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DIFFERENCE IN REGARDS TO THE AMBIT OF SEC

138 BY COMPARING THE TWO JUDGEMENTS

The apex court in two of its judgements that are Electronics Trade And Technology Vs Indian
Technologists and M/S Modi Cements Ltd Vs Shri Kuchil Kumar Nandi have explicitly
discussed the nature and scope of the section 138 of the Negotiable instruments act, 1881 and has
overruled its own ruling. Section 138 of NI act is a penalty provision which deals with the
punishments for the dishonoured cheques due to insufficiency of the funds in the bank account or
if exceed the agreemented amount with the bank. The purpose behind adding this section is to
prevent dishonesty on the part of the drawer of negotiable instrument to draw a cheque without
sufficient funds in his account maintained by him in a bank and induce the payee or holder in due
course to act upon it.

CASE 01 - ELECTRONICS TRADE AND TECHNOLOGY VS INDIAN

TECHNOLOGISTS

In the case of Electronics, the apex court overruled the decision of the High Court which said
that the ingredients of section 138 were not fulfilled as the bank memo stated “instructions for
stopping payment and stamped” and thereby the cheque is not dishonoured due to insufficient
funds rather it was an instruction to not to pay. However, the apex court while interpreting the
language of the section 138 relied on two situations: Firstly, If the cheque has been drawn and
issued to the payee and the payee has presented the cheque and thereafter, if any instructions are
issued to the Bank for non-payment and the cheque is returned to the payee with such an
endorsement, it amounts to dishonour of cheque and it comes within the meaning of Section 138.
Secondly, If after the cheque is issued to the payee or to the holder in due course and before it is
presented for encashment, notice is issued to him not to present the same for encashment and yet
the payee or holder in due course presents the cheque to the bank for payment and when it is
returned on instructions, Section 138 does not get attracted. As per the facts in this case, the
instructions given for the non-payment of the cheque was given after the payee had presented the
cheque and thereby the apex court ruled that instruction of non-payment will also attract the
section 138.
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CASE 02 -THE M/S. MODI CEMENTS LTD VS SHRI KUCHIL KUMAR NANDI

If we see the case of Modi Cement, here the apex court has not only interpreted the language of
the section of 138 but has also consider the implication of the ruling of the above case. As in the
current case, the drawer had given the instruction for the non-payment of the cheque before the
payee had presented the cheque and thereby following the ruling of the Electronics case, the high
court had quashed the appeal but apex court after observing and discussing the implication of the
said ruling overruled its own earlier judgement said that, “If we are to accept this proposition it
will make Section 138 a dead letter, for, by giving instructions to the Bank to stop payment
immediately after issuing a cheque against a debt or liability the drawer can easily get rid of the
penal consequences notwithstanding the fact that a deemed offence was committed.” And
thereby, the apex court quashed the order of the High Court.

THE DIFFERENCE BETWEEN THE TWO CASES

After understanding the judgements of both the cases, the difference in between both the cases is
the interpretation of the section 138. In the Electronics case, the court relied upon the literal
meaning of the section wherein in the second case the apex court, considered the future
implications of the ruling and thereby restricted the scope of Section 138