Only drawer of cheque can be proceeded against after issuing statutory notice.

(Petition under Section 482 of Criminal Procedure Code praying for issuance of a direction to call for the records in C.C.No.282 of 2003 on the file of the learned Judicial Magistrate No.1, Arakkonam and quash the same.)

The petition is filed seeking quashment of the criminal proceedings in C.C.No.282 of 2003 pending on the file of the learned Judicial Magistrate, Arakkonam.

2. The petitioner is the second accused in a case under Section 138 of the Negotiable Instruments Act.

3. It has been alleged in the complaint lodged by the respondent herein that the first accused was appointed as the General Power of Attorney of the second accused, who is the sole proprietor of M/s.Devika Engineering Contractors and was entrusted with the contract work as the second accused was not able to complete the contract work. A Memorandum of Understanding was executed between the parties on 21.8.1998.

4. It is further alleged that the first accused, who is the General Power of Attorney agent of the second accused, borrowed a sum of Rs.2 lakhs on 10.1.2002 and another sum of Rs.3,35,000/- on 11.2.2002 as hand loan from the complainant and issued two cheques for the aforesaid amounts. When those two cheques were presented for collection, they were returned dishonoured with an endorsement that there was insufficient funds in the account of the first accused. Having issued statutory notice to the first accused, a complaint has been lodged under Section 138 of the Negotiable Instruments Act.

5. The petitioner, who is the second accused in this case, has contended in the quashment petition that as per the memorandum of understanding, the second accused has no authority to operate the account in the name of M/s. Devaki Engineering Contractors.

6. The provisions of Section 138 of the Negotiable Instruments Act was not followed by the complainant, it has been further contended.

7. Learned counsel for the petitioner/accused No.2 would submit that the amount was borrowed by the first accused and he issued the cheques on the account of M/s.Devaki Engineering Contractors. The second accused was not the drawer of the cheques and no statutory notice also was issued on him, it is further contended.

8. Learned counsel for the complainant would submit that the evidence on the side of the complainant was already over and therefore, the second accused will have to face the trial and receive a verdict.

9. The memorandum of understanding between the first accused and the second accused would read that the second accused shall open a bank account in the name of M/s.Devaki Engineering Contractors in any one of the Nationalised Bank at the option of the first accused, who has been appointed as a power of attorney to operate the said account and the second accused will not at any stage operate the said account nor will he have any financial transaction in the said account.

10. It is the admitted case that the first accused though appointed as power of attorney holder to execute the contract work by the second accused, the first accused had the sole authority to operate the accounts opened by him in the name of M/s.Devaki Engineering Contractors. In fact, the second accused had been debarred from operating the said account. Having received hand loan, the first accused has allegedly issued two cheques, which bounced as there was no sufficient funds in the said account. Therefore, for such an existing liability of the first accused and the dishonour of cheques issued by the first accused on the account, which was under his total control, the second accused cannot be held responsible for such transaction.

11. It is not in dispute that the statutory notice was not issued to the second accused at all. It is a trite law that no prosecution under Section 138 of the Negotiable Instruments Act, can be launched without issuance of the statutory notice. Therefore, the proceedings as against the second accused is found not sustainable.

12. The Hon’ble Supreme Court in Pepsi Foods Ltd