IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 20.01.2010 CORAM: THE HONOURABLE MRS.JUSTICE ARUNA JAGADEESAN Crl.A.Nos.134 and 135/2002 1.M/s.Jayaram Finance by its Partner D.Elangovan, Kancheepuram Appellant in Crl.No.134/02 2.M/s.Mahendra Finance by its Partner D.Elangovan, Kancheepuram Appellant in Crl.No.135/02 Vs Jayaprakash Respondent in both CAs Prayer:- These Criminal Appeals are filed against the judgement dated 12.12.2001 passed in Crl.A.Nos.106 and 105 /2000 by the learned Additional District Judge Cum Chief Judicial Magistrate, Chengalput, acquitting the Respondent herein for the offence under Section 138 of the Negotiable Instruments Act, by reversing the judgement of the Trial Court dated 27.11.2000 made in CC.Nos.364 and 363/1998, convicting and sentencing the Respondent for the offence under Section 138 of the Negotiable Instruments Act to pay a fine of Rs.3000/-, in default to undergo six months Rigorous Imprisonment and Rs.47000/- as compensation under Section 357(3) of Code of Criminal Procedure in default to undergo six months Rigorous Imprisonment. For Appellant : Mr.R.Rajasekaran For Respondent : Mr.V.Sairam JUDGEMENT These Criminal Appeals are filed against the judgement dated 12.12.2001 passed in Crl.A.Nos.106 and 105 /2000 by the learned Additional District Judge Cum Chief Judicial Magistrate, Chengalput, acquitting the Respondent herein for the offence under Section 138 of the Negotiable Instruments Act, by reversing the judgement of the Trial Court dated 27.11.2000 made in CC.Nos.364 and 363/1998, convicting and sentencing the Respondent for the offence under Section 138 of the Negotiable Instruments Act to pay a fine of Rs.3000/-, in default to undergo six months Rigorous Imprisonment and Rs.47000/- as compensation under Section 357(3) of Code of Criminal Procedure in default to undergo six months Rigorous Imprisonment. https://hcservices.ecourts.gov.in/hcservices/ 2. The case of the Appellant/complainant is that the impugned cheques were drawn by the Respondent/accused in favour of one Gnanavel towards debt liability, who in turn endorsed those cheques in favour of the complainant. Thus, the complainant is the holder in due course of the impugned cheques. On the cheques being presented for encashment with his Bankers, those cheques were dishonoured on the ground that it exceeded arrangement. Statutory notice was issued by the complainant and the accused also sent a reply. Since, the accused failed to pay the cheque amount, the complaint had been filed before the learned Magistrate concerned. 3. The learned Judicial Magistrate I, Kancheepuram found the Respondent guilty and convicted and sentenced him as referred to above. Aggrieved over the conviction and sentence, the Respondent/accused preferred appeals in Criminal Appeal.Nos.106 and 105 of 2000 respectively before the learned Additional District Judge cum Chief Judicial Magistrate, Chengalput, who set aside the conviction and sentence imposed by the Trial Court and allowed the appeals. As against the said judgement, the complainant has filed the present Criminal Appeals 4. This court heard the submissions of the learned counsel on either side and also perused the material records placed. 5. Mr.R.Rajasekaran, the learned counsel for the Appellants submitted that by virtue of endorsement made by Gnanavel on the reverse of the impugned cheques, it had given rise to cause of action to the complainant and the cheques having been dishonoured for want of funds, the Respondent/accused is liable to be punished under Section 138 of the Negotiable Instruments Act. 6. On the other hand, Mr.V.Sairam, the learned counsel for the Respondent/accused submitted that the complainant in this case cannot be considered as a holder in due course, as there is no proper endorsement as required under Section 50 of the Negotiable Instruments Act. It is submitted by him that the endorsement found on the reverse are mere signatures of the said Gnanavel and no details of endorsement are stated. The learned counsel contended that since the requirement of section 50 of the Negotiable Instruments Act are not complied with, the Appellant/complainant cannot be considered as "a holder in due course" and pointed out that the said Gnanavel had not been examined as a witness before the Trial Court despite the fact that the accused had disputed the very liability and privity of contract between the Appellant and the Respondent. 7. The learned counsel for the Respondent drew the attention of this court to the decisions rendered in the cases of Ashok Kumar Vs. K.Gunasekaran, Proprietor of Vijay Fabrics [2005- 1-DCR-323], Mukesh Chandra Guptha Vs. Anil Kumar Jain [2006-2- https://hcservices.ecourts.gov.in/hcservices/ TNLR-693-Mad] and M.N.Thangarj Vs. Sri Venkatachalapathi Tex by its Partners V.S.Gopal and others [2007-2-MWN-Cr-80-DCC] in support of his contention. 8. In the present case, there is no endorsement as contemplated under Section 50 of the said Act. In order to make a person other than the payee, holder in due course of a cheque payable to order, there should be an endorsement in favour of proposed holder and delivery of cheque concerned. Mere delivery is not sufficient. Admittedly, the instrument in question has been given in favour of one Gnanavel. It is not the case of the complainant that necessary endorsement had been made on the cheque for transferring the same. It is axiomatic that there had been no privity of contract between the complainant and the accused, who was the drawer of the cheque. 9. To the statutory notice issued by the complainant, the accused had issued a reply wherein he has clearly disputed the very liability and privity of contract between the complainant and the accused. In paragraph 2 of the reply notice dated 20.8.1998, it is specifically stated as below:- "My client at the outset submits that there is no privity of contract or business transactions between our client and my client at any time with regard to money transaction either by hand loan or by issuing cheque for the discharge of the loan to your client's concern. My client further states that there is no contract between my client and your client's concern by way of writing or by agreement though the the cheques issued by my client have to discounted by your client's concern. My client further states that when he is not having any subsisting debt or liability to your client's firm then there is no necessity for my client to give that cheque to discharge that alleged liability. My client further states that your client is not at all the holder in due course of the cheque for a valid consideration." 10. In spite of such reply of the Respondent as stated above, the complainant has not chosen to examine the payee namely Gnanavel to prove that consideration was passed to the payee at the time of transfer and it was given in lieu of the debt. However, as no endorsement had been made on the overleaf of the cheques thereby enabling the complainant to possess the same in his own name, so as to receive or recover the contents thereof from the accused thereto, the complainant could not be considered to be a "holder" much less a "holder in due course". Even the date of endorsement is missing below the signature of the endorsee. https://hcservices.ecourts.gov.in/hcservices/ 11. Under such circumstances, I do not find any reason to interfere with the finding of the lower Appellate Court and these Criminal Appeals are liable to be dismissed and accordingly, they are dismissed. Sd/- Asst.Registrar /True Copy/ Sub.Asst.Registrar Srcm To: 1.The Additional District Judge Cum Chief Judicial Magistrate, Chengalput 2.The Judicial Magistrate No.1, Kancheepuram. 3.-do- Thro' The Chief Judicial Magistrate, Chengalpattu. + 1 cc to Mr.V.Sairam,Advocate,SR.3755 + 1 cc to Mr.T.R.Ravi,Advocate,SR.3598 Crl.A.Nos.134 and 135/2002 SSK(CO) EM/30.1.10 https://hcservices.ecourts.gov.in/hcservices/