Case: I.C.D.S. Ltd Vs. Beena Shabeer

The appellant herein is a Company incorporated under the provisions of the Companies Act, 1956, having its registered and administrative office at Syndicate House, P.B. No. 46, Upendra Nagar, Manipal-576119 and branches among other places at Palayam, Trivandrum. The husband of respondent No. 1 entered into a hire-purchase agreement with the appellant for the purposes of the purchase of a Maruti car on hire purchase basis. The respondent No. 1, his wife stood as a guarantor in respect of the hire purchase facilities being made available to her husband. The facts further reveal that the respondent No. 1, on account of the aforesaid transaction and towards part payment issued a cheque bearing No. 672501 dated 29-8-1998 for Rs. 80,490.00 drawn on Catholic Syrian Bank Limited, St. Marys School, Pattom, Trivandrum to the Appellant. Admittedly, the said cheque was dishonoured and returned to the appellant with a remark "insufficient funds".(7) The factual matrix depict that the appellant issued a statutory notice on 2-9-1998 as contemplated under Section 138 of the Negotiable Instruments Act, calling upon the respondent No. 1 to pay the amount covered under the cheque within a period of 15 days and since the respondent No. 1 did not think it fit and proper to reply to the said notice in spite of receipt thereof, the appellant thereafter filed a complaint under Section 138 of the Act before the Chief Judicial Magistrates Court, Thiruvananthapuram. The complaint has been registered as S. T. No. 141/1999 in the Court of the Additional Chief Judicial Magistrate, Thiruvanantha-puram and subsequently the case was taken on file for the purposes of the complaint and immediately thereafter, the respondents herein moved a petition under Section 482 of the Code of Criminal Procedure for quashing of the complaint and the proceedings noticed above pending before the Additional Chief Judicial Magistrates Court, Thiruvananthapuram.(8) The High Court, as noticed above, did allow the Petition upon a categorical finding that being a cheque from the guarantor it could not be said to have been issued for the purpose of discharging any debt or liability and the complaint under Section 138 of the Negotiable Instruments Act, 1881, thus cannot be maintained.(9) As noticed hereinbefore, the principal reason for quashing of the proceeding as also the complaint by the High Court was by reason of the fact that Section 138 of the Act provides for issuance of a cheque to another person towards the discharge in whole or in part of any debt or liability and on the factual context, the High Court came to a conclusion that issuance of the cheque cannot be co-related for the purpose of discharging any debt or liability and as such complaint under Section 138 cannot be maintainable.

Court's reasoning:
(11) The issue as regards the co-extensive liability of the guarantor and the principal debtor, in our view, is totally out of the purview of Section 138 of the Act, neither the same calls for any discussion therein. The language of the Statute depicts the intent of the law-makers to the effect that wherever there is a default on the part of one in favour of another and in the event a cheque is issued in discharge of any debt or other liability there cannot be any restriction or embagro in the matter of application of the provisions of Section 138 of the Act : Any cheque and other liability are the two key expressions which stands as clarifying the legislative intent so as to bring the factual context within the ambit of the provisions of the Statute. Any contra interpretation would defeat the intent of the legisalture. The High Court, it seems, got carried away by the issue of guarantee and guarantors liability and thus has overlooked the true intent and purport of Section 138 of the Act. The judgments recorded in the order of the High Court do not have any relevance in the contextual facts and the same thus does not lend any assistance to the contentions raised by the respondents.(12) It is to be noted, however, that both the parties during the course of arguments have made elaborate submissions on Sections 126 and 128 of the Contract Act, but in our view, by reason of the specific language used by the legislature, question of consideration of the matter from the point of view of another Statute would not arise, neither we would like to express any view since that may have some effect as regards the merits.(13) In our view the High Court fell into a manifest error and as such the judgment impugned cannot obtain our concurrence.