If the cheque towards advance payment is dishonoured, it will not give rise to criminal liability under Section 138 of the act: Jharkhand High Court

IN THE HIGH COURT OF JHARKHAND AT RANCHI Cr. Revision No. 1512 Rang Lal Ram son of Late Jitan Ram resident of Industrial Area Balidih P.O. Balidih P.S. Marafari District Bokaro 1. The State of Jharkhand 2. Balmiki Choudhary son of Late Indradeo Choudhary resident of Azad Nagar P.O. Shivandih P.S. Marafari District Bokaro … Opp. Parties … … … CORAM: HON’BLE MRS. JUSTICE ANUBHA RAWAT CHOUDHARY Mr. A. K. Sahani Advocate For the Petitioner For the Opp. Party State : Mr. P. D. Agarwal Advocate For the Opp. Party No. 2 : Mr. Sanjay Kumar Advocate C.A.V. on 05.03.2021 Pronounced on 16.03.2021 Heard Mr. A. K. Sahani learned counsel appearing on behalf of the petitioner. of opposite party State. of opposite party No. 2. Heard Mr. P. D. Agarwal learned counsel appearing on behalf Heard Mr. Sanjay Kumar learned counsel appearing on behalf This revision has been filed for the following reliefs: “This criminal revision has been filed challenging the judgment dated 01.02.2012 passed by learned Sessions Judge Bokaro in Cr. Appeal No. 81 of 2011 whereby he has affirmed the judgment of conviction and the order of sentence dated 28.07.2011 passed by the learned Judicial Magistrate 1st Class Bokaro in C.P. Case No. 434 of 2004 whereby the petitioner has been convicted for the offence under Section 138 of the Negotiable Instruments Act 1881 and has been sentenced to pay a fine of Rs. 1 20 000 out of which Rs. 60 000 has been directed to be given to the complainant opposite party No. 2 by way of compensation and in default of payment of fine he has been directed to undergo simple imprisonment for a period of six months.” Arguments of the petitioner Learned counsel for the petitioner submits that it was the specific case of the complainant himself that he was to invest in the business of the accused and in lieu of that he would be entitled to get 40% profit. He further submits that there have been no accounts regarding profit and the cheques were issued only by way of security and not against any existing debt or liability. The further point which has been argued by the learned counsel for the petitioner is that it is come in the trial court’s judgment that the notice was served upon the son of the petitioner and therefore it is submitted that the notice was not served upon the petitioner. He submits that these aspects of the matter have not been properly considered by the learned courts below and accordingly both the judgments are perverse and fit to be set Learned counsel for the petitioner has relied upon the judgment passed by the Hon’ble Supreme Court reported in12 SCC 539 para 12 onwards. Arguments of the opposite party State Learned counsel appearing on behalf of opposite party State has relied upon a judgment passed by the Hon’ble Supreme Court reported in14 SCC 750 to submit that there is no illegality or perversity in the impugned judgments passed by the learned courts below regarding finding of service of notice upon the petitioner. He submits that there can be a number of ways in which the accused can avoid service of notice and in such situation the Hon’ble Supreme Court has held that the moment the accused appears before the learned court below he has an opportunity to pay the amount by stating that he had not received the notice regarding bouncing of cheque. He further submits that there is no scope for re appreciation of evidence particularly when the notice as per the petitioner himself was served upon his son who was residing with him. Arguments of the opposite party No. 2 Learned counsel appearing on behalf of opposite party No. 2 submits that the learned courts below have rightly appreciated the materials on record and have come to concurrent findings of fact that all the basic ingredients for offence under Section 138 of the Negotiable Instruments Act 1881 have been satisfied and accordingly there is no scope for re appreciation of evidence and coming to a different finding. He further submits that otherwise also there is presumption of law in connection with existing debt when a cheque is issued and the reverse burden has not been discharged by the petitioner. He submits that there is no illegality and perversity in the impugned judgments and therefore the present petition is fit to be Findings of this Court The prosecution case in brief is that the accused in the month of February 2003 approached the complainant for financial accommodation as the accused was going to receive two work orders. The accused agreed to give to the complainant 40% of the profit to be accrued out of said purchase orders. The complainant advanced Rs. 1 00 000 to the accused for carrying out the job but the accused did not pay back the money to the complainant and in the first week of January 2004 on the request of the complainant the accused issued a cheque of Rs. 49 500 dated 31.01.2004 and promised to pay rest of the amounts in installments within March 2004. The said cheque was deposited in the bank on 07.02.2004 but the same was dishonored on account of “insufficient fund”. On receipt of aforesaid information the complainant immediately met the accused at his residence and told him about the dishonor of the cheque. The accused requested the complainant not to take any legal action and issued a fresh cheque of Rs. 55 000 with a request not to produce the same in the bank till first week of March 2004. On 10.03.2004 another cheque was issued by the accused amounting to Rs. 5 000 . The complainant was requested by the accused to deposit the said two cheques of Rs. 55 000 and Rs. 5 000 after 21.03.2004. On 28.03.2004 the accused requested the complainant not to produce the said cheques before the bank for encashment as the accused was unable to arrange sufficient funds. Thereafter the complainant received a letter from the accused intimating the complainant that cheque issued by the accused was issued as a security and the accused asked for another Rs. 50 000 for investment. After receiving the said letter dated 27.03.2004 of the accused the complainant met the accused at his residence on 07.04.2004 and the accused informed the complainant that he wrote the letter dated 27.03.2004 on wrong advice of his friend and the accused sought three months from the complainant for depositing sufficient fund in his bank account. On 30.07.2004 the accused informed and confirmed that there are sufficient funds available in his bank account . Accordingly the complainant deposited the said two cheques dated 16.02.2004 and 10.03.2004 for an amount of Rs. 55 000 and Rs. 5 000 respectively which were dishonored on 02.08.2004 on account of “insufficient fund”. The complainant issued notice to the accused through his Advocate on 17.08.2004 informing about dishonor of cheques and for payment within 15 days. The said notice was sent to the accused through registered post as well as through courier service. Further case of the complainant is that both the letters were served upon the accused on 19.08.2004 and thereafter more than 15 days had elapsed and the accused did not pay the cheque amounts to the complainant hence the complaint petition was filed. 10. The learned Chief Judicial Magistrate Bokaro summoned the accused on 16.02.2005 to face trial for offence under Section 418 of Indian Penal Code and Section 138 of Negotiable Instruments Act 1881 and subsequently charges were also framed under Section 418 of IPC and Section 138 of Negotiable Instruments Act after recording the evidence before charge. The charges were read over and explained to the accused to which he pleaded not guilty and claimed to be tried. 11. The complainant had examined altogether two witnesses and exhibited the following materials as exhibits: Cheque No. 0265373 dated 30.01.2004 marked as ii) Memorandum issued by Vijaya Bank relating to Cheque No. 265373 dated 30.01.2004 of Rs. 49 500 marked as iii) Deposit slip of cheque No. 265373 marked as Exhibit 1 iv) Cheque No. 265372 dated 16.02.2004 of Rs. 55 000 marked asv) Memorandum issued by Vijaya Bank relating to cheque No. 265371 dated 10.03.2004 of Rs. 5 000 and cheque No. 265372 dated 16.02.2004 of Rs. 55 000 marked as Exhibit 2 1) vi) Deposit slip of cheque No. 265372 in Canara Bank marked asvii) Cheque No. 265371 marked asviii) Deposit slip of cheque No. 265371 in Canara Bank Bokaro Steel City Branch marked asix) The letter dated 27.03.2004 of accused Ranglal Ram written to the complainant Balmiki Chaudhary marked as Exhibit 4) x) Legal notice issued by the complainant to the accused Ranglal Ram marked asxi) Letter issued by the learned Advocate of the complainant to the Sub Post Master Sub Post Office Balidih Bokaro Steel City Bokaro marked as12 SCC 539it was held that payment through cheque in the nature of advance payment indicated that at the time of drawl of the cheque there was no existing liability and accordingly in such circumstances no case under section 138 of Negotiable Instruments Act 1881 can be made out. In the instant case the specific case of the complainant was that he was to invest in the business of the accused and in lieu of that it was agreed he would be entitled to get 40% of the profit and subsequently the accused inter alia issued the aforesaid two cheques. Admittedly in the present case the accused has not led any defence evidence. This Court is of the considered view that considering the nature of transactions between the parties and read with the presumption under Section 139 of the Negotiable Instruments Act that the cheque was issued against discharge of existing debt or other liability the argument of the petitioner that the same was issued by way of security has no legal basis and accordingly this Court finds that the accused could not discharge his onus against the presumption of cheque having been drawn in discharge of liability. 20. This Court further finds that so far as the other point raised by the petitioner that there have been no accounts regarding profit and the cheques were issued only by way of security and not any existing debt is concerned the same is also fit to be rejected. This Court finds that the learned court below has dealt with the plea of the petitioner regarding applicability of Sections 138 to 142 of the N.I. Act and in view of the presumption raised under Section 139 of the N.I. Act the aforesaid plea of the petitioner has no legal basis. Admittedly the petitioner did not adduce any defence evidence. There is no material on record to show that the reverse burden upon the petitioner regarding the cheque having been issued against a debt or any liability has not been discharged at all and therefore the presumption under section 139 of Negotiable Instruments Act 1881 remained intact. Accordingly both the points which have been raised by the petitioner during the course of argument are devoid of any merit and are hereby rejected in absence of any perversity or illegality in the impugned judgments passed by the learned courts below. 22. This Court finds that the learned courts below have not committed any error illegality or perversity in convicting the petitioner for bouncing of the aforesaid two cheques. 23. Accordingly this revision petition is dismissed. 24. The bail bonds furnished by the petitioner is hereby cancelled. 25. Let the records be sent back to the court concerned. 26. Let this order be communicated to the learned court below through FAX e mail. Mukul 

Summary: Payment by check in the form of an advance payment has been stated, that there was no outstanding liability at the time the check was drawn. As a result, no case under section 138 of the Act may be brought under the Negotiable Instruments Act, 1881. The High Court of Jharkhand in the case of Rang Lal Ram vs The State of Jharkhand [Cr. Revision No. 156 of 2012] by Single Bench consisting of Hon’ble Shri Justice Anubha Rawat Choudhary. The facts of the case are that the accused approached the complainant for financial accommodation. The accused agreed to give to the complainant 40% of the profit to be accrued out of said purchase orders accused and issued a cheque of Rs. 49,500/. But the same was dishonoured on account of insufficient fund. Further, the said notice was sent to the accused through the registered post as well as through courier service. Learned counsel for the petitioner submits that it was the specific case of the complainant himself that he was to invest in the 2 business of the accused and in place of that, he would be entitled to get 40% profit. He further submits that there have been no accounts regarding profit and the cheques were issued only by way of security and not against any existing debt or liability. The further point which has been argued by the learned counsel for the petitioner is that it has come in the trial court’s judgment that the notice was served upon the son of the petitioner and therefore it is submitted that the notice was not served upon the petitioner, and accordingly both the judgments are perverse and fit to be set aside. Learned counsel for the respondents submits that that there is no illegality or perversity in the impugned judgments passed by the learned courts below regarding finding of service of notice upon the petitioner. He submits that there can be several ways in which the accused can avoid service of notice and in such a situation, he has an opportunity to pay the amount by stating that he had not received the notice regarding bouncing of a cheque. He further submits that there is no scope for re-appreciation of evidence particularly when the notice as per the petitioner himself was served upon his son who was residing with him. Relying on the Apex court judgment Indus Airways Private Limited and Others vs. Magnum Aviation Private Limited and Another, it was held that “if the cheque towards advance payment is dishonoured, it will not give rise to criminal liability under Section 138 of the act.”