Proving Intent For Issuing Cheque Not Required U/S 138 NI Act, But Is Essential For Prosecution U/S 420 IPC: Jammu & Kashmir High Court

The case originated from a business transaction where the respondents engaged in purchasing goods from the complainant. Cheques were issued to settle the debt arising from this transaction. However, these cheques were dishonoured upon presentation, leading the complainant to file a complaint.

The question for the court's consideration in this petition was whether the Magistrate could have taken cognizance under Section 420 IPC against the petitioner based on a complaint initially filed under Section 138 of the Negotiable Instruments Act, 1881.

Justice Javed Iqbal Wani upon hearing the matter stated, "In an offence under Section 138 of the Act of 1881, the offence is not committed on the date of issue of the cheque or when the cheque is dishonored by the bank for specified reasons but after the demand notice is issued and the person concerned fails to pay the amount covered by the cheque within the stipulated period."

Clarifying the crucial distinction, the court underscored that "The question of inducement to another person to part with any property or to do or omit to do anything does not at all arise in a prosecution under Section 138 of the Act of 1881."

The Judicial Magistrate had taken cognizance of the complaint, issuing process against the petitioner under Section 420 IPC, while the other respondent was charged under Section 138 of the Negotiable Instruments Act. The petitioner, aggrieved by this decision, filed a revision petition, which was subsequently dismissed by the Principal District and Sessions Judge.

In its judgment, the court examined the framework governing Sections 138 and 420 IPC. The court explained that under Section 138, the primary focus is on the dishonour of the cheque and the subsequent failure to make the payment within the specified period after a demand notice is issued.

Conversely, Section 420 IPC deals with cheating, where it is imperative to establish that the accused had a fraudulent or dishonest intention at the time of the transaction, leading the other party to part with property or money.

While adjudicating the matter, Justice Wani stated that "if a person issues a cheque and subsequently the cheque is dishonored by the bank, and thereafter even after the issuance of a demand notice, the said person fails to pay the amount covered by the cheque within the stipulated period, that person commits an offence punishable under Section 138 of the Act of 1881."

He further noted that in a prosecution under Section 138, inducement to part with property or to act or omit to act “does not arise”, differentiating it from Section 420 IPC, where such inducement is a crucial element.

The court found that the Magistrate had committed a patent error by taking cognizance under Section 420 IPC based on facts that pertained to a case under Section 138 of the Negotiable Instruments Act. Justice Wani highlighted that the legal standards and necessary elements for establishing an offence under Section 420 IPC were not met in this instance, as there was no evidence of fraudulent or dishonest intention at the inception of the transaction.

The court, while quashing the complaint and the orders of the Judicial Magistrate and the revisional court, left the door open for the complainant to pursue charges under Section 420 IPC, should it be deemed appropriate and permissible by law.

Case Title: Gulzar Ahmad Malik Vs Tariq Ahmad Parray and another

Citation: 2024 LiveLaw (JKL) 211

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