Case Note & Summary
The appellant, Ashish Parikh, proprietor of Parikh Investments, filed a criminal application seeking leave to appeal against an order of acquittal passed by the learned Special Metropolitan Magistrate, Mumbai, in Case No. 538/SS/05 for an offence under Section 138 of the Negotiable Instruments Act, 1881. The appellant alleged that the respondent-accused, Ashit Vinod Shah, had issued two cheques of Rs. 9 lakh each towards part-payment of outstanding dues for purchases made. On 25 April 2005, the appellant deposited both cheques, but the drawee bank returned them unpaid with the endorsement 'attachment received from Crime Branch'. Despite service of a statutory notice demanding payment, the accused failed to pay within the statutory period. The trial court acquitted the accused, holding that there was no evidence to show that the cheque was dishonoured for want of sufficient funds or sufficient arrangement. The appellant's counsel conceded that there was no evidence of insufficient funds but argued that since the account was attached by the Crime Branch, the accused should have made payment upon receiving the statutory notice, and failure to do so should render him guilty under Section 138. The court examined the ingredients of Section 138, noting that the cheque must be returned unpaid either because the amount standing to the credit of the account is insufficient or it exceeds the amount arranged to be paid. The court held that if there were sufficient funds and the cheque was dishonoured for any other reason, such as attachment, the drawer cannot be held liable under Section 138. The court distinguished cases where the accused closes the account or issues a stop payment notice, as those actions snap the arrangement for payment. However, in this case, the dishonour was due to attachment by the Crime Branch, which is not covered under Section 138. Consequently, the court found no merit in the application and dismissed it, refusing leave to appeal.
Headnote
A) Negotiable Instruments Act - Dishonour of Cheque - Ingredients of Section 138 - The court reiterated that for an offence under Section 138 of the Negotiable Instruments Act, 1881, the cheque must be returned unpaid either because the amount standing to the credit of the account is insufficient or it exceeds the amount arranged to be paid. Dishonour due to attachment by Crime Branch does not satisfy this condition. (Paras 4-5) B) Negotiable Instruments Act - Dishonour of Cheque - Attachment of Account - The court held that if there were sufficient funds in the account and the cheque is dishonoured for any other reason, such as attachment by Crime Branch, the drawer cannot be held liable under Section 138. The appellant's argument that the accused should have paid after notice was rejected as the initial condition of dishonour for insufficiency of funds was not met. (Paras 5-6)
Issue of Consideration
Whether dishonour of a cheque due to attachment of the bank account by the Crime Branch, rather than insufficiency of funds, constitutes an offence under Section 138 of the Negotiable Instruments Act, 1881.
Final Decision
The court dismissed the application, refusing leave to appeal against the acquittal.
Law Points
- Ingredients of Section 138 NI Act
- Dishonour due to attachment not covered
- Burden of proof on complainant
