Written submission on behalf of the accused-petitioner

One of the most on-going banking practices is that banks/financial institutions are taking
cheque as a security along with other collateral securities against loan/credit facilities given
to the borrower. This practice has been started very recently. In earlier days, the
bank/financial institution would take mortgage, personal guarantees and other charge
documents, which generally did not include cheques. But, now-a-days the banks/financial
institutions are not advancing any credit facility without taking cheques as collateral
securities, which has become a real threat upon the borrowers. While the borrowers
(especially the commercial and industrial borrowers who took loan on high interest) are
facing turmoil in repaying the high interest of loan to the bank/financial institution, at the
same time they are always under threat that bank/financial institution may sell their real
property (mortgage subject) and take other legal action under the Artha Rin Adalat Ain,
2003 even in case of mere failure of repayment the installments. All these liabilities are
strict.

In addition to, now a more strict liability has been added. [The liability under Artha Rin
Adalat is strict and sometimes can be absolute. The liability under Negotiable Instruments
Act is strict but not absolute.]. Against every installment the bank/financial institution
takes one cheque and also an extra cheque for entire outstanding. All these cheques are
blank in respect of name of recipient, date, amount of money and declaring the nature of
cheque whether it is account payee or cash payee or otherwise.

Bank/financial institution files case under the Negotiable Instruments Act, 1881 for every
cheques of installments. It gives rise to a large number of cases against a borrower who has
to incur not only huge financial expenses but also physical and mental stress and
harassment in conducting the large number of cases. Under the circumstances, proceeding
under the Negotiable Instruments Act not only causes multiplicity of proceedings but also
grounds abuse of the process of law, which is also violative of the principle against double
jeopardy.

However, there are some cases decided on this issue. A short summary is given below-

(i) 55 DLR (AD) (2003) (Monzur Alam –vs- State):

It was held that-

“We have considered the submissions of the learned Advocate and gone through
the judgment and find no substance in the submission of the learned Advocate since
under section 138 of the Negotiable Instruments Act an offence is committed if a
cheque is dishonoured and if payment is not made within 15 days after receipt of a
legal notice. It is a settled law that criminal proceeding can be proceeded
independently of the civil suit. Moreover, since there is a prima facie case the
criminal cases cannot also be quashed. Therefore, the High Court Division did not
commit any illegality or made any error in law by holding that the pendency of the
civil suit will not be hindrance to proceed with the criminal cases.”

(ii) 11RG (2004) (AD 20 (S.A.B. Solaiman Ali –vs- Rangs Industries Limited and
another), and 11 BLC (2001) (HCD) 116 (Shamsul Alam –vs- Uttara Bank):

It was held that-

“Since under section 138 of the Act an offence is committed if a cheque is
dishonored and if payment is not made within 15 days after receipt of a legal

1 Dr. Syeda Nasrin

Advocate, Supreme Court of Bangladesh
 notice, criminal proceeding can be proceeded independently of the civil suit. Since
there is a prima facie case the criminal proceedings cannot be quashed”.

These cases are absolutely based on the settled principle that criminal case and civil case
can continue simultaneously. It does not consider the Artha Rin Adalat Ain.

(iii) 1 CLR (HCD) (2013) 553 (Ehetasamul Haque –vs- State):

Though the issue of section 138 of the Negotiable Instrument Act, 1881 and the Artha Rin
Adalat Ain, 2003 was considered in this case, the same lacked analysing and comparing
between two special laws and the ex-facie conflict between two legal provisions. It also
lacks other vital points of law which will be summarized later on.

This case mainly treating Artha Rin Adalat Ain as civil law and Negotiable Instruments
Act as criminal law passed the judgment interpreting section 5 of the Artha Rin Adalat Ain
without considering the Preamble along with sections 3 and 8 of Artha Rin Adalat Ain
along with sections 43, 58, 117, 118 and 138 of the Negotiable Instruments Act. The
important findings in this case are quoted below-

“The provision of section 138 of the Negotiable Instruments Act contemplated

punishment of offence for dishonour of the cheques. If the cheques are issued and it
is intentionally allowed to be dishonoured to defraud the creditor, then an offence is
committed. There is provision for issuing legal notice providing opportunity to
make repayment dishonoured cheque amount within 30 days and after expiry of the
notice period of the criminal case under section 138 of the Negotiable Instruments
Act can be filed the ensuring punishment of the offender. The criminal offence and
civil right to recover money are two different propositions. The Financial
Institution can recover the amount of loan by filing civil suit in the Artha Rin
Adalat. But the proceeding under section 138 of the Negotiable Instruments Act is
at all together together different proceeding for a punishable offence under the
Special law, and section 5 of the Artha Rin Adalat Ain, 2003 cannot override the
instant Special Law i.e. the Negotiable Instruments Act, 1881. Non-obstante Clause
in Section 5 of the Artha Rin Adalat Ain does not stand as a bar to institute
Criminal Case under the Negotiable Instruments Act, 1881. It only creates bar to
institute civil suit in ordinary civil courts.

Admittedly, all the cheques were issued by the accused-petitioner to ensure regular
payment of monthly installments. Then the cheques were signed and issued in favor
of the Financial Institution, the accused-petitioner has committed to make payment
of installment through encashing those cheques. Therefore, cheques are not merely
useless papers; rather those were used for the purpose of paying installments
against the loan. The Financial Institution shall be at liberty to present those
cheques for encashment of the installment amount as negotiable instruments and if
cheques are dishonoured for insufficient fund, it can initiate criminal proceeding
independently under section 138 of the Negotiable Instruments Act for punishable
offence and for realization of the loan amount. The section of double Jeopardy does
not arise at all.

It has already been settled by our apex court that there is nothing in the law
including a criminal case on account of a pending civil suit on the same fact. Rather
the criminal case stands for the offences, while civil suit is for realisation of money,
both can and together (reference 49 DLR (AD) 132). In reference to a criminal case
under Appellate Division held the follow view in the case Monzur Alam (MD) vs.
State and another reported in 55 DLR (AD) 62-
“Under section 138 of the Negotiable Instruments Act an offence is
committed if a cheque is dishonoured and if payment is not made within 15
days after receipt of a legal notice. It is a settled law that criminal
proceeding can be preceded independently of the civil suit.”

2 Dr. Syeda Nasrin

Advocate, Supreme Court of Bangladesh
(iv) 17 BLC (AD) (2012) 177 (Majed Hossain –vs- State):

The important findings of this case are quoted below-

“A reading of sub-section (1) of section 138 of the Act, 1881 shows that an offence
under the section shall be deemed to have been committed, the moment a cheque
drawn by a person on an account maintained by him with a banker for payment of
any amount of money to another person from out of t hat account is returned by the
bank unpaid on any of the grounds mentioned therein. Sub-section (1) of section
138 has not made any qualification of the cheque so returned unpaid either post-
dated given as a security for repayment of the loan availed by a loanee as alleged
by the accused or any other cheque issued by the drawer for encashment currently.
When the legislature has not made any difference between a post-dated cheque
issued as security for the repayment of the loan availed by the loanee, here the
petitioners, as argued by Mr. Chowdhury and a cheque issued for encashment
currently, we do not see any scope of making any such difference. Facts to be taken
into account to see whether an offence under sub-section (1) of section 138 of the
Act, 1881 has been committed or not are (a) whether the cheque issued by the
drawer was presented to the bank within a period of six months from the date on
which the same was drawn or with the period of its validity whichever was earlier
by the payee, or as the case may be, by the holder in due course of the cheque, (b)
whether the cheque returned unpaid ie dishonoured on any of the grounds
mentioned in sub-section (1) (c) whether demand for the payment of the amount of
money of the unpaid/dishonoured cheque was made to the drawer of the cheque by
the payee or, as the case may be the holder of the cheque in due course of the
cheque by giving a notice in writing within thirty days of the receipt of information
from the bank by him regarding the return of the cheque unpaid and lastly (d)
whether the drawer of the unpaid/dishonoured cheque failed to make the payment
of the amount of money of such cheque within thirty days to the payee or, as the
case may be, to the holder in due course of the cheque from the date of receipt of
the notice demanding such payment. By no logic, it can be said that the drawer of
the cheque does not know the consequence if a cheque is returned
unpaid/dishonoured for the reasons as provided in sub-section (1) of section 138 of
the Act, 1881, because ignorance of law is no plea.

A close reading of sub-section (1) of section 138 of the Act, 1881 shows that it has
nothing to do with the recovery of loan amount. The whole scheme of the law as
discussed hereinbefore, is to haul up the drawer of the unpaid/dishonoured
cheque(s) for not arranging the funds against the issuance of such cheque(s) and
then its/his failure to make the payment of the amount of the money of the
unpaid/dishonoured cheque(s) on demand by the payee or, as the case be, by the
holder in due course of the cheque(s) in writing within thirty days of the receipt of
such notice as provided in clauses (b) and (c) respectively of sub-section (1) of
section 138 of the Act, 1881.

However, one pertinent findings of this case is highly important which provides that –
“In this regard, it is also significant to note that sub-section (3) of section 138 of the
Act, 1881 has clearly provided that notwithstanding anything contained in sub-
sections (1) and (2) thereof, the holder of the cheque(s) shall retain his right to
establish his claim through civil Court if whole or any part of the value of the
cheque(s) remains unrealized.”

(v) 67 DLR (HCD) (2015) 354 (Aminul Karim –vs- Government):

It relied upon 17 BLC (AD) 177 holding that –

“Appellate Division upheld the said decision of the High Court holding:-

“We have considered the submissions of the learned Advocate and gone through
the judgment and find no substance in the submission of the learned Advocate since
under section 138 of the Negotiable Instruments Act an offence is committed if a

3 Dr. Syeda Nasrin

Advocate, Supreme Court of Bangladesh
 cheque is dishonoured and if payment is not made within 15 days after receipt of a
legal notice. It is a settled law that criminal proceeding can be proceeded
independently of the civil suit. Moreover, since there is a prima facie case the
criminal cases cannot also be quashed. Therefore, the High Court Division did not
commit any illegality or made any error in law by holding that the pendency of the
civil suit will not be hindrance to proceed with the criminal cases.”

The same view have been taken in Khondaker Mahtabuddin Ahmed vs State 49
DLR (AD) 132 and in Shamsul Islam case 11 BLC 116 that there is nothing in law
precluding a criminal case on account of a civil suit pending against the petitioners
on the same facts. The criminal case stands for the offence, while the civil suit is
for realization of money. Both can stand together.”

(vi) 21 BLC (2016) HCD 395 (Rex Apparels Ltd –vs- Government of the People’s
Republic of Bangladesh):

Only adds emphasis on establishing the principle that-

“Artha Rin Adalat Ain being a Special Law is directed towards special objects,
special measure i.e. speedy realization of the loan money from the borrower and
gives rise to special cause of action and self provides for the method of
enforcement of Rights conferred by that Act. In this law there is a provision laid
down in section 3 of the aforesaid Ain, which stated as follows:

ÒAvcvZZt ejer Ab¨ †Kvb AvB‡b wfbœZi hvnv wKQzB _vKzK bv †Kb, GB AvB‡bi weavbvejxB Kvh©Ki
nB‡eÓ|

From the above provision of Artha Rin Adalat Ain it is evident that Ain will prevail
over any other law and the bank has no other alternative, it has to follow the
provisions of law.”

From the aforesaid contention, it can be said that for recovery of loan, the bank/financial
institution has no other alternative, but to follow the provision of Artha Rin Adalat Ain.
Therefore, for recovery of loan, the bank/financial institution should not take recourse to
any other law either in the name of using security cheque under Negotiable Instruments
Act or in the disguise of criminal proceeding.

All the aforesaid cases have taken narrower view and lacked addressing several
important issues, which are summarized below under two broader heads-

A.0. Grounds for piercing/unveiling 17 BLC AD (2012) 177 and other similar kind
of judgments as stated earlier:

A.1. Security cheques are only for recovery of loan which absolutely fall
under the Artha Rin Adalat Ain, 2003, and the same should not attract
Section 138 of the Negotiable Instruments Act, 1881 – (is a well settled law
in India).

A.2. When for recovery of loan the Bank already filed Artha Rin suit (be it
adjudicated or pending), can the cheque in question be considered as
unpaid or with consideration?

A.3. Section 138 has nothing to do with the recovery of loan amount, if so,
it cannot be used as a weapon for recovery when the same is paid as
collateral security and not for repayment of loan amount.

A.4. Defense materials were not considered?

A.5. Civil suit for recovery if any amount remains unrealized?
A.6. When conflict of two special laws?

4 Dr. Syeda Nasrin

Advocate, Supreme Court of Bangladesh
 B.0. Along with the aforesaid grounds there are other grounds for examining
section 138 without piercing 17 BLC AD 177:

B.1. Security Cheque RvgvbZx `wjj as must be presented with the plaint under
Section 8 of the Ain, 2003. Without doing so, filing case under Section 138
is an abuse of the process of the Court.
B.2. Making the Artha Rin Adalat Ain nugatory.
B.3: When no amount is unpaid?
B.4. No criminal case is maintainable when dispute is of civil nature.
B.5: Whether the Act, 1881 is a special law?
B.6. Where the Act, 1881 is a pure Criminal Law?
B.7: When conflict of two special laws?
B.8: Conflict between two laws, not exactly between two proceedings.
B.9. Multiplicity of proceedings and double jeopardy upon the borrower.
B.10. The bank cannot be said as holder in due course of cheque under the
Negotiable Instruments Act.
B.11. Against fundamental rights.
B.12. Barred under the Contract Act, 1872.
B.13. Not only must Justice be done; it must also be seen to be done.

Discussion in details:

A.0. Grounds for piercing/unveiling 17 BLC AD (2012) 177

and other similar kind of judgments as stated earlier
(all those are shortly referred to as the ‘17 BLC AD 177’)

A.1. Security cheques are only for recovery of loan which absolutely fall under the Artha
Rin Adalat Ain, 2003, and the same should not attract Section 138 of the Negotiable
Instruments Act, 1881 – (is a well settled law in India):

Security cheques deposited against loan do not create criminal liability so long security
cheques are taken as one of the collateral securities along with others. In default of
repayment of loan, the same cheques are to be used for recovery of loan. So ultimately the
issue is recovery of loan which arises out of contract executed between the bank and its
customer. Therefore, the cheque also arises out of contract. And the contract is the loan
contract. As such, there is no scope to treat the security cheques different from the contract.
For enforcing the contract or in case of breach of contract only the civil liability can arise.
It is a well settled principle of law that contractual liability is a civil liability. The cheques
cannot be used for recovery of loan under criminal law. As such, there will be no other use
of the cheques except recovery of loan under civil law. And for recovery of loan, the
special law is Artha Rin Adalat Ain, 2003 (henceforth referred to as “the Ain, 2003”).

The Ain came into effect on 10.03.2003 with the following Ain as stated in the Preamble –

: Avw_©K cÖwZôvb KZ„K

© FY Av`v‡qi Rb¨ cÖPwjZ AvB‡bi AwaKZi ms‡kvab I
msnZKibK‡í cÖYxZ AvBb| †h‡nZz Avw_©K cÖwZôvb KZ„K
© cª`Ë FY Av`v‡qi Rb¨ cÖPwjZ
AvB‡bi AwaKZi ms‡kvab I msnZKiY cÖ‡qvRbxq|
English: An Act to further amend and consolidate the existing laws for
recovery of loans given by the financial institutions.
Whereas it is necessary to further amend and consolidate the existing laws
for recovery of loan given by the financial institutions.

5 Dr. Syeda Nasrin

Advocate, Supreme Court of Bangladesh
The Negotiable Instruments Act, 1881 (henceforth referred to as “the Act, 1881”) though
deals with some specific issues and for which it is considered as special law, in fact its
application is like general law. The Act, 1881 does not start with the “notwithstanding” i.e.
non-obstante clause. Moreover, it deals with promissory notes, bills of exchange and
cheques. This is not a pure criminal law. Though it is called as quasi-civil and quasi–
criminal, it is not so. It is a general law providing specific provisions addressing some
special issues. Moreover, neither the Act, 1881 nor its section 138 does not start with
“Notwithstanding”.

On the other hand, the Ain, 2003 starts with “non-obstante” Clause i.e. notwithstanding
and takes prevail over all other existing law. By no means, it cannot be said that the Ain,
2003 does not came into operation taking prevail over all existing laws including the Act,
1881.

But, 17 BLC (AD) (2012) 177 did not address this issue?

Moreover, the golden rule of interpretation is to interpret the entire statute together with its
time of enactment, purpose, intention of legislature, entire scheme of law and other
existing laws in force. The Act, 1881 never intends to be applied as a means/ weapon for
recovery of money for the banks/financial institutions. In fact, it was not used for the said
purpose before 1990 dealing with some special issues. It is a general law. It cannot be used
as a double weapon for recovery of loan while there is a special law for the said purpose.

Indian Reference on this point:

There are several decisions in India deciding on this issue that security cheques given to
bank or financial institution does not attract the criminal liability under section 138 of the
Act, 1881. Amongst all one latest decision is cited below for ready reference-

Ramkrishna Urban Co-operative Credit vs. Shri Rajendra Bhagchand Warma,

CRIMINAL APPLICATION NO. 898 OF 2009,
IN THE HIGH COURT OF JUDICATURE AT BOMBAY:

Facts:

“This is an application for leave to file appeal against the order of acquittal passed
by the learned Judicial Magistrate, First Class, Court No.1, Ahmednagar in S.T.C.
No. 960 of 2008, decided on 21.01.2009, whereby the respondent is acquitted of
offence punishable under section 138 of the Negotiable Instruments Act.

Present applicant has filed private complaint alleging that the complainant is a co-
operative society registered under the Maharashtra Co-operative Societies Act,
1960. It is doing banking business. The respondent for his business had taken loan
of Rs. 2,00,000/- (Rupees Two Lakhs Only) on 18.10.2000 and for satisfaction of
the loan, he executed promissory note, mortgage deed, guarantee deed etc. The
respondent has agreed to repay amount from time to time by installments.
Accordingly, cheque No. 500276 of Rs. 87,209/- drawn on Ahmednagar Merchants
Co-operative Bank Ltd., Branch - Dalmandai, Ahmednagar, was issued. The
cheque was dated 24.01.2008. When the complainant/applicant presented the
cheque, it was dishonoured on the ground of insufficiency of funds. Thereafter, on
11.02.2008 a notice was issued by the complainant/applicant, but inspite of the
same, the amount was not paid by the respondent and therefore the complaint was
filed.

6 Dr. Syeda Nasrin

Advocate, Supreme Court of Bangladesh
 The learned Magistrate after considering the evidence led by both sides, passed the
order of acquittal acquitting the respondent of offence punishable under section 138
of the Negotiable Instruments Act, mainly on three grounds. Firstly, it is held that
as many as ten blank cheques were obtained by the applicant bank while
sanctioning/disbursing loan as security and one of them was used in the present
case; secondly, there is bar of limitation; and thirdly, amounts paid by the
respondent, in respect of which he has produced receipts in defence, were not
reflected in the extract of account produced on record and as such it is not proved
that the amount of Rs. 89,209/- was due on the date of the cheque. As against said
decision of acquittal, the applicant/complainant wishes to file the appeal and
therefore he filed this application under section 378 (4) of the Code of Criminal
Procedure for leave to file appeal.
………………....
…………………
Thereafter, cheques from third cheque book bearing Nos. 823492 to 823500 were
used till 07.03.2008. So, it was observed by the learned Magistrate that all this
clearly indicated that the accused/respondent was not using cheques in the year
2008 from the cheque book in which cheque No. 500276 was included. So, all
these circumstances supported the case of the respondent that the respondent had
issued 10 blank cheques signed by him to the complainant in the year 2000 while
sanctioning the loan.”

Point of Law:

“It is argued that the cheque drawn must be for the discharge, in whole or in part, of
any debt or other liability. So the debt or other liability must be in existence when
the cheque, whether blank or post dated was issued. In this case the accused-
respondent issued the cheque in question as security for loan before loan amount
was disbursed. So, cheque was not towards any existing debt or liability. In case of
loan transaction, borrower is in need of money and therefore he borrows loan
amount from someone with understanding that the loan amount would be repaid in
lumpsum on a future date or in installments from particular future date onwards
periodically, with or without interest. It is not transaction of loan, if the amount is
to be repaid the moment it is paid to borrower. So, provisions of Section 138 of the
Negotiable Instruments Act are not attracted.
……………………..
……………………
Thus the object of the amendment and introduction of Chapter XVII in the
Negotiable Instruments Act by Act of 1988 was mainly to encourage all major
transactions including commercial or business transactions through cheques and to
enforce credibility and acceptability of cheques in settlement of liability in general.
Encouragement of payment by cheques/credit cards/debit cards rather than by cash
is necessary for healthy economy. That also brings in transparency in transactions
and discourages creation of black or unaccounted money through evasion of taxes
or other malpractices. So, provisions like Section 138 of Negotiable Instruments
Act are salutary to give reliability, credibility and acceptability of negotiable
instruments like cheques in daily life. However, the object was not to provide
effective and speedy remedy for recovery of loans. Law makers must not have
intended or imagined that money lenders or banks would obtain blank or post dated
cheques while sanctioning/disbursing loans as securities and would use them to
make debtors/borrowers to repay loan under threat of prosecution and punishment
under Section 138 of the Negotiable Instruments Act. So, it is doubtful if provisions
of Section 138 of the Negotiable Instruments Act would be ( 14 ) attracted to a case
in which a blank or post dated cheque is obtained by a bank or money lender before
or while sanctioning or disbursing loan amount as security for the loan.

In following cases bouncing of cheques which were given as security for loan
amounts were held not to attract provisions of Section 138 of the Negotiable
Instruments Act :-

1) Anand Urban Co-operative Credit Society V/s.

7 Dr. Syeda Nasrin

Advocate, Supreme Court of Bangladesh
 Vipin Lalchand Mehta & Anr., 2008 (2) Bom.C.R. (Cri.) 65 : 2008 ALL M.R. (Cri)
2266.
2) Goa Handicrafts, Rural & Small Scale Industries Development Corporation Ltd.,
V/s. Samudra Ropes Pvt. Ltd. & Anr., 2005 ALL MR (Cri) 2643 : 2006 (1)
Bom.C.R. (Cri) 157.
3) Hanumant R. Naik V/s. Ajit Harmalkar, 2008 (1) Bom.C.R. (Cri) 432 : 2008
ALL MR (Cri) 486.
4) M.S. Narayana Menon Alias Mani V/s. State of Kerala and Anr., (2006) 6
S.C.C.39.
5) Karekar Finance Pvt. Ltd., V/s. Shri M.N.
Bashyam & Anr., 2007 ALL MR (Cri) 3073 : 2008 (3) B.C. 98.
6) Jayantilal Parmar V/s. Vaishali Farne (2007) 2 Bom.C.R. (Cri) 403.
7) Om Shri Finance & Investment Corporation V/s.
Mohemmed Sheikh (2007) 11 LJSOFT (URC) 24.

In Anand Urban Co-operative Credit Society V/s. Vipin Mehta, 2008 (2) Bom.C.R.
(Cri) 65, trial court held that 5 blank cheques were obtained towards security for
repayment of loan as in this case. This Court refused to interfere with the order of
acquittal.

In Karekar Finance Pvt. Ltd. V/s. Shri M.N. Bashyam & Anr., 2007 ALL MR (Cri)
3073, it is held that though the accused had taken loan from the complainant, he
proved that the blank cheque was issued by him towards collateral security for loan
and interest. It is held that the cheque cannot be said to be issued towards discharge
of a debt and same would not come under purview of Section 138 of the Negotiable
Instruments Act.

Similarly, in the case of Jayantilal Parmar V/s. Vaishali Farne (2007) 2 Bom.C.R.
(Cri) 403, three blank cheques were given as security for loan amount. Two
cheques were encashed and third was bounced. The Single Bench of this Court
refused to interfere with the order of acquittal.

Facts of said case are similar to the facts in case before us.

The facts involved in Om Shri Finance & Investment Corporation V/s. Mohemmed
Sheikh (2007) 11 LJSOFT (URC) 24, are also similar to facts of our case. The
Court declined to interfere with the order of acquittal.

The Trial Court considered that though cheque was issued on or before 18.10.2000,
the date put thereon is 24.01.2008. No doubt there is authority to put date so also
the amount, as it was a blank cheque. But the question raised is whether provisions
under Section 138 of the Negotiable Instruments Act should be made applicable to
a blank cheque issued as security for loan after period of 7 to 8 years.

In the present case blank cheques were issued prior to disbursement of loan as a
collateral security for loan which was sanctioned. In such case there was no
existing debt or liability when the cheque is issued. So, in the facts and
circumstances of the case, the case does not fall within four corners of offence
punishable under section 138 of the Negotiable Instruments Act. Of course such
defence is ( 17 ) available against payee and not holder in due course.”

A.2. When for recovery of loan the Bank already filed Artha Rin suit (be it adjudicated or
pending), can the cheque in question be considered as unpaid or with consideration?

In light of the judgment reported in 17 BLC (AD) (2012) 177, for constituting an offence
under section 138 of the Negotiable Instruments Act, 1881, the cheque must be returned
unpaid. A cheque can be dishonored for many reasons, but a cheque may not be unpaid.
The amount of cheque may be paid by many other alternative ways. For that reasons, the
offence constituted under section 138 against a cheque returned unpaid and the offence
apply “without prejudice to any other provisions of this Act”. It means that the other

8 Dr. Syeda Nasrin

Advocate, Supreme Court of Bangladesh
provisions of the Act will apply so for justifying the constitution (or non-constitution) of
an offence. In this connection a negotiable instruments as not a negotiable instruments is
the eye of law. This issue should be closely monitored.

One important observation made in a case reported in SCOB [2015] HCD, is particularly
important -

“On a close scrutiny of the aforesaid provisions, it appears that section 43 contains a
specific word ‘consideration’. The literal meaning of the term ‘consideration’ is
‘pursuant to something’ which might be pursuant to an ‘agreement’ or pursuant to
an “act” or “deed” being legally enforceable. Thus, vide section 43 when a
negotiable instrument is made, drawn, accepted, endorsed or transferred without
consideration, or for a consideration which fails, creates no obligation of payment
between the parties to the transaction. If that be so, any cheque, if dishonored by the
bank, under such circumstances, will not attract section 138 of the Act. As such, the
specific criteria for the purpose of filing of a case under section 138 is whether there
is consideration; which is a vital question to be looked into for trial and conviction.
…….
……..
……..
From the discussion made hereinabove, since we found that section 138 of the
Negotiable Instruments Act is not an isolated enactment and since the same does
not contain “non-obstante” clause, as such, the same is to be read along with other
provisions of the said Act. In that view of the matter when the trial commences, the
said Act entitles the accused person to take any defence in the light of sections 6, 6,
8, 9, 43, 58 and 118 of the said Act. Therefore, we do not find any
reasons/necessity to declare the impugned amendment unconstitutional, ultra vires
or illegal.”

On this issue, Sections 43 and 58 of the Act, 1881 are particularly important.
“Section 43 of Act, 1881: Negotiable instrument made, etc, without
consideration: A negotiable instrument made, drawn, accepted, indorsed or
transferred without consideration, or for a consideration which fails, creates no
obligation of payment between the parties to the transaction. But if any such party
has transferred the instrument with or without indorsement to a holder for
consideration, such holder, and every subsequent holder deriving title from him,
may recover the amount due on such instrument from the transferor for
consideration or any prior party thereto.

Exception I - No party for whose accommodation a negotiable instrument has been

made, drawn, accepted or indorsed can, if he have paid the amount thereof, recover
thereon such amount from any person who became a party to such instrument for
his accommodation.

Exception II - No party to the instrument who has induced any other party to make,
draw, accept, indorse or transfer the same to him for a consideration which he has
failed to pay or perform in full shall recover thereon an amount exceeding the value
of the consideration (if any) which he has actually paid or performed.

Section 58 of Act, 1881: Defective title: When a promissory note, bill of exchange
or cheque has been lost or has been obtained from any maker, drawer, acceptor or
holder thereof by means of an offence or fraud, or for an unlawful consideration,
neither the person who finds or so obtains the instrument nor any possessor or
indorsee who claims through such person is entitled to receive the amount due
thereon from such maker, drawer, acceptor or holder, unless such possessor or
indorsee is, or some person through whom he claims was, a holder thereof in due
course.”

9 Dr. Syeda Nasrin

Advocate, Supreme Court of Bangladesh
Though section 118 confers presumption as to negotiable instruments regarding
consideration, it is rebuttable. It provides that –

“Section 118 of Act, 1881: Presumptions as to negotiable instruments- (a) of

consideration: Until the contrary is proved, the following presumptions shall be
made:
(a) that every negotiable instrument was made or drawn for consideration, and that
every such instrument, when it has been accepted, indorsed, negotiated or
transferred, was accepted, indorsed, negotiated or transferred for consideration;

The aforesaid presumption is rebuttable. SectionS 43 and 53 can be more explained with
the provisions of Section 117, which provides rules as to compensation. Therefore by
adducing proper evidences, it can be proved that the cheque has fallen without
consideration.

“Section 117 of Act, 1881: Rules as to Compensation: The compensation payable

in case of dishonour of a promissory note, bill of exchange or cheque, by any party
liable to the holder or any indorsee, shall be determined by the following rules:-
(a) the holder is entitled to the amount due upon the instrument, together with the
expenses properly incurred in presenting, noting and protesting it;
(b) when the person charged resides at a place different from that at which the
instrument was payable, the holder is entitled to receive such sum at the current rate
of exchange between the two places;
(c) an indorser who, being liable, has paid the amount due on the same is entitled to
the amount so paid with interest at six per centum per annum from the date of
payment until tender or realisation thereof, together with all expenses caused by the
dishonour and payment;
(d) when the person charged and such indorser reside at different places, the
indorser is entitled to receive such sum at the current rate of exchange between the
two places;
(e) the party entitled to compensation may draw a bill upon the party liable to
compensate him, payable at sight or on demand, for the amount due to him,
together with all expenses properly incurred by him. Such bill must be
accompanied by the instrument dishonoured and the protest thereof (if any). If such
bill is dishonoured, the party dishonouring the same is liable to make compensation
thereof in the same manner as in the case of the original bill.”

The Rule as to compensation that the holder is entitled to the amount due upon the
instrument under section 117(a) is more elaborated under sub-section 2 of section 138,
which states that-

“Where any fine is realized under sub-section (1), any amount upto the face value
of the cheque as far as is covered by the fine realized shall be paid to the holder”.

In light of the above sections, every cheque i.e. negotiable instrument should be backed by
consideration which remains unpaid till final adjudication of the case. As soon as the
cheque falls without consideration or lacks unpaid-ness, it automatically loses its
acceptability as a negotiable instrument under the Act, 1881. It might have other
corroborative values, but it cannot be considered as negotiable instrument under this Act,
1881. The payment of consideration or without consideration can happen at any time. The
cheque may fall without consideration when payment is made thereon. Therefore, only that
part /portion of amount remains unpaid against the face value of the cheque can be paid
against the cheque. Now, the question is, what if the payment is already made against the

10 Dr. Syeda Nasrin

Advocate, Supreme Court of Bangladesh
cheque in question? or what if the payment is under the process of recovery in another
course of law? or what if there remains no unpaid /outstanding dues against the cheque?

Unfortunately, 17 BLC (AD) 177 does not address this issue?

A.3. Section 138 has nothing to do with the recovery of loan amount, if so, it cannot be
used as a weapon for recovery when the same is paid as collateral security and not for
repayment of loan amount:

Yes, section 138 has nothing to do with recovery of loan. Before the amendment dated 6 th
July 2000 it was stated in sub-section 1 of section 138 that for the discharge in whole or in
part, of any debt or other liability “means a legally enforceable debt or other liability”.

It was repealed too. After 6 (six) years of said repeal, the following sections came into
force, almost speaking the same thing in a bit different way there—

“Where any fine is realized under sub-section (1), any amount upto the face value
of the cheque as far as is covered by the fine realized shall be paid to the holder”.

Only Sub-Section 3 of Section 138 starts with “Notwithstanding “clause. Therefore, there
is reasonable clarification that by this Sub-Section a harmonious interpretation between the
processes (be it civil or criminal) for realization of money should be merged. Those two
cannot be treated as isolated. The earlier provision containing discharge of liability was
repealed on 6th July 2000, whereas sub-sections 2 and 3 were added on 9th February 2006.
Meanwhile, on 10th March 2003 the Artha Rin Ain came into force. Sub-section 3 of
section 138 is an implication of merging these two. If money realized/recovered by section
138, then only for remaining balance civil suit can be taken. Alternatively, if civil
proceeding has already taken for realization of money, or money has already been realized
through civil proceeding, then no proceeding under section 138 shall lie.

Unhappily, 17 BLC (AD) 177 does not address this issue?

A.4. Defense materials were not considered?

It is a matter of great regret that though 17 BLC AD 177 provides the ingredients for
constituting an offence under section 138 of the Act, 1881, it miserably fails to
examine the defence materials or other pre-conditions as provided under the Act,
1881. From that perspective, 17 BLC AD 177 is not comprehensive so far analyzing
the offence constituted under section 138 of the Act, 1881.

A.5. Civil suit for recovery if any amount remains unrealized?

Sub-Section 3 of Section 138 provides that where any fine is realized under sub-section
(1), any amount upto the face value of the cheque as far as is covered by the fine realized
shall be paid to the holder. If money realized/recovered by section 138, then only for
remaining balance civil suit can be taken. Alternatively, if civil proceeding has already
taken for realization of money, or money has already been realized through civil
proceeding, then no proceeding under section 138 shall lie. Therefore, it also means that
once case is filed under section 13, then before realization of the money thereof, no civil
suit should lie, because there is no provision for set-off or counter claim in both these
cases.

11 Dr. Syeda Nasrin

Advocate, Supreme Court of Bangladesh
A.6. When conflict of two special laws?

17 BLC AD 177 did not address the issue. It generalizes the conflict between civil and
criminal proceedings. Despite of considering the same, it did not address the issue of
res-judicata or principle barred by double jeopardy.

B.0. Along with the aforesaid grounds there are other grounds
for examining section 138 without piercing 17 BLC AD 177

B.1. Security Cheque RvgvbZx `wjj as must be presented with the plaint under Section 8 of
the Ain, 2003. Without doing so, filing case under Section 138 is an abuse of the process
of the Court:

In default of repayment of loan, the bank/financial institution can file suit for recovery of
loan amount as arisen out of a contractual relationship. There arose no question of criminal
offence, thus criminal proceeding. It is well settled that proceeding under Section 138
cannot be treated as a suit for recovery of money by bank/financial institution [203 (2013)
DLT 129]. Therefore, taking proceeding under Section 138 using security cheque is a
malafide, fraudulent and unreasonable use of a legal device. It is decided by the Supreme
Court of India in R. Vijayan vs. Baby and another, reported in AIR 2012 SC 528 and by the
Delhi High Court in Delhi High Court Bar Association & Anr. Vs. Govt. of NCT of Delhi
& Anr., reported in 203 (2013) DLT 129 that “We are conscious of the fact that
proceedings under Section 138 of the Act cannot be treated as civil suits for recovery
of the cheque amount with interest”.

Moreover, bank/financial institution files case under Section 138 using the security cheque
which is RvgvbZx `wjj under the Artha Rin Adalat. For filing case under Section 138 the
bank/financial institution has to present original cheque before the learned court of
cognizance/trial below. On the other hand, while filing the suit under the Artha Adalat Ain
the bank/financial institution has to produce details descriptions of all RvgvbZx `wjj
deposited against the loan in the Schedule of the plaint and also produce the copies of all
RvgvbZx `wjj before the Artha Rin Adalat. So, security cheques being RvgvbZx `wjj become
the subject-matter of both proceeding under Section 138 and the Artha Rin Adalat which
sould not be subject-matter of proceeding under section 138.

While, the Artha Rin Adalat Ain is a special legislation, and it has been enacted amending
and consolidating all the laws in the relevant area for recovery of loan by the
bank/financial institution; therefore application of Artha Rin Adalat shall prevail over the
Negotiable Instruments Act for recovery of any amount relating to loan of bank/financial
institution.

And, the bank/financial institutions as a mandatory recourse has to file suit under the Artha
Rin Adalat Ain first annexing all the RvgvbZx `wjj including cheques. Here, the
bank/financial institutions have no scope to use the security cheque (RvgvbZx `wjj) for
initiating criminal proceeding under Section 138, when the law (Artha Rin Adalat Ain)
expressly makes the security cheque (RvgvbZx `wjj) as the subject-matter of the Artha Rin
suit. It is already settled that when the special law makes anything subject-matter to it, the
special law shall prevail over general law [16 BLD (1996) 300]. It is also settled that in

12 Dr. Syeda Nasrin

Advocate, Supreme Court of Bangladesh
case of enforcing two special laws, always the later and more related/special one shall
prevail.

However, the bank/financial institution by-passing and in derogation of the Artha Rin
Adalat Ain uses security cheque for initiating criminal proceeding under Section 138 in
lieu of producing those cheques in the Artha Rin Suit. It not only makes the schedule of
Artha Rin suit defective but also it is an abuse of the process of the law and practice fraud
upon the Court. It is like using the legal device as an instrument of fraud and harassment,
which is absolutely malafide, arbitrary, unreasonable and coram non judice [34 DLR (AD)
(1982) p. 222, Rochefoucauld v Boustead (1897) 1 Ch 196, 2001 (6) ALD 582]. Leaving
recourse or along with invoking under the Artha Rin Adalat Ain, the proceeding under
Section 138 is the colorable exercise of the legal provision under Section 138, which is
liable to be prevented for ends of justice. It is a well established legal principle now that no
legal device can be used with malafide intention.

For ready reference the relevant portion of Section 8 of Artha Rin Adalat Ain is quoted
below-

aviv- 8| AviwR|- (1) Avw_©K cÖwZôvb AviwR `vwL‡ji gva¨‡g gvgjv `v‡qi Kwi‡e Ges D³ AviwR‡Z Ab¨vb¨
wel‡qi g‡a¨, wbb¥ewY©Z welqmg~n DwjøwLZ nB‡e, h_vt-
(K) ev`xi bv, wVKvbv, Kg©¯’j BZ¨vw`I weeiY;
(L) weev`xi bvg, wVKvbv, Kg©¯’j, evm¯’vb BZ¨vw`I weeiY;
(M) `vexi mwnZ m¤úwK©Z mKj NUbv;
(N) gvgjvi KviY D™¢‡ei NUbv, ¯’vb Ges ZvwiL;
(O) †KvU© wd cÖ`v‡bi D‡Ï‡k¨ gvgjvi Zvq`v`;
(P) Av`vj‡Zi GLwZqvi iwnqv‡Q g‡g© weeiY; Ges
(Q) cÖvw_©Z cÖwZKvi|

(2) c~e©eZ©x Dc-avivq ewY©Z welqvw`i AwZwi³, ev`x, AvwR©‡Z AviI AšÍf’©³ Kwi‡e-

(K) GKwU Zdwmj, hvnv‡Z cÖ`wk©Z nB‡e-

(A) weev`x‡K cÖ`Ë g~j FY ev †ÿÎgZ, wewb‡qvMK…Z UvKvi cwigvY;
(Av) ¯^vfvweK my` ev †ÿÎgZ, gybvdv ev fvov wnmv‡e Av‡ivwcZ UvKvi cwigvY;
(B) `Û my` wnmv‡e Av‡ivwcZ UvKvi cwigvY;
(C) Avi Ab¨vb¨ welq eve` weev`xi Dci Av‡ivwcZ UvKvi cwigvY;
(D) gvgjv `v‡q‡ii c~e© ch©šÍ cÖYxZ †kl wnmve g‡Z weev`x KZ©K
„ ev`x Avw_©K cÖwZôvb‡K FY ev
cvIbv cwi‡kva eve‡` Rgv`vbK…Z UvKvi cwigvY; Ges
(E) ev`x KZ©„K cÖ`Ë I avh© †gvU Ges weev`x KZ©„K cwi‡kvwaZ †gvU UvKvi Zzjbvg~jK Ae¯’vb;

(4) ev`x Zuvnvi `vexi mg_©‡b mvÿ¨ wnmv‡e Zuvnvi `L‡j bvB Ggb †Kvb `wj‡ji Dci wbf…i Kwi‡j, D³ `wjj
Kvnvi wbKU Av‡Q Zvnv D‡jøL Kwiqv D³ `wj‡ji GKwU ZvwjKv AvwR©i mwnZ `vwLj Kwi‡e|
(5) Dc-aviv (2) I (3) Gi weav‡bi e¨Z¨‡q, cieZ©x‡Z †Kvb `wjj ev`x `vwLj Kwi‡j, Av`vjZ msMZ KviY
I LiP cÖ`vb e¨wZ‡i‡K Dnv MÖnY Kwi‡e bv; Ges cÖ‡`q LiP miKvix ivR¯^ wnmv‡e wba©vwiZ Lv‡Z Rgv nB‡e|

But 17 BLC AD 177 did not consider this issue?

13 Dr. Syeda Nasrin

Advocate, Supreme Court of Bangladesh
B.2. Making the Artha Rin Adalat Ain nugatory:

Negotiable Instruments Act, 1881 came into force on 9th December 1881, while Artha Rin
Adalat Ain, 2003 came into force on 10th March 2003 as a special and complete legislation
for the purpose of recovery of FY by the bank/financial institution. This Act is a
consolidation and amendment of all the existing laws in this area of recovery of FY by the
bank/financial institution. The Preamble of the Artha Rin Adalat Ain reads out “Avw_©K
cÖwZôvb KZ©„K FY Av`v‡qi Rb¨ cÖPwjZ AvB‡bi AwaKZi ms‡kvab I msnZKiYK‡í cÖYxZ AvBb| †h‡nZz Avw_©K
cÖwZôvb KZ©„K cÖ`Ë FY Av`v‡qi Rb¨ cÖPwjZ AvB‡bi AwaKZi ms‡kvab I msnZKiY cÖ‡qvRbxq”.

The application of this Ain has been narrated in Section 3 stating that “AvB‡bi cÖvavb¨t
AvcvZZ: ejer Ab¨ †Kvb AvB‡b wfbœZi hvnv wKQzB _vKzK bv †Kb, GB AvB‡bi weavbvejxB Kvh©Ki nB‡eÓ|
This provision has got absolute effect by Section 5, relevant provisions are quoted below-

aviv- 5t Av`vj‡Zi GKK GLwZqvit- (1) Ab¨ †Kvb AvB‡b hvnv wKQzB _vKzK bv †Kb, Bc-aviv (5) I (6)
Gi weavb mv‡c‡ÿ, Avw_©K cÖwZôv‡bi FY Av`vq m¤úwK©Z hveZxq gvgjv aviv 4 Gi Aaxb cÖwZwôZ, †NvwlZ ev
MY¨ nIqv A_© FY Av`v‰Z `v‡qi Kwi‡Z nB‡e Ges D³ Av`vj‡ZB Dnv‡`i wb®úwË nB‡e|
............
............
(8) GB AvB‡bi Aaxb `v‡qiK…Z gvgjv ÒA_© FY gvgjvÓ bv‡g, ‡iwRwóª nB‡e|

Therefore, it expressly means that it was the legislature’s intention that for recovery of loan
(FY) by the bank/financial institution, the Artha Rin Adalat Ain will be the first,
comprehensive and absolute recourse. There is no way to go under Negotiable Instruments
Act; offence under which is criminal in nature. The legislature has no intention that the
bank/financial institution can initiate criminal proceeding under Section 138 for recovery
of loan. If the legislature had such intention, then Artha Rin Adalat Ain would have no
meaning to come into effect, and the law-makers would definitely include the Negotiable
Instruments Act under Section 5(2). It is an established rule of interpretation that intention
of the law-makers should be preferred while interpreting a statute [41 DLR(AD) (1989)
165, 15 BLD (AD) (1995) 194].

Moreover, if the law-makers had any intention of applying Section 138 for recovery of
loan, then this Section would also take place in Section 12, which deals with other
alternatives to be taken before filing Artha Rin Suit. This Section does not include Section
138, which means that Artha Rin Suit is the comprehensive and complete forum for
recovery of loan by the bank/financial institution.

Therefore, leaving the substantial recourse and in addition to taking substantial recourse,
the bank/financial institution is now taking this additional recourse under Negotiable
Instruments Act as a first recourse, which is absolutely nugatory and frustration of the
purpose of the Artha Rin Adalat Ain.

It has been decided in a case Messers Rabeya Oil Mills vs. Janata Bank & another,
reported in 16 BLD (1996) p. 300 that –

“In this case it is admitted that the petitioner took loan from the Respondent 1 Bank.
The Bank also got decree from the Artha Rin Adalat in the mortgage suit. Section 5
of the Artha Rin Adalat Act, 1990 is on power and jurisdiction of the Artha Rin
Adalat and S. 7 provides appeal from the Judgment and decree of the said court and
the forum filing such appeal in the High Court Division and time for filing appeal is

14 Dr. Syeda Nasrin

Advocate, Supreme Court of Bangladesh
 30 days from the date of judgment and decree. Sub-section (2) of S. 6 enjoins for
payment of at least half of the decreetal amount for filing appeal. Thus it is seen that
S. 5 confers upon the Artha Rin Adalat exclusive jurisdiction to hear and decide suit
for recovery of loan. S. 7 provides for forum for Appeal and sub-section (2) of S. 6
enjoins payment of 50% of the decreetal amount for filing appeal. The petitioner in
this case before us did not file any appeal from the decree made in the Mortgage
Suit rather it filed an independent suit for declaration that the property in suit cannot
be sold in execution of the decree by the Respondent 1 in that such action is barred
under S. 6 of the Land Reforms Ordinance, 1984, according to which land used as
homestead in the rural area is exempt from all legal processes including sale, and the
owner of such land shall not be divested or dispossessed of the land or evicted there
from by any means by any office, court or any other authority. The contention
requires consideration of the relevant provisions of the two enactments S. 5 of the
Artha Rin Adalat Act, 1990 in an explicit language manifestly makes it clear that
notwithstanding anything contained in any other the Artha Rin Adalat Act, 1990 is
vested with exclusive jurisdiction to entertain suit for recovery of money by
financial institution. And the Land Reforms Ordinance, 1984 in its premable states
that it is brought into existence for the purpose of reform of the law relating to land
tenure, land holding and land transfer with a view to maximising the production and
ensuring better relation between the land owners and bargaders.

Therefore the intent of this legislature seems to be for maximisation of production

and better relation between the owner and bargaders. Read in the light of the
preamble we are of the opinion that S. 6 of the Ordinance does not exclude the
jurisdiction of the Artha Rin Adalat, a creature of a Subsequent Act and a special
legislation to pass a decree for recovery of money arising out of suit for recovery of
loan granted by the financial institution and it does not also prohibit the sale of
mortgage property in execution of a decree obtained in Money Suit one from by a
financial institution like the present one. It is a settled rule of interpretation of law
that the special prevails over on the principle of supercilious derogates the
generilious? The general law the Act therefore thus, the Ordinance, 1984, does
control the Artha Rin Adalat Act, 1990. Taking this view we hold that S. 6 of the
law Reforms Ordinance, 1984 does not take away the property of the petitioner out
of the ambit of the legal proceedings of the Artha Rin Adalat. Accordingly the
execution proceeding has been started without any lawful authority or for inclusion
of the homestead land the execution proceeding can not be said as initiated without
any lawful authority. The other grounds taken not being pressed contended by Mr.
Halder we do not express our opinion thereon. But below we part with this judgment
we feel that a suitable amendment in the Artha Rin Adalat Act, 1990 is necessary in
so far as it relates to homestead land of a loanee who takes loan from the financial
institution falling within the description of the Act of 1990 to secure a guaranteed
right to live in his homestead land of a citizen.”

Alternatively, in view of the aforesaid case, bank/financial institution is also bound to take
recourse first under the Artha Rin Adalat Ain leaving all other secondary alternatives.

B.3: When no amount is unpaid?

The scope of 17 BLC AD 177 is so narrow and limited that the case does not examine the
whole scheme of Act, 1881, its erstwhile perspectives, its purposes as well as the defence
materials as provided under the Act, 1881 itself. It also fails to make a comparative as well

15 Dr. Syeda Nasrin

Advocate, Supreme Court of Bangladesh
as harmonious interpretation of Act, 1881 and Ain, 2003. It does not make any
interpretation of law.

B.4. No criminal case is maintainable when dispute is of civil nature:

It has been long decided in a number of cases by the Hon’ble Appellate Division that when
the dispute is clearly of civil nature, no criminal proceeding would attract [4 BLC (AD)
(1999) p. 167, 45 DLR (AD) (1993) p. 27, 17 BLD (AD) (1997) p. 143]. It has been very
recently decided by the Hon’ble Appellate Division in M.A. Sukur vs. Md. Zahirul Haque
and another reported in 23 BLT (AD) (2015) p. 76 that “it appears that dispute, if any,
between the parties is of civil nature and complainant-bank already instituted
Miscellaneous Case No. 15 of 1992 for realization of outstanding dues from the
appellant. There is no gainsaying the fact that the dispute arose out of money given to
the appellant and as such, it appears that the criminal proceeding against the
appellant is an abuse of the process of the court. The normal financial transaction
between the debtor and the creditor does not come within the scope of any offence”.

The ‘banking loan transaction’ is purely and clearly a financial relationship of civil nature
between the bank/financial institution and its customers. This relationship arises out of a
contract executed between the bank/financial institution and the customers. The security
cheque is given by the loan borrower as part of contract as a condition precedent for
sanctioning loan. Therefore, any liability arising out of this contractual relationship is
clearly and purely civil. As such, the criminal proceeding should not be entertained as a
first recourse for recovery of loan arising out of a business contact for ends of justice. This
is absolutely against the principle of general bank-customer civil nature relationship.

But 17 BLC AD 117 did not address this issue?

Security cheques deposited against loan by the borrower to the bank/financial institution is
different from other cheques as meant under Section 138:

Post-dated cheque given is as a security against a bank loan by the borrower as a part of
commercial transaction under a loan contract. It is given not to make ‘payment on
demand’ as meant under Section 6 read with Section 138 of the Negotiable
Instruments. It has been given as a part of further security, which comes after other
securities like mortgage of properties, personal guarantees, charges and others. It is not the
sole security given against a loan taken from the bank/financial transaction. This is the
difference from other cheques or security cheques given by any person to other person.
Other cheques are generally given for payment on demand and without any additional
securities or charge documents. But, security cheque to the bank/financial institution is
given as a far alternative way for recovery of loan. Since proceeding under Section 138
cannot be said as a suit for recovery of loan, therefore the bank/financial institution cannot
file case under this Section using security cheque for recovery of loan. Moreover, since the
issue of being default in a loan arises out of a pure and clear banking transaction which is
absolutely civil and contractual in nature, therefore the bank/financial institution has no
scope to file criminal case under Section 138.

But 17 BLC AD 117 did not address this issue?

16 Dr. Syeda Nasrin

Advocate, Supreme Court of Bangladesh
The loan transaction between the bank/financial institution and the borrower is different
from the ordinary relation between a borrower and a creditor who generally gives and takes
cheque with the intention of payment on demand. Before entertaining the security cheques
given against any loan to the bank/financial institution, the nature of relationship between
the bank/financial institution with the customers (especially the borrowers) should be
closely observed. We save money in bank and borrow from there considering it as a
secured transaction, of course without thinking about criminal liability. The bank/financial
institution is for flourishing national economy. The national economy cannot be flourished
without investment in business and commerce. For that reason multiple incentives and
policy supports are given in this sector. But, now-a-days the mayhem creating by the
bank/financial institution using security cheque is nothing but a complete deadlock for the
borrowers.

Hence, a reasonable classification should be made between the ‘security cheques’ given by
the borrower against loan to the bank/financial institution and the ‘other cheques’ given by
an issuer to the drawer. This classification should also be made in light of Article 27 of
our Constitution for the economic development and commercial sustainability in our
country.

B.5: Whether Negotiable Instruments Act, 1881 is a special law?

Since the Act, 1881 came into force in 1881, therefore for analysing perspectives of this
Act interpretations can be taken from Indian jurisdiction. The Act, 1881 is not a criminal
law though proceeding under section 138 gives birth to a criminal proceeding. The Act,
1881 is a special law comparing to the Contract Act, 1872 because Negotiable Instruments
is the outcome of a contract, but it is a particular type of contract for which special
provisions have been made in the Negotiable Instruments Act. It cannot be disputed that
“the law laid down for special cases must always overrule the provisions of a general
character” contained in the Contract Act- Kwong H.L. Saw Mills v C.A.M.L. Firm AIR
1933 Rang 131. But in many matters the provisions of the Contract Act may have to be
resorted to (for details, see discussions under the heading Negotiable Instruments Act vis-
à-vis Law of Contract’, infra).

The Act, as it stands, cannot be said to be exhaustive and all comprehensive, touching all
the aspects of negotiable instruments- Sivaram v Jayarama AIR 1966 Mad 197. In fact, the
Act does not even purport to deal with all kinds of negotiable instruments. And as t he Act
is not exhaustive, the maxim expressio unius est exclusio alterius (expression of one thing
is exclusion of another) cannot be applied without limitation.

A negotiable instrument is basically a contract (or more than one contract) and the
Negotiable Instruments Act is a statute dealing with a particular form of contract. The
Contract Act, on the other hand, is a general status dealing with various contracts. The law
laid down for special cases must always override the provisions of a general character. But
the Negotiable Instruments Act, as pointed out earlier, is not exhaustive and it has not
totally disengaged itself from the provisions of the Contract Act.

[Ref: S.P Sen Gupta, “The Negotiable Instruments Act,

1881, Ed 2011 (reprint 2012), P. 9]

17 Dr. Syeda Nasrin

Advocate, Supreme Court of Bangladesh
The Act, 1881 is set for specific purposes, but applies as general law. It cannot be said as
special law.

B.6. Where the Act, 1881 is a pure Criminal Law?

Though proceeding under section 138 is a criminal proceeding, the Act, 1881 itself is not a
criminal law altogether. It is an extended part of law of contract. Therefore, the Act, 1881
is of civil nature. In support of this contention, our proposition is that there are several laws
e.g. the Companies Act, 1994, the Securities and Exchange Commission Ordinance, 1969,
the Real Estate Development Act, 2010 providing both fine and imprisonment in the form
of punishment for offences committed thereon (triable in criminal court), but do all these
laws are criminal in nature? The answer is “No”. The conflict is not between a criminal
proceeding or a civil proceeding, the conflict is between two laws where the Act, 1881 is if
taken as, a special law (though applies generally) for several purposes, and on the other
hand the Artha Rin Ain is a special law exclusively for one purpose. The Act, 1881 is with
several purposes without establishing any particular court for itself while Artha Rin Ain is
only for a special purpose having all comprehensive legal recourses and establishing court
for itself. When the conflict of two special law arises, the later one shall prevail first.

Even if it is taken that the Act, 1881 and the Ain, 2013 are completely two laws having no
overriding effect on each other, still the question is whether bank/financial institution can
go beyond Artha Rin Ain for recovery of same loan. In 17 BLC AD 177 was observed that
““In this regard, it is also significant to note that sub-section (3) of section 138 of the Act,
1881 has clearly provided that notwithstanding anything contained in sub-sections (1) and
(2) thereof, the holder of the cheque(s) shall retain his right to establish his claim through
civil Court if whole or any part of the value of the cheque(s) remains unrealized.”

Now the alternative question is that does a suit for recovery of money can be filed for
realization of the same amount? or when case is filed under section 138, without final
adjudication of the same can a suit for recovery of money can be filed wherein only for the
outstanding money a civil suit can be filed? Thus sub-section 3 to section 138 ultimately
allows the holder in due course to file another suit for realization of money. It only allows the
holder to file suit for realization of the outstanding/unrealized amount if any after realization
under sub-section 2 of section 138. The condition has been made stronger with the word “if”.

B.7: When conflict of two special laws?

It is a well-settled principle of law that in case of conflict of two special laws, the law
enacted later on shall prevail.

B.8: Conflict between two laws, not exactly between two proceedings:

The conflict between NI Act and Artha Rin Ain has been explained as comparing to the
conflict between a mere civil proceeding and a criminal proceeding. But the exact conflict
is not between the two proceedings, it is between two statutes, and misuse of the provision
of one statute gives birth to the abuse of the process of law.

But neither 17 BLC AD 177 nor any other case addressed this issue.

B.9. Multiplicity of proceedings and double jeopardy upon the borrower:

18 Dr. Syeda Nasrin

Advocate, Supreme Court of Bangladesh
If the borrower fails to repay the loan or any installment, the bank/financial institution can
take a series of actions against the borrower including the following-

(i) The bank/financial institution can take action under Section 12 of the Artha Rin
Adalat Ain, 2003.
(ii) In default, can file Artha Rin Suit and Artha Execution case.
(iii) Can send the loan defaulter to civil prison.
(iv) Can file money suit or bankruptcy against the defaulter.
(v) Can send the name of the defaulter borrower to the CIB Report.
(vi) Debarring the borrower from taking any further credit facility from any
bank/financial institution.
(vii) Many other actions which can cause both financial and proprietary loss.

So, there are a number of recourses available to the bank/financial institution. In addition
to this, allowing bank/financial institution to initiate proceeding under Section 138 is
something more than double jeopardy upon the borrower. This is also violative of the
fundamental rights as guaranteed in our Constitution (discussed later in details).

B.10. The bank cannot be said as holder in due course of cheque under the Negotiable
Instruments Act:

Bank/financial institution cannot be treated as holder in due course. The security cheque is
not given by the loan creditor for discharging his liability against loan; rather the security
cheque has been taken compulsorily taken by the bank/financial institution. Virtually it is
the bank/financial institution who left no option ahead the loan borrower but to give post-
dated cheque, otherwise bank/financial institution shall refuse to sanction loan. So,
bank/financial institution cannot be treated as holder in due course, rather they should be
treated as holders by coercion/compulsion.

Taking cheques as security for loan with other securities against a loan given by
bank/financial institution should be declared illegal and unconstitutional. The term
“secured loan” has been defined under Section 5(e) of the Banking Companies Act, 1991
as such “secured loan or advance’ means a loan or advance made on the security of assets
and the market value of the assets, as determined in the prescribed manner by the
Bangladesh Bank, is not at any time less than the amount of loan or advance”. In view of
this definition cheque does not constitute any security of assets which is not at any time
less than the amount of loan or advance.

B.11. Against fundamental rights:

As analysed earlier that allowing bank/financial institution to initiate proceeding under

Section 138 is something more than double jeopardy upon the borrower. It is also violative
of the fundamental rights as guaranteed in our Constitution. Under the existing law, the
issue of being “defaulter in loan” gives rise several liabilities of the defaulter including
civil and criminal. The liability under the Artha Rin Adalat Ain is directly related with the
‘right to property’ and the ‘right to life’ (civil prison). Liability under this Ain is almost
strict, especially the provisions of Section 12, 16, 17, 19, 20, 27, 33, 24, 41, 43, 46 and
others. Moreover, several illegalities, malafide, arbitrary and fictitious activities are carried
out by the bank/financial institution under the disguise of Artha Rin Adalat Ain.

19 Dr. Syeda Nasrin

Advocate, Supreme Court of Bangladesh
On the other hand, liability under the Negotiable Instruments Act is also strict and
absolutely relates to the ‘right to life, liberty and property’ as guaranteed under Article 31,
32 and 42 of our Constitution. Any question relating to life, liberty and property should be
dealt in accordance with law and also in more sensitive way so far giving maximum
safeguard/security to the life, liberty and property. But, proceeding under Section 138 for
recovery of loan in addition to Artha Rin suit is absolutely against the principle of double
jeopardy as enshrined under Article 35 of our Constitution.

B.12. Barred under the Contract Act, 1872:

It has become viral and serious threat already that the banks/financial institutions are
recovering the double amount of money by filing Artha Rin Case and criminal case under
the Negotiable Instruments Act for the same loan simultaneously; as such they are using
the engine of law/statute in fraudulent means and also to create undue, unjust, unfair and
terrible pressure upon a person. It makes a person’s life more than hell. People are really
suffering for it. They are abusing the process of law. It is universally settled that no
provision of law can be used as an engine of fraud and oppression. While obtaining loan,
the banks/financial institutions are being in the superlative position leave no scope of doing
fair bargain to the borrower who needs fund doing business or otherwise. The
banks/financial institutions take cheques, and the borrowers become bound to give so.
There remains no option of choice, which should not be the case under the law of contract.
But banks/financial institutions do not sanction loan without taking cheques, which is a
clear oppression upon the borrower. This kind of business oppression abusing the prevision
of law should be prevented for ends of justice. Moreover, this kind of activity makes the
contract law and the pre-conditions for a valid contract nugatory. But the Government and
the Bangladesh Bank are doing nothing on this issue.

B.13. Not only must Justice be done; it must also be seen to be done:

Justice is not mechanical. Justice is not always systematic. Justice is more than the mere
execution of law. For execution/implementation/acting absolutely in according to the law
in black and white by parliament, there is executive organ. Justice is more than the piece of
statute. For that reason, judges can make law. Justice is a greater concept of law. It is
sometimes above and beyond law. Justice is not bound to fit into the legal structure; rather
the legal structure will fit itself for justice. This is the duty of court being the court of
justice, not merely the court of law. Moreover, no provision of a statute can be used as an
engine of fraud or oppression. For recovery of same amount out of same transaction using
two statutes is an express fraudulent use and abuse of the process of law. Section 138 of
Act, 1881 and the Ain, 2003 are the reflection of this misuse, but because of some
narrowly settled principle (few misinterpreted), the justice becomes feeble. There should
be a way-out.

Scope of examining aforesaid questions of law under Section 561A

The aforesaid points are completely related with very questions of law as stated earlier.
Though already few decisions have been made by the Hon’ble Appellate Division in some
cases under Section 138, but in no case the aforesaid questions of law was determined.
Under the circumstances, an application under Section 561A of the Code of Criminal

20 Dr. Syeda Nasrin

Advocate, Supreme Court of Bangladesh
Procedure, 1898 is maintainable and the aforesaid questions of law should be decided for
ends of justice.

To conclude, it can be said that proceeding under Section 138 by the bank/financial
institution using security cheque given by the borrower gives birth to a number of
illegalities and injustices, and it makes the Artha Rin Adalat Ain nugatory. Some serious
questions of law are involved in this matter, which are to be decided under an application
under Section 561A for securing the ends of justice.

By,
Dr. Syeda Nasrin
Advocate, Supreme Court of Bangladesh.

21 Dr. Syeda Nasrin

Advocate, Supreme Court of Bangladesh