Badave Vs. Surendra Madhavrao Nighojakar & Anr  Insc 139 (14 March 2001)
Thomas, R.P. Sethi & B.N. Agrawal B.N.Agrawal,J.
in this appeal has been made to judgment passed by the Bombay High Court
dismissing writ application filed by the appellant upholding an order passed by
a Sessions Court in revision refusing to interfere with the order passed by a
Chief Judicial Magistrate taking cognizance and issuing process against the
appellant for the offence under Section 138 of the Negotiable Instruments Act,
1881 (hereinafter referred to as `the Act).
Madhavrao Nighojkar respondent No. 1 filed a petition of complaint in the Court
of Chief Judicial Magistrate, Satara on 2.9.1996 for prosecution of the
appellant under Section 138 of the Act besides Section 420 of the Penal Code
which was registered as Criminal Case No. 11348/96. Case of the complainant in,
short, is that on 4.7.1993 an agreement to sell was executed by the complainant
for sale of his 1/3rd share in CTS No. 189 within Pratapganj Peth in the
district of Satara for Rs. 2,21,000/- and the said sale was required to be
executed in the name of mother and wife of the appellant. At the time of
agreement, Rs. 50,000/- was paid by the accused to the complainant. Thereafter
on 10.11.1995 sale deed was scribed and on that date a further sum of Rs.
1,25,000/- was paid by the accused to the complainant besides a post-dated cheque
drawn on State Bank of India, Satara Branch, for Rs.46,000/-
bearing the date as 20.1.1996 which was made over by the accused to the
complainant. Later on, the accused on several occasions made a request to the
complainant for not presenting the cheque in the bank as he was not having
sufficient funds in his bank account which request was acceded to by the
complainant. Ultimately, as the period of six months was going to expire on
19.7.1996, the complainant had no option but to present the said cheque before
his banker for encashment, but the same was returned without clearance on 11-7-1996 with the endorsement account closed. From these
facts complainant deduced that the accused had deceived him which necessitated
issuance of notice by the complainant to the accused on 22.7.1996 which was
refused by him on 6.8.1996 whereafter the present complaint was filed.
the filing of petition of complaint, the complainant was examined on solemn
affirmation and by order dated 2.9.1996 the Magistrate took cognizance of the
offence under Section 138 of the Act and issued process against the accused.
The said order having been unsuccessfully challenged by the accused before the
Sessions Court as well as the High Court, the present appeal by special leave
is before us.
of the appellant for the offence under Section 138 of the Act has been assailed
on the sole ground that even if the facts disclosed in the complaint are taken
at their face value and accepted in entirety, no offence at all much less the
offence under Section 138 of the Act is made out as one of the conditions
precedent for its applicability is that cheque must be presented to the bank
within a period of six months from the date on which it was drawn or within the
period of its validity whichever is earlier, but in the case on hand the cheque
was presented before the banker for encashment after expiry of six months from
the date it was made over by the accused to the complainant, though within a
period of six months from the date mentioned on the cheque. As such, the
question which arises for our consideration is:
period of six months for presentation of cheque to the banker, as required
under proviso (a) to Section 138 of the Act, should be reckoned from the date
mentioned on the face of the cheque or a date previous to that when it was made
over by the drawer to the drawee.
question posed is no longer res integra as the same is concluded by a two Judge
Bench decision of this Court in the case of Anil Kumar Sawhney vs. Gulshan Rai,
1993 (4) SCC 424 wherein in similar circumstances it was laid down by this
Court that post-dated cheque shall be deemed to have been drawn on the date it
bears and not the previous date on which it was made over by the drawer to the drawee,
but as the matter has been placed before this three Judge Bench, we find it
expedient to consider the same.
original Act, Chapter XVII contained two sections: Section 138 was related to
power to appoint Notary Public and Section 139 dealt with power to make rules
for Notary Public. But with the introduction of the Notaries Act, 1952 making
elaborate provision for appointment of Notaries and their duties, functions,
etc., the aforesaid provision became redundant and consequently by Section 16
of the Notaries Act, 1952, Sections 138 and 139 were repealed and thereby
Chapter XVII was abolished w.e.f. 14th February, 1956. However, Chapter XVII
has been re-introduced in the Act by Section 4 of the Banking, Public Financial
Institutions and Negotiable Instruments Laws (Amendment) Act, 1988 (Act 66 of
1988) with effect from 1.4.1989 with a new nomenclature for the Chapter: Of
Penalties in case of Dishonour of certain Cheques for insufficiency of Funds in
the Accounts. This new Chapter contains five sections, namely, Sections 138 to
142 which are altogether different from old Sections 138 and 139. The object of
bringing Section 138 by the aforesaid amending Act on the Statute appears to be
to inculcate faith in the efficacy of banking operations and credibility in
transacting business of negotiable instruments. Despite civil remedy, Section
138 intends to prevent dishonesty on the part of the drawer of negotiable
instruments to draw a cheque without sufficient funds in his account maintained
by him in a bank and induces the payee or holder in due course to act upon it.
portion of Section 5 and the provisions of Sections 6, 19, 138, 139 and 140 of
the Act may be quoted hereunder:- S.5. Bill of exchange.- `Bill of Exchange is
an instrument in writing containing an unconditional order, signed by the
maker, directing a certain person to pay a certain sum of money only to, or to
the order of, a certain person or to the bearer of the instrument..
A `cheque is a bill of exchange drawn on a specified banker and not expressed
to be payable otherwise than on demand.
Instruments payable on demand.- A promissory note or bill of exchange, in which
no time for payment is specified, and a cheque, are payable on demand.
Dishonour of cheque for insufficiency etc., of funds in the account.- 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 for
the discharge, in whole or in part, of any debt or other liability, 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 provision of this Act, be punished with
imprisonment for a term which may extend to one year, or with fine which may
extend to twice the amount of the cheque, or with both.
that nothing contained in this section shall apply unless
cheque has been presented to the bank within a period of six months from the
date on which it is drawn or within the period of its validity, whichever is
the payee or the holder in due course of the cheque, as the case may be, makes
a demand for the payment of the said amount of money by giving a notice in
writing, to the drawer of the cheque, within fifteen days of the receipt of
information by him from the bank regarding the return of the cheque as unpaid;
and (c) the drawer of such cheque fails to make the payment of the said amount
of money to the payee or as the case may be, to the holder in due course of the
cheque within fifteen days of the receipt of the said notice.
Explanation.- For the purposes of this section,
`debt or other liability means a legally enforceable debt or other liability.
added) S.139.- Presumption in favour of holder.- It shall be presumed, unless
the contrary is proved, that the holder of a cheque received the cheque of the
nature referred to in Section 138 for the discharge, in whole or in part, of
any debt or other liability.
Defence which may not be allowed in any prosecution under Section 138.- It
shall not be a defence in a prosecution for an offence under Section 138 that
the drawer had no reason to believe when he issued the cheque that the cheque
may be dishonoured on presentment for the reasons stated in that section.
concept of post-dated cheque was well known even in common law and it was in
effect a bill of exchange payable on demand with a post date upon which the
demand was to be made. As far back as in 1776 and while the Law of Merchant was
then in process of formation, it was held in Da Silva vs. Fuller, Sel. Ca.238
M.S. referred to in Chitty on Bills of Exchange, 11th Edition, (188) that a
banker was not justified in paying a post-dated cheque before its actual date.
In 1868 nearly a hundred years later, the Court of Queens Bench in Emanuel vs. Robarts,
(1868) 9 B.&S. 121 observed that a banker was justified in refusing payment
of a post-dated cheque before its due date and that the custom of banker to do
so was a part of the contract between the banker and the customer. In Bull vs.
O Sullivan, L.R. 6 Q.B.209 the Court laid down that a post-dated cheque payable
to order was an instrument payable to order on demand on its date. Later, in
1877 in Gatty vs. Fry, 2 Ex.D. 265 the Court held that a post-dated cheque is
not payable on the day it is issued but on the day of its date. All these cases
were decided before the law was codified in England by the Bills of Exchange Act, 1882. After passing of the aforesaid Act,
in the case of Palmer, (1882) 19 Chancery Division 409, it has been decided by
the Court of Appeal that a post-dated cheque was equivalent to a bill of
exchange payable on a future date, namely, the date of the cheque. In the case
of Hinchcliffe vs. The Ballarat Banking Company, 1 V.R. (L) 229, the Court
determined the exact point in question in the present case against the bank,
holding that a post-dated cheque is a bill of exchange payable at a future date
and that the banker may be liable to an action by the customer for negligence
if he pays such cheque before the day it bears date.
high authority of Royal Bank of Scotland vs. Tottenham, (1894) LXX1 Law Times
Reports 168 similar question was subject matter of consideration before the
Court of Appeal in which Lord Esher, M.R., after due consideration observed
thus:- A cheque is a contract between the parties, and it is for a Judge at the
trial to construe that contract by reading what is written upon it. Reading
this cheque, upon its face it is dated the 10th August, and is payable to
order. What is the true construction of that contract upon reading it? It is
simply an order to pay 250l. upon demand. It is said that this is not the
proper construction under the circumstances, because the cheque was signed on
the 3rd August, and handed over to the payee upon the 8th August, being dated
the 10th August. It is said that the cheque was, therefore, a post-dated cheque.
Upon those facts being proved before the Judge, what ought he to do? Must he
say that, in construing this written document, because it was handed over
before the day of the date written upon it, he must put a different
construction upon it and say that it is not a bill payable upon demand, but a
bill payable two days after the day of its issue or negotiation? I have never
heard of a cheque being so construed, and the argument of the appellant is
entirely fallacious..It is not denied that, by the Bills of Exchange Act, 1882,
a post dated cheque is not made invalid;..The objection as to post-dating a cheque
is therefore now an obsolete and useless objection. If a cheque is dealt with
as a bill of exchange before the date which it bears, then it becomes a bill of
exchange in the ordinary sense; but it is not in any way an escrow. All the defences
and objections are futile and must fail.
case of Pollock vs. Bank of New Zealand (1902) XX New Zealand Law Reports 174,
the Court of Appeal was considering a case where bank had paid a post dated cheque
before expiry of its date and thereafter dishonoured another cheque of its
customer presented before the date of the post- dated cheque on the ground that
after payment of the post-dated cheque, there were no funds to honour another cheque
and consequently the same was dishonoured which necessitated filing of a suit
by the customer for damages.
suit was decreed and when the matter was taken in appeal, the Court of Appeal
while upholding the same observed thus:- The bank, by paying the post-dated cheque
before its actual date, wrongfully debited its amount against the plaintiffs
account. But for that debit there would have been sufficient funds to meet the cheque
for Pound 38 11s., a cheque which the bank ought to have paid, but which they,
in breach of their duty to the plaintiff, dishonoured. The plaintiff is
therefore entitled to damages for the wrongful dishonour of this cheque.
Canada, (1947) SCR 377, the Supreme Court
of Canada was considering a case where
payment of a post-dated cheque was made before the date of issue due to
oversight. Thereafter the drawer countermanded payment of the cheque at the
opening of business on the day of the date of cheque. This necessitated filing
of a suit by the drawer against the bank for realisation of the payments
erroneously made by the bank under post-dated cheque. The suit was decreed by
the trial court but on appeal being preferred the Supreme Court of Alberta in
its Appellate Division dismissed the suit by allowing the appeal whereafter on
special leave to appeal being granted, the matter was taken in appeal to the
Supreme Court of Canada which set aside the appellate judgment and restored
that of the trial court decreeing the suit and held that before the date of
issue of the cheque the bank was not justified in honouring the same.
case of Brien vs. Dwyer & Anr., (1979) 53 Australian Law Journal Reports
123, the matter was considered by the High Court of Australia and it was laid
down that a post-dated cheque was a bill of exchange payable at a future date.
Laws of England, 4th Edition (Reissue) Volume 3(1), at page 143, procedure to
be adopted by the bank in relation to post-dated cheque has been enumerated
which reads thus:- Post-dated cheques are not invalid, but the banker should
not pay such a cheque if presented before the date it bears. If, therefore, a cheque
dated on a Sunday is presented on the previous business day, it should be
returned with the answer `post- dated. A post-dated cheque, however, if
presented at or after its ostensible date, should be paid though the banker
knows it to be post-dated, and even if it has been presented before the date
and refused payment.
Chalmers & Guest on Bills of Exchange, Cheques and Promissory Notes, 15th
Edition, at page 74, the concept of `post- dated cheques has been explained as
under:- Post-dated cheques. Cheques are often issued post-dated, that is to
say, bearing a date later than that on which they are in fact issued. The
purpose of issuing a post- dated cheque is to prevent the drawee banker from
paying the cheque to the payee or a holder before the date written on the cheque.
It is clear that the instrument is a cheque once the date written on it
arrives. But its status is unclear prior to that date. It is arguable that,
between the date of its issue and the date written on the cheque, it is not
payable on demand and so cannot be a cheque but an instrument of a different
kind. The view has been express that: `so far as regards its practical effect,
a post- dated cheque is the same thing as a bill of exchange at so many days
date as intervene between the day of delivering the cheque and the date marked
upon the cheque. It has also been stated that the effect of issuing a
post-dated cheque is equivalent to giving a promissory note not payable until
the date written on the cheque.
Dictionary of Banking, 12th Edition, at page 463 `post-dated has been defined
as follows:- Post-dated. A cheque which is dated subsequent to the actual date
on which it is drawn, and which is issued before the date it bears, is called a
post-dated cheque should not be paid before the date appearing thereon A cheque
presented for payment before the date has arrived should be returned marked
`post-dated F.E. Perry in The law and practice relating to banking : 1, at
pages 137 & 138 has dealt with `post-dated cheque as under:- A cheque must
not be postdated, that is, dated after the day on which it is presented for
payment to the drawee branch. Postdated cheques present far more difficulties
to the banker than antedated cheques: they are practical difficulties rather
than legal ones.But a cheque is generally postdated because the drawer does not
expect to have the funds to meet it until that date arrives. It is a mandate to
the banker to the effect that it should not be paid before that date arrives.
case of Jiwanlal Achariya vs. Rameshwarlal Agarwalla, AIR 1967 SC 1118, a cheque
dated 25th February, 1954 was delivered on 4th February, 1954 and encashed soon
after 25th February, 1954. This Court was considering the question of payment
envisaged within the meaning of Section 20 of the Indian Limitation Act, 1908
and delivering the majority judgment, Wanchoo, J., speaking for himself and
J.C. Shah,J., observed thus:- Where, therefore, the payment is by cheque and is
conditional, the mere delivery of the cheque on a particular date does not mean
that the payment was made on that date unless the cheque was accepted as
the cheque is not accepted as an unconditional payment, it can only be treated
as a conditional payment.
such a case the payment for purposes of S. 20 would be the date on which the cheque
would be actually payable at the earliest, assuming that it will be honoured..As
the payment was conditional it would only be good when the cheque is presented
on the date it bears, namely, February 25, 1954 and is honoured. The earliest
date, therefore, on which the respondent could have realised the cheque which
he had received as conditional payment on February 4, 1954 was the 25th
February, 1954 if he had presented it on that date and it had been honoured.
bare perusal of Sections 5 & 6 of the Act it would appear that bill of
exchange is a negotiable instrument in writing containing an instruction to a
third party to pay a stated sum of money at a designated future date or on
demand. On the other hand, a `cheque is a bill of exchange drawn on a bank by
the holder of an account payable on demand. Under Section 6 of the Act a `cheque
is also a bill of exchange but it is drawn on a banker and payable on demand. A
bill of exchange even though drawn on a banker, if it is not payable on demand,
it is not a cheque. A `post-dated cheque is not payable till the date which is
shown thereon arrives and will become cheque on the said date and prior to that
date the same remains bill of exchange.
prosecuting a person for an offence under Section 138 of the Act, it is
inevitable that the cheque is presented to the banker within a period of six
months from the date on which it is drawn or within the period of its validity
whichever is earlier. When a post dated cheque is written or drawn, it is only
a bill of exchange and so long the same remains a bill of exchange, the
provisions of Section 138 are not applicable to the said instrument. The
post-dated cheque becomes a cheque within the meaning of Section 138 of the Act
on the date which is written thereon and the 6 months period has to be reckoned
for the purposes of proviso (a) to Section 138 of the Act from the said date.
while respectfully agreeing with the law laid down by this Court in the case of
Anil Kumar Sawhney, we hold that six months period shall be reckoned from the
date mentioned on the face of the cheque and not any earlier date on which the cheque
was made over by the drawer to the drawee.
case on hand, the cheque was prepared and made over by the drawer to the drawee
on 10.11.1995 but the date mentioned thereon was 20.1.1996 and it was presented
before the banker for encashment on 7.7.1996, i.e., within a period of six
months from 20.1.1996. Thus we find no ground to quash prosecution of the
appellant as, on the facts alleged, an offence under Section 138 of the Act is
clearly made out.
appeal is accordingly dismissed.