HON’BLE SRI JUSTICE B.SESHASAYANA REDDY CRIMINAL PETITION Nos. 3041, 3042 & 3045 of 2008 COMMON ORDER: Since these three criminal petitions are between the same parties and they arise out of the same transaction, I deem it appropriate to dispose of them by this common order. 2. The 1st respondent is a partnership firm having its registered office at Nellore. The petitioner requested the 1st respondent-complainant in the year 1999 to provide loan for his business necessities and thereupon, the 1st respondent arranged various amounts to the petitioner over a period of three years. The petitioner became indebted to the 1st respondent-complainant as on 31-3-2003 an amount of Rs.2,30,00,000/-. The petitioner executed promissory notes promising to liquidate outstanding liability with interest at 24% per annum. The petitioner made a part payment of Rs.6,000/- by way of cash to the 1st respondent-complainant on 1-1-2006 towards the amount due under the promissory notes. The petitioner also issued 14 post-dated cheques for Rs.10,00,000/- each towards the amount due under various promissory notes. The 1st respondent-complainant presented six cheques bearing Nos. 515988 to 515993 for a total amount of Rs.60,00,000/-. The said cheques came to be returned on 22-02-2007 with cheque return Memos dated 09-02-2007 endorsing as “Account Closed”. Seven cheques bearing Nos. 020413, 020416, 020419, 020422 and 020423 dated 02-02-2007 drawn on Oriental Bank of Commerce, Vijayawada for a total amount of Rs.70,00,000/- were also returned on 22-2- 2007 with Cheque Return Memos dated 17-2-2007 endorsing as “Account Closed”. The 1st respondent-complainant got issued a notice through registered post on 14-03-2007 under Section 138 of Negotiable Instruments Act calling upon the petitioner-accused to make good the amount covered under the cheques in question. The petitioner-accused received the said notice on 22-3- 2007 and issued reply denying his liability. Hence he presented a complaint before the XI Addl.Chief Metropolitan Magistrate, Civil Courts Compound, at Secunderabad in respect of 13 cheques. The learned Magistrate took the complaint on file as CC No. 460 of 2007. The 1st respondent-complainant also filed a complaint in the Court of I Addl.Chief Metropolitan Magistrate, City Criminal Courts Complex, Redhills, Nampally at Hyderabad in respect of eight cheques bearing Nos. 515982 to 515987 and 515994 and 515995 drawn on HDFC Bank, Vijayawada. The said eight cheques got returned with an endorsement ‘Account Closed’. The learned Magistrate took the complaint on file as CC No.528 of 2007. The 1st respondent-complainant also filed a complaint before the XI Additional Chief Metropolitan Magistrate, Civil Courts Compound, at Secunderabad in respect of five cheques bearing Nos. 515996, 515997, 515998, 515999, 516000 for Rs.10,00,000/- each drawn on H.D.F.C Bank, Vijayawada. The said cheques also got returned with an endorsement ‘Account Closed’. The learned Magistrate took the complaint on filed as CC No. 465 of 2007. Hence, these criminal petitions. 3. Heard learned counsel appearing for both the parties. 4. Learned counsel appearing for the petitioner submits that the petitioner presented 14 cheques earlier and of them 10 cheques came to be dishonoured on the ground of ‘account closed’ and there upon the 1st respondent initiated proceedings in the year 2004 before the concerned court and those cases are for trial on the file of Judicial First Class Magistrate, Kurnool as CC Nos. 973 of 2005 and 978 of 2005. A further submission has been made that the 1st respondent-complainant knew well as on the date of presentation of the next series of 26-cheques that the account had already been closed, it cannot be said that the ingredients of Sec. 138 of Negotiable Instruments Act, 1881 (for short ‘the Act’) have been made out. 5. Per contra, the learned counsel appearing for the respondent No.1- complainant submits that once the cheques are returned on the ground of account closed, it gives cause of action for the payee to initiate criminal proceedings U/sec. 138 of the Act. In support of his submission, reliance has been placed on NEPC MICON LTD., AND OTHERS[1]. Much reliance has been placed on para Nos. 7 and 8 of the Judgment and it reads thus: “7. Further, the offence will be complete only when the conditions in provisos (a) (b) and (c) are complied with. Hence the question is, in a case where a cheque is returned by the bank unpaid on the ground that the “account is closed” would it mean that the cheque is returned as unpaid on the ground that ‘the amount of money standing to the credit of that account is insufficient to honour the cheque”? In our view, the answer would be obviously be in the affirmative because the cheque is dishonoured as the amount of money standing to the credit of “that account” was “nil” at the relevant time apart from it being closed. Closure of the account would be an eventuality after the entire amount in the account is withdrawn. It means that there was no amount in the credit of “that account” on the relevant date when the cheque was presented for honouring the same. The expression “the amount of money standing to the credit of that account is insufficient to honour the cheque” is a genus of which the expression “that account being closed” is a specie. ; after issuing the cheque drawn on an account maintained, a person, if he closes “that account” apart from the fact that it may amount to another offence, it would certainly be an offence under Section 138 as there was insufficient or no fund to honour the cheque in “that account”. Further the cheque is to be drawn by a person for payment of any amount of money due to him “on an account maintained by him” with a banker and only on “that account” the cheque should be drawn. This would be clear by reading the section along with provisos (a) (b) and (c). 8. Secondly, proviso (c) gives an opportunity to the drawer of the cheque to pay the amount within 15 days of the receipt of the notice as contemplated in proviso (b). Further Section 140 provides that it shall not be a defence in prosecution for an offence under Section 138 that the drawer has no reason to believe when he issued the cheque that the cheque may be dishonoured on presentment for the reasons stated in that section. Dishonouring the cheque on the ground that the account is closed is the consequence of the act of the drawer rendering his account to a cipher. Hence reading sections 138 and 140 together, it would be clear that dishonour of the cheque by a bank on the ground that the account is closed would be covered by the phrase “the amount of money standing to the credit of that account is insufficient to honour the cheque.” 6. Indisputably, the 1st respondent filed complaints against the petitioner herein for the offence punishable U/sec. 138 of the Act in respect of earlier set of 14-cheques which were issued in the year 2003-2004 on the same banks, on which the present set of cheques were drawn. The set of 14-cheques issued earlier came to be dishonoured on the ground of account closed and thereupon complaints have been filed against the petitioner and they are pending trial in the court of Judicial I Class Magistrate, Kurnool. The 1st respondent stated in the present set of complaints relatable to 26-cheques that the cheques were issued on 01.01.2006. The relevant portion of the complaint filed in CCNo. 528 of 2007 on the file of the I Addl.Chief Metropolitan Magistrate, Hyderabad, reads thus: “E. The complainant further submits upon continuous demands, the accused however handed over 14 cheques of each forRs.10,00,000/- and requested the complainant to realize the amount and credit to his outstanding account. When the said cheques were presented for realization, those were dishonoured and complaints under section.138 of Negotiable Instruments Act. 1881 filed and the same were pending against Accused at Kurnool. F. The complainant further submits that again on D/o 1st January, 2006 the accused furnished 26 cheques each for Rs.10,00,000.00 to the complainant towards partial discharge of the total outstanding amount as on 1st January, 2007” 7. The series of cheques which are the subject matter of earlier complaints and the series of cheques which are the subject matters of the present complaints indicate that they were handed over to the 1st respondent- complainant on one and the same date. The 1st respondent knew well as on the date of presentation of second set of 26 cheques, the earlier sets of cheques were dishonoured on the ground of “account closed”. Knowing fully well of the closure of the accounts, the 1st respondent-complainant presented the second series of cheques. The assertion of the 1st respondent-complainant that the second set of cheques were issued on 02-01-2006 on the very face of it is unsustainable, in which case continuation of proceedings arise out of the second series of cheques amounts to abuse of process of court. 8. Accordingly, the criminal petition is allowed quashing the proceedings initiated against the petitioner-accused in CC Nos. 528 of 2007, 460 of 2007 and 465 of 2007 on the file of the I Addl.Chief Metropolitan Magistrate, Hyderabad ____________ 12-08-2010 Mjl/* [1] (1999)4 Supreme Court Cases 253