Delhi High Court
Adigear International & Ors. vs State & Anr. on 6 December, 2013
Author: Sunita Gupta
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* IN THE HIGH COURT OF DELHI AT NEW DELHI
DATE OF DECISION: 06th DECEMBER, 2013
+ CRL.M.C. 3746/2013
ADIGEAR INTERNATIONAL & ORS. ..... Petitioner
Through Mr. Sandeep Sethi, Sr. Advocate
with Mr. Nilesh Sawhney, Advocate
versus
STATE & ANR. ..... Respondent
Through Ms. Kusum Dhalla, APP
Mr. Neeraj Kishan Kaul, Sr.
Advocate with Mr. Vikramjeet
Bakshi and Mr. Rajnish Gaur,
Advocates for R-2
+ CRL.M.C. 3756/2013
ADIGEAR INTERNATIONAL & ORS. ..... Petitioner
Through Mr. Sandeep Sethi, Sr. Advocate
with Mr. Nilesh Sawhney, Advocate
versus
STATE & ANR. ..... Respondent
Through Ms. Kusum Dhalla, APP
Mr. Neeraj Kishan Kaul, Sr.
Advocate with Mr. Vikramjeet
Bakshi and Mr. Rajnish Gaur,
Advocates for R-2.
+ CRL.M.C. 3757/2013
ADIGEAR INTERNATIONAL & ORS. ..... Petitioner
Through Mr. Sandeep Sethi, Sr. Advocate
with Mr. Nilesh Sawhney, Advocate
versus
Crl.M.C.Nos.3746/13, 3756/13, 3757/13, 3758/13, 4619/13 Page 1 of 22
STATE & ANR. ..... Respondent
Through Ms. Kusum Dhalla, APP
Mr. Neeraj Kishan Kaul, Sr.
Advocate with Mr. Vikramjeet
Bakshi and Mr. Rajnish Gaur,
Advocates for R-2.
+ CRL.M.C. 3758/2013
ADIGEAR INTERNATIONAL & ORS. ..... Petitioner
Through Mr. Sandeep Sethi, Sr. Advocate
with Mr. Nilesh Sawhney,
Advocate.
versus
STATE & ANR. ..... Respondent
Through Ms. Kusum Dhalla, APP
Mr. Neeraj Kishan Kaul, Sr.
Advocate with Mr. Vikramjeet
Bakshi and Mr. Rajnish Gaur,
Advocates for R-2.
+ CRL.M.C. 4619/2013
M/S ADIGEAR INTERNATIONAL & ANR. ..... Petitioner
Through Mr. Sandeep Sethi, Sr. Advocate
with Mr. Nilesh Sawhney,
Advocate.
versus
STATE & ANR. ..... Respondent
Through Ms. Kusum Dhalla, APP
Mr. Neeraj Kishan Kaul, Sr.
Advocate with Mr. Vikramjeet
Bakshi and Mr. Rajnish Gaur,
Advocates for R-2.
CORAM:
HON'BLE MS. JUSTICE SUNITA GUPTA
JUDGMENT
: SUNITA GUPTA, J.
1. Vide this common order, I shall dispose of Cr.M.C.Nos.3746/2013,
3756/2013, 3757/2013, 3758/2013 and 4619/2013, as all these petitions are
between the same parties and substantially common question of law and
facts are involved in them. For the sake of convenience, I shall take up
Crl.M.C No.3746/2013.
2. By virtue of this petition, the petitioners are seeking quashing of the
impugned summoning order dated 08.04.2013 passed by the learned
Metropolitan Magistrate, Dwarka Courts, New Delhi in Complaint Case
No.229/13 titled The Hongkong and Shanghai Banking Corporation Ltd v.
M/s Adigear International & Ors., complaint and proceedings emanating
therefrom, inter alia, on the allegations that the petitioners are arrayed as
accused in the said complaint u/s 138 of the Negotiable Instruments Act
(for short `N.I Act') filed by respondent no.2 pleading that in partial
discharge of their liability, the petitioner no.1 through petitioner no.2
issued a cheque dated 15.12.2012 for Rs.50 lakhs drawn on State Bank of
Bikaner and Jaipur in favour of respondent no.2. The said cheque was
dishonoured by the banker of petitioner no.1 for the reason "payment
stopped by drawer". A legal demand notice dated 18.12.2012 was sent,
followed by a complaint u/s 138 of the N.I Act. After the respondent
tendered pre-summoning evidence, vide impugned order dated 08.04.2013,
the learned Trial Court took cognizance of the offence u/s 138 of the N.I
Act and the petitioners were summoned.
3. The impugned order is challenged, inter alia, on the ground that the
same has been passed in a mechanical and cyclostyled manner without
considering the relevant record. Before summoning the accused, it should
be considered as to whether an offence has been made out or not. The
requirement of Section 138 of the N.I Act is that the person sought to be
made liable should have issued cheque in favour of another person. When
the averments of fact in this regard are lacking, the summoning order
cannot be sustained. Had the learned M.M perused the record, he would
have come to know that the original cheque is not issued by petitioner no.2
on behalf of petitioner no.1 in favour of respondent no.2 but in favour of
petitioner no.1 itself i.e self drawn cheque thereby transferring funds from
one of its accounts in State Bank of Bikaner and Jaipur to its own account
maintained with HSBC Ltd i.e. respondent no.2. No case is made out
against the petitioners and, therefore, the petitioners cannot be made to
suffer the ignominy of protracted trial, as such the impugned summoning
order dated 08.04.2013, complaint and proceedings emanating therefrom
be quashed/set aside.
4. When the matter first came up for hearing, vide order dated
11.09.2013 it was ordered that the Trial Court shall adjourn the matter to
some other day after the date fixed in this case and notice was ordered to
be issued to respondent no.2 Respondent no.2 moved an application
bearing Crl.M.A.15633/13 for vacation of the order dated 11.09.2013.
5. I have heard Mr. Sandeep Sethi, Senior Advocate for the petitioners
duly assisted by Mr. Nilesh Sawhney, Advocate and Mr. Neeraj Kishan
Kaul, Senior Advocate for respondent no.2 duly assisted by Mr. Vikram
Singh Bakshi, Advocate, at great length and have perused the record.
6. It was submitted by learned counsel for the petitioners that a
complaint u/s 138 of the N.I Act can be filed either by the payee or holder
in due course. He referred to Sections 9, 13, 15 and 16 of the N.I Act. It
was submitted that the cheque was in favour of the petitioners and did not
bear any endorsement, much less in favour of the complainant. The
complaint is completely silent that they are holders in due course or that
there was any endorsement on the cheque in their favour. Rather the
averments made in the complaint are to the effect that the complainant is
the payee of the cheque which is not borne out from the cheque itself.
Therefore, the complaint itself is not maintainable. Reliance was placed on
National Small Industries Corporation Ltd v. State (NCT of Delhi) &
Anr, 2009 Cri.L.J.1299 SC; M/s Shankar Finance & Investments v. State
of Andhra Pradesh & Ors, 2008(3) Civil Court Cases 586 (SC);
Vishnupant s/o Chaburao Khaire v. Kailash S/o Balbhir Madan, 2010
Cri.L.J.2166; M/s Jayaram Finance, Kancheepuram & Anr v.
Jayaprakash, 2010 Cri.L.J 3323 (Mad HC); Anil Kumar v. Ramakrishna
Kartha, 2009(2) Civil Court Cases 535(Kerala); Morepen Finance Ltd v.
Reserve Bank of India, 116(2005) DLT 129 and Kuruvilla v. Sathi Rajan
Rajeev Nivas, II(2013) BC 120.
7. It was further submitted that the complaint also lacks in material
particulars, inasmuch as, although the complaint has been filed against as
many as five petitioners but it is merely alleged that they are involved in
the day-to-day affairs of the company which does not meet the
requirements of law. Specific averments are required to be made in order
to fasten liability on the petitioners, as such, in the absence thereof also,
the complaint and the proceedings emanating therefrom are liable to be
quashed. Reliance was placed on Central Bank of India v. Asian Global
Ltd. and Ors., AIR 2010 SC 2835; National Small Industries Corporation
Ltd v. Harmeet Singh Paintal & Another, (2010) 3 SCC 330; Saroj
Kumar Poddar v. State (NCT of Delhi & Anr, (2007) 3 SCC 693.
8. Rebutting the submission of learned counsel for the petitioners, it
was submitted by learned Senior counsel for respondent no.2 that the
complaint gives a detailed account regarding the role played by each and
every petitioner. He referred to various documents such as Trade
Financing General Agreement, Agreement for Overdraft/Cash Credit
facility, Demand Promissory Note, Letter of Continuity, Agreement for
Working Capital Loan, Deed of Hypothecation, Hypothecation of Stocks,
Deed of Guarantee executed by accused nos. 2 to 5 for submitting that
specific averments have been made in the complaint from para 5 to para 15
giving the details of the roles played by each and every accused.
Moreover, Asian Global(supra), Harmeet Singh Paintal(supra) and Anil
Kumar(supra) does not help the petitioners because all these authorities
pertains to a company where merely disclosing that the Directors were in
charge of and responsible for the conduct of its business, is not sufficient.
There should be specific averments in the complaint about the part played
by the Directors in the transaction. It was submitted that petitioner no.1 is
a firm. Petitioners 2 to 5 are its partners, that being so, the partners are
liable for the acts of the firm. Even otherwise in the instant case, role of
each and every petitioner has been specified in the complaint.
9. As regards the submission that the complainant/respondent is not a
"holder in due course" or that no endorsement was made in favour of the
complainant, reference was made to Sections 9, 118(g), 138 and 139 of the
N.I Act. Reliance was placed on Mahadev Corporation vs. Allahabad
Bank, (2005) 120 DLT 135; Bank of India v. State and Ors, 2010(119)
DRJ 401; Punjab and Sind Bank vs. Vinkar Sahakari Bank Limited and
Others, (2001) 7 SCC 721; U.Ponappa Moothan Sons, Palghat v.
Catholic Syrian Bank Limited and Others, (1991) 1 SCC 113; for
submitting that substantially similar plea was taken in these cases and were
repelled by the Courts.
10. Rebutting the submissions of learned counsel for the petitioners that
the cheque was not endorsed in favour of the complainant, it was
submitted by learned senior counsel for respondent no.2 that the bank was
possessor of the cheque for consideration. Therefore, it was holder in due
course and onus is on the petitioners to rebut it during the trial and for that
reason the complaint cannot be quashed at the initial juncture. It was
further submitted that M/s Jayaram Finance(supra) and Anil Kumar
(supra) relied upon by counsel for the petitioners does not help him
inasmuch as in those cases, the cheque was in possession of a third party
and, therefore, endorsement was essential and in the absence of the same,
complaint u/s 138 of the N.I Act was not maintainable.
11. Lastly, relying upon the judgments in M/s Intech Net Limited and
Ors. v. State and Anr., 2007 Crl.L.J.216, Iridium India Telcom Limited v.
Motorola Incorporated and Others, (2011) 1 SCC 74 and M.M.T.C Ltd
and Another vs. Medchl Chemicals and Pharma (P) Ltd and Another,
(2002) 1 SCC 234, it was submitted that at this stage, the Court cannot go
into the disputed questions of facts and there is no justification for
embarking upon an enquiry as to the reliability or genuineness or otherwise
of the allegations made in the complaint. As such the petition is liable to
be dismissed.
12. I have given my considerable thoughts to the respective submissions
of learned counsel for the parties and have perused the record.
13. Before coming to the factual matrix of the case, the relevant
provisions of law incorporated in Sections 9,13, 15, 16, 118(g),138 and
139 are reproduced as under:-
" 9. Holder in due course.-
"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 indorse thereof, if
[payable to order] before the amount mentioned in it became
payable, and without having sufficient cause to believe that any
defect existed in the title of the person from whom he derived his
title."
xx xx xx xx xx xx xx xx xx
"13. Negotiable instrument.-[(1) A "negotiable instrument" means
a promissory note, bill of exchange or cheque payable either to
order or to bearer.
Explanation (i).- A promissory note, bill of exchange or cheque is
payable to order which is expressed to be so payable to a
particular person, and does not contain words prohibiting transfer
or indicating an intention that it shall not be transferable.
Explanation (ii).- A promissory note, bill of exchange or cheque is
payable to bearer which is expressed to be so payable or on which
the only or last endorsements is an endorsement is an
endorsement in blank.
Explanation (iii) Where a promissory note, bill of exchange or
cheque, either originally or by endorsement, is expressed to be
payable to the order of a specified person, and not to him or his
order, it is nevertheless payable to him or his order at his option.]
(2) A negotiable instrument may be made payable to two or more
payees jointly, or it may be made payable in the alternative to one
or two, or one or some of several payees.]
xx xx xx xx xx xx xx xx xx
15. Endorsement.- When the marker or holder of an negotiable
instrument signs the same, otherwise than as such maker, for the
purpose of negotiation, one the back or face thereof or on a slip of
paper annexed thereto, or so signs for the same purpose a
stamped paper intended to be completed as a negotiable
instrument, he is said to indorse the same, and is called the
endorser.
16. Endorsement "in blank" and "in full"-"endorsee"-1[(1)] If the
endorser signs his name only, the endorsement is said to be "in
blank", and if he adds a direction to pay the amount mentioned in
the instrument to, or to the order of, a specified person, the
endorsement is said to be "in full", and the person so specified is
called the "endorsee" of the instrument.
[(2) The provisions of this Act relating to a payee shall apply with
the necessary modifications to an endorsee.]
xx xx xx xx xx xx xx xx xx xx
118.Presumptions as to negotiable instruments.-
(g) that holder is a holder in due course - that the holder of a
negotiable instrument is a holder in due course; provided that,
where the instrument has been contained from its lawful owner,
or form any person in lawful custody thereof, by means of an
offence or fraud, or for unlawful consideration, the burden of
proving that the holder is a holder in due course lies upon him.
xx xx xx xx xx xx xx xx xx xx
138. Dishonour of cheque for insufficiency, etc., of funds in the
accounts-
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 liability, 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 provisions of this Act, be punished with imprisonment
for [a term which may extend to two 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-
(a) The cheque has been presented to the bank within a period of
six months from the date on which it is drawn or within the period
of its validity, whichever is earlier.
(b) The payee or the holder induce 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, 3["within thirty days"] of the receipt of information by him
from the bank regarding the return of the cheques as unpaid, and
(c) The drawer of such cheque fails to make the payment of the
said amount of money to the payee or, as the case may be, to the
holder in due course of the cheque, within fifteen days of the
receipt of the said notice.
Explanation: For the purpose of this section, "debt or other
liability" means a legally enforceable debt or other liability].
139. Presumption in favour of holder -It shall be presumed, unless
the contrary is proved, that the holder of a cheque received the
cheque of the nature referred to in section 138 for the discharge,
in whole or in part, or any debt or other liability]."
14. The basic submission of learned counsel for the petitioners is that the
respondent was not the "holder in due course" of the cheques in question;
there are no allegations in the complaint to the effect that the respondent
was holder in due course of the cheques. The petitioners had drawn the
cheques in its own name, 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. The respondent bank was
merely a collecting bank and could not, in any circumstance, be termed as
holder in due course of the cheque. Reliance was placed on National
Small Industries Corporation Ltd v. State (supra) for submitting as to who
can file a complaint u/s 138 of the N.I Act. In that case, it was observed
that the term `complaint' is not defined under the Code. Section 142 of the
N.I Act requires a complaint u/s 138 of the Act, to be made by the payee
(or by the holder in due course). It is thus evident that in a complaint
referring to dishonour of the cheque (which has not been endorsed by the
payee in favour of anyone), it is the payee only who can be the
complainant. To the similar effect was the view taken in M/s.Shankar
Finance Investments(supra). Reliance was placed on Vishnupant (supra),
Jayaram Finance(supra) and Anil Kumar(supra) for submitting that in the
absence of endorsement, as contemplated u/s 50 of the Act, mere delivery
of the cheque is not sufficient. However, all these authorities are not
applicable inasmuch as in Vishnupant(supra), the respondent complainant
was not the person named in the instrument nor he was the person to whom
or to whose order, money by the instrument was directed to be paid.
There was no endorsement on the cheque by the deceased paying in favour
of the respondent-complainant, as such, it was held that the amount under
the instrument was not directed to be paid to him. The complainant being
not the payee nor "holder in due course" had no authority to demand
money and lodge complaint as he cannot give valid discharge for payment
made to him. Similarly in Jayaram Finance(supra) the instrument in
question was given in favour of one Gananvel. No endorsement was made
on the cheque for transfer enabling the complainant to possess the same in
his own name so as to receive the contents thereof from the accused. As
such, it was held that the complainant could not be considered to be
"holder" much less "holder in due course". In Anil Kumar(supra) also, on
facts it was found that the respondent was not a "holder in due course".
14. On the other hand, in Mahadev Corporation(supra) relied upon by
learned counsel for the respondent, substantially similar facts were
involved. In that case also substantially similar plea was taken that the
respondent was not the holder in due course of the cheque in question;
there were no allegations in the complaint to the effect that the respondent
was holder in due course; the cheques were drawn by the petitioner in its
own name. Repelling the contention, it was observed by this Court that the
respondent is a person who is a holder in 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, bill of exchange or
cheque shall be holder in due course. As the cheques were issued by the
petitioner in its own name but were ultimately to be credited in the account
of the respondent and thus respondents were to be benefited of such
payment and now since they have been put to disadvantage because of
dishonour of such cheques, the petitioners cannot agitate that since the
cheque in question was not issued in the name of respondent but in the
name of petitioners themselves, therefore, provisions of Section 138 are
not attracted to the case, the respondent being not holder in due course of
cheques. In that case also, the order of summoning passed by the
Magistrate was sought to be challenged by way of revision petition which
was dismissed.
15. In Bank of India(supra), the Director of the company had issued
cheques from his personal account in favour of the company so that the
amount deposited in the account of the company that had availed overdraft
and other facilities from the bank is utilised for discharging dues of the
bank. On dishonour of the cheque, the bank filed a complaint claiming
itself to be the "holder in due course". While the learned Metropolitan
Magistrate issued a notice u/s 251 Cr.P.C on the accused persons, in
revision, the learned Additional Sessions Judge observed that the bank was
not a holder in due course since there was no endorsement u/s 16 of the
N.I. Act made on the cheque and the status of the complainant bank, under
these circumstances, cannot be treated as "holder in due course". After
referring to Section 9 of the N.I. Act which defines holder in due course, it
was observed as under:-
"5. It is apparent from this definition that for being a 'holder in due
course' of a bill or a cheque it was not necessary that there should
be an endorsement on the bill or cheque. 'Holder in due course'
has been defined as any person, who for consideration, becomes
the possessor of the promissory note or cheque. There is no doubt
that endorsee or the payee of such a bill or cheque are also
considered as 'holder in due course', but, it is not the case that
payee or endorsee alone are holders in due course. A person
whose banking account is overdrawn if negotiates with his bankers
a cheque, drawn by a third party, to reduce the overdraft, the
banker becomes a holder for value of the cheque. The pre-existing
debt of the overdraft is a sufficient consideration for the
negotiation of a cheque to the banker. If a person handovers
cheque to the bank with the clear understanding to the bank that
cheque is towards the debt payable by the company, though the
cheque remains in the name of the company but the bank
becomes holder of the cheque in due course. What is to be seen is
that whether the bank has come into possession of the cheque for
a value pursuant to a contract between the parties express or
implied................ Once it is established to the satisfaction of the
Court that the cheques were issued for discharge of the debt of
the company, the bank who had given this debt to the company
would be considered as 'holder in due course'. The 'holder in due
course' of cheque means any person entitled to receive or recover
the amount due thereon from the parties thereto."
Therefore the order of the Session Court was set aside and complaint
was held to be maintainable.
16. In Punjab and Sind Bank(supra) it was observed as under:-
"Section 142 of the Act envisages a complaint to be made in writing
"either by the payee or the holder in due course of the cheque, as
the case may be". Section 8 of the Act defines "holder" as any
person entitled in his own name to the possession of the cheque
and to receive or recover the amount due thereon from the parties
thereto. We have no doubt that complainant-bank was well within
its right to possess the cheque and to receive or recover the
amount covered by the instrument. "Holder in due course" means a
person who for consideration became the possessor of a cheque if
payable to bearer before the amount became payable. (vide Sec. 9).
In this context reference has to be made to Section 118(g) of the
Act which contains a mandate that until the contrary is proved the
holder of a negotiable instrument shall be presumed to be a holder
in due course. Thus there is no escape for the court from drawing
such presumption."
It was further observed that:
".........that the complainant-company is the holder of the
instrument on its own right. As such it could be a holder in due
course also until the concerned party adduces evidence to rebut the
presumption. It is of course open to the respondents to rebut the
presumption in the trial but till then the High Court could not say
that the complainant is not a holder in due course at all."
17. In Ponnappa(supra), it was observed that:
"The definition makes it clear that to be a 'holder in due course' a
person must be a holder for consideration and the instrument must
have been transferred to him before it becomes overdue and he
must be a transferee in good faith and another important condition is
that the transferee, namely, the person who for consideration
became the possessor of the cheque should not have any reason to
believe that there was any defect in the title of the transferor."
18. In Durga Shah Mohan Lal Bankers vs. Governor General in
Council & Ors, AIR (39) 1952, Allahabad 590, it was observed:
"4. A cheque is under the law a negotiable Instrument. Its
negotiability can be destroyed only if it is marked as ''not
negotiable" on its face; it is not destroyed by its simply being
crossed whether generally or specially. The only effect of crossing a
cheque is, as stated in Section 126, Negotiable Instruments Act, that
the drawee bank must not pay it otherwise than to any banker if it
is crossed generally, or to the particular banker if it is crossed
specially There is no other effect of the crossing. In Carlon v. Ireland
(1856) 25 LJQB 113 Coleridge J. stated at p. 114 :
"It may be that the effect of the crossing is to require caution on
the part of the person taking it, & to throw upon him the
obligation of showing that he had taken it bona fide, & had
given value for it ; but it cannot be carried further without
interfering with the negotiability of the instrument."
Lord Cairns C. said in Smith v. The Union Bank of London (1875) 1
QBD 31 that,
"Whatever may have been the effect of a crossing, the
negotiability of the cheque was not thereby restrained."
19. In M/s Tailors Priya v. M/s Gulabchand Danraj, AIR 1963
Calcutta 36, it was observed as under:-
"17. It is thus found that a cheque is a negotiable instrument and
may be transferred or negotiated by indorsement and delivery,
making the indorsee the holder in due course. But unlike other
negotiable instruments, there are specific provisions with regard
to crossed cheques. Those provisions have been mentioned above.
If the words "not negotiable" are used with special crossing, then
it is still transferable but not negotiable. The Negotiable
Instruments Act does not provide specifically for a crossing, "a/c
payee" or "a/c payee only". At one time it used to be thought in
England that such indorsement had no legal effect and it was even
thought that such indorsement invalidated a cheque. However,
the practice of making such endorsements is so widespread and
has been going on for such a length of time, that it can no longer
be said that such a crossing would invalidate a cheque. But, there
has really been no satisfactory decision with regard to the legal
consequences of such crossing. The two cases mentioned above,
which are always cited, do not specifically deal with such
endorsements, except a passing observation of Lord Scrutton L J.
in (1924) 1 KB 775. However, it seems that the text books are
unanimous in their opinion that an indorsement or crossing
containing the words "a/c payee" or "a/c payee only" does not
restrict the negotiability of the cheque. It is only a direction on the
collecting banker to put the money into the account of the person
shown as the payee, on the face of the cheque. The result is this:
Supposing A issues a cheque in favour of B and crosses it "a/c
payee only". B may negotiate it in favour of C. and C may negotiate
it in favour of D and so on. The only result of such crossing is that
when it is put into the hands of the collecting banker, the Banker is
put on notice that the money must be put into the account of B
only and not in any other account, and if it puts the money into
some other account with notice of the crossing, it will be liable for
negligence. I however fail to see the merits of this curious
procedure. In the illustration given above, C may take the cheque
from B and become the holder for value and yet if he goes to his
banker and asks the banker to collect the money, the duty of the
banker would be, not to put the money into C's account but into
B's account, and if B has no account then the banker may refuse to
accept the cheque at all. Under such circumstances. I do not see
what benefit C has got by negotiation. It amounts to this, that he
becomes a holder for value but without the right of getting this
banker to collect the money."
20. In British Bank of Middle East vs. Almal Brothers, 66, CWN
285, it was observed:
"3. The cheque in suit is on the face of it, a bearer cheque. It is a
bearer cheque as it is expressed to be so payable. It is also crossed
"Account payee only." Does this crossing alter the position?
Sections 46 and 47 of the Negotiable Instruments Act provide, "a
cheque payable to bearer is negotiable by delivery thereof." It is
well settled that crossing of a cheque does not restrain its
negotiability, so that a crossed bearer cheque may pass from hand
to hand without any endorsement, while a crossed cheque
payable to order may be negotiated by endorsement as in the case
of cheques uncrossed.............."
21. In view of the aforesaid, even if the cheques were issued by the
petitioners in its own name but was in possession of the complainant who
was entitled to receive or recover the amount due thereon, unless the
contrary is proved by the petitioner, the complainant being the holder of
the negotiable instruments shall be presumed to be the holder in due
course.
22. As regards the submission that except for alleging in para 21 of the
complaint that accused nos.2 to 5, being the persons responsible for the
affairs of the accused no.1 and also being involved in day to day
functioning of accused no.1 firm, they are jointly and severally liable to be
prosecuted, there is no other averment against them, same is absolutely
belied by the record that in as much as a perusal of the certified copy of
the complaint filed by the petitioners themselves goes to show that paras 3
to 16 gives a detailed account regarding the role played by all the
petitioners and as to how they are jointly, severally and co-extensively
liable to make payment to the complainant. It is alleged that petitioner
no.1 is the partnership firm of which respondents 2 to 5 are the partners,
who are responsible to petitioner no.1 firm for the conduct of its day to day
business and are managing the affairs of the firm. Petitioner no.1
approached respondent no.2 to make available certain credit facilities in
the nature of working capital finance and respondent no.2, vide Banking
Facility Letter (for short `BFL') dated 28.08.2008 had sanctioned various
facilities to petitioner no.1, which is a partnership firm comprising of
petitioner nos. 2 to 5 as its partners. The terms and conditions mentioned
in the BFL were duly accepted by the petitioners. Not only that, petitioner
no.1 firm executed various documents in the nature of Trade Financing
General Agreement, Demand Promissory Note in the sum of Rs.7.50
crores, Letter of Continuity, Counter-Indemnity, Agreement for working
Capital Loan, all dated 28.08.2008 and petitioners 2 to 5 executed their
separate Deeds of Guarantee. Many other loan documents were also
executed by the petitioners. Again, petitioner no.1 approached respondent
no.2 for enhancement of credit facilities and respondent no.2 vide BFL
dated 24.11.2009 sanctioned enhanced credit facilities and various
documents were executed by the petitioners. The facilities were again
enhanced from time to time. As per the statement of account maintained
by respondent no.2, as on 30.11.2012, an amount of Rs.8,24,61,932.59
along with future interest was recoverable from the petitioners. In part
discharge of their liabilities, five cheques including the cheque in question
was issued by the petitioners and handed over to respondent no.2, which
on presentation was dishonoured. A legal notice dated 18.12.2012 was
issued to which they did not send any reply and thereafter the complaint
was filed. Respondent no.2 was holder in due course and have received
the documents from the petitioners in discharge of their liabilities. As such
specific averments have been made against the petitioners for showing that
they are jointly and severally liable to be prosecuted. Moreover Harmeet
Singh Paintal(supra), Saroj Kumar Poddar(supra) and Asian Global
Ltd.(supra) are of no help to the petitioner since these cases pertain to
Director of company. Needless to say, a company is an entity distinct from
its members whereas partnership is not a juristic person.
23. Lastly there is force in the submission of learned senior counsel for
respondent no.2 that the case is at its initial stage. Only summons has so
far been issued to the petitioners. Time and again it has been held by
Hon'ble Supreme Court that power to quash proceedings at initial stage
have to be exercised sparingly, with circumspection and in rarest of rare
cases. In Iridium (supra), it was observed as under:-
"44. ..............This Court has repeatedly held that power to quash
proceedings at the initial stage have to be exercised sparingly with
circumspection and in the rarest of the rare cases. The power is to
be exercised ex debito justitiae. Such power can be exercised
where a criminal proceeding is manifestly attended with malafide
and have been instituted maliciously with ulterior motive. This
inherent power ought not to be exercised to stifle a legitimate
prosecution. In the present case, the parties are yet to place on
the record the entire material in support of their claims. The issues
involved are of considerable importance to the parties in
particular, and the world of trade and commerce in general.
45. In such circumstances, in our opinion, the High Court ought to
have refrained from indulging in detailed analysis of very
complicated commercial documents and reaching any definite
conclusions. In our opinion, the High Court clearly exceeded its
jurisdiction in quashing the criminal proceeding in the peculiar
facts and circumstances of this case. The High Court noticed that
while exercising jurisdiction under Section 482 Cr.P.C. "the
complaint in its entirety will have to be examined on the basis of
the allegations made therein. But the High Court has no authority
or jurisdiction to go into the matter or examine its correctness.
The allegations in the complaint will have to be accepted on the
face of it and the truth or falsity cannot be entered into by the
Court at this stage...."
24. Substantially similar view was taken in MMTC Ltd (supra), where it
was observed:-
"13. It is settled law that at this stage the Court is not justified in
embarking upon an enquiry as to the reliability or genuineness or
otherwise of the allegations made in the complaint. The inherent
powers do not confer an arbitrary jurisdiction on the court to act
according to its whim or caprice. At this stage the court could not
have gone into merits and or come to conclusion that there was
no existing debt or liability."
25. In Intech Net Limited (supra), it was observed:-
"Once the issuance of the cheques is admitted and as the words
"or bearer" have not been struck off, the complainant is held to be
the holder of the said cheques in due course though it was written
as self and thus he is entitled to receive the cash and on
dishonouring of the said cheques, he can very well file the
complaint. The contention of the petitioners that the said cheques
was issued in the process of transaction between the first
petitioner and the complainant for supply of goods has to be
substantiated during the course of trial by the petitioners by
leading evidence. Under these circumstances, I see no ground to
quash the impugned proceedings at this stage."
26. This being the legal position, the allegations in the complaint will
have to be accepted on the face of it and the truth or falsity cannot be
entered into by this Court at this stage. That being so, there is no ground to
quash the summoning order or the complaint or the proceedings emanating
therefrom. As such, application moved by respondent no.2 is allowed and
all the petitions are dismissed. It is, however, clarified that nothing stated
herein shall have any reflection on the merits of the case.
SUNITA GUPTA
(JUDGE)
DECEMBER 06, 2013
as
