LexNEPC MICON LTD. AND ORS. versus MAGMA LEASING LTD.
Open in Lexace · Ask the AI about this caseJudgment (excerpt)
A
NEPC MI CON LTD. AND ORS.
v.
MAGMA LEASING LTD.
APRIL 29, 1999
B
[K.T. THOMAS AND M.B. SHAH, JJ.]
Negotiable Instruments Act, 1881-Sections 138 and 140-Cheques-
Dishonour of-Cheque returned with an endorsement 'account closed'-
Applicability of section 138-Held, Account closed would mean that the
C 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 cheq;e~
Hence section 138 attracted.
Interpretation of statutes :
D
Penal statutes-Duty of the Court to interpret it consistent with the
legislative intent and purpose.
Words and Phrases :
"Account closed"-Meaning of in the context of Negotiable Instruments
E Act, 1881 Section 138.
Cheques issued by the appellant to the respondents in discharge of its
liabilities were returned by the bank concerned with an endorsement "account
closed". The respondent initiated criminal proceedings under the Negotiable
Instruments Act, 1881 ("the Act") against the appellants. During the pendency
F of the proceedings, appellants filed an application for dropping the proceedings
but the application was rejected by the trial court. Appellant's revision
petition for quashing the trial court proceedings was rejected by the High
Court. Hence this appeal.
On behalf of the appellants it was contended that, the complaint, on the
G face of it, did not make out any offence punishable under the Act, and
therefore, it deserves to the quashed, and that the cheques were returned
with an endorsement "account closed" which was not covered by the Act.
Dismissing the appeal, this Court
H
HELD : 1.1. The return of a cheque by the bank, unpaid on the ground
932
NEPC MICON LTD. v. MAGMA LEASING LTD.
933
that the "account is closed" would mean that the cheque is returned as A
unpaid on the ground that "the amount of money standing to the credit of
that account is insufficient to honour the cheque" as envisaged in Section
. 138 of the Act. (941-H; 942-AI
2.1. The cheque was dishonoured as the amo~nt of money standing to
the credit of"that account" was "nil" at the relevant time apart from it being B
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amount in the account is withdrawn.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" C
is a genus of which the expression "that account being closed" is 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". The cheque
is to be drawn by a person for payment of any amount of money due to him D
on an account maintained by him with a banker and only on "that account"
the cheque should be drawn. (937-E-G]
Shivendra Sainsguiri v. Mis Adrnio and Anr., (1996) Cr.L.J. 1816
(Bengal); Veeraraghavan v. Lalitha Kr., (1995) Cr. L.J. 1882 (Madras); Ml
s. Dada Silk Mills v. Indian Overseas Banking Co., (1994) Cr.L.J. 2874 E
(Guj); Mls.G.M Mittal Stainless Steels Ltd. v. Mis. Nagarjuna Investment
Trust Ltd., (1995) 4 Crimes 379 (AP); Japahari v. Priya, (1994) 1 Crimes
3798 (Ker); Rakesh Porwal v. Varayan Joglekar, (1993) Cr.L.J. 688; G.F.
Hurasikattimath "·Sr. ··/Kant 70 Com case 278 (Karnataka); S. Prasanna
v. R. Vijayalakshmi 1192 Cr. L.J. 1233 (Mad) and Om Prakash Bhardwaj p
Maniyar v. Swati Girish Bhide and Ors., referred to.
3.1. Section 138 of the Act is a penal statute. It is the duty of the Court
to interpret the Act consistent with the legislative intent and purpose so as
to suppress the mischief and advance the remedy. Section 138 of the Act has
created a contractual breach as an offence and the legislative purpose is-to G
promote efficacy of banking and of ensuring that in commercial or contractual
transactions, cheques are not dishonoured and credibility in transacting
business through cheques is maintained. (941-F]
Modi Cements Ud v. Kuchil Kumar Nandi, (1998] 3 SCC 249;
Electronics Trade and Technology Development Corp. Ltd. v. Indian H
D
934
SUPREME COURT REPORTS
[1999] 2 S.C.R.
A Technologists and Engineers, [1996j 2 SCC 739 and K.K. Siddharthan v. T.P.
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