Delhi District Court
Vide This Order I Shall Decide The ... vs Mansingh Tusaria on 1 November, 2011
IN THE COURT OF SHRI ARUN KUMAR, METROPOLITAN
MAGISTRATE:DWARKA COURTS:NEW DELHI
CC NO: 4382/08
Unique Case ID No: RO759742008
UCO Bank ...............Complainant
Versus
Man Singh Tusaria ................Accused
ORDER:
1. Vide this order I shall decide the application for substitution of the complainant moved by M/s J.M. Financial Asset Constructions Company Pvt. Ltd. (hereinafter referred to as the applicant).
2. The present complaint has been filed by the complainant against the accused under section 138 of the Negotiable Instruments Act wherein the accused was summoned vide order dated 11.09.2007 upon which the CC NO:4832/08 UCO BANK V. MANSINGH TUSARIA Order dated 01.11.2011 1 of 17 accused had entered his appearance on 05.11.2009 and was admitted to bail. A notice under Section 251 Cr.P.C. was issued to the accused to which he did not plead guilty and claimed trial and accordingly the matter was fixed for complainant's evidence vide order dated 02.01.2010. After closure of the complainant's evidence statement of the accused under Section 313 of the Cr.P.C. was recorded on 30.04.2011 and the matter was fixed for defence evidence. On 16.07.2011 the accused has examined himself as DW1 and the matter was adjourned for cross examination at the request of Ld. Counsel for the complainant. On 16.08.2011 once again adjournment was sought on behalf of the complainant and the same was allowed subject to cost of Rs. 2000/ and the matter was fixed for cross examination of DW1 on 21.09.2011. However, since 21.09.2011 the complainant has stopped appearing before the court and on the same day the present application for substitution of complainant was moved by the applicant herein alleging CC NO:4832/08 UCO BANK V. MANSINGH TUSARIA Order dated 01.11.2011 2 of 17 interalia that the loan account, in partial discharge of liability under which the cheque Ex. CW1/B had been issued by the accused herein, has been assigned by complainant in favour of the applicant vide assignment deed dated 29.03.2011 and in view of Section 5(4) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 (hereinafter referred to as SARFAESI Act) the applicant has stepped into the shoes of the complainant for all purposes and hence complainant may be replaced with the applicant. Legal Aid counsel for the accused has strongly opposed the aforesaid application on the ground that there is no legal provision for substitution of the complainant in a criminal case under section 138 of the NI Act, either in the Negotiable Instruments Act or in the Code of Criminal Procedure, 1973. In rebuttal, Ld. Counsel for the applicant has referred to Section 35 of the SARFAESI Act and submits that in view of the aforesaid provision, Section 5 of the SARFAESI Act has overriding CC NO:4832/08 UCO BANK V. MANSINGH TUSARIA Order dated 01.11.2011 3 of 17 effect over all the laws including Section 142 of the NI Act and the various provisions of Code of Criminal Procedure. Ld. Counsel for the applicant has further relied on a decision of Ld. Sessions Judge, Greater Bombay passed in Criminal Revision No. 354 of 2009 in support of his application. I have considered the rival submissions made on behalf of both the parties and have perused the record.
3. It would be apposite at this stage to reproduce the relevant provisions of Negotiable Instruments Act, Code of Criminal Procedure and SARFAESI Act.
Section 5 and Section 35 of the SARFAESI Act read as follows:
"5. Acquisition of rights or interest in financial assets (1) Notwithstanding anything contained in any agreement or any other law for the time being in force, any securitisation company or reconstruction company may acquire financial assets of any bank or financial institution
(a) by issuing a debenture or bond or any other security in the nature of the debenture, for consideration agreed upon between such company and the bank or financial institution, incorporating therein such terms and conditions as may be agreed upon between them; or
(b) by entering into an agreement with such bank or financial institution for the transfer of such financial assets to such company on such terms and CC NO:4832/08 UCO BANK V. MANSINGH TUSARIA Order dated 01.11.2011 4 of 17 conditions as may be agreed upon between them.
(2) If the bank or financial institution is a lender in relation to any financial assets acquired under subsection (1) by the securitisation company or the reconstruction company, such securitisation company or reconstruction company shall, on such acquisition, be deemed to be the lender and all the rights of such bank or financial institution shall vest in such company in relation to such financial assets.
(3) Unless otherwise expressly provided by this Act, all contracts, deeds, bonds, agreements, powersofattorney, grants of legal representation, permissions, approvals, consents or noobjections under any law or otherwise and other instruments of whatever nature which relate to the said financial asset and which are subsisting or having effect immediately before the acquisition of financial asset under subsection (1) and to which the concerned bank or financial institution is a party or which are in favour of such bank or financial institution shall, after the acquisition of the financial assets, be of as full force and effect against or in favour of the securitisation company or reconstruction company, as the case may be, and may be enforced or acted upon as fully and effectually as if, in the place of the said bank or financial institution, securitisation company or reconstruction company, as the case may be, had been a party thereto or as if they had been issued in favour of the securitisation company or reconstruction company, as the case may be. (4) If, on the date of acquisition of financial asset under subsection (1), any suit, appeal or other proceeding of whatever nature relating to the said financial asset is pending by or against the bank or financial institution, save as provided in the third proviso to subsection (1) of section 15 of the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986) the same shall not abate, or be discontinued or be, in any way, prejudicially affected by reason of the acquisition of financial asset by the securitisation company or reconstruction company, as the case may be, CC NO:4832/08 UCO BANK V. MANSINGH TUSARIA Order dated 01.11.2011 5 of 17 but the suit, appeal or other proceeding may be continued, prosecuted and enforced by or against the securitisation company or reconstruction company, as the case may be.
35. The provisions of this Act to override other laws The provisions of this Act shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law." Further section 302 and section 256 of the Cr.P.C., 1973 reads as follows:
"302. Permission to conduct prosecution.
(1) Any Magistrate inquiring into or trying a case may permit the prosecution to be conducted by any person other than a police officer below the rank of Inspector; but no person, other than the Advocate General or Government Advocate or a Public Prosecutor or Assistant Public Prosecutor, shall be entitled to do so without such permission:
Provided that no police officer shall be permitted to conduct the prosecution if he has taken part in the investigation into the offence with respect to which the accused is being prosecuted.
(2) Any person conducting the prosecution may do so personally or by a pleader.
256. Nonappearance or death of complainant.
(1) If the summons has been issued on complaint and on the day appointed for CC NO:4832/08 UCO BANK V. MANSINGH TUSARIA Order dated 01.11.2011 6 of 17 the appearance of the accused, or any day subsequent thereto to which the hearing may be adjourned, the complainant does not appear, the Magistrate shall notwithstanding anything hereinbefore contained, acquit the accused unless for some reason he thinks it proper to adjourn the hearing of the case to some other day:
Provided that where the complainant is represented by a pleader or by the officer conducting the prosecution or where the Magistrate is of opinion that the personal attendance of the complainant is not necessary, the Magistrate may dispense with his attendance and proceed with the case. (2) The provisions of subsection (1) shall, so far as may be, apply also to cases where the nonappearance of the complainant is due to his death."
Moreover, Section 142 of the Negotiable Instruments Act reads as follows: "142. Cognizance of offences Notwithstanding 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;
(b) Such complaint is made within one month of the date on which the cause of action arises under clause (C) of the proviso to section 138:
Provided that the cognizance of a complaint may be taken by the Court after the prescribed period, if the complainant satisfies the Court that he had sufficient cause for not making a complaint within such period.
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No court inferior to that of a Magistrate or a Judicial Magistrate of the first class shall try any offence punishable under section 138."
4.It is settled legal position that criminal law can be set in motion by any person by filing a complaint but there are exceptions to this general principle some of which have been provided under Sections 195 to 199 of the Criminal Procedure Code. In the present case, we are concerned with the complaint under Section 138 of the NI Act and by virtue of provisions of section 142 of the NI Act the complaint can be filed either by a payee or holder in due course only and none else. It is well settled common law principle that a person cannot do a thing indirectly which cannot be done by him directly and hence a person who cannot file a criminal complaint under Section 138 of the Negotiable Instruments Act, cannot be allowed to be substituted in place of the payee or holder in due course as the case may be, for prosecution of the aforesaid complaint subject to all just exceptions. One such exception has been carved out in cases of death of complainant during the pendency of proceedings in which case legal representatives of the complainant can continue with the prosecution of the said complaint on behalf of the complainant. But even in those cases the complaint shall be continued in the name of the CC NO:4832/08 UCO BANK V. MANSINGH TUSARIA Order dated 01.11.2011 8 of 17 original complainant.
5.Now the question arises whether in view of Section 5(4) of the SARFAESI Act read with section 35 thereof, another exception has been carved out of Section 142 of the Negotiable Instruments Act so as to allow the substitution of any Asset Reconstruction Company in place of Complainant which might have acquired the financial assets of the complainant company. This is exactly what is sought to be contended on behalf of the applicant. It is submitted by Ld. Counsel for the applicant that Section 5(3) and section 5(4) of the SARFAESI Act allows the applicant, being the acquirer of financial assets from the complainant, to step into the shoes of the complainant and to get itself substituted in place of the original complainant. It is further submitted by him that even if there is any inconsistency between Section 5(3) and 5(4) of the SARFAESI Act on the one hand and Section 142 of the NI Act on the other, the former shall have an overriding effect over the later by virtue of provisions of Section 35 of the SARFAESI Act. Though on a plain reading of Section 5 (3), Section 5(4) and section 35 of the SARFAESI Act, the aforesaid submission made on behalf of the applicant seems to be plausible but on a deeper analysis the aforesaid contention is liable to be rejected.
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6. It may be noted that Sections 138 and 142 of the NI Act which falls under chapter XVII of the NI Act were added in the year 1988 vide Banking, Public Financial Institutions and Negotiable Instruments Laws (Amendment) Act, 1988. The object for insertion of Section 138 of the NI Act was to inculcate faith of the business community in negotiable instruments. The offence under Section 138 of the NI Act has been made noncognizable and right to file a criminal complaint against commission of the offence has been conferred upon payee or holder in due course and none else. Admittedly the applicant in the present case is not the payee. Now, we will examine whether the applicant falls in the category of holder in due course. The term holder in due course has been defined in Section 9 of the NI Act, which reads as follows: "Section 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."
7. From a perusal of the aforesaid Section it is apparent that a person can become a holder in due course in respect of any cheque only before it becomes payable. Now a cheque which is otherwise payable on demand is valid upto a maximum period of six months from such date. In CC NO:4832/08 UCO BANK V. MANSINGH TUSARIA Order dated 01.11.2011 10 of 17 the present case the cheque is dated 10.07.2007 and thus the validity period of the cheque in the present case had already expired and cheque had ceased to be payable prior to the execution of assignment deed between the complainant and the applicant and therefore the applicant cannot become the holder in due course of the aforesaid cheque. Thus in order to get itself substituted the applicant has banked upon the contention that Section 5(4) of the SARFAESI Act is an exception to Section 142 of the NI Act. Now I shall deal with the aforesaid contention.
8. Before adverting to the various provisions of SARFAESI Act, it would be appropriate to go to the objects and purposes for enactment of the SARFAESI Act. In this regard relevant portion of the Statement of Objects and Reasons of the aforesaid Act may be reproduced hereinunder:
"The financial sector has been one of the key drivers in India's efforts to achieve success in rapidly developing its economy. While the banking industry in India is progressively complying with the international prudential norms and accounting practices, there are certain areas in which the banking and financial sector do not have a level playing field as compared to other participants in the financial markets in the world. There is no legal provision for facilitating securitisation of financial assets of CC NO:4832/08 UCO BANK V. MANSINGH TUSARIA Order dated 01.11.2011 11 of 17 banks and financial institutions. Further, unlike international banks, the banks and financial institutions in India do not have power to take possession of securities and sell them. Our existing legal framework relating to commercial transactions has not kept pace with the changing commercial practices and financial sector reforms. This has resulted in slow pace of recovery of defaulting loans and mounting levels of nonperforming assets of banks and financial institutions. Narasimham Committee I and II and Andhyarujina Committee constituted by the Central Government for the purpose of examining banking sector reforms have considered the need for changes in the legal system in respect of these areas. These Committees, inter alia, have suggested enactment of a new legislation for securitisation and empowering banks and financial institutions to take possession of the securities and to sell them without the intervention of the court. Acting on these suggestions, the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Ordinance, 2002 was promulgated on the 21st June, 2002 to regulate securitisition and reconstruction of financial assets and enforcement of security interest and for matters connected therewith or incidental thereto. The provisions of the Ordinance would enable banks and financial institutions to realise longterm assets, manage problem of liquidity, asset liability mismatches and improve recovery by exercising powers to take possession of securities, sell them and reduce nonperforming assets by adopting measures for recovery or reconstruction.
2. It is now proposed to replace the Ordinance by a Bill, which, inter alia, contains provisions of the Ordinance to provide for
(a) registration and regulation of securitisation companies or reconstruction companies by the Reserve Bank of India;
(b) facilitating securitisation of financial assets of banks and financial institutions with or without the benefit of underlying securities;
(c) facilitating easy transferability of financial assets by the securitisation company or reconstruction company to acquire financial assets of banks and financial institutions by issue of debentures or bonds or any other security in CC NO:4832/08 UCO BANK V. MANSINGH TUSARIA Order dated 01.11.2011 12 of 17 the nature of a debenture;
(d) empowering securitisation companies' or reconstruction companies to raise funds by issue of security receipts to qualified institutional buyers;
(e) facilitating reconstruction of financial assets acquired by exercising powers of enforcement of securities or change of management or other powers which are proposed to be conferred on the banks and financial institutions;
(f) declaration of any securitisation company or reconstruction company registered with the Reserve Bank of India as a public financial institution for the purpose of section 4A of the Companies Act, 1956;
(g) defining 'security interest' as any type of security including mortgage and change on immovable properties given for due repayment of any financial assistance given by any bank or financial institution;
(h) empowering banks and financial institutions to take possession of securities given for financial assistance and sell or lease the same or take over management in the event of default, i.e. classification of the borrower's account as nonperforming asset in accordance with the directions given or under guidelines issued by the Reserve Bank of India from time to time;
(i) the rights of a secured creditor to be exercised by one or more of its officers authorised in this behalf in accordance with the rules made by the Central Government;
(j) an appeal against the action of any bank or financial institution to the concerned Debts Recovery Tribunal and a second appeal to the Appellate Debts Recovery Tribunal;
(k) setting up or causing to be set up a Central Registry by the Central Government for the purpose of registration of transactions relating to securitisation, asset reconstruction and creation of security interest;
(l) application of the proposed legislation initially to banks and financial institutions and empowerment of the Central Government to extend the application of the proposed legislation to nonbanking financial companies and other entities;
(m) nonapplication of the proposed legislation to security interests in CC NO:4832/08 UCO BANK V. MANSINGH TUSARIA Order dated 01.11.2011 13 of 17 agricultural lands, loans not exceeding rupees one lakh and cases where eighty per cent, of the loans are repaid by the borrower.
2. The Bill seeks to achieve the above objects."
9. Now coming to the object and purposes for introduction of Section 138 of the NI Act, the provision was specifically introduced to enhance the acceptability of cheques in settlement of liabilities by making the drawer liable for penalties in case of bouncing of cheques due to insufficiency of funds in the accounts or for the reason that it exceeds the arrangements made by the drawer, with adequate safeguards to prevent harassment of honest drawers.
10. Thus a perusal of statement of object and reasons of both the SARFAESI Act, 2002 and of chapter XVII of the Negotiable Instruments Act as introduced vide Banking, Public Financial Institutions and Negotiable Instruments Laws (Amendment) Act, 1988 shows that both the statutes operate in different fields and objects of introduction of CC NO:4832/08 UCO BANK V. MANSINGH TUSARIA Order dated 01.11.2011 14 of 17 Section 5 of the SARFAESI Act and Section 138 of the Negotiable Instruments Act are entirely different. While the former has been enacted for empowering banks and financial institutions to take possession of the securities and to sell them without the intervention of the court so as to reduce the nonperforming assets of the banks, the later has been incorporated to inculcate the trust and faith of commercial world in usage of negotiable instruments. While the former essentially is a civil remedy with special emphasis on speedy recovery of dues of the banks from the borrowers, the later is a criminal remedy with particular emphasis on punishment of the wrongdoer so as to maintain the faith of business community in transactions through negotiable instruments. If we read Sections 5 and 35 of the SARFAESI Act on the one hand and Section 138 and Section 142 of the NI Act on the other in the light of their respective objectives, there is no manner of doubt that neither there is any contradiction/overlapping in provisions of the two statutes nor the CC NO:4832/08 UCO BANK V. MANSINGH TUSARIA Order dated 01.11.2011 15 of 17 former carves out any exception to Section 142 so as to allow the filing of complaint under section 138 by an assignees, in case the financial assets are assigned subsequent to dishonour of the cheque or to allow the substitution of assignees as complainants in pending proceedings under Section 138 of the NI Act. So interpreted the words "other proceedings of whatever nature" as mentioned in Section 5 means any other proceedings initiated by the banking company for the purposes of recovery of dues from the borrower in respect of the financial assets which in most of the cases shall be the Civil proceedings and not the proceedings u/s 138 of the NI Act initiated by the banking company against the drawer of any cheque given in discharge of his debt or liability.
11. Thus in view of the aforesaid discussions, with due respect I fail to agree with the judgment passed by Ld. Addl. Sessions Judge, Greater Bombay in Cr. Rev.No. 354/2009 in CC No. 102/SS/2007 and I am of CC NO:4832/08 UCO BANK V. MANSINGH TUSARIA Order dated 01.11.2011 16 of 17 the considered view that the application moved by the applicant for substitution of the complainant is not maintainable particularly at the stage of defence evidence. Accordingly the present application moved on behalf of M/s JM Financial Assets Reconstruction Company Pvt. Ltd. is hereby dismissed.
12. Ordered Accordingly.
Announced in the open court on this 1st day of November, 2011.
(ARUN KUMAR)
Metropolitan Magistrate:Dwarka Courts
CC NO:4832/08
UCO BANK V. MANSINGH TUSARIA
Order dated 01.11.2011 17 of 17