Karnataka High Court
Arun S/O Late Ashok Agrawal vs Vinod S/O Channappa Sedamkar on 31 August, 2020
Author: Hanchate Sanjeevkumar
Bench: Hanchate Sanjeevkumar
IN THE HIGH COURT OF KARNATAKA
KALABURAGI BENCH
DATED THIS THE 31ST DAY OF AUGUST, 2020
BEFORE
THE HON'BLE MR.JUSTICE HANCHATE SANJEEVKUMAR
CRIMINAL REVISION PETITION NO.2603/2012
Between:
Arun S/o late Ashok Agrawal
Now Aged: 21 Years, Occ: Business
R/o C/o Revanappa Reddy
H.No.8-9-136, Besides Dr. Rajshekhar
Kulkarni's Hospital, Near Jail Colony
Bidar
... Petitioner
(By Sri Anil Kumar Navadagi, Advocate)
And:
Vinod S/o Channappa Sedamkar
Now aged: 32 Years, Occ: Business
R/o H.No.8-9-260, Besides Sacred
Heart Church, Vijayanagar
Opp. New Bus Stand, Bidar
... Respondent
(By J.K. Bukka, Advocate)
This Criminal Revision Petition is filed under Section
397 r/w Section 401 of Cr.P.C, praying to allow the petition
and set aside the order dated 05.01.2011 vide Annexure-B
passed by the FTC-II, Bidar in Crl.Rev.P.No.73/2009 and
consequently be pleased to restore the proceedings against
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the respondent for an offence under Section 138 of N.I. Act
in C.C. No.553/2008 on the file of Prl. JMF-II, Bidar and also
grant such other reliefs as this Hon'ble Court deems fit.
This petition coming on for hearing this day, the Court
made the following:
ORDER
(Through Virtual Court) The present criminal revision petition is filed praying to set aside the order dated 05.01.2011 passed by the Fast Track Court-II, Bidar (hereafter 'Fast Track Court') in Crl.R.P.No.73/2009 and consequently to restore the proceedings against the respondent herein for the offence under Section 138 of Negotiable Instruments Act, 1881 ('N.I.Act' for short) in C.C.No.553/2008 on the file of the Prl. JMFC(II), Bidar.
2. Brief facts:
The petitioner is the complainant, who filed a private complaint under Section 200 of Cr.P.C before the trial court as against the respondent herein, who issued cheque in favour of the petitioner and upon 3 presentation of the same to the Bank, it was returned with an endorsement "Account is Closed". Thus, petitioner alleged that the respondent had committed the offence under Section 138 of N.I. Act. After recording sworn statement of the complainant, which was culminated into registration of case as C.C.No.553/2008 as the learned Magistrate has taken the cognizance of the offence as against the respondent herein for the offence under Section 138 of N.I.Act and thereafter on 30.04.2009 recorded the plea of the accused, who pleaded not guilty, accordingly the learned Magistrate proceeded for enquiry/trial.
3. It is this order dated 30.04.2009 of the learned Magistrate recording the plea of the respondent was put in challenge by the respondent herein before Fast Tract Court in Crl.R.P.No.73/2009 and the said court set aside the order passed on 30.04.2009 by the learned Magistrate by recording the plea of the 4 respondent on the ground that the 'Account is Closed' does not constitute an offence under Section 138 of N.I.Act and the Fast Track court by relying on the judgment of this court in Nagaraja Upadhya vs. M. Sanjeevan reported in 2007 (5) Kar. L.J. 288 has formed opinion that the element "Account is Closed"
does not attract the penal provision as per Section 138 of N.I.Act, saying so the Fast Track Court allowed the criminal revision petition and set aside the plea recorded by the learned Magistrate on 30.04.2009. In other words, the Fast Track Court had completely quashed the proceedings and virtually amounts to discharge of the respondent.
4. Heard both sides and perused the material on record.
5. The learned counsel for the petitioner Sri Anil Kumar Navadagi submits that in the present case it is not disputed fact that the cheque was returned 5 with an endorsement by the bank "Account is Closed"
and even though the learned Magistrate while recording the plea had mentioned the endorsement as "Insufficient Funds", but virtually it is "Account is Closed" and therefore this factum is not disputed by the learned counsel for the respondent also. Therefore, submitted that even though the cheque is returned by the bank with endorsement "Account is Closed", it attracts the penal provision under Section 138 of N.I.Act and this is rightly appreciated by the learned Magistrate. But, the Fast Track Court has wrongly construed the provisions of Section 138 of N.I.Act and passed order virtually amounting to discharging the respondent for the offence alleged. Therefore, in this regard, the learned counsel places reliance on the decision of the Hon'ble Supreme Court in the case of NEPC Micon Ltd. & Ors. Vs. Magma Leasing Ltd. reported in (1999) 4 SCC 253, wherein the Apex court was pleased to hold that even in the case of the cheque 6 is dishonored as account holder closes his account and from the said bank account if cheque is issued, it attracts the penal provision under Section 138 of N.I.Act. The learned counsel also places reliance on the judgment of Calcutta High Court in the case of Krishan Gupta & another vs. State of West Bengal & another reported in 2007 Crl.L.J.2502, on these grounds prays to allow the petition.
6. On the other hand, learned counsel for the respondent Sri. J.K. Bukka submits that closure of account cannot attract the criminal provisions under Section 138 of N.I.Act. The Fast Track Court has passed well considered order after following the dictum of this court in Nagaraja Upadhyaya's case. Under these circumstances, when account is closed and cheque is issued, it does not attract offence under Section 138 of N.I.Act. Therefore, the impugned order is perfectly justifiable and legal one and there is no need 7 to interfere with the order passed by the Fast Track Court. Further, the learned counsel for the respondent places reliance on the judgment of the Hon'ble Supreme Court in the case of Raghu Lakshminarayanan vs M/s. Fine Tubes reported in AIR 2007 SC 1634. Therefore submitted that this revision petition is devoid of merits and prays to reject the same.
7. In the present case, it is not disputed fact that the bank has issued endorsement that the "Account is Closed", therefore the cheque is not honored. There is no material at this stage whether the account is closed at the instance of the respondent or as per the rules prevailed in operating the account. It is submitted by both the learned counsel that the respondent has maintained Savings Bank account and the cheque is issued from the said Savings Bank account.
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8. Upon hearing the rival submission by both the sides, a short question that falls before this court and which to be decided in the present case is:
Whether the endorsement made by the bank while returning the cheque as "Account is Closed" attracts penal provision under Section 138 of N.I.Act?
9. The Fast Track Court had relied upon the judgment of this court in the case of Nagaraja Upadhya's case supra and held that the endorsement by the bank that "Account is Closed" does not attract the penal provision under Section 138 of N.I.Act. Upon careful perusal of the facts and circumstances and offence therein are that the accused maintained 'Current Account' and the closure of account is at the instance of the bank as per the rules of the bank. In the above stated case, the accused had not given instructions or issued notice to close his account. But the account is closed at the instance of the bank as per the rules prevailing. Under those circumstances, it was 9 held in that judgment that the accused was not having an intention to close the account and then issued the cheque. Therefore, this factual matrix in the above cited case makes different from the present case. But the Fast Track Court has wrongly relied on the above cited judgment without ascertaining the facts involved in the above case and the facts involved in the present case. Therefore, above stated judgment is not helpful in the present case as relied on by the learned counsel for the respondent.
10. In the present case, the facts as discussed above are that the respondent had maintained Savings Bank account and it is not the contention taken by the respondent that the bank had closed his account as per the rules prevailing Banking rules. But the respondent has issued cheque from the savings bank account which he had already closed his bank account. Therefore, due to this difference in the factual matrix, 10 the above cited ruling is not applicable in the case on hand.
11. Further, the Fast Track Court had relied upon the judgment of Bombay High Court in the case of Omprakash Bhojraj Maniyar vs. Swati Girish Bhide & Ors. [Crl.Rev.No.243-246/1991, DD: 10.01.1992], wherein it was observed that only upon two contingencies the penal provision under Section 138 of N.I.Act is applicable but the offence under Section 138 of N.I.Act is not applicable where the endorsement by the Bank is made as 'Account is Closed'. I am unable to accept the said observations made by the Bombay High Court for the reason that in view of the principle of law laid down by the Hon'ble Supreme Court in the case of NEPC Micon's case supra as relied upon by the learned counsel for the petitioner. In the said case the facts are that the NEPC Micon's supra had issued five cheques in favour of the respondent-Magma Leasing Ltd. dated 01.01.1997 and there afterwards the appellant had 11 closed their account by giving instructions to the Bank and accordingly the cheques presented to the bank by the respondent-Magma Leasing Ltd. were returned with endorsement as "Account Closed". Therefore, under these facts and circumstances, the Hon'ble Apex Court was pleased to laid down the principle of law at para-15 attracting the remark as account closed is also amounting to offence under Section 138 of N.I.Act and which is extracted as below:
"In view of the aforesaid discussion we are of the opinion that even though Section 138 is 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 shew 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 12 construed as to defeat tall attempts to do, or avoid doing, in an indirect or circuitous manner that which 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."
12. Therefore, as per the dictum of the Hon'ble Apex Court as above stated, even the bank issued remark while returning the cheque as "Account Closed"
also attracts the penal provision under Section 138 of N.I.Act. Further, the Calcutta High Court in Krishan Gupta's case supra the similar facts and circumstances are involved, it was held that even in case endorsement by the bank as "Account is Closed" while not honoring the cheque attracts penal provision under Section 138 of N.I. Act, at para-10 it is observed as follows;
"10. The submission of Mr. Bagchi that the cheque being drawn on a non est account, the same shall not attract the penal consequences of Section 138 of the Negotiable Instruments Act, if accepted 13 would completely frustrate the very object of insertion the said provisions by Banking, Public Financial Institutions and Negotiable Instrument Law (Amendment) Act, 1988. In any even, this is not a case of drawing of cheque on a defunct account but revalidation of cheque which was drawn on an existing account. The revalidation of cheque as in the instant case by extending the period of validity secure such cheque against loss of enforceability and sustain its validity."
13. In the present case, the respondent has maintained savings bank account and has issued cheque on 09.08.2007 and the respondent has closed savings bank account much prior on 03.04.2006. Therefore, prima facie the respondent had issued cheque from the savings bank account which he has already closed the account.
14. When the account is closed, then from the said account, cheque was issued, under these circumstances, if it is held penal provision under Section 138 of N.I. Act is not applicable, then it ridicules legislature intent and object of curbing such offences 14 occurring while in financial transactions. It is a matter of trial before the learned Magistrate whether the account is closed at the instance of the Bank or at the instance of the respondent by giving instructions to the bank. But, it is undisputed fact in the present case that the respondent had maintained savings bank account. Therefore, savings bank account normally cannot be closed unless there is an instruction from the account holder. Therefore, under these circumstances, the judgment of this court in Nagaraja Upadhya's case supra is not applicable in the present case. But, the Fast Track Court has wrongly relied on the judgment without making difference in facts involved in the case and has blindly followed the said judgment. When the facts in the above cited judgment is different and not applicable, placing reliance on the said judgment is not correct.
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15. The plain wordings of Section 138 of N.I.Act is that penalties in case of dishonor of certain cheques for insufficiency, etc. of funds in the account. It is not only for two contingencies, one is for insufficient of funds or because it exceeds the amount arranged to be paid from that account, but also where the cheque is dishonored for the reason "Account is closed" also attracts the penal provision under Section 138 of N.I. Act. In the present case, the closure of account and then drawing up of cheque from the said account prima facie attracts offence under Section 138 of N.I.Act. Therefore, in this regard the Hon'ble Apex court in the case of NEPC Micon's case supra has made interpretation and laid down principle of law that even in the case that the endorsement by the bank as "Account is Closed", the penal provision under Section 138 of N.I.Act is applicable. Therefore, the observations made by the Fast Track Court that offence under Section 138 of N.I. Act is not attracted in the case, 16 where the bank has issued endorsement that account is closed is not correct. Therefore, the order passed by the Fast Track Court is not in accordance with law and thus is liable to be set aside, accordingly, it is set aside and consequently the proceedings in C.C.No.553/2008 on the file of the Court of Prl. JMFC-II, Bidar is revived. Accordingly, the point raised is answered in the Affirmative. Hence, the following:
ORDER The Crl.R.P.No.2603/2012 filed by the petitioner is hereby allowed.
The order passed in
Crl.Rev.P.No.73/2009 dated 05.01.2011
passed by the court of Fast Tract-II, Bidar is hereby set aside.
Consequently, the proceedings in
C.C.No.553/2008 on the file of the
Prl. JMFC (II), Bidar is hereby restored on its Board and it is directed to proceed with the case and dispose of the case in accordance with law as expeditiously as 17 possible not later than six months from the date of receipt of copy of the order, keeping in view the case is of the year 2008.
Sd/-
JUDGE BL