05 February 2010
Vishnupant vs Kailash (Bombay High Court) Judgement dated 25-1-2010.
" By demise of payee, it cannot be said that any of the heirs or legatees get right to issue notice under proviso (b) to s. 138 of the Act. Only a person who is authorized by the succession certificate, letters of administration or probate granted by the court, is entitled to issue notice under proviso (b) to s. 138 of the Act and to file complaint u/s. 142(a) of the Act. In the present case, respondent-complainant is not payee or holder in due course as per the law. He has no authority to demand money and lodge a complaint as he cannot give valid discharge for payment made to him - Hence, the order of issuance of process against the petitioner-accused quashed and set aside"
07 February 2010
DEAR RAHUL HERE IS COMPLETE JUDGMENT OF BOMBAY HIGH COURT AURANGABAD BENCH.
IN THE HIGH COURT OF JUDICATURE AT BOMBA Y APPELLATE SIDE, BENCH AT AURANGABAD CRIMINAL WRIT PETITION NO. 842 OF 2009 Vishnupant s/o Chaburao Khaire, age 50 years, occup. business, r/of Avi Lodge, Pansare Galli, Urban Bank Road, Ahmednagar. Petitioner versus Kailash s/o Balbhir Madan, age 52 years, occup. business, resident of Amit Watch Company, Navi Peth, Ahmednagar. Respondent Shri A.S. Zarekar, Advocate for the Petitioner. Shri C.R. Deshpande, Advocate, instructed by Ms. Sabahat T. Kazi, Advocate, for Respondent. Coram : P.R.Borkar,J. Judgment reserved on : 09.01.2010 Judgment pronounced on: 25.01.2010 JUDGMENT 01. Heard Shri A.S. Zarekar learned Advocate for the petitioner and Shri C.R. Deshpande, learned Advocate instructed by Ms. Sabahat Kazi, learned Advocate for the Respondent. 02. Rule. By consent, rule made returnable forthwith and the writ petition is taken up for final disposal at the admission stage. 2 03. This writ petition is filed by original accused for quashing and setting aside the order passed on 7.8.2008 by the learned Judicial Magistrate, First Class, Ahmednagar on complaint Exhibit 1 in S.T.C. No.1467 of 2008 filed by present Respondent, whereby process was issued against the Petitioneraccused for offence punishable under Section 138 of the Negotiable Instruments Act, 1881 (for short, "N.I.Act"). 04. The point that is raised in this petition is "Whether one of the heirs of deceased payee can file complaint under Section 138 of the Negotiable Instruments Act. ?". 05. It is no more disputed at this stage that on 28.8.2007, petitioneraccused had issued a cheque bearing No. 034452 for Rs.3,00,000/= (Rupees Three lakhs only) in favour of father of the Respondentcomplainant. Balbhir, father of the Respondentcomplainant died on 5.9.2007 in a vehicular accident. On 5.2.2008, the Respondentcomplainant presented the said cheque for encashment to the Punjab National Bank. However, the same was dishonoured and returned with endorsement "insufficient funds". On 3.3.2008, the respondentcomplainant issued legal notice through 3 Advocate calling upon the petitioneraccused to pay the amount due under the said cheque. However, since the accused failed to pay the amount, the respondent filed criminal case bearing S.T.C. No.1467 of 2008 in the court of J.M.F.C., Ahmednagar against the accused for having committed offence punishable under Section 138 of the N.I. Act. The learned Magistrate passed an order on 7.8.2008 issuing process and it is this order which is challenged in the present writ petition. 06. Shri Zarekar, learned Advocate for the petitioner submitted that as far as taking of cognizance of offence punishable under Section 138 of the N.I.Act is concerned, as per Section 142 (a) of the N.I.Act, notwithstanding anything contained in the Code of Criminal Procedure, 1973, no court can take cognizance of any offence punishable under Section 138 except upon a complaint, in writing, made by the payee or, as the case may be, the holder in due course of the cheque. Learned Advocate Shri Zarekar further submitted that in this case the respondentcomplainant is neither the payee nor holder in due course and as such, he was not entitled as per Section 142 (a) of the N.I.Act to file complaint for offence punishable under Section 138 of the N.I. Act. 4 07. Learned Advocate Shri Zarekar further referred to section 7 of the N.I.Act which defines various terms under the N.I.Act, including the term "payee". Payee means a person named in the instrument, to whom or to whose order the money is by the instrument directed to be paid. The term "Holder in due course" is defined in Section 9 as 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 indorsee 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. In this case, admittedly the cheque was issued by the petitioneraccused in the name of father of the respondentcomplainant. It is, therefore, argued by Advocate Shri Zarekar that the respondentcomplainant could not be "payee" in terms of definition as under Section 7 of the N.I.Act. According to him, respondentcomplainant had not for consideration beco me possessor of the dishonoured cheque and, therefore, he is not "holder in due course" as defined in Section 9. It is not that the cheque was endorsed by the deceased Balbhir in the name of present respondentcomplainant. For all 5 thease reasons, the cognizance of complaint filed by the respondent is bad in law and order of issuance of process deserves to be quashed and set aside. 08. On the other hand, Shri C.R.Deshpande, learned Advocate for the Respondentcomplainant argued that after the death of his father, the respondentcomplainant stepped into the shoes of his father as a payee and as such, was entitled to file complaint against the petitioneraccused. 09. Learned Advocates for the respective parties cited various authorities in support of their submissions. 10. Shri Zarekar, learned Advocate for the Petitioneraccused first relied upon the case of Anil Kumar vs. Ramakrishna Kartha 2009 All M R (Cri. ) Journal 252 which is a ruling by Single Bench of Kerala High Court. It is held therein that the person who is not a payee or endorsee is not entitled to file a complaint for offence punishable under Section 138 of the N.I. Act. It is also observed in para 9 that in order to make a person, other than a payee, a holder in due course of a cheque payable to order, 6 there shall be endorsement in his favour and a delivery of the cheque as provided under Section 48 of the N.I.Act and the delivery alone is not sufficient to make him a holder in due course as endorsement is necessary. Factual position in that case as borne out from paragraph 2 of the judgment is that the revision petitioner had issued cheque in favour of one Krishnadas. The first respondent claimed that for consideration he received the cheque from the brother of the payee as the payee was out of India and presented the cheque for encashment and as it was dishonoured for want of sufficient funds, he sent notice demanding the amount and on failure, lodged the complaint. Although the trial court and the Sessions Court found that the complaint was maintainable and therefore sustained the conviction of the revision petitioner, the learned Single Bench of Kerala High Court on the basis of the said set of facts, held that the complainant was not payee or endorsee and thus not entitled to lodge the complaint. Revision was allowed, conviction was set aside and the complaint was dismissed. It is argued that in our case, there was no endorsement by deceased Balbhir (original payee) in favour of the respondent and so he is not holder in due course. 7 11. Second case relied upon by Advocate Shri Zarekar is of Govind Ram Chanani vs. Latha, 2009 All MR. (Cri.) Journal 236 which is a ruling of Single Bench of Karnataka High Court. In the said case, cheque issued in favour of partnership firm was dishonoured. It was held that even a person who is looking after entire business affairs of partnership firm cannot file complaint without authorization and therefore the complaint was dismissed. In paragraph 9 of the case, it is observed that only the power of attorney, agent or a person authorised in writing by the payee or holder in due course of the cheque, is a person competent to present the complaint as under Section 142 of the N.I.Act. 12. The next case relied upon by Advocate for the Petitioneraccused is of Single Bench of our High Court i.e. Roy Joseph Creado vs. Sk. Tamisuddin 2008 (2) Mh.L.J.(Cri.) 118. In that case, the complainant died without signing and verifying the complaint. The Respondent was permitted to continue the prosecution as Special Power of Attorney. However, copy of the said power of attorney did not show that the respondent had undertaken the liability to indemnify the accused persons if the complaint was found to be 8 frivolous or false. Process issued on the basis such verified statement (of the respondent) was, therefore, held to be illegal and improper and it was held that the prosecution against the accused would tantamount to abuse of the process of law. Learned Single Bench of this court, after referring to Section 142 of the N.I.Act, further observed that the said Section commences with nonobstante clause and, therefore, it supersedes the general definition of the word "complaint" as given in Section 2(d) of the Code of Criminal Procedure. In paragraph 18, it is held that the complaint filed by the complainant was defective because it was not signed by the complainant Smt. Saira. The defect was curable during her life time. She could have been asked to sign the complaint. That was not done. The complaint was verified by the respondent although, he did not state in clear words that he was not only Special Power of Attorney holder but also had full knowledge of the facts in which the cheque was issued by the applicants in the name of Smt. Saira as a result of liability to discharge the legal debt or money due to her. It is also made clear in paragraph 19 of the judgment, that although Respondent Sk. Tamsuddin obtained permission to continue the prosecution as her special power of 9 attorney, he did not seek his substitution as a legal heir of the deceased. So, the question raised in the present case was not under consideration of the court. 13. Decision of learned Single Bench of Kerala High Court in P.K. Koya Moideen vs. G. Haribharan 1996 Cri.L.J. 3153, is cited by Advocate Shri Zarekar for the petitioner. In said case, Section 9 of the N.I.Act (definition of holder in due course) was considered. Cheque was drawn in the name of complainant's father. Subsequent to death of his father, the complainant claimed payment in his capacity as executor of the will, but there was nothing to indicate that he paid any consideration to his father to claim payment under the cheque. Genuineness of the will was also to be adjudicated upon. Under these circumstances, it is held that the executor of the will could not be termed as "holder in due course." 14. Then the case of Sivakumar vs. Natrajan 2009 All MR (Cri.) 2165 (SC) was relied upon by Advocate Shri Zarekar. In paragraph 10 of the judgment, it has been observed that Section 138 of the N.I. Act being of penal nature, indisputably it warrants strict 10 construction. 15. Learned Advocate Shri Zarekar also relied upon the case of Vishw a Mitter v. O.P. Poddar AIR 198 4 S.C. 5, and more particularly he referred to paragraph 4 of the judgment for proposition that the Magistrate would be competent to enquire into the qualification or eligibility of the complainant to file the complaint and the Magistrate must apply his mind if there is any provision contrary made in the statute requiring special eligibility criteria for filing complaint. 16. The case of Dhariwal Tobacco Products Ltd. vs. State of Maharashtra (2009) 2 S.C.C. 370 was relied upon by learned Advocate Shri Zarekar, which is in respect of alternate remedy. It is held therein that even if the revision application is barred, remedy under Articles 226 of 227 of the Constitution would be available. 17. On the other hand, Shri C.R. Deshpande, learned Advocate, also relied upon several authorities. First authority is Ajay Kumar Agrawal and 11 another vs. State of Jharkhand, 2003 (2) Crimes 226. In that case, private complaint was filed against the petitioner Ajay Kumar and another for having committed offences punishable under Sections 420 and 468 of I.P.C. as also under Section 138 of the N.I. Act. The complainant therein died and the question, therefore, was whether after the death of the complainant, prosecution could have been continued. In paragraph 21 of the judgment,it has been observed that from the complaint it was apparent that the complainant himself was the owner of a business house dealing in mica and he/his company sold a huge amount of mica to the accused persons worth Rs.7,30,000/=. It was further observed that the right to receive the amount by his business house could not be frustrated by technicalities of the definitions as recorded in the Negotiable Instruments Act because his own business house also must be deemed to be beneficiaries of the cheques and therefore his son will also be deemed to be the "holder in due course.". In that case, paras 5 and 7 show that cognizance of complaint was taken by Addl.Chief Judicial Magistrate, Koderma by his order dated 19.2.2001 and the complainant expired on 5/6.6.2001. So, issue raised in our case was not under consideration in that case. 12 18. Next case relied upon by learned Advocate Shri Deshpande is Punjab & Sind Bank vs. Vinkar Sahakari Bank Ltd. 2001 (4) ALL MR 474 (S.C.). In that case, it was the submission of the accused that the complainant was not the holder in due course unless endorsement was made on the instrument in the manner prescribed under Section 50 of the N.I. Act. While dealing with this issue in paragraphs 21 to 23, it is observed that Section 142 of the N.I. 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. It was further observed that Section 8 of the Act defines the "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. It was held that the complainantbank was well within its right to possess the cheque and to receive or recover the amount covered by the instrument. In paragraph 22, reference was made to Section 118(g) of the Act which mandates that until the contrary is proved the holder of a negotiable instrument shall be presumed to be a holder in due course and thus there is no escape for the Court from drawing such presumption. It was held in paragraph 23 that it was undisputed that the complainantcompany 13 was the holder of the instrument in its own right and as such it could be holder in due course also until the concerned party adduces evidence to rebut the presumption. 19. So, it was argued by learned Advocate Shri Deshpande before this court that in the facts of the present case, the complainant being the son of the deceased payee, should be deemed to be holder of instrument in due course until that presumption is rebutted under Section 118(g) of the N.I. Act. 20. Shri Deshpande, learned Advocate for the respondentcomplainant heavily relied upon Division Bench ruling of Kerala High Court in Chandra Babu vs. Remani 2003 (2) DCR 347. In that case, in paragraph 5, it is held as follows: "5. Another important statutory provision in this regard is S.53 which is as follows: "53. Holder deriving title from holder in due course. A holder of a negotiable instruments who derives title from a holder in due course has the rights thereon of that holder in due course. Therefore, a holder deriving title from the holder in due course has all the rights of a holder in due course. Therefore, legal representative of a holder in due course has 14 all the rights of the holder in due course. Here, in this case, if the original payee is a holder in due course, his representative has all his rights. Therefore, rights under Ss. 138 and 142 are applicable to the legal representative also if he derives title from the holder in due course." In aforesaid case, references were also made to other rulings of the Kerala High Court and at the end of paragraph 9, following observations are made. "9...............................Apart from the above, in this case, complainant holds the cheque after the death of the payee as a legal heir and she is entitled to possess the same in her own name and in view of S. 53, being a legal heir, she is a holder in due course and he can get a full discharge. The party was free to pay the amount to her and to get back the cheque. In view of S.53 of the Act, legal heir of the payee or holder in due course can maintain a complaint under S.138 of the Act." Relying on this case, it is argued that this writ petition has no merit and the cognizance by the Magistrate of the complaint lodged by the respondent as heir of deceased Payee Balbhir is tenable and there is no bar of Section 142 (a) of the N.I.Act. 21. Another case cited by Advocate Shri Deshpande for respondent is of Single Bench of Kerala High Court Smt. Bhagava vs. M.s Sri Kadasiddeshwara 15 Trading Company and another 2004 (1) Crimes 701. In the said case, payee had died before presenting cheque for encashment and the cheque was therefore presented by his wife and on bouncing of the cheque, after completing formalities, she had filed complaint. In the facts of the said case, it is held therein that on death of payee, his legal heirs stepped into shoe of payee for all practical purposes and such legal heir could also file and prosecute complaint and the impugned order dismissing the complaint was set aside. 22. Ruling of Single Bench of Karnataka High Court in Ashok Kumar v. Dr. T.R. Bhageerathi 2009 Cri.L.J.221 is relied upon by Advocate Shri Deshpande, wherein it is held in paragraph 9 as under: "9. The contention of the learned counsel for the petitioner that the legal representatives of payee or the holder in due course are not entitled to file a criminal petition under Section 142 of the Act is unacceptable to me. Section 8 of the Act defines "Holder" means any person entitled to his own name to the possession thereof and to receive or recover the amount under the instrument from the drawer. Therefore, the legal representatives of a payee or holder in due course are entitled to the legal possession of the instrument and further to receive and recover the amount covered under the instrument from the drawer. Section 118(g) of the Act specifies 16 that holder of a negotiable instrument is a holder in due course. Therefore, the legal representatives of deceased payee or holder in due course are entitled to file a complaint under Section 146 of the Act for offence punishable under Section 138 of the Act." The Court placed reliance on the case of Punjab & Sind Bank vs. Vinkar Sahakari Bank Ltd. (supra) and at the same time observed that facts were different. It is argued by learned Advocate of the petitioner that Section 118(g) only raises a presumption that holder of negotiable instrument is holder in due course. However, in this case, respondent claims to be heir of deceased payee. It is not his case that for consideration he became the possessor of cheque issued to his father. Moreover, it is not case of a bearer cheque. 23. Advocate Shri Deshpande also relied upon the case of M.M.T.C. Ltd. vs Medchl Chemicals & Pharma (P) Ltd. AIR 2002 SC 182. In that case, the Supreme Court considered Sections 138, 139 and 142(a) of the N.I.Act and held that the complaint must be made by payee and in case the complaint on behalf of company if filed by person not initially authorised, such defect can be subsequently cured by sending person competent to 17 represent company. 24. The above said case law particularly observations in case of Roy Joseph Creado (supra) indicate that once complaint is filed and verification of complainantpayee or complainantholder in due course is recorded, his subsequent death will not prevent his legal heir from continuing the complaint. However, we will have to see what would be position if payee or holder in due course of cheque dies prior to that. If such payee or holder in due course dies after expiration of time of payment mentioned in the notice required by Section 138 of the N.I.Act, but before filing of complaint, question would be whether sole heir or one of the heirs having authority of other heirs can file complaint and give verification on ground that by succession he/they have entered into shoes of deceased payee/holder in due course. Another contingency arises where payee/holder in due course dies before expiration of period of payment mentioned in the notice under Section 138 of the N.I.Act as is the case before us. Here, moot question is whether person claiming to be sole legal representative or one of the legal representatives can on payment of amount due under cheque, give valid discharge to drawer. If 18 not, can it be said that by not making payment to such person, the drawer commits the offence. This requires detail analysis of position of law. 25. It is argued on behalf of the petitioner that the present respondentcomplainant alone is not the heir of the deceased payee and as such he could not have issued notice to demand amount of cheque when the cheque in the name of his father was dishonoured. He could not have filed complaint under the N.I. Act as he was neither the payee nor holder in due course. 26. It may be noted that the cheque is a negotiable instrument and also a valuable security and thus forms part of the movable property of the deceased which can be inherited or succeeded to by the legal heirs of the deceased. As per Section 138 of the Negotiable Instruments Act, where any cheque drawn by a person on 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 19 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. The payee is expected to issue notice calling upon the drawer concerned to pay the amount under the cheque within 15 days and in case such amount is not paid within prescribed time, payee or holder in due course of the cheque may file complaint as per Section 142 of the N.I.Act. Section 142 (a) which is relevant for our purpose, is as follows:" 142. Cognizance of offencesNotwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974)( a) no court shall take cognizance of any offence punishable under Section 138 except upon a complaint, in writing, made by the payee or, as the case may be, the holder in due course of the cheque." Payee is defined in Section 7 of the N.I. Act as the person named in the instrument, to whom or to whose order the money is by the instrument directed to be paid. Section 9 defines the "holder in due course" as follows: 20 "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 indorsee 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. 27. The present Respondentcomplainant is not the person named in the instrument nor he is a person to whom or to whose order money by the instrument is directed to be paid. Admittedly, there is no endorsement on the cheque by the deceased payee in favour of the Respondentcomplainant. So, it is not that the amount under the instrument was directed to be paid to him. The holder in due course is defined as the person who for consideration is entitled to the possession of the bearer cheque or payee or endorsee thereof. It is submitted that as a legal representative of the deceased payeefather, the respondentcomplainant, is entitled to possession of the valuable security/movable property left by his deceased father and also to receive or recover the amount thereunder. It is not disputed that the complainant could have filed a civil suit on the basis of the dishonoured cheque for recovery of the amount 21 stated in the said cheque. The question is whether the respondentcomplainant could file complaint in view of specific wording of Section 142(a). It is argued that the respondent complainant has not become possessor of the property for consideration, but it is because of death of his fatherpayee. He is also not endorsee. 28. If we consider the scheme of Chapter XVII of the N.I.Act regarding penalties in case of dishonour of certain cheques for insufficieny of funds in the account, it is clear that under proviso (b) to Section 138 of the N.I.Act the payee or the holder in due course of the cheque, as the case may be, is to make a demand for the payment of the said amount of money by giving a notice in writing, to the drawer of the cheque, within [thirty] days of the receipt of information by him from the bank regarding the return of the cheque as unpaid. As per proviso (c), if the drawer of such cheque fails to make payment of the amount due under the cheque to the payee or to the holder in due course as the case may be within fifteen days of receipt of notice, then the offence is complete. It may be noted that this requires that the person demanding the amount must have right to demand 22 the money and secondly, he must be in a position to give full discharge to the person who is to make the payment. If a person to whom payment is to be made is not in a position in law to give full discharge and indemnity for payment made, nonpayment to him cannot be an offence. 29. We may refer to certain provisions of the Succession Act in this respect. Section 211 speaks that the executor or administrator, as the case may be, of a deceased person is his legal representative for all purpose, and all the property of the deceased person vests in him as such. Section 273 of the Succession Act is regarding conclusiveness of probate or letters of administration. As per this section, probate or letters of administration shall have effect over all the property and estate, movable or immovable, of the deceased, throughout the [State] in which the same is or are granted, and shall be conclusive as to the representative title against all debtors of the deceased, and all persons holding property which belongs to him, and shall afford full indemnity to all debtors, paying their debts and all persons delivering up such property to the person to whom such probate or letters of administration have 23 been granted. Similarly, under Section 381, succession certificate with respect to debts and securities specified therein, is conclusive as against person owing such debts or liable on such securities and affords full indemnity to all persons as regards all payments made or dealings had, with the person to whom the certificate is granted. In other words, only in case the legatee or heir is armed with succession certificate or probate or letters of administration, he would be entitled to give full discharge and indemnity to the drawer of the cheque. Unless he can give such indemnity it cannot be said that he has authority to issue notice and non payment of amount mentioned in the notice within 15 days is an offence. 30. By demise of payee itself, it cannot be said that any of the heirs or legatees get right to issue notice under proviso (b) to Section 138 of the N.I. Act and then lodge a complaint under Section 142 (a) of the said Act as if he automatically enters into the shoes of the deceased payee. 31. When we consider the rights of the heirs or legatees to recover the amount of debt and securities of the deceased, we must also recognize right of the 24 debtor and person holding security to have full indemnity and full discharge in case he makes payment to such legal heir or legatee. We find such indemnity and full discharge of liability provided to maker, acceptor or endorsee respectively of a negotiable instrument on payment under Section 82 of the N.I.Act. 32. So in my considered opinion, only a person who is authorized by succession certificate, letters of administration or probate granted by the court, is entitled to call upon the drawer to pay the amount of dishonour cheque, by issuing notice under proviso(b) of to Section 138 of the N.I.Act and he would be entitled to file complaint under Section 142 of the Act as he would be then really entering into the shoes of the deceased payee. 33. In the present matter, it is not the case of the respondentcomplainant that he was armed with either the letters of administration, or probate or succession certificate. 34. In the result, the writ petition deserves to be allowed as the complainant is not payee or holder 25 in due course within meaning of law. He has no authority to demand money and lodge complaint as he cannot give valid discharge for payment made to him. Hence, the order of issuance of process against the petitioner is hereby quashed and set aside. Rule made absolute accordingly. pnd/criwp842.09 (P.R.BORKAR, J.) 26