HONBLE SRI JUSTICE P. KESHAVA RAO
CRIMINAL PETITION No.8861 OF 2011
13-04-2018
M/s. Sri Sai Mourya Estates & Projects Pvt., Ltd, & others. ..Petitioners
The State of A.P., rep., by its Public Prosecutor,High Court of A.P., Hyderabad & another...Respondents
Counsel for Petitioners: Sri D. Bhaskar Reddy.
Counsel for respondent No.1: Learned Public Prosecutor
<GIST:
>HEAD NOTE:
? Cases referred
1. 2010 Crl. L.J. 2166
2. II (2004) BC 152 (DB)
3. IV (2010) BC 181
4. 2004 (2) KCCR 864
5. 1984 Crl. L.J. 1326
6. 2006 (1) ALD (Crl.) 643 (A.P.)
7. (2006) 5 SCC 530
8. 2012 (1) ALD (Crl.) 865 (A.P.)
9. 2005 (1) ALD (Crl.) 305 (SC)
THE HONBLE SRI JUSTICE P. KESHAVA RAO
CRIMINAL PETITION No.8861 of 2011
ORDER:
Heard counsel for the petitioners as well as the respondents.
The present criminal petition is filed by the petitioners/
accused Nos.1 to 3 and 5, to quash the proceedings initiated
against them in C.C.No.1375 of 2010 on the file of the Court of the
II Additional Chief Metropolitan Magistrate at Nampally,
Hyderabad, for the offences under Section 138 of the Negotiable
Instruments Act, 1881 (for short, the Act).
The brief facts of the case are that originally the 2nd
respondent herein filed the above mentioned case i.e., C.C.No.1375
of 2010 against the petitioners and two others. The case of the 2nd
respondent is that petitioner No.1 is a private limited company
represented by petitioner Nos.2 to 4 and two others and petitioner
Nos.2 to 4 approached his father and requested him to give hand
loan for the purpose of developing the lands in Magadha Venture
situated at Kokapet Village, Ranga Reddy District. Believing the
version of the petitioners, his father paid a sum of Rs.25 lakhs in
cash as hand loan and in view thereof the petitioners executed a
promissory note, dated 04.10.2007. In the said promissory note,
Sri M. Chandra Shekar and Sri B. Venu Gopal Reddy acted as
witnesses, since amount was paid in their presence. It is also
stated that the petitioners agreed to pay the above said amount
with interest @24% per annum within a period of two years
thereof. However, after receiving the amount, the petitioners have
changed their colour and started avoiding payment of the said
amount. It is also specifically stated that the said amount was
obtained by petitioner Nos.2 to 4 and two others for the purpose of
investing in the real estate business of petitioner No.1 company.
Petitioner No.1 is a private limited company, petitioner No.2 is the
Managing Director and petitioner Nos.3, 4 and two others are the
Directors of petitioner No.1 company. In fact, petitioner Nos.2 to 4
and two other Directors are equally taking part in the business of
the company and also looking after the financial aspects, such as,
negotiating with the customers, issuing of cheques etc., and
therefore all are equally responsible for the day to day affairs of the
1st petitioner company. The 1st petitioner company represented by
accused Nos.3 and 4, with the consent of accused Nos.2, 5 and 6,
issued a cheque bearing No.332164, dated 16.09.2010, for a sum
of Rs.25 lakhs drawn on Andhra Bank, Banjara Hills, in favour of
the father of the 2nd respondent towards discharge of the debt.
When the father of the 2nd respondent deposited the above
mentioned cheque for collection through his banker i.e., Bank of
Baroda, Abids branch, Hyderabad, the same was returned unpaid
with an endorsement funds insufficient and the same was
intimated to him on 17.09.2010. All the accused persons have
jointly and severally liable for payment of the amount covered
under the dishonoured cheque, but with a view to defeat the
payment, all the accused have committed default in payment of
legally enforceable debt to the father of the 2nd respondent. In
pursuance of the said dishonour of the cheque, the father of the
2nd respondent got issued statutory notice, dated 07.10.2010,
through his counsel calling upon all the accused, including the
petitioners herein, to pay the amount covered under the above said
cheque within 15 days from the date of receipt of the notice. All
the accused, including the petitioners herein, have received the
notice on 11.10.2010 under the postal acknowledgement, dated
12.10.2010 and 13.10.2010 respectively, but have not chosen to
give any reply and no amount is paid. However, after issuance of
the legal notice, unfortunately the father of the 2nd respondent died
on 13.10.2010. That apart, he also filed a suit for recovery of the
amount covered under the subject cheque before the Chief Judge,
City Civil Court, Hyderabad vide O.S(SR).No.34507 of 2010. The
original cheque as well as the cheque returned memo were filed
before the civil Court and the same will be produced at the time of
trial before the concerned Court. In those circumstances, the
private complaint was filed vide C.C.No.1375 of 2010. Aggrieved
by the filing of the complaint and initiation of proceedings against
all the accused, including the petitioners herein, the present
criminal petition is filed to quash the same.
Counsel appearing for the petitioners contended that the
subject cheque was issued in the name of the father of the 2nd
respondent, who filed a civil suit before the competent civil Court.
Relying on Section 142 of the Act, he would contend that the
complaint has to be filed by the payee or the holder in due course
of the cheque as the case may be. But, in the present case, the 2nd
respondent is not the holder in due course and therefore he cannot
file a complaint against the petitioners and two others for the
offence under Section 138 of the Act. As per Section 9 of the Act,
holder in due course means a person who for consideration
became the possessor of a cheque if payable to the bearer before
the amount became payable and since the 2nd respondent is
neither payee nor the holder in due course is not the possessor of
the cheque for consideration amount, and as such the complaint
filed by him is not maintainable. He also contended that unless a
succession certificate or letter of administration or a probate of will
is granted, the 2nd respondent, being the legal representative,
cannot initiate the proceedings and the complaint filed by him is
not maintainable. To support his contention the counsel has
brought to the notice of the Court the provisions of Sections 53, 78
and 82(c) of the Act. The said provisions contemplate that the
holder of a negotiable instrument, who deserves title from a holder
in due course, has the right thereon of that holder in due course
and subjected to provisions of Section 82(c), payment of the
amount due on a promissory note, bill of exchange or cheque must
in order to discharge a maker or accepter, be made to the holder of
the instrument. Section 82(c) of the Act reads as follows:
by payment:- to all parties thereto, if the instrument is
payable to bearer or has been endorsed in blank, and such maker
acceptor or endorser makes payment in due course of the amount
due thereon.
Thus, the counsel contended that the 2nd respondent is
neither the payee nor the holder in due course. To support his
contention, counsel for the petitioners has relied on the judgment
of the Bombay High Court in Vishnupant Chaburao Khaire v.
Kailash Balbhir Madan .
The facts of the said case are that the accused/petitioner
therein issued a cheque in favour of the father of the
respondent/complainant on 28.08.2007. However, the father of
the respondent/complainant died on 05.09.2007 in a vehicular
accident. On 05.02.2008, the complainant presented the cheque
for encashment, but the same was dishonoured and returned with
an endorsement insufficient funds. The complainant issued a
legal notice on 03.03.2008 and since the accused failed to pay the
amount, filed a criminal case for the offences under Section 138 of
the Act. Challenging the said initiation of the proceedings, the
accused therein filed Crl.W.P.No.842 of 2009 before the Bombay
High Court (Aurangabad Bench). The accused mainly contended
that the complainant is neither a payee nor a holder in due course
and he is not entitled to file the complaint for the offence
punishable under Section 138 of the Act. While dealing with the
said issue, the Bombay High Court held that the complainant is
not a payee or holder in due course within the meaning of law and
he has no authority to demand money and lodge a complaint, since
he can not give valid discharge for payment made to him. The said
finding was arrived at by referring to Sections 211, 273 and 381 of
the Succession Act by holding that unless the complainant is in a
position to give full discharge and indemnity to the drawer of the
cheque, he cannot lodge a complaint. The relevant paragraphs in
the said judgment are as under:
The present Respondent-complainant 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 Respondent-complainant. 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 payee-father, the respondent-
complainant, 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 stated in the said
cheque. The question is whether the respondent-complainant
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 father-payee. He is also not endorsee.
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 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, non-payment to him
cannot be an offence.
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 03-12-2017 (Page 8 of 9) www.manupatra.com
Hon'ble Sri Justice P. Keshava Rao such property to the person to
whom such probate or letters of administration have 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.
However, in the case on hand, it is the specific case of the
2nd respondent that after issuance of the cheque in question by all
the accused including the petitioners herein, his deceased father
issued legal notice, dated 07.10.2010, calling upon all the accused
to pay the amount covered under the cheque. However, before
lodging the complaint unfortunately he died on 13.10.2010. In
that regard, it is specifically mentioned in the complaint that after
the demise of his father, on an application, the Tahsildar, Nandyal,
Kurnool District, issued family member certificate showing the
name of the 2nd respondent as legal heir of his deceased father. By
virtue of the said certificate, the 2nd respondent stepped into the
shoes of his deceased father and is a payee or holder in due course
of the subject instrument. Therefore, the above said judgment
cited by the counsel for the petitioners is not applicable to the facts
and circumstances of the case on hand.
Counsel for the 2nd respondent, advancing his arguments,
contended that the 2nd respondent, being the legal representative,
can initiate and continue the proceedings under the provisions of
Sections 138 and 142 of the Act. The legal representatives will
step into the shoes of the original payee or the holder in due
course and can continue the proceedings. He also would contend
that the disputed contentions can be raised only during the course
of trial, but not at the threshold. He also emphasized on the
aspect that as the payee or the holder in due course i.e., the
deceased father of the 2nd respondent has already issued a legal
notice, dated 07.10.2010, the same proceedings can be continued
by the 2nd respondent being the son and legal representative. He
further contended that any person can initiate action against
anybody to set the law into motion. That being the position, the
proceedings initiated by the 2nd respondent being the legal
representative are maintainable. He also relied on the proposition
that legal representative can be brought on record during the
pendency of the criminal proceedings and he can initiate and
continue the proceedings under the Act.
Counsel for the 2nd respondent brought to the notice of the
Court the definition of Holder and Holder in due course as per
Sections 8 and 9 of the Act and contended that the 2nd respondent
would come within the definition of Holder as well as Holder in
due course, since he is entitled to recover the amount due from
the petitioners being the legal representative of his deceased father.
To support his contention that any person can initiate action
against anybody to set the law into motion, he brought to the
notice of the Court the definition of Complaint in Section 2(d) of
the Code of Criminal Procedure. He also brought to the notice of
the Court Section 256 Cr.P.C., which contemplate non-appearance
or death of the complainant i.e., if the summons have been issued
on a complaint, Section 256(2) Cr.P.C. contemplates that the
provisions of sub-section (1) shall, so far as may be, apply also to
cases where the non-appearance of the complainant due to his
death. Basing on the above provisions, he would contend that the
proceedings as initiated by the 2nd respondent for the offence
under Sections 138 and 142 of the Act against the petitioners are
maintainable. To substantiate his contentions, he has relied upon
the following judgments: Chandra Babu v. Ramani , Anup
Jagdish Agarwal v. Nilkunj Lalit Shah and others , Smt.
Bhagava v. Sri Kadasiddeshwara Trading Company and
another , Maddipatta Govindaiah Naidu and others v.
Yelakaluri Kamalamma and another , Tripuraneni Sai Prasad v.
State of A.P. and another , Balasaheb K. Thackeray and
another v. Venkat Alias Babru and another , Gadala Vasantha
(died) by L.Rs. and another v. Cybermate Infotek Ltd.,
Secunderabad and another and Jimmy Jahangir Madan v.
Bolly Cariyappa Hindley (died) by L.Rs. .
In Chandra Babu (2 supra), a Division Bench of the High
Court of Kerala while considering a similar issue pleased to
observe as under:
Another important statutory provision in this regard is
Section 53 which is as follows:
"53. Holder deriving title from holder in due
course:- A holder of a negotiable instrument 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 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 Sections 138 and 142 are applicable to
the legal representative also if he derives title from the holder in
due course.
Next contention is that there may be other legal heirs and,
therefore, complaint by the one legal heir/representative is not
maintainable. That is a matter for evidence. Further, they are all
curable defects and that is not a matter to be considered for
quashing a complaint at the initial stage (see M.M.T.C. Ltd., and
Anr. V. Medchil Chemicals & Pharma (P) Ltd., & Anr. (2002 (1) SCC
234).
In Anup Jagdish Agarwal (3 supra), the High Court of
Bombay observed as follows:
These views have my respectful concurrence. Moreover,
nothing contrary to brought to my notice. In my view, in the light
of this statutory scheme and the decisions referred above, it can
be safely concluded that a complaint can be filed by the legal
representatives of the payee and merely because it is so filed, it
cannot be held that it is not maintainable. Once, the complaint
can be held to be maintainable, then, any larger issue need not be
gone into at this prima facie stage. Whether the presumption is
applicable or whether burden has been discharged by the
accused by leading evidence to the contrary are all matters which
must be gone into and decided at the trial. Merely because in a
petition challenging the issuance of process, all pleas of the afore
referred nature are raised, does not mean that the presumption is
not available to the complainants at this stage. The stage at
which presumption can be held to be rebutted is not this prima
facie stage of issuance of process. It is not as if the accused will
have no opportunity to prove to the contrary. The complaint is yet
to be tried. However, the order issuing process on the complaint
cannot be faulted on the ground raised in this petition. The first
contention, therefore, must fail.
In Smt. Bhagava (4 supra), the High Court of Karnataka
held as follows:
Having regard to the factual aspects and the settled
principles of law in this regard, in the opinion of this Court, on
the death of the payee, his legal heirs steps into the shoes of the
payee for all practical purposes and such a person can also file
and prosecute the complaint after completing the legal
formalities. It is also necessary to mention that it would be
incumbent upon the complainant to prove that the complainant
is the legal representative of the deceased payee, in the event of
accused disputing the same. In the case on hand, the payee had
died and the wife of the payee, as the legal heir, had presented
the cheque in question and on the cheque being dishonoured,
legal notice had also been issued and thereafter, the proceedings
had been initiated under Section 138 of the NI Act.
In Maddipatta Govindaiah Naidu (5 supra), this Court
observed as follows:
On an examination of all the relevant provisions of the
criminal procedure code and the judicial precedents on the
question, the proposition that criminal proceedings abate on the
death of the complainant appears to be legally unfounded and
unacceptable. Criminal proceedings legally instituted do not
terminate or abate merely on the death of the complainant. The
cause of action for civil action bears no analogy to complaints of
crime.
In Tripuraneni Sri Prasad (6 supra), this Court observed as
follows:
Thus, in view of the clear legal position, as stated above,
the objection that the son of the deceased cannot come on record
and continue the prosecution cannot be sustained. The point is
answered accordingly holding that the proceedings in
C.C.Nos.230 of 2004 and 264 of 2004 ipso facto do not come to
an end and could be continued by the son of the deceased.
In Balasaheb K. Thackeray (7 supra), the Apex Court held
as under:
At this juncture it is relevant to take note of what has
been stated by this Court earlier on the principles applicable. In
Ashwin Nanubhai Vyas v. State of Maharashtra (AIR 1967 SC 983)
with reference to Section 495 of the Code of Criminal Procedure,
1898 (hereinafter referred to as the old Code) it was held that
the Magistrate had the power to permit a relative to act as the
complainant to continue the prosecution. In Jimmy Jahangir
Madan v. Bolly Cariyappa Hindley ((2004) 12 SCC 509) after
referring to Ashwin case (1 supra) it was held that heir of the
complainant can be allowed to file a petition under Section 302 of
the Code to continue the prosecution.
In Gadale Vasantha (died) (8 supra), this Court observed as
follows:
In view of the above pronouncement of the Supreme
Court in Jimmy Jahangir Madans case (supra), decision of the
Madras High Court in Thothans case (supra) no longer holds the
field. The lis does not die with death of the complainant in
criminal law. Any person, whether legal representatives of the
deceased-complainant or any other interested person can
continue the proceedings by coming on record in the place of the
deceased-complainant with permission of the Court and can
continue the prosecution either under Section 302 or under
Section 495 Cr.P.C.
By considering the intendment of the provisions as stated
supra and the findings given by the various High Courts, including
the Apex Court, in the above referred judgments, it goes to show
that the legal representative of a deceased can maintain
proceedings for the offences under Sections 138 and 142 of the Act
as a payee or a holder in due course against the drawer. As per
Sections 138 and 142 of the Act, a payee or a holder in due course
should make a demand for payment of such money by giving a
notice in writing to the drawer of the cheque within the stipulated
period of receiving the information regarding dishonour of the
cheque and in the event of drawer of such cheque failed to make
payment of such amount to the payee or the holder in due course
of the cheque within that stipulated period, entail the payee or the
holder in due course to file a complaint and initiate proceedings.
Further, for the purpose of taking cognizance under Section 142 of
the Act, a complaint should be filed in writing by the payee or the
holder in due course. Section 7 of the Act defines Payee as
follows:
The person named in the instrument, to whom or to
whose order the money is by the instrument directed to be paid,
is called the Payee.
The holder in due course, as defined under Section 9 of the
Act, is as follows:
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 endorsee thereof, if payable to order, before the
amount mentioned in it became payable and without having
sufficient cause to believe that any defect existed to the title of the
person from whom he derived his title.
The specific contention raised by the petitioners herein, who
are the accused in C.C.No.1375 of 2010, is that admittedly the 2nd
respondent is not a payee or a holder in due course. The
complaint is filed as a legal representative. The legal
representative of the payee is not a holder in due course, since the
subject instrument/cheque came into possession of the 2nd
respondent as a legal representative of the deceased and not by
paying consideration by him or an endorsement on the cheque in
his favour by the original payee. In this context, Section 75 of the
Act contemplates presentment or to agent, representative of
deceased or assignee of insolvent, which reads as follows:
Presentment or to agent, representative of deceased
or assignee of insolvent:- Presentment for acceptance or
payment may be made to the duly authorized agent of the drawee,
maker or acceptor, as the case may be, or where the drawee,
maker or acceptor has died, to his legal representative, or, where
he has been declared an insolvent, to his assignee.
The above provision provides that if the maker of the cheque
is dead, payment can be demanded from the legal representatives
of the drawer, maker or acceptor. The heading of the Section is
very clear and it shows presentment of the negotiable instrument
can be made by the representative of the deceased also. Section
78 of the Act provides to whom payment should be made. Per
contra, Section 138 of the Act says that if the amount is paid to the
holder of the instrument, there should be sufficient discharge of
liability. The Holder as defined under Section 8 of the Act is as
follows:
Holder:- The Holder of a promissory note, bill of
exchange or cheque means any person entitled in his own name
to the possession thereof and to receive or recover the amount
due thereon from the parties thereto.
Where the note, bill or cheque is lost or destroyed, its
holder is the person so entitled at the time of such loss or
destruction.
Section 53 of the Act contemplates a holder of a negotiable
instrument who derives title from a holder in due course have the
rights thereon of that of a holder in due course. Therefore, the
holder deriving a title from the holder in due course have all the
rights of the holder in due course. Therefore, the legal
representative of a holder in due course have all the rights of the
holder in due course.
In the case on hand, the deceased father of the 2nd
respondent was the holder in due course. Therefore, the 2nd
respondent by virtue of being a legal representative is a holder in
due course and he got all the rights to initiate proceedings under
the provisions of Sections 138 and 142 of the Act against the
petitioners herein. Hence, there is no dispute on the proposition
that the legal representative can file/initiate proceedings for
realizing the amount.
Section 78 of the Act deals with to whom payment should be
made and the same is as follows:
To whom payment should be made:- Subject to the
provisions of Section 82, clause (c) payment of the amount due on
a promissory note, bill of exchange or cheque must, in order to
discharge the maker or acceptor, be made to the holder of the
instrument.
From the above provision, it is clear that the 2nd respondent
holds the cheque after the death of his father being the payee and
as a legal heir he is entitled to possess the same in his own name
and in view of Section 53 he is the holder in due course and can
get a full discharge. Thus, under Section 53 of the Act, a legal
representative/heir of the payee or holder in due course can
maintain a complaint under Section 138 of the Act.
The other contention raised by the counsel for the petitioners
that there may be other legal representatives and therefore the
complaint filed by one legal heir i.e., the 2nd respondent is not
maintainable. However, that is a matter of evidence and the same
can be cured. Apart from that it is not a matter to be considered
for quashing the complaint at the initial stage.
In the above circumstances, this Court is of the opinion that
the complaint is maintainable. The 2nd respondent being the legal
representative of his deceased father i.e., payee or holder in due
course can file a complaint under Section 138 read with Section
142 of the Act. As such, this Court holds that there are no merits
in the criminal petition and the same is dismissed. Interim order,
if any, stands vacated.
In the circumstances, the II Additional Chief Metropolitan
Magistrate at Nampally, Hyderabad is directed to dispose of the
matter as expeditiously as possible, preferably within a period of
six months from the date of receipt of a copy of this order, after
appreciating the rival contentions made by the parties, since the
matter is of the year 2010.
Miscellaneous petitions, if any, shall also stand dismissed.
____________________________
JUSTICE P. KESHAVA RAO
Date:13-04-2018.
CRIMINAL PETITION No.8861 OF 2011
13-04-2018
M/s. Sri Sai Mourya Estates & Projects Pvt., Ltd, & others. ..Petitioners
The State of A.P., rep., by its Public Prosecutor,High Court of A.P., Hyderabad & another...Respondents
Counsel for Petitioners: Sri D. Bhaskar Reddy.
Counsel for respondent No.1: Learned Public Prosecutor
<GIST:
>HEAD NOTE:
? Cases referred
1. 2010 Crl. L.J. 2166
2. II (2004) BC 152 (DB)
3. IV (2010) BC 181
4. 2004 (2) KCCR 864
5. 1984 Crl. L.J. 1326
6. 2006 (1) ALD (Crl.) 643 (A.P.)
7. (2006) 5 SCC 530
8. 2012 (1) ALD (Crl.) 865 (A.P.)
9. 2005 (1) ALD (Crl.) 305 (SC)
THE HONBLE SRI JUSTICE P. KESHAVA RAO
CRIMINAL PETITION No.8861 of 2011
ORDER:
Heard counsel for the petitioners as well as the respondents.
The present criminal petition is filed by the petitioners/
accused Nos.1 to 3 and 5, to quash the proceedings initiated
against them in C.C.No.1375 of 2010 on the file of the Court of the
II Additional Chief Metropolitan Magistrate at Nampally,
Hyderabad, for the offences under Section 138 of the Negotiable
Instruments Act, 1881 (for short, the Act).
The brief facts of the case are that originally the 2nd
respondent herein filed the above mentioned case i.e., C.C.No.1375
of 2010 against the petitioners and two others. The case of the 2nd
respondent is that petitioner No.1 is a private limited company
represented by petitioner Nos.2 to 4 and two others and petitioner
Nos.2 to 4 approached his father and requested him to give hand
loan for the purpose of developing the lands in Magadha Venture
situated at Kokapet Village, Ranga Reddy District. Believing the
version of the petitioners, his father paid a sum of Rs.25 lakhs in
cash as hand loan and in view thereof the petitioners executed a
promissory note, dated 04.10.2007. In the said promissory note,
Sri M. Chandra Shekar and Sri B. Venu Gopal Reddy acted as
witnesses, since amount was paid in their presence. It is also
stated that the petitioners agreed to pay the above said amount
with interest @24% per annum within a period of two years
thereof. However, after receiving the amount, the petitioners have
changed their colour and started avoiding payment of the said
amount. It is also specifically stated that the said amount was
obtained by petitioner Nos.2 to 4 and two others for the purpose of
investing in the real estate business of petitioner No.1 company.
Petitioner No.1 is a private limited company, petitioner No.2 is the
Managing Director and petitioner Nos.3, 4 and two others are the
Directors of petitioner No.1 company. In fact, petitioner Nos.2 to 4
and two other Directors are equally taking part in the business of
the company and also looking after the financial aspects, such as,
negotiating with the customers, issuing of cheques etc., and
therefore all are equally responsible for the day to day affairs of the
1st petitioner company. The 1st petitioner company represented by
accused Nos.3 and 4, with the consent of accused Nos.2, 5 and 6,
issued a cheque bearing No.332164, dated 16.09.2010, for a sum
of Rs.25 lakhs drawn on Andhra Bank, Banjara Hills, in favour of
the father of the 2nd respondent towards discharge of the debt.
When the father of the 2nd respondent deposited the above
mentioned cheque for collection through his banker i.e., Bank of
Baroda, Abids branch, Hyderabad, the same was returned unpaid
with an endorsement funds insufficient and the same was
intimated to him on 17.09.2010. All the accused persons have
jointly and severally liable for payment of the amount covered
under the dishonoured cheque, but with a view to defeat the
payment, all the accused have committed default in payment of
legally enforceable debt to the father of the 2nd respondent. In
pursuance of the said dishonour of the cheque, the father of the
2nd respondent got issued statutory notice, dated 07.10.2010,
through his counsel calling upon all the accused, including the
petitioners herein, to pay the amount covered under the above said
cheque within 15 days from the date of receipt of the notice. All
the accused, including the petitioners herein, have received the
notice on 11.10.2010 under the postal acknowledgement, dated
12.10.2010 and 13.10.2010 respectively, but have not chosen to
give any reply and no amount is paid. However, after issuance of
the legal notice, unfortunately the father of the 2nd respondent died
on 13.10.2010. That apart, he also filed a suit for recovery of the
amount covered under the subject cheque before the Chief Judge,
City Civil Court, Hyderabad vide O.S(SR).No.34507 of 2010. The
original cheque as well as the cheque returned memo were filed
before the civil Court and the same will be produced at the time of
trial before the concerned Court. In those circumstances, the
private complaint was filed vide C.C.No.1375 of 2010. Aggrieved
by the filing of the complaint and initiation of proceedings against
all the accused, including the petitioners herein, the present
criminal petition is filed to quash the same.
Counsel appearing for the petitioners contended that the
subject cheque was issued in the name of the father of the 2nd
respondent, who filed a civil suit before the competent civil Court.
Relying on Section 142 of the Act, he would contend that the
complaint has to be filed by the payee or the holder in due course
of the cheque as the case may be. But, in the present case, the 2nd
respondent is not the holder in due course and therefore he cannot
file a complaint against the petitioners and two others for the
offence under Section 138 of the Act. As per Section 9 of the Act,
holder in due course means a person who for consideration
became the possessor of a cheque if payable to the bearer before
the amount became payable and since the 2nd respondent is
neither payee nor the holder in due course is not the possessor of
the cheque for consideration amount, and as such the complaint
filed by him is not maintainable. He also contended that unless a
succession certificate or letter of administration or a probate of will
is granted, the 2nd respondent, being the legal representative,
cannot initiate the proceedings and the complaint filed by him is
not maintainable. To support his contention the counsel has
brought to the notice of the Court the provisions of Sections 53, 78
and 82(c) of the Act. The said provisions contemplate that the
holder of a negotiable instrument, who deserves title from a holder
in due course, has the right thereon of that holder in due course
and subjected to provisions of Section 82(c), payment of the
amount due on a promissory note, bill of exchange or cheque must
in order to discharge a maker or accepter, be made to the holder of
the instrument. Section 82(c) of the Act reads as follows:
by payment:- to all parties thereto, if the instrument is
payable to bearer or has been endorsed in blank, and such maker
acceptor or endorser makes payment in due course of the amount
due thereon.
Thus, the counsel contended that the 2nd respondent is
neither the payee nor the holder in due course. To support his
contention, counsel for the petitioners has relied on the judgment
of the Bombay High Court in Vishnupant Chaburao Khaire v.
Kailash Balbhir Madan .
The facts of the said case are that the accused/petitioner
therein issued a cheque in favour of the father of the
respondent/complainant on 28.08.2007. However, the father of
the respondent/complainant died on 05.09.2007 in a vehicular
accident. On 05.02.2008, the complainant presented the cheque
for encashment, but the same was dishonoured and returned with
an endorsement insufficient funds. The complainant issued a
legal notice on 03.03.2008 and since the accused failed to pay the
amount, filed a criminal case for the offences under Section 138 of
the Act. Challenging the said initiation of the proceedings, the
accused therein filed Crl.W.P.No.842 of 2009 before the Bombay
High Court (Aurangabad Bench). The accused mainly contended
that the complainant is neither a payee nor a holder in due course
and he is not entitled to file the complaint for the offence
punishable under Section 138 of the Act. While dealing with the
said issue, the Bombay High Court held that the complainant is
not a payee or holder in due course within the meaning of law and
he has no authority to demand money and lodge a complaint, since
he can not give valid discharge for payment made to him. The said
finding was arrived at by referring to Sections 211, 273 and 381 of
the Succession Act by holding that unless the complainant is in a
position to give full discharge and indemnity to the drawer of the
cheque, he cannot lodge a complaint. The relevant paragraphs in
the said judgment are as under:
The present Respondent-complainant 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 Respondent-complainant. 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 payee-father, the respondent-
complainant, 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 stated in the said
cheque. The question is whether the respondent-complainant
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 father-payee. He is also not endorsee.
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 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, non-payment to him
cannot be an offence.
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 03-12-2017 (Page 8 of 9) www.manupatra.com
Hon'ble Sri Justice P. Keshava Rao such property to the person to
whom such probate or letters of administration have 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.
However, in the case on hand, it is the specific case of the
2nd respondent that after issuance of the cheque in question by all
the accused including the petitioners herein, his deceased father
issued legal notice, dated 07.10.2010, calling upon all the accused
to pay the amount covered under the cheque. However, before
lodging the complaint unfortunately he died on 13.10.2010. In
that regard, it is specifically mentioned in the complaint that after
the demise of his father, on an application, the Tahsildar, Nandyal,
Kurnool District, issued family member certificate showing the
name of the 2nd respondent as legal heir of his deceased father. By
virtue of the said certificate, the 2nd respondent stepped into the
shoes of his deceased father and is a payee or holder in due course
of the subject instrument. Therefore, the above said judgment
cited by the counsel for the petitioners is not applicable to the facts
and circumstances of the case on hand.
Counsel for the 2nd respondent, advancing his arguments,
contended that the 2nd respondent, being the legal representative,
can initiate and continue the proceedings under the provisions of
Sections 138 and 142 of the Act. The legal representatives will
step into the shoes of the original payee or the holder in due
course and can continue the proceedings. He also would contend
that the disputed contentions can be raised only during the course
of trial, but not at the threshold. He also emphasized on the
aspect that as the payee or the holder in due course i.e., the
deceased father of the 2nd respondent has already issued a legal
notice, dated 07.10.2010, the same proceedings can be continued
by the 2nd respondent being the son and legal representative. He
further contended that any person can initiate action against
anybody to set the law into motion. That being the position, the
proceedings initiated by the 2nd respondent being the legal
representative are maintainable. He also relied on the proposition
that legal representative can be brought on record during the
pendency of the criminal proceedings and he can initiate and
continue the proceedings under the Act.
Counsel for the 2nd respondent brought to the notice of the
Court the definition of Holder and Holder in due course as per
Sections 8 and 9 of the Act and contended that the 2nd respondent
would come within the definition of Holder as well as Holder in
due course, since he is entitled to recover the amount due from
the petitioners being the legal representative of his deceased father.
To support his contention that any person can initiate action
against anybody to set the law into motion, he brought to the
notice of the Court the definition of Complaint in Section 2(d) of
the Code of Criminal Procedure. He also brought to the notice of
the Court Section 256 Cr.P.C., which contemplate non-appearance
or death of the complainant i.e., if the summons have been issued
on a complaint, Section 256(2) Cr.P.C. contemplates that the
provisions of sub-section (1) shall, so far as may be, apply also to
cases where the non-appearance of the complainant due to his
death. Basing on the above provisions, he would contend that the
proceedings as initiated by the 2nd respondent for the offence
under Sections 138 and 142 of the Act against the petitioners are
maintainable. To substantiate his contentions, he has relied upon
the following judgments: Chandra Babu v. Ramani , Anup
Jagdish Agarwal v. Nilkunj Lalit Shah and others , Smt.
Bhagava v. Sri Kadasiddeshwara Trading Company and
another , Maddipatta Govindaiah Naidu and others v.
Yelakaluri Kamalamma and another , Tripuraneni Sai Prasad v.
State of A.P. and another , Balasaheb K. Thackeray and
another v. Venkat Alias Babru and another , Gadala Vasantha
(died) by L.Rs. and another v. Cybermate Infotek Ltd.,
Secunderabad and another and Jimmy Jahangir Madan v.
Bolly Cariyappa Hindley (died) by L.Rs. .
In Chandra Babu (2 supra), a Division Bench of the High
Court of Kerala while considering a similar issue pleased to
observe as under:
Another important statutory provision in this regard is
Section 53 which is as follows:
"53. Holder deriving title from holder in due
course:- A holder of a negotiable instrument 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 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 Sections 138 and 142 are applicable to
the legal representative also if he derives title from the holder in
due course.
Next contention is that there may be other legal heirs and,
therefore, complaint by the one legal heir/representative is not
maintainable. That is a matter for evidence. Further, they are all
curable defects and that is not a matter to be considered for
quashing a complaint at the initial stage (see M.M.T.C. Ltd., and
Anr. V. Medchil Chemicals & Pharma (P) Ltd., & Anr. (2002 (1) SCC
234).
In Anup Jagdish Agarwal (3 supra), the High Court of
Bombay observed as follows:
These views have my respectful concurrence. Moreover,
nothing contrary to brought to my notice. In my view, in the light
of this statutory scheme and the decisions referred above, it can
be safely concluded that a complaint can be filed by the legal
representatives of the payee and merely because it is so filed, it
cannot be held that it is not maintainable. Once, the complaint
can be held to be maintainable, then, any larger issue need not be
gone into at this prima facie stage. Whether the presumption is
applicable or whether burden has been discharged by the
accused by leading evidence to the contrary are all matters which
must be gone into and decided at the trial. Merely because in a
petition challenging the issuance of process, all pleas of the afore
referred nature are raised, does not mean that the presumption is
not available to the complainants at this stage. The stage at
which presumption can be held to be rebutted is not this prima
facie stage of issuance of process. It is not as if the accused will
have no opportunity to prove to the contrary. The complaint is yet
to be tried. However, the order issuing process on the complaint
cannot be faulted on the ground raised in this petition. The first
contention, therefore, must fail.
In Smt. Bhagava (4 supra), the High Court of Karnataka
held as follows:
Having regard to the factual aspects and the settled
principles of law in this regard, in the opinion of this Court, on
the death of the payee, his legal heirs steps into the shoes of the
payee for all practical purposes and such a person can also file
and prosecute the complaint after completing the legal
formalities. It is also necessary to mention that it would be
incumbent upon the complainant to prove that the complainant
is the legal representative of the deceased payee, in the event of
accused disputing the same. In the case on hand, the payee had
died and the wife of the payee, as the legal heir, had presented
the cheque in question and on the cheque being dishonoured,
legal notice had also been issued and thereafter, the proceedings
had been initiated under Section 138 of the NI Act.
In Maddipatta Govindaiah Naidu (5 supra), this Court
observed as follows:
On an examination of all the relevant provisions of the
criminal procedure code and the judicial precedents on the
question, the proposition that criminal proceedings abate on the
death of the complainant appears to be legally unfounded and
unacceptable. Criminal proceedings legally instituted do not
terminate or abate merely on the death of the complainant. The
cause of action for civil action bears no analogy to complaints of
crime.
In Tripuraneni Sri Prasad (6 supra), this Court observed as
follows:
Thus, in view of the clear legal position, as stated above,
the objection that the son of the deceased cannot come on record
and continue the prosecution cannot be sustained. The point is
answered accordingly holding that the proceedings in
C.C.Nos.230 of 2004 and 264 of 2004 ipso facto do not come to
an end and could be continued by the son of the deceased.
In Balasaheb K. Thackeray (7 supra), the Apex Court held
as under:
At this juncture it is relevant to take note of what has
been stated by this Court earlier on the principles applicable. In
Ashwin Nanubhai Vyas v. State of Maharashtra (AIR 1967 SC 983)
with reference to Section 495 of the Code of Criminal Procedure,
1898 (hereinafter referred to as the old Code) it was held that
the Magistrate had the power to permit a relative to act as the
complainant to continue the prosecution. In Jimmy Jahangir
Madan v. Bolly Cariyappa Hindley ((2004) 12 SCC 509) after
referring to Ashwin case (1 supra) it was held that heir of the
complainant can be allowed to file a petition under Section 302 of
the Code to continue the prosecution.
In Gadale Vasantha (died) (8 supra), this Court observed as
follows:
In view of the above pronouncement of the Supreme
Court in Jimmy Jahangir Madans case (supra), decision of the
Madras High Court in Thothans case (supra) no longer holds the
field. The lis does not die with death of the complainant in
criminal law. Any person, whether legal representatives of the
deceased-complainant or any other interested person can
continue the proceedings by coming on record in the place of the
deceased-complainant with permission of the Court and can
continue the prosecution either under Section 302 or under
Section 495 Cr.P.C.
By considering the intendment of the provisions as stated
supra and the findings given by the various High Courts, including
the Apex Court, in the above referred judgments, it goes to show
that the legal representative of a deceased can maintain
proceedings for the offences under Sections 138 and 142 of the Act
as a payee or a holder in due course against the drawer. As per
Sections 138 and 142 of the Act, a payee or a holder in due course
should make a demand for payment of such money by giving a
notice in writing to the drawer of the cheque within the stipulated
period of receiving the information regarding dishonour of the
cheque and in the event of drawer of such cheque failed to make
payment of such amount to the payee or the holder in due course
of the cheque within that stipulated period, entail the payee or the
holder in due course to file a complaint and initiate proceedings.
Further, for the purpose of taking cognizance under Section 142 of
the Act, a complaint should be filed in writing by the payee or the
holder in due course. Section 7 of the Act defines Payee as
follows:
The person named in the instrument, to whom or to
whose order the money is by the instrument directed to be paid,
is called the Payee.
The holder in due course, as defined under Section 9 of the
Act, is as follows:
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 endorsee thereof, if payable to order, before the
amount mentioned in it became payable and without having
sufficient cause to believe that any defect existed to the title of the
person from whom he derived his title.
The specific contention raised by the petitioners herein, who
are the accused in C.C.No.1375 of 2010, is that admittedly the 2nd
respondent is not a payee or a holder in due course. The
complaint is filed as a legal representative. The legal
representative of the payee is not a holder in due course, since the
subject instrument/cheque came into possession of the 2nd
respondent as a legal representative of the deceased and not by
paying consideration by him or an endorsement on the cheque in
his favour by the original payee. In this context, Section 75 of the
Act contemplates presentment or to agent, representative of
deceased or assignee of insolvent, which reads as follows:
Presentment or to agent, representative of deceased
or assignee of insolvent:- Presentment for acceptance or
payment may be made to the duly authorized agent of the drawee,
maker or acceptor, as the case may be, or where the drawee,
maker or acceptor has died, to his legal representative, or, where
he has been declared an insolvent, to his assignee.
The above provision provides that if the maker of the cheque
is dead, payment can be demanded from the legal representatives
of the drawer, maker or acceptor. The heading of the Section is
very clear and it shows presentment of the negotiable instrument
can be made by the representative of the deceased also. Section
78 of the Act provides to whom payment should be made. Per
contra, Section 138 of the Act says that if the amount is paid to the
holder of the instrument, there should be sufficient discharge of
liability. The Holder as defined under Section 8 of the Act is as
follows:
Holder:- The Holder of a promissory note, bill of
exchange or cheque means any person entitled in his own name
to the possession thereof and to receive or recover the amount
due thereon from the parties thereto.
Where the note, bill or cheque is lost or destroyed, its
holder is the person so entitled at the time of such loss or
destruction.
Section 53 of the Act contemplates a holder of a negotiable
instrument who derives title from a holder in due course have the
rights thereon of that of a holder in due course. Therefore, the
holder deriving a title from the holder in due course have all the
rights of the holder in due course. Therefore, the legal
representative of a holder in due course have all the rights of the
holder in due course.
In the case on hand, the deceased father of the 2nd
respondent was the holder in due course. Therefore, the 2nd
respondent by virtue of being a legal representative is a holder in
due course and he got all the rights to initiate proceedings under
the provisions of Sections 138 and 142 of the Act against the
petitioners herein. Hence, there is no dispute on the proposition
that the legal representative can file/initiate proceedings for
realizing the amount.
Section 78 of the Act deals with to whom payment should be
made and the same is as follows:
To whom payment should be made:- Subject to the
provisions of Section 82, clause (c) payment of the amount due on
a promissory note, bill of exchange or cheque must, in order to
discharge the maker or acceptor, be made to the holder of the
instrument.
From the above provision, it is clear that the 2nd respondent
holds the cheque after the death of his father being the payee and
as a legal heir he is entitled to possess the same in his own name
and in view of Section 53 he is the holder in due course and can
get a full discharge. Thus, under Section 53 of the Act, a legal
representative/heir of the payee or holder in due course can
maintain a complaint under Section 138 of the Act.
The other contention raised by the counsel for the petitioners
that there may be other legal representatives and therefore the
complaint filed by one legal heir i.e., the 2nd respondent is not
maintainable. However, that is a matter of evidence and the same
can be cured. Apart from that it is not a matter to be considered
for quashing the complaint at the initial stage.
In the above circumstances, this Court is of the opinion that
the complaint is maintainable. The 2nd respondent being the legal
representative of his deceased father i.e., payee or holder in due
course can file a complaint under Section 138 read with Section
142 of the Act. As such, this Court holds that there are no merits
in the criminal petition and the same is dismissed. Interim order,
if any, stands vacated.
In the circumstances, the II Additional Chief Metropolitan
Magistrate at Nampally, Hyderabad is directed to dispose of the
matter as expeditiously as possible, preferably within a period of
six months from the date of receipt of a copy of this order, after
appreciating the rival contentions made by the parties, since the
matter is of the year 2010.
Miscellaneous petitions, if any, shall also stand dismissed.
____________________________
JUSTICE P. KESHAVA RAO
Date:13-04-2018.
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