VERY IMPORTANT POINT
Under Sections 138 read with Section 143 Negotiable Instruments Act, 1881 only a payee or holder in due course can file a complaint. In this case cheque was issued by 2nd respondent in favour of 1st respondent. 1st respondent gave it to complainant in discharge of his debt in presence of 2nd respondent but without an endorsement as required under Sections 14, 15. So complainant did not became either holder or holder in due course and complaint is liable to be quashed.

T. Ch. Surya Rao, J.— The petitioner seeks to invoke the inherent jurisdiction of this Court under Section 482 of the Code of Criminal Procedure to quash the proceedings initiated against him in C.C. No. 488 of 2002 on the file of the Judicial Magistrate of First Class, Dharmavaram.

2. The petitioner is the first accused and the respondents 1 and 2 herein are the complainant and the second accused respectively. The first respondent filed a complaint for the offence punishable under Section 138 read with Section 142 of the Negotiable Instruents Act (‘NI Act’ for brevity). It is alleged inter alia in the complaint that the second accused in the course of business transactions he had with the complainant purchased silk sarees from the complainant on credit basis. In discharge of the said debt, the second accused gave a cheque bearing No. 740630 dated 27-2-2002 drawn on South Indian Bank Limited, Kanchipuram Branch, for a sum of Rs. 30,000/- to the complainant. The said cheque was signed and issued by the first accused in favour of the second accused. The second accused gave the said cheque to the complainant with the permission of the first accused. The complainant accepted the said cheque that the cheque would be honoured by the Banker on its presentation. Thus, the complainant was the holder in due course of the said cheque and had a right to present the same for collection. When the complainant presented the said cheque with his banker for collection, it was dishonoured on 20-8-2002 with an endorsement. “funds insufficient”. Upon receiving intimation from his Banker on 23-8-2002, within 15 days thereafter, he sent a registered notice dated 5-9-2002 to the accused through his counsel calling them upon to pay the cheque amount within 15 days from the date of receipt of the said notice. It was duly served on the first accused on 12-9-2002 and on the second accused on 7-9-2002. Since both the accused failed to pay the said amount within one month from the date on which the cause of action had arisen, eventually the complaint filed the complaint.

3. Sri M.V.K. Viswanadham, learned counsel appearing for the petitioner/first accused represents that there has been no legally enforceable debt between the petitioner and first respondent/complainant and that no consideration was passed under the cheque in question.

4. Per contra, Sri P. Veera Reddy, learned counsel appearing for the first respondent/complainant, contends that the cheque having been issued by the petitioner to the complainant in the presence of the second respondent/second accused and under his promise, the complainant becomes the holder in due course and, therefore, he can lay the complaint.

5. Apparently, the cheque in question was signed by the first accused and was drawn in favour of the second accused. The name of the complainant, therefore, does not appear on the instrument. Confessedly the cheque was given to the complainant by the first accused in the presence of the second accused and on the promise made by both the accused that the cheque would be honoured on its presentation, he received the cheque and thereby he became the holder in due course of the said cheque. Perhaps on that premise, he laid the complaint against both the accused. It is therefore appropriate here to consider the question as to whether the complainant is the holder in due course or not.

6. The provisions germane in the context for consideration are Sections 8, 9, 14 and 15 of the Negotiable Instruments Act. Section 8 read as under:

“8.“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.”

7. From a perusal of the above provision it is obvious that mere possession of the cheque is not sufficient to become