Delhi High Court
Venkatesh Dutt vs Ms Shoes East Limited on 19 December, 2003
Equivalent citations: II(2004)BC19, 2004CRILJ1695, (2004)137PLR32
Author: J.D. Kapoor
Bench: J.D. Kapoor
JUDGMENT J.D. Kapoor, J.
1. Short question involved for consideration in these proceedings is whether the complaint under Section 138 of the Negotiable Instruments Act relating to dishonoring of a cheque which in this case was of the amount of Rs. one core can be allowed to continue along with other complaints under Section 138 of the Act arising out of the agreement or compromise arrived at between the parties in the original complaint wherein several cheques were issued and accepted by the complainant but on presentation were dishonored. In other words, can the complainant be allowed to continue the original complaint along with as many complaints as many cheques are issued and accepted by way of compromise in the original complaint.
2. Admittedly in the instant case not only the proceedings of the original complaint relating to the cheque of Rs. One core are continuing but as many as seven more complaints arising out of the cheques given by the petitioner in lieu of Rs. One core by way of agreement between the parties have been filed wherein petitioner has been summoned as accused. Admittedly, a civil decree has also been obtained by the respondent/complainant for the amount due from the petitioner to the respondent in respect of which execution proceedings are in vogue.
3. Main gravies of the contention of Mr.L.C.Goyal, learned counsel for petitioner is that once respondent by way of agreement between the parties had accepted seven cheques during the subsistence of the complaint against a cheque of Scone core, this amounted to compounding the offence which has to result in acquittal on account of compounding of the offence as cheques issued subsequently in lieu of the liability of the cheque giving rise to the original complaint had provided fresh cause of action.
4. As against this Mr.Ravi Gupta, learned Counsel for the respondent contends that any agreement made by the parties which is contrary to the provisions of Section 138 is of no relevance as in the instant case by virtue of clause 8 of the agreement executed between them during the pendency of the original complaint under Section 138 of the Act initiated on account of dishonoring of the cheque of Rs. One core, respondent/complainant had reserved the right to continue the cases initiated in respect of every cheque. Clause 8 reads as under:-
"That in the event the cheques issued by the Borrower as per this Agreement are not honored, MSS shall have the right to continue the above referred cases and to further initiate both civil and criminal actions including under Section 138 of the Negotiable Instrument Act with reference to the cheques issued under this Agreement."
5. It is contended that perusal of clause 8 shows that the complainant/ respondent was given the liberty to initiate action under Section 138 of the Act in case cheques issued under this agreement are not honored without foregoing his right to continue with the original complaint.
6. In order to appreciate the aforesaid rival contentions, reproduction of Section 138 is necessary. It reads as under:-
"138. Dishonour of cheque for insufficiency, etc., of funds in the account--Where any cheque drawn by a person on an account maintained by him 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 provision 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 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.
Explanation---For the purposes of this section, "debt or other liability" means a legally enforceable debt or other liability."
7. Bare perusal of the Section shows that dishonored cheque drawn by a person on an account maintained by him with a banker for payment any amount of money to another person from out of that amount for the discharge in whole or in part of any debt or other liability if returned by the Bank unpaid vests a legal right in the aggrieved person to initiate the proceedings under Section 138.
8. The very fact that a party enters into a compromise during the pendency of a complaint filed under Section 138 of the Act shows the cause of action pertaining to the initial cheque ceases to be available to the complainant as fresh cause of action becomes available in respect of the cheques issued pursuant to the agreement between the parties in case those cheques are dishonored.
9. By no stretch of imagination complaints under Section 138 relating to several cheques given by a party to the complainant on account of the agreement between the parties towards liability against initial cheque leading to the filing of original complaint can be allowed to go simultaneously. Reason is simple. Section 138 of the Negotiable Instruments Act specifically refers to only that cheque which is issued towards the liability drawn by a person on an account with a banker for payment of money and no other cheque. Once the parties enter into an agreement during the pendency of such complaint or proceedings and complainant accepts the cheques given by the accused in lieu of the subject matter of original complaint every cheque gives rise to a fresh cause of action if it, on presentation is dishonored as in that case original complaint becomes extinct. Aggrieved person has a right to file as many complaints as many cheques were given to him as every cheque under the Act provides an independent and fresh cause of action to the aggrieved person.
10. Even otherwise it is difficult to accept that two parallel proceedings, one emanating from the original cheque and others emanating from the terms of the agreement between the parties, can be allowed to run simultaneously. If the earlier complaint is also allowed to continue along with the subsequent complaints then the very purpose of agreement between the parties and issuance of fresh cheques become meaningless as fresh cheques issued by a party are towards the original liability that gave rise to the initial complaint filed under Section 138 of the Act.
11. Proceedings u/s 138 of the Act are penal proceedings and are independent of civil remedy of suit for recovery and therefore cannot be allowed to be converted into a civil suit. Since the offence under Section 138 of the Negotiable Instruments Act is of compoundable nature parties may decide to compound the offence u/s 138 of the Act by way of agreement. Once the complainant agrees to accept the cheques towards the liability of the accused during the pendency of the complaint, it amounts to compounding the offence resulting in acquittal as he has with open eyes entered into the agreement and accepted the cheques. Any stipulation like clause 8 in the agreement has no legal value being against the very provision of Section 138 of the Act which makes the drawer liable for penal proceedings in respect of every such cheque which is dishonored but does not encompass the original cheque in lieu of which several cheques are issued and accepted. Every such cheque, if dishonored, shall make the drawer liable for penal proceedings as envisaged u/s 138 of the N.I. Act.
12. In view of the foregoing reasons, the petition is allowed, the complaint filed by the respondent under Section 138 of the Act for cheque of Rs. One core and the proceedings arising there from stand quashed whereas the subsequent complaints filed by the respondent arising out of as many as seven cheques shall continue being independently maintainable.