2001(2) ALL MR (JOURNAL) 4
(KARNATAKA HIGH COURT)
H.N. NARAYAN, J.
N. G. Narayanaswamy Vs. M/S. Vijayanand Roadlines Ltd.
Cri. Petn. No. 1721 of 1997
22nd September, 2000
Petitioner Counsel: RAVI B. NAIK
Respondent Counsel: M.V. DEVARAJU
Negotiable Instruments Act (1881) S.138 - Dishonour of cheque - Complaint - Notice not issued to drawer within time - Notice to payee who endorsed the same to holder in due course is not compliance of S.130(b).
The notice as contemplated under Section 138 (b) is not issued to the drawer of the cheque within 15 days of the receipt of information by him from the bank regarding the return of cheque as unpaid and notice to the payee who endorsed the same to the holder in due course, is no compliance of Section 138(b) of the Act. As such, the complaint made upon the grounds stated in the complaint strictly do not constitute an offence under Section 138 of the Act and that the learned Magistrate is not justified in taking cognizance of the offence and issue of process. If that be so, the proceedings pending is really an abuse of process of law and is liable to be quashed. [Para 11]
M/s. U. Ponnappa Moothan Sons, Palghat Vs. Catholic Syrian Bank Ltd., AIR 1991 SC 441 [Para 9]
JUDGMENT :- The short question which calls for consideration in this petition filed under Section 482, Cr. P. C. is whether a complaint for initiating criminal proceedings against the accused for an offence under Section 138 of the Negotiable Instruments Act ("the Act" for short), is maintainable in law in the absence of a notice to the drawer of the cheque as required under Section 138(2) of the Act.
The complainant presented a complaint under Section 200, Cr. P. C. r/w. Section 138 of the Act alleging that the accused has committed an offence punishable under Section 138 of the Act with a further request to order for payment of compensation out of the fine amount under Section 357, Cr. P.C. The complainant is a Limited Company carrying on business of transportation and are leading parcel carriers in Northern and Southern parts of India. Their office is situate at Hubli. One of the Directors of the Company is authorised by the Managing Director as its power of attorney to file this complaint. It is alleged that the accused is doing the profession of Consultancy in Licence and Marketing having his office at Madras. The accused and one of his agents by name Shri Aji Narasimhan of Bangalore have visited the complainant's office during the month of March 1994 for the purpose of discussions and to enter into an agreement for providing financial aid or assistance to the complainant's company. After prolonged discussion between the two parties, they finalised the terms and conditions and entered into an agreement for providing financial aid to the complainant. As per the said agreement, it was specifically agreed by the accused with the complainant that the accused shall advance a loan of Rs. 30 crores in the month of June, 1994 and for that the accused represented to the complainant to make payment ofRs. 36,75,000/- towards up front fees to the accused for advancing loan or financial assistance of Rs. 30 crores to the complainant. The complainant paid an amount of Rs. 36,75,000/- to the accused believing the representation of the accused by an account payee Crossed Demand Draft. But the accused did not advance the cash assistance of Rs. 30 crores as agreed upon by him within the stipulated period. Thereafter, a fresh memorandum of understanding was entered into by the parties dated 13-2-1995. Even then, the accused did not advance the loan or financial assistance as agreed. When the complainant and his representative approached the accused in person on 5-11-1996, the accused showed a cheque D/- 13-11-1996 issued by M/s. Sahodaya Housing and Leasing Ltd., which was in favour of the accused for Rs. 30 crores. The accused had promised them to settle the accounts on realisation of the said cheque. When the complainant insisted the accused to make payment of loan on the said day itself, the accused expressed his inability and thereafter agreed to arrange a cheque from M/s. Sahodaya Housing and Leasing Ltd., issued in his favour which would be endorsed in favour of the complainant on or before 30-11-1996. Thereafter the accused issued a cheque of State Bank of Travancore, Residency Road, Bangalore, D/- 30-11-1996 for Rupees l,50,000/- payable to the accused by M/s. Sahodaya Housing and Leasing Ltd., by making necessary endorsement on the back of the said cheque by making an endorsement to be payable to the complainant. The accused gave a letter D/- 5-11-1996 addressing to the complainant along with the said cheque. Thus the cheque for Rs.1,50,000/- was issued in favour of the complainant towards the liability under the Contract/Agreement D/- 13-5-1994. Thereafter, the complainant presented the said cheque for collection with his banker viz., Canara Bank, Kalasipalyam Branch, Bangalore, and the said cheque was returned to the complainant on 4-12-1996 with a debit advice D/- 4-12-1996 as unpaid due to "Insufficient Funds". Thereafter the complainant got issued a legal notice through his counsel on 16-12-1996 to the accused intimating the fact of dishonour of the said cheque and further called upon the accused to make payment of Rs. l,50,000/- being the amount of the said cheque within 15 days from the date of receipt of the said legal notice failing which the complainant would be constrained to take both civil and criminal action against him. The said legal notice came to be served upon the accused. The accused then gave reply notice D/- 2-1-1997 taking false and baseless contentions with a view to avoid the liability of the payment of Rs. l,50,000/- to the complainant. The accused after the expiry of 15 days after the receipt of the said legal notice of the complainant has not come forward to make payment of the said amount of Rupees l,50,000/-. Hence, the complainant is constrained to file the complaint before the Court below.
3. The learned Magistrate before whom the complaint was presented, perused the complaint and the documents produced therein and according to him a prima facie case is made out and therefore, cognizance of the offence is taken by him and recorded the sworn statement of the accused and in his opinion "there are sufficient material grounds to proceed against the accused for the offence punishable under Section 138 of the N.I. Act." Hence ordered to register a criminal case against the accused and issued summons to the accused, the legality and correctness of which is assailed in this petition.
4. Sri Sheelavanth - learned counsel appearing for Sri Ravi B. Naik for the petitioner contended that the cheque on which the complaint is filed is issued by Sahodaya Housing and Leasing Private Ltd., signed by its Director Sri Josh Varghese in the name of the petitioner and the petitioner in whose name the cheque is issued cannot be prosecuted for an offence under Section 138 of the Act since it is not a cheque drawn by the petitioner-accused on an account maintained by him with any banker and is not issued towards discharge of any liability. It is further contended that the cheque presented is not one issued by the petitioner towards discharge of his liability to the extent of the amount covered under the cheque and therefore, the learned Magistrate ought to have dismissed the complaint. It is further contended that the complaint is bad for non-compliance of Section 138(b) of the Act since the respondent-complainant had not issued any notice to the drawer of the cheque and a notice is issued only to the petitioner who has endorsed and negotiated the cheque in favour of the respondent-complainant. Therefore, the complainant is incompetent to prosecute the petitioner for the offence alleged against him and that the cognizance taken by the learned Magistrate and issue of process is thus opposed to law and facts of this case.
6. Therefore, the precise issue as stated in the preamble of the order is whether initiation of criminal proceedings against the petitioner who is not a drawer of the cheque is incompetent, specially for non-compliance of Section 38(b) of the Act.
7. It is unnecessary for me to go into the various allegations made in the detailed complaint placed before the Magistrate. Sufficient to note that the petitioner agreed to make arrangement for finance amounting to Rs. 30 crores in favour of the complainant and received a sum of Rs. 36,75,000/- towards front fee and that he failed to secure the loan as agreed upon from time to time. There was long correspondence between the parties before the petitioner secured a cheque from Sahodaya Housing and Leasing Pvt. Ltd., for a sum of Rs. l,50,000/-, endorsed it in favour of the complainant with a letter to realse the amount paid by the complainant to him and to return the balance of a crore and odd to him. The complainant presented the cheque which came back with an endorsement "Funds in-sufficient". The complainant got issued a legal notice to the petitioner who failed to pay the amount received by him towards front fee and therefore it is within the limitation provided under Section 142(b) of the Act. The learned Magistrate without applying his mind to the claim made in the complaint, took cognizance of the offence, recorded the sworn statement of the complainant and formed an opinion that the facts placed before him are sufficient to initiate action against the accused petitioner and ordered issue of summons.
8. It is not disputed that the complainant was the holder in due course. The cheque was drawn by one of the Directors of Sahodaya Housing & Leasing Pvt. Ltd., in favour of the petitioner for a sum of Rs.l,50,000/- and that the petitioner endorsed the same in favour of the complainant. The dispute is inter se between the complainant and the accused regarding the total claim as disclosed in their legal notices is not the subject matter of discussion in this petition. Therefore, the accused was the holder of the cheque and that the complainant after the endorsement became the holder of the cheque in due course.
9. The Supreme Court in M/s. U. Ponnappa Moothan Sons, Palghat v. Catholic Syrian Bank Ltd., AIR 1991 SC 441 at para 17 held that a holder, to be a holder in due course, must not only have acquired the bill, note or cheque for valid consideration but should have acquired the cheque without having sufficient cause to believe that any defect existed in the title of the person from whom he derived his title. This condition requires that he should act in good faith and with reasonable: caution. However, mere failure to prove bona fide or absence of negligence on his part would not negative his claim.
9A. From the correspondence produced by the complainant it is noticed that after issue of this cheque, the petitioner addressed a letter requesting the complainant not to present the cheque for encashment for no reason. The petitioner dodged sufficiently to make repayment of the front fee received by him by the complainant. Therefore, the from complainant has in fact acted in good faith in this raspect and there are no mala fides in his conduct in presenting the cheque for encashment. The conduct of the petitioner throughout shows that he had no mind to pay the amount received by him.
"Where any 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 that account for the discharge, in whole or in part, of any debt or other labiality, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provision of this Act, be punished with imprisonment for a term which may extend to one year, or with fine which may extend to twice the amount of the cheque, or with both:
Provided that nothing contained in this section shall apply unless-
(b) the payee or the holder in due course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving a notice, in writing, to the drawer of the cheque, within fifteen days of the receipt of information by him from the bank regarding the return of the cheque as unpaid." (Emphasis supplied)
11. I do not find any necessity to prolong the discussion. The notice as contemplated under Section 138 (b) is not issued to the drawer of the cheque within 15 days of the receipt of information by him from the bank regarding the return of cheque as unpaid and notice to the payee who endorsed the same to the holder in due course, is no compliance of Section 138(b) of the Act. As such, the complaint made upon the grounds stated in the complaint strictly do not constitute an offence under Section 138 of the Act and that the learned Magistrate is not Justified in taking cognizance of the offence and issue of process. If that be so, the proceedings pending is really an abuse of process of law and is liable to be quashed.
12. In the result, this petition succeeds. The order of the learned Magistrate dt, 10-4-1997 passed in C.C.20500 of 1997 on the file of the IX Additional Chief Metropolitan Magistrate, Bangalore is accordingly quashed.