Mahadev Corpn. Vs. Allahabad Bank

IN THE HIGH COURT OF DELHI AT NEW DELHI SUBJECT : SECTION 138 OF THE NEGOTIABLE INSTRUMENTS ACT Crl. Revision 10/1999 Date of decision: May 9 2005 MAHADEV CORPORATION Through

..... Petitioner Mr. M.L. Kasturi ,Advocate. versus

ALLAHABAD BANK Through

..... Respondent Mr.. C. Mukund, Sr Adv, with Mr. Ashok Jain and Mr. P. Jain, Advocates.

H.R.MALHOTRA, J. 1. These three revision petitions arise out of similar orders passed by the Metropolitan Magistrate on the application moved by the petitioner/accused for recalling the summoning orders earlier issued against them for commissions of offence punishable under Section 138 of the Negotiable Instruments Act (hereinafter referred to as the Act). There were three cheques which were dishonoured and therefore necessity arose for the complainant to file three separate complaints against the petitioner/accused. 2. Since similar question arises in all the three revisions petitions, therefore , these three petitions are being disposed of together by one common judgement. Brief facts as emerges from these files are that the petitioner company was allowed cash-credit facility by the respondent bank and accounts in this regard being Account No. CC-500219 was opened by the respondent bank. As on 4th December,1995 an outstanding balance of Rs. 83,38,616.10 was shown in the accounts against the permitted operator limit of Rs. 32,52,000/-. 3. The respondent bank addressed a letter to the petitioner corporation on 4th December,1995 asking them to deposit the amount of Rs. 83,38,616.10. The petitioner, in reply, vide their letter dated 19th December,1995 acknowledged its liability and also forwarded seven post dated cheques for Rs. 8,00,000/- each so as to cover the repayment of the overdrawn amount. The petitioner had issued these cheques in their own name on an account being maintained by them in Corporation Bank, Paschim Vihar, New Delhi.

4. On the cheques being dishonoured, a notice as specified in Section 138 of the Act was issued to the petitioner to which no reply was given by the petitioner/corporation and accordingly the respondent instituted the complaint under Section 138 of the Act. The Metropolitan Magistrate after recording preliminary evidence came to the conclusion that prima facie a case for commission of offence punishable under Section 138 was made out and accordingly summoned the petitioner as an accused which order was assailed by them by making an application before the same Metropolitan Magistrate who maintained his earlier order and dismissed the application for recalling the order. It is against that impugned order the petitioner has come in revision. 5. It is urged by the learned counsel for the petitioner that the respondent was not the holder in due course of the cheques in question and the learned trial court misinterpreted the Section 9 of the Act and even otherwise there was no allegation appearing in the complaint to the effect that the respondent was holder in due course of the cheques. It is further urged that the petitioner had drawn the cheques in its own name and therefore it cannot be said that the respondent became holder in due course of the cheques in question as the same were never transferred nor endorsed in their favour and the respondent bank was merely a collecting bank and could not in any circumstances be termed as holder in due course of the cheques as it had made no credit entry in respect of the cheques in question in the account of the petitioner No. 1 maintained in the books of the respondent. 6. On the other hand learned counsel for the respondent submitted that the provisions of Section 138 of the were applicable to the facts of the case and the trial court rightly appreciated the import of Section 138 of the Act by holding that the respondents were holders in due course of the cheques as the cheques if honoured it would have benefited the respondent and not anybody else. He urged that the petitioner committed the offence punishable under Section 138 of the Act as the cheques so issued by them were returned by their bankers Corporation Bank on the ground as specified in the Act and therefore the petitioner rendered themselves liable for being tried and punished according to law. It was urged by the learned counsel for the respondent that the object of enacting Section 138 of the Act was to enhance the acceptibility of the cheques for settlement of liability by making the drawer liable to penalty in case of bouncing of cheques due to insufficient arrangements made by the drawer, which adequately works to prevent the harassment of drawer. He also referred to Section 118(g)of the Act which states that unless contrary to, it shall be presumed that the holder of the negotiable instrument is a holder in due course, provided that where the instructions had been obtained from its lawful owner or any person in lawfuly

custody thereof on the strength of provisions he argued that the petitioner drew the cheques from the corporation on an account maintained by them and delivered it to the respondent bank to be deposited in their account towards the over-drawing in cash-credit account so as to regularise the said account. 7. I have heard learned counsel for the parties on this aspect and also having gone through the provisions of Section 138, 118(g) and Sec. 46 of the Act, I am of the opinion that the respondent is a person who is a holder of the due course of the cheques as definition of holder in due course clearly envisages that any person who for consideration became possessor of Promissory Note, Will or Cheques shall be holder in due course. As the cheques which were issued by the petitioner though in their own name but were ultimately to be credited in the account of the respondent and thus respondents were to be beneficial of such payments and now since they have been put to disadvantage because of dishonouring of such cheques, the petitioner cannot agitate that since the cheques in question were not issued in the name of the respondent but in the name of the petitiioner themselves and therefore provisions of Section 138 are not attracted to the case, the respondent being not holder in due course of cheques. Such an argument do not hold water, it being devoid of any substance. 8. Therefore the impugned order cannot be sustained in the eyes of law, it being against the provisions of Section 118(g) and also Section 46 of the Act. The case of the respondents squarely and aptly fits into the provisions of Section 138. The petitioners were rightly summoned under such provisions and the subsequent orders passed by the Magistrate recalling the summoning order is bad in law and needs to be set aside as such. 9. In the result, the revision petition is dismissed and the petitioners shall be put to trial for commission of offence punishable under Section 138 of the Act. May 9 ,2005.

Sd/H.R. MALHOTRA, J.

Crl. Appeal No. 671/2005 Date of Decision : October 06, 2006

M/s Bhasin Credit Aid Ltd. Appellant. Through: Mr. Vivekanand, Advocate for the Appellant. Versus Mr. Raj Kumar. ..... Respondent Through: Mr. Harsh M. Jauhari, Advocate for the respondent. S.N. AGGARWAL, J (ORAL)

1. The appellant “M/s Bhasin Credit Aid Ltd.” has preferred this appeal by way of special leave against the impugned judgment dated 24.04.2004 passed by Shri A.K. Sarpal, then M.M., Delhi dismissing its complaint under Section 138 of Negotiable Instruments Act (for short “N.I. Act”) for absence of authorization in favour of Mr. M.L. Sharma, Manager (Accounts) through whom the said complaint was filed. 2 The appellant is a company duly incorporated under the Companies Act, 1956. The respondent had issued a cheque to the appellant company which when presented to the bank for encashment was bounced. Notice of bouncing of cheque was given by the appellant company to the respondent and as the payment of the bounced cheque was not made despite service of notice, a complaint under Section 138 of N.I. Act was filed against the respondent through the appellant's Manager (Accounts) Mr. M.L. Sharma. The appellant filed a copy of a

Resolution Ex.CW1/7 alongwith the complaint to show authorization in favour of Mr. M.L. Sharma through whom complaint was filed. The learned Court below construed the said resolution as conferring no power on Mr. M.L. Sharma to institute the complaint under Section 138 of N.I. Act against the respondent. The view taken by the Court below is that the aforementioned resolution authorized Mr. M.L. Sharma only to file a recovery suit for recovery of the amount of bounced cheque. As the Court below was of the view that since the complaint filed was not by a duly authorized person, the complaint under Section 138 of N.I. Act was dismissed on that ground. 3 The learned counsel for the appellant has argued that no authorization for filing a criminal complaint under Section 138 of N.I. Act was required and according to him, any person can set the criminal law into motion and therefore, it is urged that the Court below committed an error in dismissing the complaint on the ground of absence of proper authorization. 4 The learned counsel for the respondent has relied upon a judgment of the Supreme Court in M/s BSI Ltd. and Anr. Vs. Gift Holdings Pvt. Ltd. And Anr. reported as I (2000) BC 292 (SC) and on the strength of the said judgment, he has contended that the word “suit” referred in resolution Ex.CW1/7 cannot be stretched to authorize Mr.M.L. Sharma to institute criminal prosecution against the respondent under Section 138 of N.I. Act. This judgment, in my opinion, is not applicable to the facts of the present case. The judgment in M/s BSI Limited's case (supra) lays down that when a company becomes sick then Section 22 of SICA bars initiation of civil proceedings against a sick company without prior permission of BIFR and the said bar does not apply to criminal prosecution. 5 The question for decision in the present case is whether the Court below was justified in dismissing the appellant's complaint under Section 138 of N.I. Act on the ground of absence of proper authorization in favour of Mr. M.L. Sharma through whom the said complaint was

filed. The law, in this regard, is well settled that anyone can set the criminal law in motion by filing the complaint constituting the offence. For the offence under the Negotiable Instruments Act, the only criteria prescribed by Section 142 is that it must be instituted by the payee or holder in due course. The fact that the complaint lodged by a Manager or other employer who had not been authorized by the Board of Directors to sign and file the complaint cannot be a ground for quashing the complaint. 6 In the case of Vishwa Mittar Vs. O.P. Poddar reported as 1984 (1) RCR (Crl.) 196 it was held by the Hon'ble Apex Court that anyone can set the criminal law in motion by filing a complaint of facts constituting an offence before a Magistrate entitled to take cognizance. It was further held in the said case that no Court can decline to take cognizance on the sole ground that the complainant was not competent to file the complaint. 7 In MMTC Ltd. Vs. Medchl Chemicals and Pharma (P) Ltd. reported as 2002 (1) RCR (Crl.) 318, the facts were almost similar as are in the present case. In MMTC's case (supra) the complaint under Section 138 of N.I. Act was filed on behalf of MMTC through its employee Mr.Lakshman Goel who was later on substituted by Mr. Sampat Kumar, the Deputy General Manager. In that case, the complaint of MMTC was dismissed by the Magistrate and aggrieved by that the Company went in appeal before the High Court and the High Court took a view that the absence of a complaint by a duly delegated authority is not a mere defect or irregularity which could be cured subsequently. The High Court also took a view, in that case, that if the record does not disclose any authorization, then taking cognizance of the complaint was barred by Section 142(a) of the Negotiable Instruments Act. This judgment of the High Court was challenged by the company “MMTC” before the Supreme Court and the Supreme Court

disagreeing with the aforementioned view of the High Court held as under:- “ In our view the reasoning given above cannot be sustained. Section 142 of the Negotiable Instruments Act provides that a complaint under Section 138 can be made by the payee or the holder in due course of the said cheque. The two complaints, in question, are by the appellant company who is the payee of the two cheques.” 8 I am of the view that the question raised in the present appeal is squarely covered by the aforementioned two judgments of the Hon'ble Supreme Court in MMTC's case (supra) and Vishwa Mittar's case (supra). Since the complaint of the appellant under Section 138 of N.I. Act was dismissed by the Court below only on the ground of absence of proper authorization in favour of Mr. M.L. Sharma, the impugned judgment of the Court below cannot stand the test of judicial scrutiny. Hence the impugned judgment is hereby set aside. This appeal is allowed. The case is remanded back to the trial Court for decision on merits as per law after hearing both the parties. The parties are directed to appear before the trial Court for further directions at 2 PM on 16.10.2006.

SD./S.N. AGGARWAL,J