K. Thankappan, J.@mdashComplainant in C.C. No. 397/2002 on the file of the Court of the Judicial First Class Magistrate-I, Kochi is the appellant. The allegation in the complaint is as follows: First accused, a dealer in paper and paper products, used to purchase paper products from the appellant, a public limited company, on credit for a pretty long time and as per the arrangement, the bills of the accused would be credited by the bank in favour of the appellant and amount should be paid by the accused to the bank within 90 days and in default the amount would be debited to the account of the appellant with interest. As the accused failed to pay the bills amount, the appellant had to pay the amount with interest. Thus, the accused owed a sum of Rs. 40,66,479/-. O.S. No. 686/2000 and C.C. Nos. 433/2001 and 435/2001 were filed by the appellant against the accused. But during the pendency of the cases, in view of the settlement arrived at between the parties the 2nd accused on behalf of the firm issued 4 post-dated cheques to the appellant and when one of the above cheques for Rs. 50,00,000/- dated 30-8-2001 was presented for encashment, the same was dishonoured on the ground of insufficiency of funds in the account of the accused. On complying the provisions regarding the notice etc., the complaint was filed. After considering the entire evidence, the trial court found that accused 1 and 2 respondents 1 and 2 were found guilty u/s 138 of the Negotiable Instruments Act and they were convicted thereunder the 1st respondent was sentenced to pay fine of Rs. 5,000/- and 2nd respondent was sentenced to undergo simple imprisonment for six months and to pay a compensation of Rs. 5,00,000/- and in default to undergo six months. Accused Nos. 3 and 4 were not found guilty and they were acquitted u/s 255(1) of the Code of Criminal Procedure. Aggrieved by the conviction and sentence awarded against accused 1 and 2/respondents 1 and 2, they had approached the appellate court by filing Crl. A. No. 143 of 2005. Against the acquittal of accused 3 and 4, the appellant filed Crl. R.P. No. 4/2005 before the same court. After considering the evidence, the appeal was allowed and the findings entered by the trial court against respondents 1 and 2 were set aside and respondents 1 and 2 were acquitted. The revision filed by the appellant was dismissed. Against the judgment of the appellate court, this appeal has been filed by the appellant.
2. Heard the learned Counsel for the appellant and the learned Public Prosecutor for the 3rd respondent State. Though notice was served on respondents 1 and 2, there is no appearance on behalf of them.
3. The learned Counsel for the appellant contends that the findings of the appellate court that the cheque was not supported by consideration is against the provisions of Section 138 of the Negotiable Instruments Act. It is also contended that the finding of the appellate court that the cheque was not issued in discharge of a legally enforceable debt or liability is not sustainable in law.
4. It was specifically alleged in the complaint that as respondents 1 and 2 who were dealers in paper and paper products failed to pay bill amount of Rs. 40,66,479/-, O.S. No. 686/2002 was filed before the Addl. Sub Court, Ernakulam and C.C. Nos. 433/2001 and 435/2001 were filed before the Judl. First Class Magistrate Court-II, Ernakulam against them and in view of the settlement, the 2nd respondent on behalf of the firm issued Ext. P3 cheque and when it was presented for encashment, the same was dishonoured. Evidence adduced by the appellant would show that respondents 1 and 2 failed to pay the bill amount as per the agreement and in view of the settlement, four cheques were issued by respondents 1 and 2 in favour of the appellant. If that be so, as per the provisions of Section 138 of the Act, 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, an offence u/s 138 of the Negotiable Instruments Act is attracted. The lower appellate court found that in spite of receipt of cheque the suit was proceeded against respondents 1 and 2. The pendency of a suit for recovery of a legally enforceable debt will not preclude the appellant to proceed with the matter u/s 138 of the Negotiable Instruments Act.
5. The learned Counsel for the appellant brought to the notice of this Court a decision of the Apex Court reported in Goa Plast (P) Ltd. v. Chico Ursula D'' Souza 2004 (3) KLT 93 to substantiate the case of the appellant. In the above decision the Apex Court considered the same facts situation and in paragraph 26 of the above decision the Apex Court held as follows:
26. The object and the ingredients under the provisions, in particular, Sections 138 and 139 of the Act cannot be ignored. Proper and smooth functioning of all business transactions, particularly, of cheques as instruments, primarily depends upon the integrity and honesty of the parties. In our country, in a large number of commercial transactions, it was noted that the cheques were issued even merely as a device not only to stall but even to defraud the creditors. The sanctity and credibility of issuance of cheques in commercial transactions was eroded to a large extent. Undoubtedly, dishonour of a cheque by the bank causes incalculable loss, injury and inconvenience to the payee and the entire credibility of the business transactions within and outside the country suffers a serious setback. Parliament, in order to restore the credibility of cheques as a trustworthy substitute for cash payment enacted the aforesaid provisions. The remedy available in the civil Court is a long-drawn matter and an unscrupulous drawer normally takes various pleas to defeat the genuine claim of the payee.
6. It is also brought to the notice of this Court another decision of the Apex, Court reported in I.C.D.S. Ltd. v. Beena Shabeer 2002 (3) KLT 218. In the above decision in paragraph 10 the Apex Court held as follows:
10. The language, however, has been rather specific as regards the intent of the legislature. The commencement of the section starts with the words "where any cheque". The above noted three words are of extreme significance, in particular, by reason of the user of the words "any" - the first three words suggest that in fact for whatever reason if a cheque is drawn on an account maintained by him with a banker in favour of another person for the discharge of any debt or other liability. the highlighted words if read with the first three words at the commencement of Section 138, leave no manner of doubt that for whatever reason it may be, the liability under this provision cannot be avoided in the event the same stands returned by the banker unpaid. The legislature has been careful enough to record not only discharge in whole or in part of any debt but the same includes other liability as well.
7. In the above circumstances, this Court is of the view that wherever there is a default on the part of one in favour of another and in the event a cheque is issued in discharge of any debt or other liability, there cannot be any restriction or embargo in the matter of application of the provisions of Section 138 of the Negotiable Instruments Act. Section 138 of the Negotiable Instruments Act is a penal provision. The commission of an offence under that Section entails conviction and sentence on proof of the guilt in a duly conducted criminal proceedings. Once the offence is committed, the prosecution proceedings can be initiated not for recovery of the amount covered by the cheque but for bringing the offender to the penal liability. The scheme of provision contained in the new chapter would indicate that it is primarily to provide an additional criminal remedy over and above the civil remedies available under the Act.
8. It has come out in evidence that respondents are dealers in paper and paper products, they used to purchase goods from the appellant as per bills and as per the agreement, bills of the accused will be credited by the bank in favour of the appellant and amount should be paid by respondents 1 and 2 to the bank and in case the accused fails to pay the amount, the amount will be debited to the account of the appellant with interest and accused failed to pay the bill amount and cases were filed by the appellant for realisation of the amount from respondents 1 and 2 and the cheques were issued for settlement of the amount due from respondents 1 and 2. Respondents 1 and 2 had no case before the court that no amount was due to the appellant as per the accounts of the appellant and the cheque in question was not issued in discharge of the liability. At the same time, it can be seen that the specific case set up by the appellant is that the cheque was issued for settlement on cases. The lower appellate court proceeded or the wrong premise that by issuing that particular cheque a concluded contract was not arrived at too and held that the cheque was not supported by consideration. Basically Negotiable Instruments Act concerned with the Law of Contracts. In contract, the term "consideration" means a reasonable equivalent or other valuable benefit passed on by the promisor to the promisee or by the transferor to the transferee. Further, the consideration shall be adequate or rather so as to make it sufficient and valuable having regard to the facts, circumstances and necessities of each case. The evidence adduced by the appellant would show that there exists sufficient consideration for issuing the cheque in question. If that be so, this Court is of the view that Ext. P3 cheque is issued in discharge of a legally enforceable debt or liability. Hence, the finding of the appellate court is perverse and is liable to be set aside.
In the result, the impugned is set aside and the appeal is allowed. Accordingly, conviction and sentence passed against respondents 1 and 2 by the trial court are confirmed.
