Whether a cheque which has been dishonoured for grounds such as closure of account or stoppage of payment would attract punishment under Section 138.

 Whether a cheque which has been dishonoured for grounds such as closure of account or stoppage of payment would attract punishment under Section 138.

 

Section 138, N.I. Act suggests that only a drawer whose cheque is dishonored for insufficiency of funds or for exceeding arrangement with the bank is liable for prosecution. Thus, a question may arise as to whether a cheque which has been dishonoured for grounds such as closure of account or stoppage of payment would attract punishment under Section 138. The answer is found in the case of Laxmi Dychem v. State of Gujarat and Ors [(2012) 13 SCC 375] wherein the Supreme Court of India has categorically held that “The expression "amount of money...........is insufficient" appearing in Section 138, N.I. Act is a genus and dishonor for reasons such as"account closed", "payment stopped", "referred to the drawer" are only species of that genus and would attract penal liability under Section 138, N.I. Act.

When a cheque is returned under a caption “Kindly contact

Drawer /Drawee Bank and please present again” would it attract offence under Section 138.?

The Hon’ble Madras High Court in the case of Sathiya Murthi vs Kesava Narayanan [Crl.O.P No.10406 of 2019 and Crl.M.P Nos.5390 & 5391 of 2019 ]Decided on 24.0.2019, had an occasssion to deal with the above question and ultimately held as follows:

“5. The only ground that has been raised by the learned counsel for the petitioner is that, the cheque has been returned by the bank by requesting the respondent to contact the Drawer - Drawee Bank and present it again. The respondent without complying with the requisite has proceeded to file the complaint for an offence under Section 138 of the Negotiable Instrument Act.

It is true that the Hon'ble Supreme Court of India has held

that, for whatever reasons a cheque is returned, a complaint

can be maintained under Section 138 of the Negotiable Instruments Act and if such a purposeful interpretation is not given to the provision, it will defeat the beneficial legislation which wants to penalize the persons who fail to honour a cheque, after issuing the same.

6. However, in the facts of the present case, the concerned

bank has not returned the cheque on the ground of defect. It

has been returned by directing the respondent to contact a

concerned bank and present it again. In short, this

endorsement cannot be held to be dishonour of cheque.

In the considered view of this Court, the respondent without

complying with the requirements of the bank, ought not to

have proceeded to file a complaint under Section 138 of the

Negotiable Instruments Act. The Court below went wrong in

taking cognizance of the complaint.

7. In the result, proceedings in C.C.No.5476 of 2016 is

hereby quashed, accordingly this Criminal Original Petition

stands allowed. ‘’