Punjab-Haryana High Court
Gulshan Rai vs Anil Kumar on 21 January, 1992
Equivalent citations: [1993]76COMPCAS685(P&H)
JUDGMENT Chahal, J.
1. This order will dispose of three connected Criminal Miscellaneous Nos. 8855-M of 1991, 8857-M of 1991 and 8859-M of 1991, brought under Section 482 of the Criminal Procedure Code for quashing of three complaints, brought by the respondent against the petitioner for offence under Section 138 of the Negotiable Instruments Act, 1881 (as introduced by the Banking, Public Financial Institutions and Negoitable Instruments Laws (Amendment) Act, 1988), (for brevity " the Act " ). The petitioner also seeks the quashing of the summoning order dated July 1, 1991, passed by the Judicial Magistrate, I Class, Karnal, in these complaints.
2. The brief facts leading to the litigation may be enumerated. In 1988 a private limited concern, known and styled as Sai Beverage Pvt. Ltd., was floated and a piece of land was purchased in District Sonepat, while its registered office was situated at 43 Km. Stone, Karnal GT Road. Disputes having arisen, civil litigation started which culminated in a compromise. Under the terms of the compromise, the petitioner agreed to pay a total sum of Rs. 10,00,000 to the respondent and his associates through instalments. The respondent had to hand over the shares issued in his name and in the names of his associates. Post-dated cheques were issued. The cheques in dispute in the three complaints are : two cheques dated February 15, 1991, each for Rs. 1,00,000 ; a third cheque dated April 15, 1991, for Rs. 1,50,000 and a fourth cheque dated May 15, 1991, for Rs. 1,50,000. These cheques, when presented to the bank, were dishonoured, as the funds were not arranged for. The respondent claims to have served the necessary notice and the payments nut having been made, he has initiated prosecution.
3. The fact that the cheques were post-dated is not disputed. However, there is a dispute as to the date when these were issued. According to the petitioner, the cheques were issued on March 12, 1990, while according to the respondent, they were issued on March 5, 1990, at the time of execution of the compromise deed. The case of the petitioner is prima facie corroborated by a reference to receipt P-i issued by the respondent in favour of the petitioner and P-2 issued by the petitioner in favour of the respondent, read along with Clause 1 whereby it had been agreed between the parties that :
" The mode of payment will be by means of cheques to be drawn by the defendants/appellants in favour of the shareholders belonging to the respondents' group whose names will be given by the respondent to the appellant showing the amount to be paid to each payee, as per schedule of instalments, shown above, in respect of the total amount of Rs. 10 lakhs to be paid to them. The defendants/appellants will issue post-dated cheques simultaneously on transfer of the share certificates held by the respondent and his associates in respect of the above-said two companies, and those shall have the first charge on the present and future assets of the appellant."
4. The recitals in the compromise deed clearly postulated the issuing of post dated cheques simultaneously when the shares were transferred. I may, however, add that the date of issue of the post-dated cheques, whether March 5, 1990, as claimed by the respondent or March 12, 1990, as claimed by the petitioner, will not make any material difference for the decision of the present case as, in either case, the legal proposition will be the same.
5. Section 138 of the Act envisages the commission of an offence by the drawer of a cheque which has been dishonoured if the conditions mentioned therein are fulfilled. One of the conditions in proviso (a) to the Section is to the effect that 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. A plain reading of this Section shows that the cheque has to be presented not beyond the period of six months from the date of its making. It shall be irrespective of the fact as to the date which the cheque carries at its face. The presumption under Section 118 of the Act that the negotiable instrument bearing the date will be presumed to have been made on that date is not attracted to the facts of the present case, as this presumption stands rebutted from the clear averments made by the parties themselves. The cheques were post-dated and to fix the petitioner with a criminal liability, the respondent had to present the cheque within six months of the date it was drawn. The Legislature, in its wisdom has used in Section 138 the words "within a period of six months from the date on which it is drawn" instead of saying "within six months from the date the cheque bears." The post-dating of the cheque does not make it invalid, but when such a cheque is post-dated in a manner that the date of presentation is beyond the period of six months of the date on which it is drawn, it can be presumed that the payee had the knowledge that in the event of its dishonour for want of funds, the criminal liability created under Section 138 will not be attracted. The fact that it was stipulated in the compromise and it was to the knowledge of the respondent that the criminal charge shall not be attracted in case of dishonour, derives support from the averments made in paragraph 7 of the compromise deed wherein it had been agreed that in case the petitioner fails to arrange for payment of the cheque in favour of the respondent or his associates, the respondent shall be entitled to recover the amount by filing an execution. Section 138 of the Act is a penal provision and its language has to be strictly construed. Under this section, the offence is not committed either by the issuance of the cheque or by its dishonour, but only if all the ingredients of the Section are fulfilled, including the presentation within the time specified, the issuance of a proper notice and the failure of the drawer to make the payment within the stipulated period.
6. A similar situation was examined by Padmini Jesudurai J. of the Madras High Court in Babu Xavier v. Lalchand Munoth, [1992] 74 Comp Cas 716 and the learned judge observed as follows (at page 722) :
" Post-dated cheques, though legal, are real anomalies in the commercial world. They are payable on demand and negotiable even between the dates of issue and the dates shown on them. The holder of such a cheque, duly negotiated to him, even before the date the cheque bears, is indeed a holder in due course under the Act. Yet when presented to the bank before the ostensible date, the banker does not honour the cheque but returns them. The unpaid banker who honours the cheque, without noticing the date the cheque bears, does so at its risk, since he is bound to suffer loss, if the drawer of the cheque countermands the cheque before the date of the cheque, by a stop payment order or he dies or becomes insolvent before the above date. The position of a holder in due course of such a cheque is just the same.
Yet the law is that a cheque otherwise valid, does not become invalid merely by reason of its being either post-dated or ante-dated. When, therefore, a person receives a cheque, post-dated or ante-dated beyond a period of six months, he should be deemed to receive it with the knowledge that in the event of dishonour for want of funds, Section 138 of the Act will not help him. This obviously is the intention of Parliament. . .
It flows from the above discussion that a cheque is drawn on the date when the drawer signs the cheque, complete in its form. On such an interpretation, cheques post-dated or ante-dated beyond the period of six months from the date the cheques bear, would be out of the purview of Section 138 of the Act."
7. A contrary view was taken by the Kerala High Court in Manoj K. Seth v. Fernandez [1992] 73 Comp Cas 441. Their Lordships of the Kerala High Court considered as to when a post-dated cheque shall be deemed to have been drawn and the following observations were made (at page 447) :
" Offences under Section 138 of the Act would be committed only when a cheque drawn for payment of any debt or liability is returned by the bank unpaid and the drawer fails to make payment of the said amount within 15 days of the notice of dishonour. One of the elements to be satisfied is that the cheque should have been returned unpaid. It goes without saying that such return of the cheque by the drawee could only be on presentation ; that is when he is capable of presenting the same for encashment. In the case of post-dated cheque as noted earlier, the same can be presented only on or after the date of the cheque. The question as to when a post-dated cheque can be considered to have been drawn for the purpose of Section 138 of the Act cannot be dealt with independently of the right to present the same. In relation to the drawer and drawee, a post-dated cheque becomes operative only from the date of the cheque when alone the same is intended to be honoured. A post-dated cheque for the purpose of Clause (a) of the proviso to Section 138 of the Act has to be considered to have been drawn on the date it bears and in this case, since the cheque was presented within six months of the date of the cheque, it cannot be said that the condition in the said proviso is not satisfied."
8. With due respect to the learned judges, I am unable to endorse these observations. No separate definition as to drawing or making a cheque was given in the Act for the purpose of Section 138. As such, the other provisions of the Act have to be considered as to when the cheque is deemed to have been drawn under Section 7 of the Act. 'Drawer' and 'drawee' are defined as follows :
" 7. 'Drawer', 'Drawee'. - The maker of a bill of exchange of cheque is called the 'drawer', the person thereby directed to pay is called the 'drawee'. "
9. A document is stated to be made when recorded and signed by the maker thereof. A cheque shall be deemed to have been made on the day it is filled in and signed by the drawer without reference to the date it carries. The date it carries at its face is only recorded to determine if it is an ante-dated or post-dated cheque. If there be no such allegation, then there will be a presumption under Section 118 that the cheque was drawn on the date it carries at its face. I follow the observations of the learned judge of the Madras High Court in Babu Xavier's case [1992] 74 Comp Cas 716.
10. Since admittedly, the disputed cheques were presented to the bank more than six months after the date they were made, no criminal offence under Section 138 of the Act is made out. In this situation, I accept all the three criminal miscellaneous petitions, enumerated above and quash the impugned complaints and the summoning orders.