The main legal point established is the interpretation of the definitions of a cheque, bill of exchange, and holder in due course under the Negotiable Instruments Act, and the presumption of holder in due course under S.118(g).

1. Leave granted.

2. This case involves a queer situation when a "pay order" was dishonoured by the drawer bank. The holder thereof (Punjab and Sindh Bank) filed a complaint under S.138 of the Negotiable Instruments Act, 1881 (for short'the Act'). The drawer bank and its officials have been arraigned as accused in the complaint. But a single judge of the High Court of Bombay quashed the complaint mainly on the premise that the instrument (described as the "pay order") is not a cheque. The Punjab & Sindh Bank has filed this appeal in challenge of the aforesaid order of the High Court. Besides the premise stated above learned single judge of the High Court adopted two more grounds for quashing the complaint. One among them is that even assuming that the instrument is a cheque it was crossed and hence the complainant-bank should only have collected the amount and remitted the same to the account of the person shown as payee in the instrument. The other is, the complainant was not a 'holder in due course' inasmuch as no endorsement was made on the instrument in the manner prescribed under S.50 of the Act and hence the complainant has no locus standi to file the complaint.

3. The short facts leading to the filing of the complaint are these.

The first accused in the complaint is a co-operative bank. It drew the pay order on 18.12.1992 in a sum of Rs. 48.40 lakhs, the relevant inscriptions of which are the following . "Payee's account only - To pay Punjab & Sindh Bank - M/s. Poise Leasing and Finance Company Ltd. on order". According to the appellant the said pay order was got assigned to the complainant-bank from M/s. Poise Leasing and Finance Company Ltd. When the instrument was presented for clearance before the first accused bank on 18.12.1992 it was returned with the remarks "funds uncleared". It was again presented on 6.1.1993 and then it was returned dishonoured with the remarks "drawee bank's funds with our bank i.e. sponsoring bank, are insufficient". This was followed by sending a notice to the first accused bank as contemplated in S.138 of the Act. Since the amount was not paid within the statutory period a complaint was filed on 9.3.1993.

4. On process being served on the respondents a Writ Petition was filed by them before the High Court of Bombay for quashing the criminal proceedings. But the High Court dismissed the Writ Petition on 1.7.1999 without prejudice to the rights of the accused to make a plea before the trial court for discharging the accused. Thereafter the accused moved the trial Magistrate for recalling the process on the ground, inter alia, that the instrument is not a cheque as per S.138 of the Act. The Magistrate dismissed the aforesaid plea as per his order dated 29.1.2000. When the accused filed a second Writ Petition in the High Court in challenge of the aforesaid order of the Magistrate the learned single judge allowing the said Writ Petition passed the impugned order.

5. The first question raised is whether the instrument which is described by both sides as a "pay order" is a cheque within the meaning of S.138 of the Act. Mr. Shekar Naphde, learned senior counsel who argued for some of the respondents contended that the "pay order" is only a draft issued by the bank and it may at best be a promissory note and is not a cheque.

6. For deciding the said question we have to know what is a cheque. S.6 of the Act defines a cheque as this. "A cheque is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand". Now we have to look at the definition of bill of exchange. It is contained in S.5 of the Act. The first paragraph of this section is enough for the purpose of this case and hence it is extracted below.

"A bill of exchange is an instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay a certain sum of money only to, or to the order of, a certain person or to the bearer of the instrument."

7. The