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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 ..... Petitioner


Through Mr. M.L. Kasturi ,Advocate.

versus

ALLAHABAD BANK ..... Respondent


Through 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