Issuing Cheque Subsequent To Closing Of The Bank Account Would Amount To The Offence Of Cheating Under Indian Penal Code, 1860

Issuing Cheque Subsequent To Closing Of The Bank Account Would Amount To The Offence Of Cheating Under Indian Penal Code, 1860

INTRODUCTION:

The Kerala High Court in its decision in T.O. Souriyar vs. Muttom Abdulla Kanjirathinkal House and Ors. observed that the actions of a person issuing a cheque after voluntarily closing his bank account tantamounts to an offence of cheating under Indian Penal Code, 1860 in addition to the prosecution under section 138 of the Negotiable Instruments Act, 1881.

FACTS:

The revision petitioner herein is the complainant (“Petitioner”), the first Respondent is the accused (“Respondent”) and the second Respondent is the State of Kerala (“State”). The Respondent had offered a job to the son of the Petitioner at Apollo Tyres and is said to have obtained Rs. 50,000/- for rendering his services. Since the Respondent failed to arrange for the job, the Petitioner demanded that the amount be returned. Thereafter, the Respondent issued a cheque dated 25th April, 1988 (“said cheque”) to the Petitioner for the amount of Rs. 50,000/-. When the said cheque was presented for collection, it was dishonored stating that the Respondent had closed his account on 13th January 1998 from which the said cheque had been drawn. Accordingly, the Petitioner filed a complaint against the Respondent before the Judicial First Class Magistrate-I, Aluva, alleging the commission of offence under Section 420 of Indian Penal Code, 1860 (“IPC”). After completion of investigation, the Assistant Sub-Inspector of Police, Aluva filed the final report before the Judicial Magistrate alleging the commission of offence under section 420 of the IPC.

Following the trial, the learned Magistrate after hearing both sides and appraising the evidence produced, held that the Respondent was guilty of offence under Section 420 of IPC and awarded a sentence of simple imprisonment of one year and a direction to pay compensation of Rs. 50000/- to the Petitioner under Section 357(3) of Criminal Procedure Code, 1973 with a default clause of simple imprisonment for three months.

Being aggrieved by the order of the learned Magistrate, the Respondent preferred an appeal before the Additional Sessions Court, North Paravur. The learned Sessions Judge found that the facts and circumstances of the case do not constitute an offence under Section 420 of IPC and accordingly set aside the conviction and imprisonment against the Respondent.

Aggrieved by the order passed by the Additional Sessions Court, the Petitioner filed a revision petition before the Kerala High Court.

ISSUE FOR CONSIDERATION:

The main issue for consideration before the Kerala High Court was:

Whether the offence of cheating punishable under Section 417 IPC or Section 420 IPC is attracted if a person, after voluntarily closing his account, issues a cheque towards the discharge of a pecuniary liability leading to the inevitable consequence of its dishonor on the ground that the bank account is closed?

JUDGMENT:

The Kerala High Court determined that in light of the provisions of Section 415 of the IPC, to establish the offence of cheating, Firstly, there should be deception perpetrated upon a person by the accused. Secondly, by perpetrating such deception, the accused should have fraudulently or dishonestly induced the person so deceived to deliver any property to any person, or to consent that any person shall retain any property, or should have intentionally induced the person so deceived to do or omit to do anything which he would not do or omit to do, if he were not so deceived. Thirdly, the act or omission on the part of the person so deceived should have either caused or likely to have caused damage or harm to that person in body, mind, reputation or property.

Further, that the pertinent aspect to be looked into was whether the act of the Respondent receiving an amount of Rs. 50,000/- from the Petitioner upon the unfulfilled promise of arranging a job for the Petitioner's son, and thereafter issuing a cheque for the said amount on an account which he had voluntarily closed three months prior to the date of issuance of the cheque, towards the repayment of the said amount, leading to the dishonour of the said cheque, would amount to cheating, as envisaged under Section 415 IPC.

The High Court observed that the conduct of the Respondent would definitely amount to deception in so far as it relates to the fraudulent and dishonest inducement made by the Respondent to make the Petitioner believe that he would be able to have returned to him the amount of Rs. 50000/- by presenting and encashing the said cheque.

The Court observed that in a given case, if it is established that a drawer of the cheque, after voluntarily closing his account, executed and issued it to the payee with the intention that the payee would not encash the cheque which the drawer was indebted to pay, the offence of cheating under Section 415 of the IPC would be attracted in the facts and circumstances of that case. The distinction can be made through analysing as to the mens rea of the drawer, whether the drawer wanted to deceive the payee at the time when he issues a cheque, pretending it to be from a valid and live bank account maintained by him.

The Court relied on a judgment of the Apex Court in Sangeetaben Mahendrabhai Patel v. State of Gujarat and Another wherein it was observed that though there may be some overlapping facts in a prosecution for the offence under Section 138 of the Negotiable Instrument Act, 1881 and Section 420 of the IPC in connection with the dishonour of the same cheque due to closure of the account, the ingredients of the said offences are entirely different, and subsequent prosecution under Section 420 of the IPC in respect of a case which had already been prosecuted under Section 138 of the Negotiable Instruments Act, 1881 is not barred by any statutory provisions.

A similar view was expressed by the full bench of Andhra Pradesh High Court in OPTS Marketing Pvt. Ltd. (M/s.) and Others v. State of A.P and others wherein it was observed that the accused had dishonest intention not to pay even at the time of issuance of the cheque and that offence under Section 420 IPC cannot be quashed if the averments show that the accused had dishonest intention.

The High Court held that the learned Additional Sessions Judge’s reliance on the judgment of Kerala High Court in Surendran v. Ramachandran Nair was erroneous as the facts and circumstances in the aforesaid case was not identical to the present case wherein the mens rea of the Respondent has been clearly established.

The Court further held that the Additional Sessions Judge had also wrongly interpretated the dictum laid down by the Kerala High Court in Salim v. Thomas wherein it was held that until the last unused cheque leaf is returned to the bank by the drawer, it must be held that such account holder continued the account with the bank and hence the dishonor of the cheque in that case, would not constitute the offence of cheating. While distinguishing the facts of the aforesaid case, the High Court observed that the concept of presumption of a bank account remaining live till the unused cheque leaves are surrendered to the bank, was invoked in the aforesaid case merely to ensure that the drawer of the cheque cannot escape from the criminal liability of Section 138 of the Negotiable Instruments Act, by contending that the dishonor of cheque was due to closure of account and not due to insufficiency of funds in his account. There is nothing laid down in the case of Salim (supra) to the effect that under no circumstances, would the offence of cheating be attracted in a case where a drawer issues a cheque after the closure of his account with the dishonest intention to prevent the payee from getting the amount due from him the drawer.

Accordingly, the High Court opined that the finding of the learned Additional Sessions judge on the non-applicability of the offence of cheating in the facts and circumstances of the present case was against the settled principles of law.

The High Court observed that the requirements of Section 415 of the IPC were attracted in the facts and circumstances of the present case and therefore such offence was punishable under Section 417 IPC with imprisonment of either description for a term which may extend to one year, or with fine, or with both.

In view of the above observations, the High Court set aside the order of the Additional Sessions Judge and held that the Respondent was found guilty of Section 417 IPC and accordingly sentenced to imprisonment till rising of court and charged a fine of Rs. 1,00,000/-. Out of the above fine of Rs. 1,00,000/-, if realized, an amount of Rs. 90,000/-shall be paid as compensation to the petitioner under Section 357 (1) (b) Criminal Procedure Code, 1973. In the event of default of payment of the fine, the Respondent is to undergo simple imprisonment for a term of six months.