M. Sreeramulu Reddy vs N.C. Ramasamy

Arunachalam, J.—The petitioner, M. Sreeramulu Reddy, is the sole accused in C.C. No. 21104 of 1989 pending on the file of Xth

Metropolitan Magistrate, Egmore, Madras. On a private complaint instituted by the respondent, he is being prosecuted for alleged commission of

an offence punishable u/s 138 of the Negotiable Instruments Act.

The allegations made in the complaint disclose that the petitioner had approached the respondent for tenancy of the first floor of the premises

concerned, in or about April, 1989, and agreed to pay Rs. 30,000 as advance. The petitioner occupied the premises on April 7, 1989. The

petitioner paid Rs. 12,500 in cash, representing a portion of the amount to be paid as advance and further handed over a cheque dated April 7,

1989, for the balance of Rs. 17,500 drawn on Karnataka Bank Limited, Anna Nagar.

The complaint further states that, as requested by the petitioner, the cheque was presented through his banker, Indian Overseas Bank, Anna

Nagar, Madras. But it was dishonoured on May 31, 1989, ""for want of funds in the account of the petitioner"". On being questioned by the

respondent, the petitioner is alleged to have stated that he was unable to arrange for fund. This representation was on July 21, 1989. The cheque

was presented over again and for a second time the instrument was returned with an endorsement ""refer to the drawer"". The complainant alleges

that the cheque was presented for a second time on the specific advice of the petitioner. The respondent issued a notice dated July 31, 1989,

through his lawyer calling upon the petitioner to pay Rs. 17,500. A reply was duly sent. The complainant, however, states that notwithstanding the

reply notice, the petitioner requested the respondent to present the cheque over again, expressing regret for its not having been honoured, on two

earlier occasions. The cheque was presented again on October 11, 1989, and returned as in the past ""for want of funds in the account of the

petitioner"". The respondent issued a lawyer''s notice on October 14, 1989, which received by the petitioner on October 21, 1989. The petitioner

sent a reply dated October 23, 1989, denying his liability to pay. Thereafter, the complaint was filed on November 10, 1989. The trial Magistrate

took cognizance and issued process to the petitioner. The petitioner appeared before the trial Magistrate, on a few occasions and on March 12,

1990, the respondent was examined in chief, in the trial court. This petition was admitted by this court on March 13, 1990, only after the

respondent was examined before the Magistrate.

In this petition referred u/s 482 of the Criminal Procedure Code, to call for the records and quash the pending prosecution as not maintainable

and an abuse of process of court, Mr. G. Appavoo, learned counsel appearing on behalf of the petitioner, contended, that there was no liability to

pay and hence the ingredients of section 138 of the Act will not stand attracted. To substantiate this contention, he submitted that the understanding

between the parties was that the petitioner should pay in cash Rs. 17,500 and take return of the cheque, which should not be presented at all by

the respondent to the bank. He then submitted, that the liability contemplated under the Act was only future liability and not past, even if it were to

be held that the cheque was issued on the basis of liability. The next contention was, that the complaint ought to have been filed within he statutory

period contemplated u/s 142 of the Act read with section 138 of the Act, after the issue of the first notice in July, 1989. He further argued that the

return by the bank with an endorsement ""refer to the drawer"" will not include the two contemplated categories, viz., amount of money standing to

the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from the account by an agreement

made with that bank and if that be so a prosecution u/s 138 of the Act was misconceived and hence it should not be allowed to survive any longer.

On these circumstances, I have heard Mr. K. S. Rajagopalan, learned counsel appearing on behalf of the respondent. He contended that the

questions canvassed by the petitioner related to factual details which may have to be placed before the trial Magistrate for appreciation. He

brought to my notice the judgment of Janarthanam J. in Sivasankar Vs. Santhakumari, wherein the learned judge has taken the view that on

successive dishonour of cheques on different occasions, when presented within its period of validity, separate causes of action for initiation of

prosecution will arise and that failure to file prosecution on the dishonour of cheque on the first occasion was not a bar to initiation of prosecution

subsequently. He further brought to my notice the view expressed by me in M. Harinarayanan v. Nina M. Lulla [1990] LW 143, wherein, under

similar circumstances, I have held that the validity of the notice served and reckoning of limitation will be one for appreciation of evidence, and not

for a decision at the stage of invoking of inherent powers.

In reply, Mr. G. Appavoo placed for my consideration the decision of a Division Bench of this court in Sukanraj Khimraja v. N. Rajagopalan

[1989] 1 LW 401, wherein, while considering as to who the holder in due course was, u/s 9 of the Negotiable Instruments Act, the Division Bench

took the view, that the cheque therein was not negotiable, after being dishonoured.

I have carefully considered the rival submissions placed before me by the opposing counsel. It is very clear that the documents, which have been

filed along with the complaint, are the cheque and memos issued by the bank on three different occasions, lawyer''s notice issued by the

respondent to the petitioner on October 16, 1989, acknowledgment dated October 21, 1989, and reply dated October 23, 1989, issued by the

petitioner. No other document has accompanied the complaint. If that be so, the petitioner will have to bring those documents on record before the

trial Magistrate, and afford an opportunity to the respondent to challenge the same. Further, the respondent may have to be cross-examined, if it is

the contention of the petitioner, that there was an agreement between the parties, that the cheque should not be presented for encashment and

should be kept only as a security for the later payment of advance by the petitioner. Again, it will be a question of fact as to which of the notices

issued by the respondent could be deemed to be one u/s 138(b) of the Act. On the averments made in the complaint, at this stage, it is not possible

to conclude that the notice dated October 16, 1989, cannot be deemed to be a notice u/s 138(b) of the Act. However, it will be open to the

petitioner to challenge the effect of such notice, before the trial Magistrate, after sufficient evidence is brought on record. Further, in view of the law

laid down by Janarthanam J. in Sivasankar''s case [1991] LW 481; [1994] 79 Comp Cas 412, it may not be possible to go into the question at

this stage, whether successive dishonour of cheques would bar a complaint being instituted u/s 138 of the Act, if the complaint satisfies that the

presentation of the cheque was within the period of its validity. On the facts, it will be open to the petitioner, to challenge the validity of the notice

or notices for a finding being rendered by the Magistrate, on appreciation of the facts. It is not possible for me to agree that the liability

contemplated under the Act should only be a future liability. If it is the case of the petitioner that no liability has accrued, then again it relates to the

realm of facts, which may have to be placed before the trial Magistrate for appreciation. Without evidence having come on record, it will not be

appropriate for the petitioner to invoke the inherent powers of this court and seek to halt the proceedings pending before the trial Magistrate.

On the contention that the words ""refer to drawer"" will not take in ""insufficiency of funds"" or ""the amount shown in the cheque exceeded the

arrangement"", this court had occasion to consider this very question in V. S. Krishnan v. V. S. Narayanan [1990] LW 66 and the following

observations were made :

In banking parlance the reason ''refer to drawer'' when cheques are returned unpaid is used generally for returning the cheques for want of funds in

the drawer''s account or because of service of garnishee order. This again is a matter of evidence. The bank would be able to justify before the

court the reasons for which the cheque was returned. If the banking parlance ''refer to drawer'' is used for the purpose aforementioned, the

ingredient of the section would be attracted. If the words ''refer to drawer'' cannot take in its fold the two contingencies contemplated in the

section, the offence cannot be stated to have been established.

The aforestated observations make it apparent that even on this question, appreciation of evidence to be placed before the trial Magistrate,

would be the sole criterion.

The ruling of the Division Bench cited by the petitioner''s counsel cannot enure in his favour. In a Letters Patent Appeal, the Division Bench of

this court, while referring to section 9 of the Negotiable Instruments Act, wherein the meaning of ""holder in due course"" has been indicated, held

that after the cheque in that case was dishonoured, the payee M endorsed it to R for valuable consideration. R, the plaintiff in that case who was

the brother of M, was fully aware that the cheque had been dishonoured and the endorsement in his favour was only after it was returned by the

bank. Therefore, exhibit A-1 (the cheque concerned) had lost its negotiability. Therefore, R cannot be a holder in due course. The essential

characteristic having not been comprehended and more so when the cheque had never been thereafter presented to the bank for encashment, it

was held, that the suit as laid could not have been declared at all. Holding that R cannot be a holder in due course, the suit was dismissed. The

point involved in this petition is so different that the petitioner cannot usefully urge that the judgment of the Division Bench would be sufficient to

quash the pending prosecution. All the grounds having been negatived, this petition deserves dismissal at this stage. Accordingly, this petition shall

stand dismissed.