Kerala High Court
Chandra Babu vs Remani on 4 April, 2003
Equivalent citations: II(2004)BC152, 2003(2)KLT750
Author: J.B. Koshy
Bench: J.B. Koshy
ORDER J.B. Koshy, J.
1. Can the legal representatives of the payee file a complaint under Section 138 of the Negotiable Instruments Act (hereinafter referred to as 'the Act') is the question to be considered in this case. It is alleged that petitioner in this case borrowed an amount of Rs. 25,000/- from the husband of the respondent and issued a cheque No. 556736 drawn on Syndicate Bank. Sreekaryam Branch dated 4.4.1995 for the discharge of that debt. Respondent's husband (payee) died on 15.4.1995 after 11 days of issuance of the cheque. Respondent wile and the legal heirs of the late Sudevan presented the cheque before the said bank on 29.9.1995. On 4.10.1995 the cheque was returned unpaid to the respondent/complainant on account of insufficiency of funds in the account of the petitioner/accused. On the same day, respondent issued a legal notice calling upon the petitioner/accused to repay the amount covered by the cheque. The notice was acknowledged by the petitioner/accused on 9.10.1995. Since cheque amount was not paid, a complaint dated 6.11.1995 was filed before the Judicial Magistrate of the First Class- III, Thiruvananthapuram. It was numbered as S.T. No. 4 of 1996. For issuance of another cheque for Rs. 80,000/- another complaint was filed which was numbered as S.T. No. 6 of 1996. For issuance of cheque for Rs. 50,000/-, S.T. No. 7 of 1996 was filed. In all these cases, cheques were returned on the ground of insufficiency of funds. This Criminal Miscellaneous Case was filed under Section 482 of the Code of Criminal Procedure for quashing the above Annexures A1 to A3 private complaints filed under Section 138 of the Act contending that the complainant cannot file such complaints as she is not the payee or holder in due course. Petitioner also relied on the decision of this Court in Koya Moideen v. Hariharan (1996 (1) KLT 389). It is also pointed out that this Court has already quashed a similar complaint filed by the same complainant in Crl.M.C. No. 3382 of 1999 in view of the decision reported in Koya Moideen v. Hariharan (1996 (1) KLT 389). When the matter came up before the learned Single Judge, Mr. R. Basant (J.), noticing the decisions in Janaki v. State of Kerala, (1976 KLT 182) and Devi v. State of Kerala, 1977 KLT 781, wherein this Court held that, in law, a legal representative is not a different person from the deceased, the learned Judge was of the opinion that the 'payee' in Sections 7 and 142 of the Negotiable Instruments Act would include the legal heirs of a deceased payee and the matter was referred to the Division Bench.
2. Mere issuance of a cheque without funds in the bank will not constitute an offence under Section 138 of the Act. To constitute an offence under Section 138, the cheque should be dishonoured for insufficiency of funds if the cheque is presented within a period of six months from the date on which it is drawn from the period of its validity whichever is earlier. Two other, conditions are also to be satisfied to constitute an offence under Section 138 of the Act. Those conditions which are relevant for the purpose of this case are contained in proviso (b) and (c) of Section 138 of the Act which are as follows:
"(b) the payee or the holder in due course of the cheque as the case may be, makes a demand for the payment of me said amount of money by giving anotice, in writing, to the drawer of the cheque, within fifteen days of the receipt of information by him from the bank regarding the return of the cheque as unpaid, and
(c) the drawer of such cheque fails to make the payment of the said amount of money to the payee or, as the case may be, to the holder in due course of the cheque, within fifteen days of the receipt of the said notice".
(underlining for emphasis.) The above would show that the payee or the holder in due course should make a demand for the payment of such money by giving notice in writing to the drawer of the cheque within fifteen days of the receipt of information regarding dishonour of the cheque and drawer of such cheque should have failed to make payment of the said amount of money to the payee or the holder in due course of the cheque within fifteen days from the date of receipt of such notice. Section 142 of the Negotiable Instruments Act provides for taking cognizance of the offence under Section 138. Complaint should be filed in writing by the payee or holder in due course. Section 142 of the Act reads as follows:
"142. Cognizance of offences : Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2of 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) xx x x x
(c) xx xx xx xx"
(underlining for emphasis)
Proviso (b) and (c) of Section 138 and Section 142(a) of the Act together would show that it is the payee or the holder in due course of the cheque who has to issue notice of dishonour and on getting the notice, it is for the drawer to pay the amount of the cheque to the payee or holder in due course and if the above is not paid, it is for the payee or holder in due course has to file the complaint to the Magistrate's Court.
3. Now, we will consider the definition clauses. 'Payee' is defined under Section 7 of the Act 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"."
'Holder in due course' is defined in Section 9 as follows:
'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 in the title of the person from whom he derived his title."
The contention raised by the petitioner in this case is that, admittedly, complainant is not the payee of the cheque. She filed the complaint as a legal representative. Legal representative of the payee is not a holder in due course. The complainant in this case came to the possession of the cheque only as a legal heir of the deceased and not by paying consideration to him or by endorsement of the cheque to him by the original payee. Section 75 of the Act is also important in this matter. Section 75 of the Act reads as follows:
"75. Presentment by or to agent, representative of deceased, or assignee of insolvent :
Presentment for acceptance or payment may be made to the duly authorised 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 section only provides that if the maker of the cheque is dead, payment can be demanded from the legal representatives of the drawee, maker or acceptor. But, heading of the section is very wide and it shows presentment of the negotiable instrument can be made by the representative of the deceased also. Even though under the above section, presentment can be made to the legal representative of the maker or drawee of the cheque, legal heir of the maker or drawee of the cheque is not liable for criminal action under Section 138 of the Act.
4. Section 78 provides to whom payment should be made. Unlike Section 138, Section 78 says that if the amount is paid to the holder of the instrument, there will be sufficient discharge of liability. "Holder" is defined in Section 8 as follows:
"The 'holder' of a promissory notice, bill of exchange or cheque means any person entitled in his own name to the possession thereof and to receive or recover them, 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".
Person entitled in his own name to the possession thereof only means that the person who is legally entitled to the possession of the cheque. Complainant in this case came to the possession of the cheque not by fraud or theft. Being a legal representative, she is legally entitled to hold the cheque.
5. 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,
6. In Janaki v. State of Kerala and Ors. (1976 KLT 182) it was held that, in law, a legal representative is not a different person from the deceased. The Court held as follows:
"4. The argument, to my mind, ignores the concept of a legal representative, that, in law he is not a different person from the deceased, but only continues the persona of the deceased."
The above view was reiterated by the Division Bench of this Court in Devi and Ors. v. State of Kerala (1977 KLT 781). However, we are of the opinion that the above decision may not be applicable in this case. What the Court held in those cases was that when amounts are due to the Government, revenue recovery proceedings can be taken against the legal representatives of the defaulter also from the assets they have inherited from the defaulter. That may not have much bearing to decide whether a legal representative of a payee or a holder in due course can exercise the right under Sections 138 and 142 of the Act.
7. In Koya Moideen case (supra) (1996 (1) KLT 389), the question arose whether an executor of the Will can file complaint under Section 138 read with Section 142 of the Act. There, the cheque in question was drawn in favour of R. Ganapathy Iyer, father of the complainant. It was stated in the complaint that Ganapathy Iyer executed Will and complainant and his brother were made the executors under the Will and, therefore, complaint was filed in his capacity as executor. The Court held that since the executors did not obtain the cheque for consideration, executors are not holder in due course. The above decision is not dealing with the right of a legal representative. Nowhere, the effect of Section 53 was discussed in that case. Another learned Judge of this Court in Pandalai v. Jacob C. Alexander, 2000 (2) KLT 59, held that the decision in Koya Moideen's case (supra) is per incuriam. It was held as follows:
"8. The judgment passed by a Single Judge of this Court in Koya Moideen v. Hariharan (1996 (1) KLT 389) holding that the executor of the will cannot be treated as the holder in due course and he cannot file a complaint under Section 138 of the N.I. Act unless there is an averment in the complaint that he had paid consideration to the deceased and thereby he became the holder in due course, cannot be followed as it is per incuriam of Section 27 of the N.I. Act and Section 306 of the Indian Succession Act since Section 27 of the N.I. Act empowers agency and Section 306 of the Indian Succession Act provides that demands and rights of action of or against the deceased survive to and against the executor or administrator, except those causes of action which are expressly mentioned in that Section as it will not survive to and against the executor or administrator. Therefore the contention of the petitioner based on the above decision is not sustainable".
Here, in this case, Section 27 is not attracted as payee already passed away and legal representative became the holder. In 1996 (1) KLT 389 as well as in Annexure A4 order in Crl.M.C. No.3382 of 1999 effect of Section 53 was not discussed.
8. There is no dispute that the proposition that legal representative can file a suit for realising the amount. A Full Bench of the Punjab and Haryana High Court after considering large number of decisions in Padam Parshad v. Lok Nath Ishwar Sarup and Ors., (AIR 1964 Punjab 497 FB) held as follows:
"(5)....... It will be apparent from the definition of holder' that it means aperson entitled in his own name to the possession of the negotiable instrument and to receive or recover the amount due thereon from the parties thereto. Section 78 provides as to whom payment should be made of the amount due on the promissory note in order that the maker or acceptor thereof is discharged from liability thereon. On the interpretation of the aforesaid two sections, a plethora of case law has grown up, but it appears to us that so far as the case of an heir of a deceased holder is concerned, the rule of law seems to be well settled. The preponderance of judicial opinion is for the view that an heir of a deceased holder can bring a suit on the basis of the promissory note though such an heir cannot be said to be a holder within the meaning of Section 8. The decided cases, which will be noticed hereafter, are almost unanimous that there is no bar created by the aforesaid two sections in the way of such an heir to sue on the basis of the promissory note and recover the debt due to the deceased holder".
After quoting the decision of the Allahabad High Court in Rai Ram Kishore v. Ram Parshad, AIR 1952 All. 245 - FB, the Full Bench of the Punjab High Court further held that:
"(8)...... The legal representatives of the holder "would appear to us to be clearly entitled to recover upon the instrument and Section 78 or anything else in the Negotiable Instruments Act cannot and does not stand in the way of such a suit being brought by the legal representatives of the holder against the person liable on the instrument............
(10) It will appear from the authorities that have been quoted above that the rule seems to be fairly well settled that an heir of a deceased holder can bring a suit on the basis of the promissory note to recover the amount due thereon to the deceased holder by reason of the fact that he succeeds to the estate of the deceased holder by inheritance. No decision taking the contrary view has been brought to our notice."
Even though Chapter XVII of the Negotiable Instruments Act, 1881 (Sections 138 to 142) was inserted by Act No. 66 of 1988, there is no indication in the Act that other provisions in the Act including definition Sections and Section 53 are only to civil suits and not on complaints instituted as per the provisions in Chapter XVII.
9. One contention raised by the petitioner is that once he received the notice in view of proviso (b) to Section 138, he can get a discharge if the amount is paid to the holder in due course or payee within fifteen days of the receipt of notice. When complainant is a legal heir, by paying the amount, to her, he will not get a complete discharge as the complainant is not the payee or holder in due course. But, Section 78 clearly provides that making payment to holder, maker of the cheque will get discharge. Section 78 reads as follows:
"78. 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".
Apart from the above, in this case, complainant holds the cheque after the death of the payee as a legal heir and she is entitled to possess the same in her own name and in view of Section 53, being a legal heir, she is a holder in due course and he can get a full discharge. The party was free to pay the amount to her and to get back the cheque. In view of Section 53 of the Act, legal heir of the payee or holder in due course can maintain a complaint under Section 138 of the Act.
10. 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. and Anr., 2002 (1) SCC 234 = 2001 AIR SCW 4793).
In the above circumstances, we are of the view that the complaint is perfectly maintainable. A legal representative of the payee or holder in due course can file a complaint under Section 138 read with Section 142 of the Act if other conditions in the above sections are satisfied. We direct the Judicial Magistrate of the First Class-Ill, Thiruvananthapuram to dispose of the matter as expeditiously as possible after considering the rival contentions raised by the parties.
Before closing the matter, we would like to add that despite service of notice, respondent (complainant) did not appear before us. Therefore, being a referred matter, we have appointed Shri. K. Gopaiakrishna Kurup, former State Prosecutor as Amicus Curiae in this case. We place it on record our appreciation for the valuable assistance rendered by Shri. Gopaiakrishna Kurup in disposing of the case. We also note that Shri. M. Balagovindan appearing for the petitioner also argued well in this case.
The Crl.M.C. is dismissed.