAD AND OTHERS v. STATE OF ANDHRA PRADESH 2,
it was held that:
“In view of S. 142 of the Act, when a complaint filed by the payee or the holder
in due course of the cheque which was dishonoured, the Magistrate has
necessarily to take cognizance if the other ingredients are satisfied. He has no
right or power to refer it for investigation to the police just like a private
complaint filed in accordance with the provisions of the Criminal P.C.”
12. Similar view was taken by this Court in
Y. VENKATESWARA RAO v. MAHEE HANDLOOMS (P.) LTD. 3, wherein it was held that:
“As evidenced by Sec. 142(a) of the negotiable Instruments Act no Court shall
take cognizance of any offence punishable under Sec.138 except upon a complaint
in writing made by the payee or as the case may be, the holder in due course of
the cheque. In the present case, the case was taken cognizance on a police
complaint and consequently, as rightly submitted by the learned counsel for the
petitioner, the complaint is not taken on file properly. In view of the
provisions of Sec.142 (a) of the negotiable Instruments Act, the proceedings in
C.C.184/91 on the file of the VI metropolitan magistrate are quashed on and from
referring the case by the learned magistrate under Sec. 156(3) of the Code and
thereafter.”

13. Similar view was taken in K. MAHADEVAN v.
Y. VENKATESH AND ANOTHER 4, wherein two cheques were dishonoured and a private
complaint was filed by payee of cheques which was forwarded by the Magistrate to
police and after a charge sheet being filed by police, magistrate took
cognizance of offence. In those circumstances, it was held that adopting such a
procedure is a glaring defect in procedure because under Section 12 of the
Negotiable Instruments Act, cognizance of an offence is dishonour of cheque (s)
should be taken on a private complaint only.
14. In CENTRAL BANK OF INDIA AND ANOTHER v.
M/s. SAXONS FARMS AND OTHERS 5, it was held that:
“Under Section 142 of the Act, Court can take cognizance of an offence
punishable under Section 138 only on a complaint in writing made by the payee.
Therefore, the police could not have started investigation under Section 138 of
the Act. But if a cheque is dishonoured drawer may expose himself to
prosecution under various sections of the Indian penal Code which are cognizable
and police could take up investigation. What was indicated in the notice was
that in addition to the legal action by the appellant-bank under the Act, option
was kept open for taking action against the respondents under the provisions of
Indian penal Code by informing the police. Therefore, the contention of the
learned counsel for the respondents has no force.”

15. Now the other question is when it is alleged that the Accused has
not only committed the offence punishable under Section 138 of the Act, but also
committed the offence under Section 420 of IPC, what has to be done? In
such circumstances, in NEMICHAND SWAROOPCHAND SHAHA v. M/S. T.H. RAIBHAGI FIRM
6, it was held that it is absolutely necessary for the purpose of bringing in
Section 415 IPC that the complainant should have been fraudulently or
dishonestly induced by the petitioners to deliver the property concerned and
unless the ingredients of cheating within the meaning of Section 415 of IPC are
made out, no cognizance can be taken for the said offence.
16. In S. JAYASWAMI AND ANOTHER v. STATE OF ORISSA AND ANOTHER 7, the
Orissa High Court observed as follows:
“The dishonour of the cheques by the Bank due to insufficient funds is squarely
covered under the scope of Section 138 of the Act. The provision of Section 420,
IPC is not attracted unless mala fide intention of the person issuing the cheque
is established. Here, no specific instances have been pleading about the
existence of mala fide intention. As has been said in the case of G. Sagar Suri
(supra), dishonest intention and mis-representation are to be specifically
indicated to attract the provisions of Section 406 or 420, IPC and if such
specific allegations are not there and general allegations of dishonour of
cheque is there, only Section 138 of the Act will be attracted. When same
cheques are involved in the complaint case and in the G.R. Case and when the
only allegation is bouncing of the cheques for insufficient funds or stop
payment direction, the issue will be covered only under Section 138 of the Act.
In such situation, the police investigation into the issue during pendency of
the complaint cases would be abuse of the process of Law and Court.”

17. In VEER PRAKASH SHARMA v. ANIL KUMAR AGARWAL 8, it was observed
that:
“In law, only because he had issued cheques which were dishonoured, the same by
itself would not mean that he had cheated the complainant. Assuming that such a
statement had been made, the same, in our opinion, does not exhibit that there
had been any intention on the part of the appellant herein to commit an offence
under Section 417 of the Indian Penal Code.”

18. In HRIDAYA RAJAN PRASAD VERMA AND OTHERS v. STATE OF BIHAR AND
ANOTHER 9, the Supreme Court held that:
“In determining the question it has to be kept in mind that the distinction
between mere breach of contract and the offence of cheating is a fine one. It
depends upon the intention of the accused at the time to inducement which may be
judged by his subsequent conduct but for this subsequent conduct is not the sole
test. Mere breach of contract cannot give rise to criminal prosecution for
cheating unless fraudulent or dishonest intention is shown right at the
beginning of the transaction, that is the time when the offence is said to have
been committed. Therefore it is the intention which is the gist of the offence.
To hold a person guilty of cheating it is necessary to show that he had
fraudulent or dishonest intention at the time of making the promise. From his
mere failure to keep up promise subsequently such a culpable intention right at
the beginning, that is, when he made the promise cannot be presumed.”
19. Now it has to be seen whether there is an allegation in the present case
that the petitioner had induced the complainant on the date of issuing the
cheque i.e., whether he had any fraudulent or dishonest intention at the
beginning of the transaction. Unless it is specifically alleged that at the
very inception the Accused has dishonest intention to cheat, the ingredients of
Section 415 punishable under Section 420 of IPC have not been made out. A
reading of the complaint makes it very clear that when the second respondent
approached the petitioner with regard to the due amount, he promised to settle
the accounts and having verified the accounts, he requested two weeks time and
subsequently issued the cheque in dispute. Though it is the case of the second
respondent that the petitioner had closed the Account without any intimation to
him, it is not clear as to when the account was closed.
20. Another important fact pointed out by the learned counsel for the
petitioner is that the reply notice sent on behalf of the petitioner is dated
27-04-2002, which reveals that the petitioner agreed to repay the due amount in
instalments and the first instalment is payable on 23-04-2002 and the balance in
due course. If that is the case, the issuance of the cheque, dated 13-05-2002
for the entire amount of Rs.3,85,000/- becomes doubtful. Though the documents
filed by the petitioner cannot be looked into at this stage, having regard to
the facts and circumstances of the case, it appears that since there is no
allegation that the petitioner had fraudulent intention on the date of issuing
the cheque and closed the account by the date of issuing the cheque, it appears
that the ingredients of Section 420 of IPC have not been made out. In the above
circumstances, the proceedings against the petitioner are liable to be quashed.
21. Accordingly, the Criminal Petition is allowed. The proceedings
against the petitioner in C.C.No.437 of 2005 on the file of the Additional
Judicial First Class Magistrate, East & north, R.R. District, transferred to X
Metropolitan Magistrate, Malkajgiri, R.R. District, are hereby quashed.

?1 1991 (2) CRIMES 93
2 1992 CRI.L.J. 597
3 1992 (3) ALT 73
4 1993 CRI.L.J. 2659
5 1999 CRI.L.J. 4571
6 2002 (1) CIVIL L J 417
7 2005 CRI.L.J. 2896
8 2007 (9) SCALE 502
9 (2000) 4 SCC 168


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One thought on “When the cheque was bounced one has to file a private complaint for cheque bounces case but not police complaint. For attracting 420 cheating, there must be proper pleading and material of evidence to show that at the very inception malafide intention was existed.

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