LCI Learning

Share on Facebook

Share on Twitter

Share on LinkedIn

Share on Email

Share More

Account Blocked/Freezed can be prosecuted under 138 NI Act.

Page no : 2

madhu mittal (director)     03 July 2012

Respected Sir.

The follwoing citation and para may be helpful about freezing of a/c:

10. Mr. Sandeep Sethi also raised a plea that since the endorsement on the return memo was "account frozen., it did not amount in law to dishonour of cheque. This submission, in my view, is untenable. A bare reading of Section 138 of the N.I. Act will demonstrate the fallacy of this submission. Once a cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person is returned unpaid, there is a presumption drawn that it was issued for discharge of a valid debt or liability even though a rebuttable presumption. The payee, on receipt of notice from his banker that the cheque is returned unpaid, is required to issue a statutory demand notice within 15 days of such notice to the drawer, giving the drawer 15 days time to satisfy the demand from its communication.

MANU/DE/1125/2009

Equivalent Citation:

IN THE HIGH COURT OF DELHI

Crl. M.C. No. 1951/2009 and Crl. M.A. Nos. 7276-77/2009

Decided On: 24.07.2009

Appellants: Rajat Pharmachem Ltd. and Ors.
Vs.
Respondent: State Trading Corporation of India Ltd.

madhu mittal (director)     03 July 2012

Respected Sir.

The follwoing citation and para may be helpful about freezing of a/c:

10. Mr. Sandeep Sethi also raised a plea that since the endorsement on the return memo was "account frozen., it did not amount in law to dishonour of cheque. This submission, in my view, is untenable. A bare reading of Section 138 of the N.I. Act will demonstrate the fallacy of this submission. Once a cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person is returned unpaid, there is a presumption drawn that it was issued for discharge of a valid debt or liability even though a rebuttable presumption. The payee, on receipt of notice from his banker that the cheque is returned unpaid, is required to issue a statutory demand notice within 15 days of such notice to the drawer, giving the drawer 15 days time to satisfy the demand from its communication.

MANU/DE/1125/2009

Equivalent Citation:

IN THE HIGH COURT OF DELHI

Crl. M.C. No. 1951/2009 and Crl. M.A. Nos. 7276-77/2009

Decided On: 24.07.2009

Appellants: Rajat Pharmachem Ltd. and Ors.
Vs.
Respondent: State Trading Corporation of India Ltd.

shailendra patadia (director)     04 July 2012

the Rajat Pharma order of delhi high court is been challanged by the complainant in supreme court and more over i have sited the judgment of Raj kumar khurana judgment of supreme court where in that case the supreme court have said the the provision of invoking section 138 are limited to the cheque returened with endorsment for insufficient and for no other reason the 138 case can be filed kindly read the para 11 of the said judgment

shailendra patadia (director)     04 July 2012

here i have attached the judjment of supreme court in Raj kumar Khurana for your referance


Attached File : 450645776 raj kumar khurana vs. state of (nct of delhi) & anr. on 5 may 2009.pdf downloaded: 439 times

madhu mittal (director)     11 July 2012

Please reconsider your opinion after giving a fresh look on following decisions:

Ist decision:

(2) Recently, Hon'ble Supreme Court in Union of India & Others Vs S.K. Kapoor  {(2011) 4 SCC 589; Decided on 16.03.2011} held as follows (SCC Pp 591, para 9) :

 

“9.…………..It is well settled that if a subsequent co-ordinate bench of equal strength wants to take a different view, it can only refer the matter to a larger bench, otherwise the PRIOR DECISION OF A CO-ORDINATE BENCH IS BINDING ON THE SUBSEQUENT BENCH OF EQUAL STRENGTH. Since, the decision in S.N. Narula's case (S.N.Narula vs. Union of India & Others, Civil Appeal No.642 of 2004 decided on 30th January, 2004 {Order Cited now vide (2011) 4 SCC 591} was not noticed in T.V. Patel's case {(2007) 4 SCC 785}, the latter decision is a judgment per incuriam. The decision in S.N. Narula's case (supra) was binding on the subsequent bench of equal strength and hence, IT COULD NOT TAKE A CONTRARY VIEW, as is settled by a series of judgments of this Court.”

 

IInd decision:

 

29. We are of opinion that a pronouncement of law by a Division Bench of this Court is binding on a Division Bench of the same or a smaller number of Judges, and in order that such decision be binding, it is not necessary that it should be a decision rendered by the Full Court or a Constitution Bench of the Court. We would, however, like to think that for the purpose of imparting certainty and endowing due authority decisions of this Court in the future should be rendered by Division Benches of at least three Judges unless, for compelling reasons that is not conveniently possible.

MANU/SC/0619/1989

Equivalent Citation: AIR1989SC1933, [1989]66CompCas466(SC), [1989]178ITR548(SC), JT1989(2)SC427, 1989(2)KLT168(SC), 1989(1)SCALE1337, (1989)2SCC754, [1989]3SCR316, [1989]74STC313(SC)

IN THE SUPREME COURT OF INDIA

Civil Appeal Nos. 2839-40 of 1989 (From the Judgment and Order dated 6-12-1984 of the Delhi High Court in R.F.A. Nos. 113 and 114 of 1968), 834 and 835 of 1986, 4404 of 1985, 6667-6685 of 1983, Review Petition No. 671 of 1985 (in C.A. No. 1965 of 1984) and Writ Petition Nos. 204-06 of 1984 and 12832 of 1985

Decided On:16.05.1989

Appellants:Union of India (UOI) and Anr.
Vs.
Respondent:Raghubir Singh (Dead) by Lrs. Etc.

Hon'ble Judges:
R.S. Pathak, C.J., E.S. Venkataramiah, Ranganath Misra, S. Natarajan and Sabyasachi Mukharji, JJ.

 

IIIrd decision:

 

16. We see great force in the above submission because once the cheque is issued by the drawer a presumption under Section 139 must follow and merely because the drawee issues a notice to the drawee or to the Bank for stoppage of the payment it will not preclude an action under Section 138 of the Act by the draw or the holder of a cheque in due course. The object of CHAPTER XVII, which is intituled as "OF PENALTIES IN CASE OF DISHONOUR OF CERTAIN CHEQUES FOR INSUFFICIENCY OF FUNDS IN THE ACCOUNTS" and contains Sections 138 to 142, is to promote the efficacy of banking operations and to ensure credibility in transacting business through cheques. It is for this reason we are of the considered view that the observations of this Court in Electronics Trade & Technology Development Corporation Ltd., Secunderabad (supra) in paragraph 6 to the effect "Suppose after the cheque is issued to the payee or to the holder in due course and before it is presented for encashment, notice is issued to him not to present the same for encashment and yet the payee or holder in due course presents the cheque to the bank for payment and when it is returned on instructions. Section 138 does not get attracted", does not fit in with the object and purpose for which the above chapter has been brought on the Statute Book.

 

18. The aforesaid propositions in both these reported judgments, in our considered view, with great respect are contrary to the spirit and object of Sections 138 and 139 of the Act. If we are to accept this proposition it will make Section 138 a dead letter, for, by giving instructions to the Bank to stop payment immediately after issuing a cheque against a debt or liability the drawer can easily get rid of the penal consequences notwithstanding the fact that a deemed offence was committed. Further the following observations in para 6 in Electronics Trade & Technology Development Corporation Ltd., Secunderabad (supra). "..........Section 138 of the Act intended to prevent dishonesty on the part of the drawer of negotiable instrument to draw a cheque without sufficient funds in his account maintained by him in a bank and induce the payee or holder in due course to act upon it. Section 138 draws presumption that one commits the offence if he issues the cheque dishonestly" in our opinion, do not also lay down the law correctly.

 

MANU/SC/0171/1998

IN THE SUPREME COURT OF INDIA

Crl. A. Nos. 244-46 of 1998 (in SLP (Crl.) Nos. 680-682/97)

Decided On: 02.03.1998

Appellants: M/S Modi Cements Limited
Vs.
Respondent: Shri Kuchil Kumar Nandi

Hon'ble Judges:M.K. Mukherjee, S.P. Kurdukar and K.T. Thomas, JJ.

Subject: Commercial

Catch Words:
Agreement, Consideration, Intention, Interpretation, Limited Company, Negotiable Instrument, Presumption, Prima Facie

Acts/Rules/Orders:Negotiable Instruments Act, 1881 -- Sections 138, 139 and 142; Criminal Procedure Code, 1963 -- Section 482

IVth Decision:

9. Chapter XVII has five sections, which are as follows:

"138. Dishonour of cheques for insufficiency, etc., of funds in the account. -

15. Justice G.P. Singh on Principles of Statutory Interpretation (Fifth Edition), 1992, has stated, at pages 82 and 83, as follows:

"The rule which is also known as 'purposive construction' or 'mischief rule', enables consideration of four matters in construing an Act: (1) what was the law before the making of the Act, (ii) what was the mischief or defect for which the law did not provide, (iii) what is the remedy that the Act has provided, and (iv) what is the reason of the remedy'. The rule then directs that the courts must adopt that construction which 'shall suppress the mischief and advance the remedy'. The rule was explained in Bengal Immunity Co. v. State of Bihar, MANU/SC/0083/1955 : [1955]2SCR603 , by S.R. Das C.J. as follows:

'It is a sound rule of construction of a statute firmly established in England as far back as 1584 when Heydon's case [1584] 3 Co Rep. 7a, 7b, 76 ER 637 was decided that for the sure and true interpretation of all statutes in general (be they penal or beneficial, restrictive or enlarging of the common law) four things are to be discerned and considered:

1st - What was the common law before the making of the Act,

2nd - What was the mischief and defect for which the common law did not provide.

3rd - What remedy Parliament hath resolved and appointed to cure the disease of the commonwealth, and

4th - The true reason of the remedy;

and then the office of all the judges is always to make such construction as shall suppress the mischief, and advance the remedy, and to suppress subtle inventions and evasions for continuance of the mischief, and pro privato commodo and to add force and life to the cure and remedy, according to the true intent of the makers of the Act, pro bono publico'."

21. Apart from any one of the 21 reasons catalogued above, that is usually given by bank in the case of return of a cheque unpaid there may be a myriad of reasons, depending upon the contingency and exigency of the situation. Insufficiency of funds in the accounts may be a situation, which may be created either innocently or unknowingly by the drawer or may be a product of mischievous gimmicks, like "closure of account", countermanding the payment, etc., or even a situation wherein the bank dishonours the cheque since it has already instituted a suit against the drawer to recover the debt against his account. Further, insufficiency of funds may be indicated by various direct and indirect endorsements by the dishonouring bank, such as "insufficiency of funds", "refer to drawer", "funds expected, present again", "effects not cleared", etc. There may even be a Situation rather created in a mischievous or malicious fashion to see that the cheque issued by the drawer stands returned by the banker unpaid by subscripttion of the signature in such a way as not to tally with the specimen signature, just to purchase time to meet the demands made knowing fully well that on the date when the cheque had been drawn, there was insufficiency of funds in his account. For the outside world, it may appear that the reason for the return of the cheque unpaid, was the existence of suspicion as regards the genuineness of the cheque issued by the drawer. But the real reason is altogether different in such a situation. The drawer in a fraudulent way does the mischief of subscribing has signature totally in a different fashion to create a doubt as to the genuineness of the cheque so issued by him. He does it with a purpose, which is rather obvious. Such a trickery device could be adopted to stall the situation of not being in a position to meet the demand, in the sense of not having adequacy of funds in the account of the drawer, and by adoption of such a device, the payee had really been hoodwinked. Manifold situations may be created by a fraudulent drawer using all sorts of ingenuity to make it appear that the reason for the return of the cheque unpaid, was neither of the two contingencies contemplated by section 138 of the Act although in the real state of affairs, the reason for the return of the cheque unpaid was either of the two contingencies contemplated therein alone. We are, therefore, of the firm view that the reasons as given by the bank for the return of the cheque may not at all reflect the reality of the situation relatable to the sufficiency or otherwise of the funds in the accounts of the drawer or whethers it exceeds the amount arranged to be paid by the drawer by agreement with the bank.

22. Once a cheque is dishonoured, whatever be the reason therefor, it behoves upon the payee or the holder in due course to issue a notice in writing to the drawer of the cheque within 15 days from the date of such return intimating, as has been provided under the sanguine provisions adumbrated under clauses (b) and (c) to the proviso to section 138 of the Act, the factum of such return and requiring him to comply with the demand within 15 days from the date of receipt of the said notice and the demand so made, if not complied with, gives rise to a cause of action for the launching of the prosecution against such drawer and the cause of action so enured, lasts for a period of one month, enabling the aggrieved payee or holder in due course to file a complaint before the competent criminal court. The existence of such factors thus prima facie constitutes an offence under section 138 of the Act, requiring the case to be taken cognizance of by the competent court, before which the complaint had been filed. Cognizance of a complaint is capable of being taken by a competent court, provided the necessary and requisite averments constituting the offence complained of are made available in the complaint and nothing further, excepting the taking of a sworn statement from the complainant.

23. In the case of prosecution for an offence under section 138 of the Act, a moot question very often raised before courts is, as to whether averments regarding sufficiency or otherwise of funds in the account of the drawer, were to be made in the complaint. Divergent views emerge on such a question from various High Court, to which we have already adverted. The rationale or reasoning for the view that there should be specific averments in the complaint as to the insufficiency of funds before ever the case is taken cognizance of, we rather feel, is not reflecting the real import, purport or the intendment of section 138 of the Act. We have already adverted to as to what is necessary and requisite for a complaint to be taken cognizance of, in respect of an alleged offence under section 138 of the Act, i.e., the factum of dishonour of the cheque, whatever be the reason, which was issued in discharge of a debt or other liability in whole or in part, after its presentation within its period of validity of six months from the date of issue, whichever is earlier, coupled with the non-compliance with the drawer of the demand made upon him and the institution of prosecution within one month from such non-compliance. Such being the case, the non-mentioning in the complaint by way of a specific averments made therein as to the insufficiency of funds in the account of the drawer, is of no consequence and the question whether there was sufficiency of funds or not in the account of the drawer on the date when the cheque had been drawn, will be relevant only during the stage of trial and such a question is capable of being decided, with ease and grace, by the court on the adduction of evidence by utilising the salient provisions adumbrated under the provisions of the Bankers' Books Evidence Act, 1891. Once it is proved in the trial that bouncing of a cheque was due to lack of balance in the account of the drawer on the date when the cheque was drawn, then it goes without saying that the act of giving a cheque resulting in the bouncing of the cheque due to lack of balance in the account was an "absolute offence" even if it was done without any "criminal intent", inasmuch as no mens rea has been prescribed for the commission of such an offence: The non-prescripttion of any mens rea therein is rather obvious. The monetary blood flow in the arteries of trade and business heart cannot be permitted to be calcified by the dishonouring of the cheque by debtors. In this view of the matter, we are of the view that there is no necessity at all to make any specific averment in the complaint as to the insufficiency of funds in the account of the drawer on the date when the cheque was drawn, before ever such a complaint is taken cognizance of by a competent court.

24. In view of what has been stated above, we answer the two questions posed, as below:

(i) It shall be competent for a Magistrate to take cognizance of a private complaint, when the return by the bank of the cheque bears an endorsement of any of the contingencies or eventualities other than the ones mentioned in section 138 of the Negotiable Instruments Act.

(ii) Invoking the inherent power under section 482 of the Code of Criminal Procedure, is not permissible to put an end to the prosecution, merely because the averments in the complaint as relatable to insufficiency of funds, are not specifically mentioned, especially when the details as to the factum of dishonour of a cheque, whatever be its reason, issued in discharge of a debt or other liability, in whole or in part, after its presentation within its period of validity or six months from the date of such issue, whichever is earlier, coupled with the non-compliance with the drawer of the demand made on him and the institution of the prosecution within one month from such non-compliance, are all specifically mentioned in the complaint, as that alone will constitute the factors making out a prima facie case of an alleged offence under section 138 of the Act to be taken cognizance of by the competent court.

MANU/TN/0074/1994

Equivalent Citation: [1995]83CompCas853(Mad)

IN THE HIGH COURT OF MADRAS

Criminal Original Petition No. 7002 of 1992

Decided On: 19.10.1994

Appellants: J. Veeraraghavan
Vs.
Respondent: Lalith Kumar

Hon'ble Judge:
Janarthanam and Thangamani, JJ.

Counsels:
For Appellant/Petitioner/Plaintiff: S. Venkatesan, Adv.

For Respondents/Defendant: A. Packiaraj, Adv.

Subject: Company

Acts/Rules/Orders:
Negotiable Instruments Act, 1881 - Section 138

shailendra patadia (director)     12 July 2012

the case of aneeta hada was refered to a larger bench in supreme court where the court was considering  the matter where a director was made any accused whithout the company been made an accused  and in that case  the three judge have observed that the law have to be strictly fallowed the observation are as below :

41. It will be seemly to quote a passage from Maxwells The Interpretation of Statutes (12th Edition) : -The strict construction of penal statutes seems to manifest itself in four ways: in the requirement of express language for the creation of an offence; in interpreting strictly words setting out the elements of an offence; in requiring the fulfilment to the letter of statutory conditions precedent to the infliction of punishment; and in insisting on the strict observance of technical provisions concerning criminal procedure and jurisdiction.

42. We have referred to the aforesaid passages only to highlight that there has to be strict observance of the provisions regard being had to the legislative intendment because it deals with penal provisions and a penalty is not to be imposed affecting the rights of persons

 

 

Further in case of nimish thakore v/s mandvi co-op bank the supreme court have observed in para 33 onwards as below  :

"14. ...it is not the duty of the court either to enlarge the scope of the legislation or the intention of the legislature when the language of the provision is plain and unambiguous. The court cannot rewrite, recast or reframe the legislation for the very good reason that it has no power to legislate. The power to legislate has not been conferred on the courts. The court cannot add words to a statute or read words into it which are not there. Assuming there is a defect or an omission in the words used by the legislature the court could not go to its aid to correct or make up the deficiency. Courts shall decide what the law is and not what it should be.

The court of course adopts a construction which will carry out the obvious intention of the legislature but could not legislate itself. But to invoke judicial activism to set at naught the legislative judgment is subversive of the constitutional harmony and comity of instrumentalities...."

34. In Raghunath Rai Bareja and Anr. vs. Punjab National Bank and Ors., (2007) 2 SCC 230 while observing that it is the task of the elected representatives of the people to legislate and not that of the Judge even if it results in hardship or inconvenience, Supreme Court quoted in affirmation, the observation of Justice Frankfurter of the US Supreme Court which is as

follows:

"41. As stated by Justice Frankfurter of the US Supreme Court (see "Of Law and Men: Papers and

addresses of Felix Frankfurter") "Even within their area of choice the courts are not at large. They are confined by the nature and scope of the judicial function in its particular exercise in the field of interpretation. They are under the constraints imposed by the judicial function in our democratic society. As a matter of verbal recognition certainly, no one will gainsay that the function in construing a statute is to ascertain the meaning of words used by the legislator. To go beyond it is to usurp a power which our democracy has lodged in its elected legislature. The great judges have constantly admonished there bretheren of the need for discipline in observing the limitations. A judge must not rewrite a statute, neither to enlarge nor to contract it. Whatever temptations the statesmanship of policy- making might wisely suggest, construction must eschew interpolation and evisceration. He must not read in by way of creation. He must not read out except to avoid patent nonsense or internal contradiction."

35. In Duport Steels Ltd. vs. Sirs, [1980] 1 All ER 529, 534, Lord Scarman expounded the legal position in the following words: "But in the field of statute law the judge must be obedient to the will of Parliament as expressed in its enactments. In this field Parliament makes and unmakes the law. The judge's duty is to interpret and to apply the law not to change it to meet the judge's idea of what justice requires. Interpretation does, of course, imply in the interpreter a power of choice where differing construction are possible. But our law require the judge to choose the construction which in his judgment best meets the legislative purpose of the enactment. If the result be unjust but inevitable, the judge may say so and invite Parliament to reconsider its provision.

 

and this what was also said by the supreme court in case of rajkumar kurana which i have quoted earlier that when the law have limited it purpose to an extent in case of cheque bounce case to insufficient funds then the law cannot be streched and the provisions cannot be invocked for any other reason for the very reason that it has been specificaly said in the provision of 138 that provided the cheque have been return unpaid for reasons in sufficiant funds and no other reasons have been laid down in the act as while the act was made the parlment was fully aware that cheques get return for many reasons but it chose only the catagory of cheque that returned un paid for insufficiant of funds only as in comercial transaction there can be verious condition of dishnour of cheque but each and every cause of return was not intended by the parlment  further the supreme court

 

more over the judgment of modi cement and all other judgmet reffered are for  stop payment  or account closed but the issue involved here in is of a case where the account were blocked/ freezed  . 

madhu mittal (director)     12 July 2012

Respected Sir,

In IVth decision, I have refered the heading is important:

 

9. Chapter XVII has five sections, which are as follows:

"138. Dishonour of cheques for insufficiency, etc., of funds in the account. -

 

Vth Decision:

 

7. That apart, in the following judgments also, the concerning Courts have concluded that reasons for dishonour of cheque are wholly irrelevant and cannot be taken into account. Once the cheque is issued by the drawer, a presumption under Section 139 must follow and despite presentation of the cheque in the bank and thereafter issuing a notice of demand, the amount remained unpaid, the drawer of the cheque can be held responsible under Section 138 of the Act. The judgments are,

1. Modi Cements Ltd. v. Shri Kuchil Kumar Nandi MANU/SC/0171/1998 : 1998CriLJ1397 .

2. Rakesh Nemkumar Porwal v. Narayan Dhondu Joglekar and Anr. 1993 Cri LJ 680 (Bom).

3. Devendra Singh v. Varinder Singh 1998 II MPWN 60.

8. In view of the law laid down in the aforementioned judgments, petition being devoid of merits, deserves to be dismissed. Hence, it is dismissed.

MANU/MP/0111/2007

Equivalent Citation: 2007CriLJ2500, I(2008)BC57,2007(2)MPLJ510

IN THE HIGH COURT OF MADHYA PRADESH (GWALIOR BENCH)

Decided On: 14.02.2007

Appellants: Yogendra Kumar Gupta
Vs.
Respondent: Ram Prakash Agrawal

Hon'ble Judges:
B.M. Gupta, J.

Subject: Criminal

Subject: Banking

Disposition:
Petition dismissed

shailendra patadia (director)     12 July 2012

the decission which you have refered are the judgment where in which the courts were deciding the intention of accused to avoid the procution under section 138 and had managed to get endorsment on their returm memo or had sent stop payment letters to the banks and the complainant  no where it can be indicated that the courts were aslo asuming that the were considering the case where in the cheque were returned for account blocked / freezed the judjument are to be read in whole for which they were considered apart from that there are catena of judgment of bombay high court delhi high court where they have considered that if the return of the cheques were beyond the contol of the accused he could not be forced to face the trial such judgments are m.l.gupta v/s ceat financials delhi high court  and hasmukh tarachand v/s Ishwarchand Vasisthanarayanchand bombay high court

madhu mittal (director)     12 July 2012

Respected Sir,

in Vth decision, it was clearly stated that reason of cheque dishonour of irrelavant, and even after receiving notice, if drawer does not pay, the case will come under section 138. 

Now take example of any case of dishonour of cheque is beyond the control of drawer, o.k., no problem, if after receiving the notice, if drawer pays, no cause of action u/s 138 N I Act, but if doen not pay now also, the matter will come u/s 138 N I Act for whatever reason the cheque returned unpaid by the banker.

shailendra patadia (director)     12 July 2012

the proceedings under negotiable instrument act are not recovery proceedings for that a civil case has to be filed

if the dishonour of the cheque is for other then the reasons mentioned in the act then where dose the question of comply with the provision to pay with in fifteen days of the receipt of the notice arises the judgment you are relying is not for the account blocked / frezeed the judgment are to be read in whole and not part which favours our case the judjment was rendered for stop payment of the cheque as not relevent to account frezeed / blocked

shailendra patadia (director)     18 November 2014

Yes there are judgments on this issue saying that in case where account is blocked freezed they are not covered under the138 negotiable instrument act

G Rama   23 April 2016

Hi friends If I present the in my account it was returned with endorsement that account is closed can I file a nN I act case against that person

G Rama   23 April 2016

Hi friends If I present the in my account it was returned with endorsement that account is closed can I file a nN I act case against that person

Roshan Yadav   20 June 2016

Does Account Blocked attracts offence u/s 138 of N.I. Act. If so plz help me out in relevent citiations.

 

Adv D P Jindal (Advocate)     11 November 2018

But when the legal notice is given and time is provided to pay the amount, then how does not fall under 138. Please advise


Leave a reply

Your are not logged in . Please login to post replies

Click here to Login / Register  


Related Threads


Loading