Back ground History of Section 489-F of Pakistan Penal Code:

Back ground history of section 489-F, P.P.C is that the cases of frauds through issuance of cheques ‘dishonestly’ have been rampant in the country; therefore, appropriate legislation became desirable. In view of that, Ordinance LXXXV of 2002, was issued and promulgated by the President of Pakistan on 25-10-2002. Initially, the validity of this legislation was also challenged before this Court. In some judgments, the legislation i.e. 489-F PPC was declared invalid and in some it was found valid. For example, in my own judgment I held section 489-F, a valid piece of legislation; reference may be made to 2005 PCr.LJ 1462. In another judgment section 489-F was found as invalid and non-existing legislation. However, this is not the subject matter of this write-up.

Objects:

The real objective was to curb the fraudulent or dishonest issuance of cheques to cause dishonest gain or to cause dishonest loss. Therefore, before approaching the investigation agency or launching a criminal prosecution, it is necessary to establish, prima facie, that the cheque was issued dishonestly and with the intention to defraud. For example, sometimes it is possible that a drawer may issue a cheque not knowing exactly the position of his account. Generally people are not very careful to maintain record of their accounts when they have money in one bank or more than one banks. In the business and trade community practice of joint account in the banks is very common. Account-holders of such joint accounts keep with themselves prepaid cheques duly signed by joint account-holders to ensure payments from the banks even in absence of’ one of the partners. At times, such cheques are misused also. To know the intention of a drawer, a payee may give a notice to the drawer after dishonourment of cheque by the drawee and before approaching the police or the Court.

Before going forward, it would be advantageous to reproduce hereunder the relevant provisions of section 489-F, P.P.C.

 

SECTION 489-F OF PAKISTAN PENAL CODE

“Whoever dishono towards re-payment of a loan or fulfilment of an obligation which is dishonored on presentation, shall be punishable with imprisonment which may extend to three years, or with fine, or with both, unless he can establish, for which the burden of proof shall rest on him, that he had made arrangements with his bank to ensure that the cheque would be honored and that the bank was at fault in not honoring the cheque.

To constitute an offence under this section, dishonesty on the part of the payer is a condition precedent in issuance of a cheque towards re-payment of loan or fulfilment of an obligation. Thus, it is for the Court to consider that under which circumstances, the cheque was issued and what was the intention of a person, issuing it. The words “whoever dishonestly issues a cheque” used in this section shows the intention of the legislature that to constitute an offence, it must be proved that the cheque has been issued dishonestly. Dishonesty means a fraudulent act or intent to defraud others, especially creditors and lien holders. Similarly, the word “dishonor”, used in this section means fail to honour a cheque, with an intent to defraud and befool a payee towards re-payment of a loan or fulfilment of an obligation just to disgrace or put him in a state of shame. Hence, mere issuance of a cheque and it being dishonored by itself is not an offence, unless and until dishonesty on the part of a payer is proved.

FUNDAMENTAL INGREDIENTS

From the reading of above provision of law it appears that for attracting the said provision certain preconditions have to be fulfilled i.e.

(i) issuance of cheque;

(ii) such issuance was with dishonest intention;

(iii) the purpose of issuance of cheque should be:

(a) to re-pay a loan; or

(b) to fulfil an obligation (which in a wide term inter alia applicable to lawful agreements, contracts, services, promises by which one is bound or an act which binds a person to some performance).

(iv) on presentation, the cheque is dishonored?

WHAT IS “DISHONEST INTENTION”

The words “whoever dishonestly issues a cheque” used in this section shows the intention of the legislature that to constitute an offence, it must be proved that the cheque has been issued dishonestly. It is crystal clear that to constitute an offence under this section, dishonesty on the part of the payer is a condition precedent in issuance of a cheque towards re-payment of loan or fulfilment of an obligation.

Word “dishonestly” employed in section 489-F, P.P.C. requires conscious and serious examination; Section 489-F starts with these words, “whoever dishonestly issues a cheque”. In this phrase, the word “dishonestly” is of crucial importance, therefore, to arrive at the real conclusion, definition of “dishonestly” requires a deeper consideration/analysis. In Pakistan Penal Code section 24 reads as under:–

“Dishonestly:–Whoever does anything with the intention of causing wrongful gain to one person or wrongful loss to another person is said to do that thing dishonestly.”

The language is explicit and conveys that to constitute an act dishonestly, it is important that something should be done with the intention of causing wrongful gain or wrongful loss. This wrongful gain may not be attained by the wrong-doer for himself only. The wrong doer may cause gain or loss to any other person also. “A person can be said to have dishonest intention if in taking property it is his intention to cause gain, by unlawful means of the property to which the person so gaining is not legally entitled or to cause loss by wrongful means of property to which the person so losing is legally entitled. It is further clear from the definition that the gain or loss contemplated need not be a total acquisition or a total deprivation but is enough if it is temporary retention of property by the person wrongfully gaining or temporary ‘keeping out’ of the property from the person legally entitled”.

In The Law Laxicon Edited by Justice Y.B. Chandrachud, at page 567 “dishonesty” is defined as giving the ordinary meaning the word “dishonestly” means “dishonesty”. It further elaborates dishonesty as disposition to lie, cheat, deceive, or defraud; untrustworthiness, lack of integrity. Lack of honesty, probity or integrity in principle; lack of fairness and straightforwardness, disposition, to defraud, deceive or astray.

Like Pakistan Penal Code, in section 24 of Indian Penal Code “dishonestly” is defined in the similar words:

“Whoever does anything with the intention of causing wrongful gain to one person or wrongful loss to another person is said to do that thing dishonestly.”

Section 24 is further elaborated on the same page as below:

The word dishonestly in section 24 Indian Penal Code has a technical meaning which is at variance with its popular sense as employing deviation from probity. It is used in connection with property and has nothing to do with probity. If a person causes wrongful gain or wrongful loss by unlawful means in respect of property to which he is not legally entitled, “he acts dishonestly within the meaning of section 24, though he may act from laudable motives. The word dishonestly does not necessarily imply wrongful gain to accused himself.”

From the definition narrated above, from both Pakistan and Indian Penal Codes, it is clear that issuance of cheque has to be clothed with dishonesty and as stated above dishonestly means intention to cause wrongful gain or wrongful loss.

WORD “LOAN”

The word ‘Loan’ employed in section 489-F, P.P.C. is  also very significant. This word is not defined in Pakistan Penal Code. However, “Loan”, according to Wharton’s Law Lexicon is anything lent or given to another on condition of return or payment. This lending or giving on condition of return or payment could be by operation of law. Similar definition was approved by the Honorable Supreme Court in Ocean Industries Limited and another v. Industrial Development Bank PLD 1966 SC 738 + M.A. Hameed Puri v. Federation of Pakistan PLD 1979 Lahore 252. In another interpretation, the essentials of a ‘loan’ according to section 2(12) are, (1) an advance which may be in money or in kind (2) the advance must carry the interest and (3) there must be condition of repayment. One of the essential condition in the definition of ‘loan’ in the Bengal Money Lender Act is repayment with interest. (The Law Lexicon edited by Justice Y.V. Chandrachud, page 1140).

“FULFILMENT OF OBLIGATION”

Another phrase used in section 489-F is also worth-consideration “or fulfilment of obligation”. The word ‘obligation’ is defined in Oxford Dictionary as ‘the state of being forced to do something because it is your duty, or because of law’. (Oxford Advance Learner’s Dictionary 7th Edition, page 1045). In accordance with Law Lexicon ‘obligation’ means a duty, the bond of legal necessity which binds together two or more determinate individuals, an act which binds a person to some performance, a binding or state of being bound in law; an act by which a person becomes bound to another or for another, or to forbear something etc. (The Law Lexicon edited by Y.V. Chandrachud, page 1335).

According to Black’s Law Dictionary, ‘obligation’ means a legal or moral duty to do or not do something. The word has many wide and varied meanings. It may refer to anything that a person is bound to do or forbear from doing, whether the duty is imposed by a law, contract, promise, social relations, courtesy, kindness, or morality. A formal binding agreement or acknowledgment of a liability to pay a certain amount or to do certain thing for a particular person or set of persons, especially a duty arising by contract.

 

VALID DEFENCE IN 489-F CASES

The second part of section 489-F Pakistan Penal Code has clearly provided that

SECTION 489-F OF PAKISTAN PENAL CODE

“Whoever dishonestly issues a cheque towards re-payment of a loan or fulfilment of an obligation which is dishonored on presentation, shall be punishable with imprisonment which may extend to three years, or with fine, or with both, unless he can establish, for which the burden of proof shall rest on him, that he had made arrangements with his bank to ensure that the cheque would be honored and that the bank was at fault in not honoring the cheque. A valid defence can be taken by the accused, if he proves that: —

(i) he had made arrange meats with his bank to ensure that the cheques would be honoured; and

(ii) that the bank was at fault in dishonoring the cheque.?

If the accused establishes the above two facts through tangible evidence and that too after the prosecution proves the ingredients of the offence then he would be absolved from the punishment.