High Court · 2009

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED: 14.08.2009C O R A MTHE HONOURABLE MR.JUSTICE K.MOHAN RAMCriminal Original Petition Nos.8368, 8369, 8370 and 8371 of 2006& 6324 and 6325 of 2006 andCrl.M.P.Nos.2207, 2209, 2211, 2213 of 2006& 1615 and 1617 of 20061. M/s. Yeskey Enterprises, Represented by its Partner, K.Chandra, No.13, Bharathi Nagar, 1st Street, T.Nagar, Chennai – 600 0172. K.Chandra, Partner, M/s. Yeskey Enterprises, No.181, 2nd Sector, 10th Street, K.K.Nagar, Chennai – 600 0793. S.Krishnamoorthy, S/o. Seetharaman, Partner, M/s. Yeskey Enterprises, No.9, Raghavendra Nagar, Chennai .. Petitioners in all the Crl.O.Ps.-Vs.-M/s. State Bank of IndiaRepresented by its Manager,Personal Banking Mr. Shyamal Bhattacharjee,Kodambakkam Branch, Kodambakkam High Road,Kodambakkam, Chennai.. Respondent in all the Crl.O.Ps.Criminal Original Petitions under Section 482 of the CriminalProcedure Code to call for the records and quash the privatecomplaints filed by the respondent against the petitioners inC.C.Nos.1287, 1525, 1526, 1286, 1288 and 1284 of 2005 on the file ofthe XVII Metropolitan Magistrate, Saidapet, Chennai.For Petitioners in all the Crl.O.Ps. :Mr. N.R.Anantha RamakrishnanFor Respondent in all the Crl.O.Ps. :Mr. M.Devaraj- - -C O M M O N O R D E RThe above criminal original petitions have been filed by theaccused 2, 3 and 5, in C.C.Nos.1287, 1525, 1526, 1286, 1288 and 1284of 2005 on the file of the XVII Metropolitan Magistrate, Saidapet, https://hcservices.ecourts.gov.in/hcservices/ Chennai. The petitioners are facing trial for an offence underSection 138 of the Negotiable Instruments Act (hereinafter referredto as "the Act") in all the aforesaid cases on the complaints filedby the respondent herein. 2. The brief facts which are necessary for the disposal of theabove Criminal Original Petitions are set-out below:-As per the allegations contained in the respective complaints,the first accused had issued the following cheques,C.C.Nos.ChequeNos.ChequedatesAmount inRs.Drawn on / Bank1287 of20053121004/5/045,20,000/-5503047/6/045,60,000/-Indian Bank, South UsmanRoad, T.Nagar, Chennai – 171525 of20055522737/6/045,35,000/-Indian Overseas Bank,Mahalingapuram Branch.1526 of20052734837/5/047,10,000/-2734887/6/047,15000/-City Union Bank, MahalakshmiStreet, T.Nagar, Chennai - 171286 of20053121147/5/045,20,000/-3121207/6/045,30,000/-Indian Bank, South UsmanRoad, T.Nagar, Chennai – 171288 of20051217787/7/048,63,000/-Bank of India, ThousandLights Branch.1284 of20052729392729327/5/047/5/046,95,000/-7,90,000/-2729432729447/6/047/6/047,50,000/-7,53,000/-City Union Bank, MahalakshmiStreet, T.Nagar, Chennai – 17in favour of the second accused. The respondent-Bank had creditedthe amounts covered by the aforesaid cheques to the account of thesecond accused when the second accused presented the cheques onvarious dates by discounting the same and according to therespondent, the amounts had been utilised by the second accused onthe same day. According to the complainant, on such discounts beingmade, the respondent herein / complainant becomes the 'holder in duecourse' of the cheques issued by the first accused and the secondaccused takes the position of the 'drawer' of the cheques, since theamounts covered under the cheques have been discounted and creditedto the accounts of the second accused. It is further alleged in therespective complaints that when the above mentioned cheques werepresented for encashment by the respondent Bank, the same were https://hcservices.ecourts.gov.in/hcservices/ returned by the Banker of the first accused with endorsements "FundsInsufficient". Thereafter, after complying with the statutoryrequirements, the aforesaid complaints came to be filed by therespondent against the petitioners herein, the first accused and oneP.R.Ganesan, the fourth accused, who is alleged to be the partner ofthe second accused. In the complaint it is alleged that to the bestof the complainant's knowledge, accused 3 to 5 are responsible forthe day-today affairs of the business of the second accused, hencethe second accused is represented by third, fourth and fifth accused.The petitioners have filed the above petitions seeking to quash allfurther proceedings in the cases initiated against them by therespondent contending that Section 138 of the Act contemplates actionto be initiated by the payee against the drawer and not against boththe drawer and the endorsee. It is contended that the respondent hasfiled the cases against the petitioners on the ground that thecheques presented by the second accused were discounted by therespondent and hence the respondent becomes the 'holder in duecourse' and the first petitioner becomes the 'drawer', but simplybecause the cheques were discounted by the respondent-Bank, thesecond accused will not become the drawer.3. Heard the learned counsel on either side.4. Though some other grounds, apart from the above saidgrounds, have been raised in the quash petitions by the petitioners,the learned counsel for the petitioners confined his submissions onlyto the aforesaid contentions.5. Learned counsel for the petitioners in support of theaforesaid contentions relied on a decision of the Andhra Pradesh HighCourt reported in (2001) 103 Company Cases 782 ( KALYANI REFINERIESv. BANARAS STATE BANK (A.P.) ). He further submitted that the factsof that case and the facts of the cases on hand are similar; in thatdecision it has been held that a company cannot be prosecuted underSection 138 of the Act simply because the cheque issued in favour ofthe company and got discounted by it with the Bank got dishonouredsubsequently; the reason for such a decision being that the companywhich got the cheques in its favour and got the same discounted withthe bank cannot come under the definition of a drawer and underSection 138 of the Act on a cheque being dishonoured the drawer ofthe cheque alone is liable to be prosecuted for the offence underSection 138 of the Act. 6. Learned counsel for the petitioners also relied upon adecision of the learned single Judge of this Court reported in (2006)2 DCR 770 (Ravi Chandran v. Subramanian). In that decision, whileconsidering as to whether the mandate holder is liable to beprosecuted under Section 138 of the Act on the cheque issued by himas a mandate holder being dishonoured, this Court has come to theconclusion that the mandate holder cannot be termed as a drawersimply because he has signed the cheques in his capacity as mandateholder; the said reasoning is sought to be pressed into service insupport of the contention of the learned counsel for the petitioners. https://hcservices.ecourts.gov.in/hcservices/

7. Countering the said contentions, the learned counsel for therespondent in all the above criminal original petitions submittedthat the respondent-Bank had paid the amounts covered by the chequesissued by the first accused in favour of the second accused only tothe second accused and as such on the cheques being dishonoured thefirst accused as well as the second accused who is the beneficiary ofthe amounts covered by the various cheques are equally liable.According to the learned counsel for the respondent, by operation ofthe endorsements made on the cheques, the second accused takes theposition of the drawer in so far as the complainant is concerned andhence the second accused is also liable to be prosecuted underSection 138 of the Act. Learned counsel further submitted thatSection 138 of the Act will have to be interpreted along with theobjects and reasons for bringing in chapter XVII under Amendment Act66 of 1988 and sub clause XI of the objects and reasons says that "toenhance the acceptability of cheques in settlement of liabilities bymaking the drawer responsible for penalties in case of bouncing ofcheque due to insufficiency of funds".8. I have considered the aforesaid submissions made by thelearned counsel on either side, perused the materials available onrecord, the averments in the complaint, the provisions contained inSection 138 of the Act and the decisions relied upon by the learnedcounsel for the petitioners.9. Before considering the contentions put forth by therespective counsel it will be useful to refer to Section 138 of theAct which reads as follows:-"138. - Dishonour of cheque for insufficiency, etc., of fundsin the account. - Where any cheque drawn by a person on anaccount maintained by him with a banker for payment of anyamount of money to another person from out of that accountfor the discharge, in whole or in part, of any debt or otherliability, is returned by the bank upaid, either because ofthe amount of money standing to the credit of that account isinsufficient to honour the cheque or that it exceeds theamount arranged to be paid from that account by an agreementmade with that bank, such person shall be deemed to havecommitted an offence and shall, without prejudice to anyother provision of this Act, be punished with imprisonmentfor a term which may extend to one year, or with fine whichmay extend to twice the amount of the cheque, or with both :Provided that nothing contained in this section shall applyunless:(a) the cheque has been presented to the bank within aperiod of six months from the date on which it is drawn orwithin the period of its validity, whichever is earlier ; (b) the payee or the holder in due course of thecheque, as the case may be, makes a demand for the payment ofthe said amount of money by giving a notice in writing, to https://hcservices.ecourts.gov.in/hcservices/ the drawer of the cheque, within fifteen days of the receiptof information by him from the bank regarding the return ofthe cheque as unpaid ; and(c) the drawer of such cheque fails to make thepayment of the said amount of money to the payee or as thecase may be, to the holder in due course of the cheque withinfifteen days of the receipt of the said notice."A careful analysis of the aforesaid provision makes it clear thatcriminal liability for the offence can basically be fastened only onthe drawer of the cheque. Not only that, the cheque must have beendrawn on an account maintained by him. In this case, admittedly, itwas the first accused who had drawn all the cheques in questionshowing the name of the second accused as the payee. Hence, by nostretch of imagination, the second accused can be deemed as a personwho has drawn the cheque. Further, admittedly, the cheques inquestion have not been drawn on an account maintained by the secondaccused. The cheques were not drawn for payment of the amounts outof the account maintained by the second accused.10. Though it is true that any civil action that may be broughtby the respondent Bank, the Bank may be legally entitled to recoverthe amounts both from the first and the second accused and thatcannot be a ground to criminally make the second accused liable forprosecution. The criminal liability cannot be fastened against thesecond accused unless the ingredients of the offence under Section138 of the Act are made out. Admittedly, discounting of a cheque isa normal business operation of a Bank. The mere fact that thecheques drawn by a third party in favour of its clients arediscounted by the banks, does not lead to any privity of contractbetween the drawer of the cheque and the Bank. The conception ofcivil liability cannot be imported into the question of criminalliability. Criminal liability has to be gathered from the specificstatutory provisions in that behalf. The decision of the AndraPradesh High Court reported in (2001) 103 Company Cases 782 (referredto supra) supports the above view of mine.11. A similar issue has come up for consideration before alearned Judge of this Court in a decision reported in 1991 (2) MWN(Crl.) 237 (Mad) (S.Badhusha Bibi v. Anandkumar Trading Co.) and thelearned Judge after going through the provisions of Section 138 ofthe Act has held as under:-"A reading of the section makes it clear that only the drawerof the cheque can alone be proceeded with for offence underSec. 138 Negotiable Instruments Act, provided the otherrequirements are satisfied. The 2nd accused who is thepetitioner herein is not the drawer of the cheque. Hence shecannot be proceeded with. The case as against her isnecessarily to be quashed."The said view also supports the view taken by me. https://hcservices.ecourts.gov.in/hcservices/

12. Thus, when by no stretch of imagination the second accusedcould be called as the drawer of the cheque, as contemplated inSection 138 of the Act, and when admittedly the second accused hadnot drawn the cheques in question on an account maintained by it witha Bank for payment of any amount of money to another person and fromout of that account, the second accused cannot be made criminallyliable under Section 138 of the Act. The accused 3 to 5 have beenprosecuted only on the allegation that to the best of thecomplainant's knowledge, they are responsible for the day todayaffairs of the business of the second accused. Apart from theaforesaid allegation, no further allegations are found in thecomplaints as to how these accused are responsible for the day todayaffairs of the business of the second accused and as such they cannotbe made vicariously liable even if it is held that the second accusedcan be prosecuted.13. Therefore, for the aforesaid reasons, this Court isconstrained to quash the proceedings in C.C.Nos.1287, 1525, 1526,1286, 1288 and 1284 of 2005 on the file of the XVII MetropolitanMagistrate, Saidapet, Chennai, as against the petitioners herein, whoare arrayed as A-2, A-3 and A-5. Though the fourth accused (A-4)-P.R.Ganesan, Partner, M/s.Yeskey Enterprises, No.19/195, ImayamColony, Anna Nagar West Extn., Chennai, in the aforesaid criminalcases, namely, C.C.Nos.1287, 1525, 1526, 1286, 1288 and 1284 of 2005on the file of the XVII Metropolitan Magistrate, Saidapet, Chennai,is not one of the petitioners in the above quash petitions and he hasalso not approached this Court by way of a quash petition to quashthe proceedings in the above said criminal cases, since this Courthas held that the prosecution against the second accused firm is notmaintainable, the fourth accused, being its partner, cannot also beprosecuted. When on a question of law, this Court has quashed thecriminal proceedings as against the other accused as this Court hascome to the conclusion that the allegations contained in thecomplaint do not reveal the commission of any offence, the benefit ofsuch order of quashing shall be extended to the other co-accused /non-petitioner, though he has not sought for quashing of the same ashas been laid down by the Apex Court in the decision reported in(1989) 4 Supreme Court Cases 59 (STATE OF U.P. v. R.K.SRIVASTAVA) andwhich has been followed by me on an earlier occasion in an orderdated 14.10.2008 passed in Crl.O.P.No.4032 of 2008. 14. For the aforesaid reasons, all further proceedings inC.Nos.1287, 1525, 1526, 1286, 1288 and 1284 of 2005 on the file ofthe XVII Metropolitan Magistrate, Saidapet, Chennai, are quashed asagainst the accused 2, 3, 4 and 5 alone are concerned and the aboveCriminal Original Petitions are allowed. Consequently, the connectedCrl.M.Ps. are closed. Sd/- Asst.Registrar/true copy/ Sub Asst.Registrar https://hcservices.ecourts.gov.in/hcservices/ srkToThe XVII Metropolitan Magistrate, Saidapet, Chennai.+1 cc to Mr.M.Devaraj, Advocate, SR.No.38856+1 cc to Mr.N.R.Anantha Ramakrishnan, Advocate, SR.No.38910Crl.O.P.Nos.8368, 8369, 8370 and 8371 of 2006 & 6324 and 6325 of 2006 andCrl.M.P.Nos.2207, 2209, 2211, 2213 of 2006& 1615 and 1617 of 2006 KA {CO}TP/14.9.2009.