Appellate Division
(Civil)
Surendra Kumar Sinha J
Md Abdul Wahhab Miah J
Hasan Foez Siddique J
SM Redwan………
………Appellant
(In Crl A No.30 of 2004)
vs
Md Rezaul Islam and others …. Respondent.
( in both the cases)
Judgment
October 9th, 2013.
Code of Criminal Procedure (V of 1898) Section 561A
Negotiable Instruments Act (XXVI of 1881) Section 138
Stop Payment-Since the cheques were returned by bank with the endorsement “payment stopped by the drawer” it is to be presumed that those were returned unpaid because the amount of money standing to the credit of that account was insufficient to honour of the cheque as envisaged in Section 138 of the Act. Of course this is a rebuttable presumption. The defence can be considered at the time of holding trial and not. in an applicative under section 561 A of the Code. . ….. (22)
Arif-uz-Zaman vs State, 17 BLC (AD) 167; Electronics Trade and Technology Development Corporation Limited vs Indian Technologists and Engineers (Electronics) (P) Ltd (1996)2 SCC 739; Modi Cements Ltd. (1998) 3 SCC 249 vs Kuchil Kumer Nandi; MMTC Ltd. vs Medical Chemicals and Pharma (P) Ltd. (2002) I SCC 234 and KK Sidharthan TP Praveena Chandran (1996) 6 SCC 69 ref.
Md Nawab Ali, Advocate-on-Record-For the Appellant. (In both the cases)
Ex-parte-Respondent. (In Crl A No. 30012004)
ASM Khalequzzaman, Advocate-on-Record-For Respondent No.3. (In Crl A No. 31 of 2004)
None represented-Respondent Nos. 1-2. (In Crl A No. 31 of 2004)
Judgment
Hasan Foez Siddique J: These two appeals being Criminal Appeal Nos. 30 and 31 of 2004 involve a pure question of law as to the applicability of Section 138 of the Negotiable Instruments Act, 1881 (hereinafter referred to as the “Act”) to a case in which a person issuing a cheque stopped its payment by issuing instruction to the drawee bank before payment.
2. In Criminal Appeal No. 30 of 2004, the complainant-appellant SM Redwan challenged the judgment and order dated 9-2-2003 passed by a Division Bench of the High Court Division in Criminal Miscellaneous Case No. 2788 of 1999 quashing the proceeding of CR Case No.4690 of 1999 started on a complaint filed by him under Section 138 of the Act.
3. In Criminal Appeal No.31 of 2004 the complainant-appellant ANM Kamrul Islam challenged the legality of the judgment and order dated 9-2-2003 passed by a Division Bench of the High Court Division in Criminal Miscellaneous Case No.57 “2 of 19Y9 quashing the proceeding of CR Case No.2337 of 1999 initiated on a complaint under Section 138 of the Act.
4. In Criminal Appeal No.30 of 2004, facts relevant for the disposal of the appeal are that the respondent No.1 (hereinafter referred to as the respondent) received Taka10,00,000 as earnest money out of total consideration of Taka 29,25,000 to sell the land measuring 2.141/22.145 acres and executed a “bainanama”. He issued a public notice through his lawyer in a daily newspaper on 14-11-1998 about the story of said “bainanama”. Some people, responding the notice, claimed that they are the owners of the said land and the respondent and his wife Shamsun Nahar have had no title and possession therein. The complainant informed that story to the respondent who failed to answer properly. Accordingly, the complainant requested him to return the said amount. The respondent issued a cheque bearing No. NCCBB 3114709 dated 15-5-1999 for a sum of Taka 3,00,000 in favour of the complainant who presented the said cheque for encashment but the said cheque was returned to him as unpaid with an endorsement, “payment stopped by the drawer.” Thereafter, the complainant issued notice in terms of Section 138 of the Act demanding payment of the aforesaid amount under the cheque which was duly served upon the respondent. The respondent failed and neglected to made payment of the amount of the cheque within the stipulated period. Then the appellant filed the instant complaint. The respondent entered appearance in obedience to the process issued in connection with the CR Case No.4690 of 1999 and then filed application under Section 561 A of the Code of Criminal Procedure in the High Court Division and obtained Rule and the said Rule was Ultimately made absolute. Then the complainant preferred this appeal getting leave.
5. In Criminal Appeal No.31 of 2004, the facts are almost identical. The respondent Rezaul Islam issued Cheque No.3114708 on 14-3-1999 for a sum of Taka 4,00,000 in favour of appellant ANM Kamrul Islam in order to repay the amount received by him to sell some landed property. The said cheque was presented by the appellant complainant for encashment in the bank which was returned with an endorsement “payment stopped by the drawer.” Then the complainant-appellant issued notice in terms of Section 138 of the Act but the respondent failed to respond and, thereafter, the appellant filed the instant complaint. The Metropolitan Magistrate took cognizance of the offence and issued process. The respondent surrendered and obtained bail and, thereafter, filed application under Section 561 A of the Code of Criminal Procedure in the High Court Division and obtained Rule which was subsequently made absolute by the judgment and order dated 9-2-2003 in Criminal Miscellaneous Case No.5752 of 1999.
6. In both the cases, the High Court Division held that since the endorsement “payment stopped by the drawer” does not attract insufficiency of fund or exist arrangement as contemplated in Section 138 of the Act, the criminal proceedings initiated against the respondent were abuse of the process of the Court.
7. Leave was granted to consider the submission of the appellants that whether the High Court Division acted illegally in making the Rule absolute holding that the cheques which were returned with the endorsements ‘payment stopped by the drawer’ do not and cannot anyway be interpreted that the cheques were returned un-cashed for insufficiency of fund and there is no ambiguity in the Section to interprete it otherwise in view of the legal position that the main issue is the dishonour of a cheque by the bank due to fraudulent action of the drawer and if the view taken by the High Court Division that payment stopped by the drawer does not come within the scope of Section 138 of the Act, is allowed to hold the field the defaulters would resort to that mode of operation
after issuing the cheque to serve their designed purpose.
8. Mr Md Nawab Ali, Advocate-on- Record appearing on behalf of the appellants, in his submissions reiterated the submissions made in the leave granting orders.
9. Mr AKM Khalequzzaman, Advocate-on Record appeared for the respondent in Criminal Appeal No.31 of 2004. In his submission he supported the Judgment and order of the High Court Division.
10. In Criminal Appeal No.30 of 2004 no one appeared for the respondent.
11. We have heard the leamed Advocate-on Record for the appellants and the learned Advocate for the respondent in Criminal Appeal No.31 of 2004, perused the judgment of the High Court Division and other materials on record.
12. The question in both the appeals is that whether the return of cheque with an endorsement “payment stopped by the drawer” gives a right to the payee or holder in due course of the cheque to initiate a proceeding against drawer under Section 138 of the Act or not.
13. The Parliament, in order to restore the credibility of the cheque as a trustworthy substitute for cash payment enacted the provision of Section 138 of the Act. The relevant part of the provision of Section 138 of the Act reads as follow:
“138 Dishonour of cheque for insufficiency, etc. of funds in the account-{l) Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provisions of this Act, be punished with imprisonment for a term which may extend to one year, or with fine which may extend to (thrice) the amount of the cheque or with both”.
14. This shows that Section 138 gets attracted in terms if cheque is dishonoured because of insufficient funds or where the amount exceeds the arrangement made with the bank.
15. The drawer of a cheque has a right to stop payment of a cheque by issuing the stop payment instruction and the bank will be held liable if it ignores such letter. The question is whether it gives a right to the payee or holder in due course to initiate a proceeding under Section 138 of the Act or not.
Ordinarily, stoppage of payment issuing instructions cannot be said to have direct nexus with “insufficient of funds.” Such instruction can be given by the drawer although he had sufficient funds in his account. At the same time one cannot rule out the possibility that the drawer in order to avoid the penal consequences of Section 138 of the Act may give instruction to his banker for stoppage of payment. All those are the questions of fact and a conclusion in either way can only be drawn on careful scrutiny of the evidence led by the parties. Issuance of stop payment instructions to the bank will not preclude an action under Section 138 of the Act by the holder of cheque in due course.
16. Earlier this Division in the case of Arifuz-Zaman vs State reported in 17 BLC (AD) 167 has observed:
“Whether the cheque in question was dishonoured for the ‘insufficiency fund’ or for the ‘dissimilarity of the signature of the drawer on the cheque’ as stated in the letter dated 30-8-2009 is a question of fact which can only be thrashed out during the trial. We
do not see any scope of deciding such question in considering the merit of the revision application.
17. It was further observed:
“However. if a holder or the payee gets hold of a dishonoured cheque by fraudulent means or forgery, the drawer of the cheque shall have the liberty to take such defence during trial”.
18. In the case of Electronics Trade and Technology Development Corporation Limited vs Indian Technologists and Engineers (Electronics) (P) Ltd. reported in (1996) 2 SCC 739, it was argued before Supreme Court of India that the stoppage of payment due to instructions does not amount to an offence under Section 138 and that, therefore, the ingredients in Section 138 have not been satisfied. The Supreme Court of India answered the said submission in the following manner.
19. “The object of bringing Section 138 on statute appears to be to inculcate faith in the efficacy of banking operations and credibility in transacting business on negotiable instruments. Despite civil remedy Section 138 intended to prevent dishonesty on the part of the drawer of negotiable instrument to draw a cheque without sufficient funds in his account maintained by him in a bank and induce the payee or holder in due course to act upon it. Section 138 draws presumption that one commits the offence if he issues the cheque dishonestly.
It is seen that once the cheque has been drawn and issued to the payee and the payee has presented the cheque and thereafter, if any instructions are issued to the bank for non-payment and the cheque is returned to the payee with such an endorsement, it amounts to dishonour of cheque and it comes within the meaning of Section 138.
Suppose after the cheque is issued to the payee or t) the holder in due course and before it is presented for encashment, notice is issued to him not to present the same for encashment and yet the payee or holder in due course presents the cheque to the bank for payment and when it is returned on instructions, Section 138 does not get attracted”. Identical views have been expressed by the Supreme Court of India in case of KK Sidharthan TP Praveena Chandran and another reported in (1996) 6 SCC 69.
20. In a subsequent case reported in (1998) 3 SCC page-249 (Modi Cements Ltd. vs Kuchil Kumer Nandi) Supreme Court of India held, “If we are to accept this proposition it will make section 138 a dead letter, for, by giving instructions to the bank to stop payment immediately after issuing a cheque against debt or liability the drawer can easily get rid of the penal consequences notwithstanding the fact that a deemed offence was committed”. In the case of Electronics Trade and Technology it was further observed:
“When a cheque is drawn by a person on an account maintained by him with the banker for payment of any amount of money to another person out of the account for the discharge of the debt in whole or in part or other liability is returned by the bank with the endorsement like (i) in this case, “refer to the drawer” (2) “instructions for stoppage of payment” and stamped (3) “exceeds arrangement” it amounts to dishonour within the meaning of section 138 of the Act. On issuance of the demanding payment within 15 days from the date of the receipt of such a notice, if he does not pay the same, the statutory presumption of dishonest intention, subject to any other liability, stands satisfied.”
21. The Supreme Court India, taking into consideration of the case of Modi Cements Ltd. and some other cases in the case of MMTC Ltd. and another vs Medical Chemicals and Pharma (P) Ltd. reported in (2002) 1 SCC 234 has observed, “Even though the cheque is dishonoured by reason of “stop payment” instruction an offence under Section 138 could still be made out.
It is held that if the accused shows that in his account there were sufficient funds to clear the amount of the cheque at the time of presentation of the cheque for encashment at the bank and that the stop payment notice had been issued because of other valid causes including that there was no existing debt or liability at the time of presentation of cheque for encashment, then offence under Section 138 of the Act would not be made out. The important thing is that the burden of so proving would be on the accused. Thus a court cannot quash a complaint on this ground.”
22. In the instant case the cheques were issued by the respondent which were returned with endorsement, “payment stopped by the drawer”. Since the cheques were returned by bank with the endorsement “payment stopped by the drawer” it is to be presumed that those were returned unpaid because the amount of money standing to the credit of that account was insufficient to honour of the cheque as envisaged in Section 138 of the Act. Of course this is a rebuttable presumption. The defence can be considered at the time of holding trial and not in an Application under Section 561 A of the Code of Criminal Procedure.
23. In view of our discussion in the foregoing paragraphs and on consideration of the fact and circumstances of the case and the law on the subject we are of the view that the High Court Division committed an error of law in quashing the instant proceedings before recording evidence to ascertain whether there was any dishonest intention of the respondents to defraud the appellants or not.
We find substance in both the appeals. Accordingly, both the appeals are allowed.
The Judgment and orders of the High Court Division are hereby set-aside. The concerned Courts are directed to proceed with the cases in accordance with law.
