Andhra HC (Pre-Telangana)
M/S. Sri Sai Mourya Estates & Projects ... vs The State Of A.P., Rep., By Its Public ... on 13 April, 2018
Author: P. Keshava Rao
Bench: P. Keshava Rao
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.