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Ashok Yeshwant Badeve v. Surendra Madhavrao Nighojakar (2001) 3 SCC 726

Ashok Yeshwant Badeve v. Surendra Madhavrao Nighojakar (2001) 3 SCC 726

FACTS-

  • Surendra Madhavrao Nighojkar, the respondent, filed a complaint against Badave in the Chief Judicial Magistrate's Court, alleging offenses under Section 138 of the NI Act and Section 420 of the IPC. The complaint stated that Badave had entered into an agreement to buy property but issued a post-dated cheque that was dishonored with the endorsement “account closed”.
  • The cheque bearing the date 20-1-1996 was given on 10-11-1995, 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.
  • 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.
  • The Chief Judicial Magistrate takes cognizance and issue the process against Badave for an offense under Section 138 of the Negotiable Instruments Act, 1881.
  • Later, upheld by the Sessions Court and Bombay High Court.
  • Ashok Yeshwant Badave appealed against a judgment of the Bombay High Court that upheld an order by a Sessions Court.

ISSUE-

  • The case raised a question about whether the six-month period for presenting a cheque should be calculated from the date mentioned on the cheque or from the date the check was handed over.

RULE-

  • Relevant provisions under NI Act 1881-
    • S.5. ‘Bill of exchange’.—A ‘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.
    • S.6. ‘Cheque’.—A ‘cheque’ is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand.
  • 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. Hence, the six month period should be counted from the date mentioned on the cheque.

HELD-

    • According to common law, In Hinchcliffe v. Ballarat Banking Co. [1870 1 VR (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.

 

  • In Jiwanlal Achariya v. Rameshwarlal Agarwalla [AIR 1967 SC 1118] a cheque dated 25-2-1954 was delivered on 4-2-1954 and encashed soon after 25-2-1954. The court held that the payment date for calculating limitation u/s 20 of the Indian Limitation Act, 1908,  is the earliest date the cheque would be actually payable, assuming it would be honored (i.e., 25-2-1954).

 

  • 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.
  • In the 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.
  • The appeal is accordingly dismissed.

 

COMMENTARIES RATI/NOTE-

 

  • Difference between bill of exchange and cheque-

 

 

A cheque does not require acceptance; in the ordinary courts it is never accepted. It is not intended for circulation; it is given for immediate payment; it is not entitled to days of grace and though, strictly speaking, it is an order upon a debtor by a creditor to pay to a third person the whole or part of a debt, yet in the ordinary understanding of persons, it is not so considered. It is more like an appropriation of what is stated as ready money in the hands of the banker; and in giving the order to appropriate to a creditor, the person giving the cheque must be considered as the person primarily liable to pay who orders his debt to be paid at a particular place, and not elsewhere, who has no right to insist on immediate presentment at that place [Ramchuru Mullic v Luchmeechund Radakissen, (1854)].

 

Unlike the bill of exchange or other negotiable instruments, a cheque does not require acceptance. However, there may be certification as to the genuineness of cheque and the signature of the drawer thereof [Sita Ram v Bombay Bullion Association].

 

Court while explaining the essentials of a promissory note held that mere writing of words “promissory note” does not make a document promissory note. It is sufficient if there is an unconditional undertaking to pay a certain sum of money to a certain person [Vijaykumaran Nair v Ajikumar].

 

The basic requirements of a bill of exchange differ slightly from that of a cheque. The bill of exchange must contain a written order to pay. The order should be unconditional, and the instrument must bear the signature of the drawer. The sum of money payable must be certain and the person to whom payable must be certain.