Criminal Application No.3241 of 2000,Criminal Application Nos.3513 of 2000,Criminal Application No.3514 of 2000,Criminal Application No.3515 of 2000,Criminal Application No.3516 of 2000,Criminal Application No.3517 of 2000,Criminal Application No.3518 of 2000,Criminal Application No.3519 of 2000,Criminal Application No.3520 of 2000,Criminal Application No.3521 of 2000

23rd January, 2002

Petitioner Counsel: Mr. I. P. BAGARIA, Mr. U. I. BAGARIA
Respondent Counsel: Mr. SHIRISH GUPTE, Mr. M. N. SHAH, M/s. LITTLE, Mr. J. D. VED, Mr. H. V. MEHTA, Mr. B. R. PATIL, Mr. K.K.KAPOOR, Mr. D. S. MHAISPURKAR

Cases Cited:
Abboy Chetti Vs. Ramachandra Rau, 27 ILR 461 [Para 8]
M/s. U. Ponnappa Moothan Sons Vs. Catholic Syrian Bank Ltd., AIR 1991 SC 441 [Para 8]

JUDGMENT

JUDGMENT :- By these petitions the Petitioner who is arraigned as accused in Criminal Case No.239/S of 1999 to 248/S of 1999 pending in the Court of the learned Addl. Chief Metropolitan Magistrate, Esplanade, Mumbai, seeks to quash and set aside the said complaint and the prosecution in pursuance thereof. There is an alternative prayer for stay of these proceedings pending hearing and final disposal of the case filed by Respondent No.3/Central Bureau of Investigation bearing No.RC 10A of 1992 in the Court of the Special Judge for Greater Bombay. The case of the petitioner in brief is as under :

2. All these complaints are filed against the petitioner for offence punishable under section 138 of the Negotiable Instruments Act. The complaints are filed by the State Bank of Bikaner and Jaipur. It is contended that the subject matter of the criminal complaint filed by respondent No.1 (complaint) against the petitioner and others is same as that of criminal case initiated by the C.B.I. against the officers of respondent No.1-Bank. The present criminal complaints for offence under section 138 of the Negotiable Instruments Act against the petitioner is an abuse of process of law specially in view of the Criminal Case registered by the C.B.I. in respect of the same transactions which are subject matter of the criminal case.

3. A reference to the complaint of respondent No.1 shows that the complaints are filed for dishonour of different cheques for Rs.5 lakhs each drawn on Bank of Behrain & Kuwait, by different concerns of Singhi group.

4. The facts in the C.B.I. case pending in the Special Court, Mumbai, in brief are that on a complaint of one Dave, Manager of the State Bank of Bikaner and Jaipur, on the allegation that bank officers C. Sunderam, M. L. Agarwal, V. Balakrishnan,and B. Chakarborty entered into a criminal conspiracy with Manilal D. Singhee and his family members and others to cheat State Bank of Bikaner and Jaipur to the tune of Rs.519 crores and in pursuance thereof floated fictitious firms in whose names letters of credits were opened and discounted with the State Bank of Bikaner and Jaipur, Nariman Point, Bombay. The beneficiary of the said letters of credits were M/s. Suvijay Commercial and Finance Co. Ltd. which also was a non-existent firm. The C.B.I. investigation revealed that B. Chakraborti was functioning as Regional Manager, Balakrishnan was an Administrative Officer (Advances), S. M. Sunderam was working as Branch Manager, Zaveri Bazar Branch, and M.L. Agarwal was Accountant in the said Branch. In all 11 companies were floated and accounts were opened with Zaveri Bazar Branch of the State Bank of Bikaner and Jaipur. Except two concerns, namely West Coast Roller Flour Mills Pvt. Ltd. and Maurya Enterprises, others were not found at the addresses mentioned and as such they were fictitious and non-existent. Current account was opened with Bank of Behrain & Kuwait, Nariman Point Branch, in the name of M/s. Suvijay Commercial and Financial Co. Ltd. under signature of the petitioner and J. Srinivasan showing them as Directors of the Company. During the course of investigation the petitioner as well as J. Srinivasan have made confessional statements and have been granted pardon by the Magistrate. Therefore, according to the petitioner cheques on the basis of which the complaints have been filed against him were without consideration. The concerns which issued the cheques being fictitious concerns, the cheques are false and forged documents and not prosecution can be continued on the basis of such document. The continuance of prosecution is therefore an abuse of process of law. The issues involved in the prosecution are also involved in the C.B.I. case pending before the Special Judge in which the petitioner has been tendered parden and is now a prosecution witness (approver). The respondent-bank claims to have purchased the cheques. However, there is no endorsement on the document and as such the complainant-bank is not the holder-in-due-course and the complaint under section 138 of the Negotiable Instruments Act is not maintainable as it is not filed by the payee or holder-in-due-course. On the aforesaid ground discharge application was moved before the learned Magistrate. The learned Magistrate however rejected the application and the petitioner has therefore approached this Court.

5. Before the learned Magistrate a reply was filed on behalf of the Bank in the discharge application contending interalia therein that the complainant has paid full consideration and has purchased the cheques and the amount of consideration has been credited to the account of the concerned firm. The complainant bank is therefore the holder-in-due-course.

6. In this Court one Shri. S. V. Raman, Deputy Superintendent of Police, has filed affidavit on behalf of the C.B.I. The material statement in the affidavit is to the effect that the case pending before the Special Judge is of entirely different nature. The ten complaints filed by the State Bank of Bikaner and Jaipur against the present petitioner and others are not a part of the criminal case investigated by the C.B.I. and pending trial before the Special Judge. The investigation was in respect of opening of fictitious accounts in the name of fictitious firms and playing fraud on the Bank of petitioner and others. The ten cheques which are in dispute in these different complaints are not the subject matter of the C.B.I. investigation at all. Since the C.B.I. has not investigated into the said cheques the Petitioner's claim either for stay of the criminal proceedings against him or for quashing of the same is untenable.

7. Arguments were heard at length. On behalf of the petitioner Shri. R. P. Bagaria Advocate appeared and on behalf of the contesting respondents Senior Counsel Shri. Shirish Gupte appeared supporting the order of the learned Magistrate. Shri. H. V. Mehta appeared for the C.B.I.

8. The first contention of Shri. Bagaria was that there is no endorsement on the cheques anywhere and in the absence of an endorsement, the cheque could not have been transferred in favour of the complaint-bank. The complainant-bank cannot claim to be purchaser and as such holder-in-due-course. Mr. Bagaria relied on a judgment reported in 27 I.L.R. page 461, Abboy Chetti v/s. Ramachandra Rau, wherein it is held as under :

"This case is governed by the decision in Pattat Ambadi Marar V/s. Krishnan, wherein it was held that an assignment by an agreement in writing of all the assignor's property including a promissory note, was held not to be sufficient to sustain a suit by the assignee on the note in the absence of an endorsement. The ground of decision is that a promissory note cannot be negotiated by the mere execution of a deed of assignment. The right of suit did not pass to the plaintiffs by operation of law for the company of which defendant was member was wound up, and it is admitted that the plaintiffs firm derived its right from assignment by exhibits B and C. The promissory note purports to be payable to the payee or order, and it is not denied that it is a negotiable instrument. I set aside the decree of the District Musif, and direct that the suit be dismissed with costs."

In my view this does not help the plaintiff. The learned Counsel for petitioner also relied on a judgment of the Supreme Court reported in A.I.R. 1991 S.C. page 441, M/s. U. Ponnappa Moothan Sons v/s. Catholic Syrian Bank Ltd. A reference to para 6 of the judgment would show that the Supreme Court has observed in this case that since the cheque being crossed as "not negotiable" nothing prevented the plaintiff-bank to purchase the cheques for a valuable consideration and the presumption under section 118(g) comes to his rescue and there is no material whatsoever to show that the cheques were obtained in any unlawful manner or for any unlawful consideration.

9. A mere reference to section 9 of the Negotiable Instruments Act makes it clear that "holder-in-due-course" means any person who for consideration became the possessor of a promissory note, bill of exchange or cheque if payable to bearer, or the payee or endorsee thereof. Thus a purchaser of the cheque is a holder-in-due-course and it is not necessary that in favour of purchaser of the cheque there should be an endorsement also. It is contended by the petitioner that the bank is the purchaser of the cheque and as such the bank is holder-in-due-course of the cheques. This argument therefore need not detain us any further.

10. It was further contended that the bank was aware that the documents are bogus. The argument is untenable. It is true that some of the bank officers may be aware. They have been prosecuted for defrauding the bank and misappropriating the amount of the bank. The bank as an institution cannot be said to be aware of the fact that the firms were non-existent because some of the officers entrusted with the property of the bank, who were duty bound to disclose defects in the firms to the Bank are alleged to have taken undue advantage of their position and prosecution against them is pending. It is noteworthy that the petitioner is one of the persons who is alleged to have entered into the conspiracy with them. It is therefore difficult to accept as to how the petitioner can claim the benefit from the pendency of that prosecution.

11. More over another important aspect of the matter is that it is clearly stated in the affidavit filed on behalf of the C.B.I. that these particular 10 cheques are not the subject matter of prosecution launched by the C.B.I. in special Court. There is therefore no question of staying the same pending the criminal case instituted by the C.B.I.

12. Section 58 of the Negotiable Instruments Act refers to negotiable instrument which is lost and which has been obtained from any maker, acceptor or holder thereof by means of an offence or fraud, or for an unlawful consideration. In this case it cannot be contended that the Bank has obtained the negotiable instrument by means of a fraud or it is in unlawful consideration. It is the contention of the petitioner in this petition itself that the bank has purchased the negotiable instrument.

13. The prosecution of the petitioner is in respect of 10 cheques which are not involved in the case before the Special Judge instituted by the C.B.I. against the bank officers and others including the petitioner wherein petitioner has been made as an approver and therefore, there is absolutely no substance in the contention of the petitioner that the prosecution case instituted by the Bank against him in respect of 10 cheques deserves to be quashed. In fact it is absolutely necessary that this case should be tried at the earliest and hearing thereof should be expedited. There is absolutely no substance in the petitions and even the request of the petitioner for stay of the criminal cases till the decision of the prosecution instituted by the C.B.I. deserves to be rejected out right for the aforesaid reasons. All the petitions are dismissed. Rule discharged. Hearing of all criminal cases is expedited.

Petitions dismissed.