Allahabad High Court
Smt. Ramawati Sharma vs Union Of India (Uoi) And Ors. on 19 March, 1998
Equivalent citations: 1998(2)ALD(CRI)788, 1998(2)ALT(CRI)18, [2001]107COMPCAS215(ALL), 1999CRILJ682, AIR 1999 ALLAHABAD 21, 1999 ALL. L. J. 42, 1999 (2) BANKLJ 24, 1999 BANKJ 664, 1999 (4) RECCRIR 358, 1998 (23) ALLCRIR 1162, 1998 (37) ALLCRIC 455, 1998 (2) BANKCAS 181, 1998 UP CRIR 490, 1998 (2) BANKCLR 309, 2000 (1) ALLCRILR 327, 2001 (107) COM CAS 215
Author: S.K. Phaujdar
Bench: S.K. Phaujdar
JUDGMENT J.C. Misra, J.
1. The basic prayer in both these writ petitions cover the constitutional validity of Section 138 of the Negotiable Instruments Act (for short N.I. Act): The petitioners in these two matters have been prosecuted for an offence under Section 138 of the N.I. Act as the cheques they had issued to pay up their debts had bounced for lack of proper fund in the respective accounts. The provisions under the aforesaid section have been challenged as violative of Articles 14, 19, 20 and 21 of the Constitution of India, hence a prayer was made to declare the provisions ultra vires of the Constitution and to further quash the criminal proceedings initiated under that section against the petitioners.
2. The case against Ramawati Sharma was filed by Rahul Malaviya in complaint No. 5376 of 1995 and the gist of the complaint case is that the accused had taken a loan from the complainant and with a view to repay the same she had issued a cheque dated 30-4-95. The cheque was drawn on the Kisanganj Branch of Allahabad Bank at Delhi, and it was deposited in Indian Overseas Bank, Allahabad. The cheque could not be encashed as the drawer of the cheque had directed that no payment under the cheque should be made. When the complainant made enquiries from the accused, an explanation was given that payment was directed to be stopped as she had no adequate sum to meet the cheque. On the request of the accused, the cheque was withheld for some time and was placed in the bank again on 8-9-1995 and it had bounced again with the same note that payment had been stopped. Accordingly, a notice as required under the law was served upon the accused, but despite receipt of the notice the sum under the cheque amounting to Rs.30,000/-was not paid.
3. In the other case, the same Rahul Malaviya filed a complaint against the accused Rama Shankar Sharma and Suresh Chandra Sharma. Here also a cheque of Rs. 30,000/- was issued by the accused for repayment of a loan and the cheque was drawn on Canara Bank, Wazirpur Branch, Delhi, dated 30-4-1995. The cheque was deposited in Indian Overseas Bank, Allahabad, and the complainant was informed that the cheque could not be encashed as there was no sufficient deposit in the account against which the cheque was drawn. The complaint was filed after due notice and after failure of the accused to pay the sum under the cheque.
4. The grounds on which the prayer for declaring the provisions ultra vires were that the N.I. Act thought of at least three types of negotiable instruments, namely, promissory note, bill of exchange and cheque, and the law had made punishable a failure of encashment upon cheque only and not upon the other two types of negotiable instruments. It was further stated that the liability to repay a loan is out and out a civil one and for that no criminal liability could have been attached, even by making a legislation.
5. The learned counsel read out before us different quotations from different provisions of International taw and American decisions and we feel that the exercise certainly proved the erudition of the learned counsel but the points read out were absolutely irrelevant for the present matters.
6. So far the second aspect of the argument is concerned, the learned counsel insisted that for incurring a loan, a person could not be made liable criminally. While we agree to his submission in toto, we would only point out that despite our insistence the learned counsel could not indicate if the penal provision was for the loan itself or for certain further action on the part of the debtor to show a repayment of the debt. Section 138 of the N. I. Act does not punish the act of taking loan but it penalises a person who proposed to repay the loan by issuance of a cheque and the cheque is not encashed due to shortage of fund in the account. This further action on the part of the debtor cannot be equated with his action of taking the loan and we must differ with the submissions of the learned counsel that Section 138 is a provision for punishing one for taking a loan.
7. So far the other part of the submission is concerned, Section 138 of the N. I. Act may be quoted hereinbelow :
"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 debtor 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 he 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 extend to one year, 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 fifteen 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.
Explanation-- For the purposes of this section, "debt or other liability" means a legally enforceable debt or other liability."
8. The provisions have been challenged as having violated the constitutional guarantees under Articles, 14, 19, 20 and 21 of the Constitution. We propose to give in short the text of these articles. Part III of the Constitution of India covers fundamental rights. Article 14 protects equality before law and provides that the State shall not deny to any person equality before law or the equal protection of the laws within the territory of India. Article 19 protects rights regarding freedom of speech and explanation, the freedom to assemble peaceably and without arms, the freedom to form association and unions, the freedom to freely move throughout the territory of India and the freedom to reside, settle in any part of the territory of India and to practice any profession Or to carry on any occupation, trade or business. At this stage itself it may be stated that we find no relevancy of the right guaranteed under Article 19 with the problem posed before us. Article 20 protects a person in respect of conviction for offences and states that no person shall be convicted of any offence except for violation of law in force at the time of commission of the Act charged as an offence, nor be subjected to a penalty greater than that which might have been inflicted under the law in force at the time of commission of the offence. This article also states that no person shall be prosecuted and punished for the same offence more than once and no person accused of any offence shall be compelled to be witness against himself. With utmost respect to the submissions of the learned counsel, we are construed to hold that the matter before us cannot be stretched to come under the purview of Article 20 as well. Article 21 gives protection of life and personal liberty and states that no person shall be deprived of his life or personal liberty except according to procedure established by law.
9. In fact, we are concerned with Articles 14 and 21 only as the petitioner challenges the vires of a penal provision and we are to see if the personal liberty of the petitioner is being taken away according to procedure established by law and this procedure must not be arbitrary. Thus, the protection of Article 21 could be invoked if at all the punitive provision appears to be violative of Article 14 of the Constitution which has guaranteed equality before law, and equal protection of laws within the territory of India.
10. Violation of Article 14 has been alleged only on the ground that the Negotiable Instruments Act speaks of promissory notes, bills of exchange and cheques, but Section 138 makes punishable certain acts committed in respect oi' cheques only. A promissory note, according to Section 4 of N.I. Act, is an instrument in writing (not being a bank note or a currency note) containing an unconstitutional undertaking, signed by the maker, to pay certain sum of money only to, to the order of, a certain person or to the bearer of the instrument. A bill of exchange is an instrument in writing containing an unconditional order signed by the maker directing a certain person to pay certain sum of money only to, or to the orders of a certain person or to the bearer of the instrument. A cheque is also a bill of exchange but is one drawn on a specified banker and not expressed to be payable otherwise than on demand.
11. The provisions of Section 138 of the N.I. Act have already been quoted. It deals with dishonour of cheques for insufficiency etc. of funds in the account and it is now the settled law that issuance of a cheque and subsequent direction upon the banker not to honour the cheque is also punishable under Section 138, subject to fulfilment of the other conditions.
12. A cheque and a promissory note may not be equated as a promissory note simply creates a liability and by issuing a cheque, the drawer desires that certain payment is to be made in favour of the holder. Section 138 does not punish every dishonour of a cheque. It must be a cheque for discharge in whole or any part any debt or other liability and the cheque is to be drawn upon a bank. This provision had to be introduced as in business transactions issuance of cheques to discharge a debt of other liability is a common transaction and it has also been found that to avoid immediate liability, people do take recourse to issuance of cheque which bounces on presentation at the bank. The law may not, therefore, be deemed discriminatory as a promissory note basically differ from a cheque and only a cheque out of possible bills of exchange have been chosen to come under the purview of Section 138. This law has been necessitated because of the malpractices prevalent in our society. "
13. We have already indicated that mere taking of loan is not made punishable by Section 138 of N.I. Act. It is the act of issuance of a cheque for discharge of a debt or liability which has only been made punishable under certain circumstances and after following certain procedures. It may not, therefore, be stated that the liberty of a person was being curtailed by an arbitrary procedure or that such a provision was violative of Article 21 of the Constitution.
14. In the light of the above, we find no reason to declare the provisions of Section 138 of the Negotiable Instruments Act ultra vires the Conistitution and the present writ petition stands dismissed.