Point of Law: Section 202 of Code confers jurisdiction on Magistrate to conduct an inquiry for purpose of deciding whether sufficient grounds justifying issue of process are made out.

JUDGMENT :

The 1st petitioner in all these petitions is ‘RCI Industries and Technologies Ltd’ (RCI Ltd.), a company having its registered office in Delhi. The petitioners 2 and 3 in these cases are the Managing Director and Director respectively, of the 1st accused company. They have preferred these petitions under Section 482 of the Code of Criminal Procedure (“Code” for the sake of brevity) challenging Annexure-A1 complaint filed by the South Indian Bank Ltd. (SIB Ltd.), Department of Trade Finance Centralised Processing Centre, Ernakulam before the Judicial Magistrate of the First Class-III, Ernakulam under Section 28(1) of the Payment and Settlement Systems Act, 2007 (“the PSS Act, 2007” for brevity).

2. As the legal issues and contentions raised in all these petitions are identical, the assertions and contentions in Crl. M.C. No.2555 of 2022 shall be adverted to, for the disposal of these petitions.

3. The allegations in the complaint in brief are as under:

(a) RCI Ltd. is a company engaged in industrial material manufacturing. The accused Nos.2 and 3 are the Managing Director and Director, respectively, and they are the persons in charge of and are responsible to the 1st accused company for the day-to-day conduct of its business.

(b) The SIB Ltd. has provided Trade Receivables Discounting/Factoring Facilities to the 1st accused company through M/s. Mynd Solutions Pvt. Ltd (M1xchange). The M1xchange operates the Trade Receivable Discounting System (TReDS) platform as per the TReDS guidelines issued by the Reserve Bank of India (RBI).

(c) For the purpose of availing the Trade Receivables Discounting/Factoring Facilities offered by the SIB Ltd, the 1st accused opted for National Automated Clearing House mandate and accordingly issued standing instructions to the bankers of the 1st accused, namely, the Union Bank of India (UBI) for a maximum amount of 100 lakhs per transaction (with payment frequency ‘as and when presented’) towards the discharge of the liability in respect of the aforementioned facility availed from the bank account of the RBI Ltd.

(d) The complainant states that the Electronic Funds Transfer initiated by the 1st accused in respect of separate factoring units could not be executed for want of funds in the account maintained by the 1st accused company. It is stated that the intimation of such dishonor of Electronic Funds Transfer was received by the SIB Ltd, as per intimation dated 25.09.2019 issued by M1xchange.

(e) The accused were bound to pay an amount of Rs.1,50,84,892/- to the complainant towards the dishonour of the above three Electronic Fund Transfer transactions.

(f) The accused availed Trade Receivables Discounting/Factoring Facilities under TReDS platform after making the complainant believe that the transaction towards the discharge of liability in respect of the aforementioned facility will be honored on presentment.

(g) Within 30 days of the receipt of information from M1xchange regarding the dishonor, the complainant issued a notice through their lawyer on 04.10.2019 calling upon the accused to effect payment within 15 days. Though notice was accepted, they have not effected payment nor issued any reply.

(h) Within the statutory period, the complaint was lodged before the jurisdictional Magistrate contending that the credit and debit transactions with respect to the Electronic Fund Transfer in the above case had taken place at the office of the complainant at Market Road, Ernakulam.

4. Sri.S. Sreekumar, the learned senior counsel appearing for the petitioners as instructed by Sri. Nandagopal S. Kurup, the learned counsel, contended that the complaint was lodged without complying with the statutory mandate. It is argued that the cognizance was taken by the learned Magistrate without conducting a proper enquiry as contemplated under Section 202 of the Cr.P.C. It is further submitted that under Section 25(1) of the PSS Act, the beneficiary will have to make a demand for the payment of the said amount of mo