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Laxmi Dyechem v. State of Gujarat and Ors. (2012)13SCC375

Laxmi Dyechem v. State of Gujarat and Ors. (2012)13SCC375

FACTS-

  • Laxmi Dyechem, the appellant, supplied Naphthalene Chemicals to the respondent-company against invoices and bills over several years.
  • A running account was maintained in the appellant's books for the respondent-company, totalling Rs. 4,91,91,035/-.
  • The respondent issued post-dated cheques towards payment for the supplied goods, which amounted to 117 cheques.
  • Several of these cheques were dishonoured by the bank for reasons such as incomplete signatures, no image found, or signature mismatch.
  • The appellant informed the respondents about the dishonour and requested payment in accordance with Section 138 of the Negotiable Instruments Act.
  • Despite notice, the amount covered by the cheques was not paid by the respondents.
  • The respondents claimed to have informed the appellant about a change in mandate and requested the return of cheques for the issuance of fresh ones. However, fresh cheques were never issued.
  • Consequently, the appellant filed forty complaints under Section 138 of the Negotiable Instruments Act against the respondents.
  • The trial court took cognizance of the offense and issued summons to the respondents.
  • The respondents through Special Criminal Applications quashed the proceedings, contending that dishonour of cheques due to signature discrepancies did not constitute an offense under Section 138.
  • Hence, the present appeal for SC.

ISSUE-

  • Whether dishonour of a cheque solely due to signature discrepancies falls within the purview of Section 138 of the Negotiable Instruments Act.

RULE-

  • A Cheque will be dishonoured due to closed account, signature mismatch or any other discrepancies which shows deliberate actions of the drawer to commit fraud.

HELD-

  • The court emphasized that Section 138 should not be interpreted strictly, citing the NEPC Micon Ltd. v. Magma Leasing Ltd (1999) 4 SCC 253, the court agreed with its interpretation that various scenarios, including dishonour due to closed accounts or mismatched signatures, fall within the scope of Section 138.

 

  • M.M.T.C. Ltd. and Anr. v. Medchl Chemicals and Pharma (P) Ltd. and Anr. (2002) 1 SCC 234: Held that dishonor due to a stop payment instruction constitutes an offense under Section 138 but is subject to rebuttable presumption under Section 139.

 

    • The court highlighted that dishonour can result from deliberate actions of the drawer, like closing the account or changing signatures. Such actions, whether intentional or not, may constitute an offense under Section 138.
    • Dishonour due to stop payment, with or without notice to the drawer, falls under Section 138.
    • However, the accused can rebut this presumption by showing valid reasons for the stoppage, like a bona fide dispute or sufficient funds in the account.
    • The court stressed the importance of examining each case individually to determine if the dishonour constitutes an offense. Factors such as the existence of a lawful debt or liability and the credibility of the accused's defence must be considered.

 

  • Modi Cements Ltd. v. Kuchil Kumar Nandi: (1998) 3 SCC 249, Overruled the view taken in Vinod Tanna and Anr. v. Zaher Siddiqui and Ors (2002) 7 SCC 541, that dishonour after issuing a notice to stop payment wouldn't attract Section 138.

 

  • The court allowed the appeals, set aside the judgment and orders passed by the High Court, and dismissed the special criminal applications filed by the respondents. The trial court was directed to proceed with the trial of the complaints filed by the appellants expeditiously.