IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 8.07.2009 CORAM: THE HONOURABLE MR.JUSTICE ARUNA JAGADEESAN Crl.OP.No.8545/2006 Mohan, Propreitor Sri Arthi Textiles, Tiruchengode Namakkal District Petitioner Vs K.P.Manickam Respondent Prayer:- This Criminal Original Petition is filed to call for the records of the complaint relating to the criminal proceedings in CC.No.918/2005 on the file of the learned Judicial Magistrate I, Erode and quash the same. For Petitioner : Mr.N.Manokaran For Respondents : Mr.V.Ayyadurai ORDER The Petitioner, who is the accused in CC.No.918/2005 has filed this Criminal Original Petition to quash the proceedings. 2. The Respondent has filed the private complaint under Section 138 of the Negotiable Instruments Act against the Petitioner. The Petitioner had issued two cheques, bearing Nos.1890380 and 1890387 dated 25.2.2005 and 4.3.2005 for Rs.30,000/- and 35,000/- respectively drawn on M/s.Lord Krishna Bank Limited, Erode in favour of one A.R.Chellappan. The above said cheques were discounted with the Respondent and thereafter, he had presented those cheques for payment and they were returned unpaid with an endorsement "Exceeds Arrangement". Thereafter, the Respondent had issued a legal notice on 8.8.2005, demanding the payment of Rs.65,000/- and as the Petitioner failed to pay the amount, the complaint has been filed. https://hcservices.ecourts.gov.in/hcservices/ 3. The learned counsel for the Petitioner has submitted that Respondent 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 of the cheques are blank and cryptic and no details of endorsement are stated. Since the requirement of Section 50 of the Negotiable Instruments Act are not complied with, the Respondent cannot be construed as "a holder in due course". He would further contend that in the absence of an endorsement made on the instrument in the manner prescribed under Section 50 of the Negotiable Instruments Act, he cannot be "a holder in due course" and therefore, the complaint filed by such holder in due course is not maintainable. The learned counsel drew the attention of this court to the decisions of this court rendered in the case of Ashok Kumar Vs. K.Gunasekaran, Proprietor of Vijay Fabrics (2005-1-DCR-323), Mukesh Chandra Guptha Vs. Anil Kumar Jain (2006-2-TNLR-693-Mad) and M.N.Thangaraj Vs. Sri Venkatachalapathi Tex by its Partners V.S.Gopal and others (2007-2-MWN(Cr)80-DCC) in support of the above said contentions. 4. At the very outset, the facts relating to the above said decisions are distinguishable, inasmuch as in those cases, after full trial, the accused was acquitted and the same was challenged on the ground that there was no proper endorsement as required under Section 50 of the Negotiable Instruments Act, since the complainant had failed to prove satisfactorily passing of consideration. On such circumstances, this court held that there was no privity of contract between the complainant and the accused and therefore, favoured acquittal of the accused. 5. In the instant case, the Petitioner seeks to quash the complaint at the preliminary stage even before the complainant has adduced evidence to prove his case that he is "a holder in due course" for consideration and he could maintain the complaint. 6. The complaint under Section 138 of the Negotiable Instruments Act can be lodged either by a payee or "a holder in due course". Only when the complainant failed to satisfactorily prove passing of consideration or the endorsement of the cheque is not in accordance with Section 50 of the Negotiable Instruments Act, then the presumption that the holder of the cheque in question is "a holder in due course" would not be drawn in favour of the complainant. A reading of Section 50 of the Act is very clear that the possession of the instrument is prima facie evidence that the holder is the owner thereof and is entitled to all the rights thereon. 7. The first part of Section 50 of the Negotiable Instruments Act reads thus, "the endorsement of a negotiable instrument followed by delivery transfers to the endorsee the https://hcservices.ecourts.gov.in/hcservices/ property therein with the right of further negotiation. From the above, it is clear that the endorsement of an instrument and delivery thereof cloth the transferee with the right to present it for acceptance, if necessary and demand payment of the same on its due date and on dishonour, he has the right to sue on the Petitioner in his own name and against all the parties to the instrument. 8. The second part of the Section 50 of the Negotiable Instruments Act reads with the endorsement and the illustration therein states the kinds of endorsement that would be made on different negotiable instruments payable to the bearer. Hence, it postulates that a person, who becomes a holder of an instrument, is entitled to transfer the same to others by way of further negotiation and unless the instrument is in such form in its inception, it is not negotiable or it is restricted from being endorsed. How such a restriction can be made is indicated in the latter portion of the Section. In the first portion of Section 50 of the Negotiable Instruments Act, endorsement alone does not vest the property in the instrument to the transferee nor to have the fact that the endorsement must be followed by delivery. 9. In Section 118 of the Negotiable Instruments Act in clause (g), the phrase "that holder is a holder in due course" has been defined as follows:- "that the holder of a negotiable instrument is a holder in due course: provided that, where the instrument has been obtained from its lawful owners, or from any person in lawful custody thereof, by means of an offence or fraud, or has been obtained from the maker or acceptor thereof by means of an offence or fraud, or for unlawful consideration, the burden of proving that the holder is a holder in due course lies upon him." 10. Whether the Petitioner cannot be considered as "a holder in due course" within the meaning of the Act is a question of fact and will have to be investigated as to whether the requisites given in the definition have been fulfilled or not, which can only be done after the evidence has been recorded and all the circumstances come to light, in such evidence. This view gains support from the decisions rendered by the Allahabad High Court in the case of Anil Kumar Jaiswal Vs. State of UP and another (III-2007—BC-240). In the said decision, the High Court of Allahabad has endorsed the view of the Magistrate that only after evidence is recorded, it will be possible for the court to decide as to whether the complainant is the holder of the cheques in question within the meaning of the Act. Therefore, the contentions raised by the learned counsel for the Petitioner cannot be considered at this stage and no interference is warranted by this court. 11. For the above said reasons, this Criminal Original https://hcservices.ecourts.gov.in/hcservices/ Petition is dismissed. However, liberty is given to the Petitioner to canvass all the grounds, which are raised in this Criminal Original Petition, before the court below and the court below shall consider and dispose of the matter, on merits and in accordance with law, expeditiously. Sd/ Asst.Registrar /true copy/ Sub Asst.Registrar Srcm To: 1.The Judicial Magistrate No.I, Erode. 2.-do- Through The Chief Judicial Magistrate, Erode. 1 cc To Mr.V.Ayyadurai, Advocate, SR.29547 1 cc To Mr.N.Manokaran, Advocate, SR.29722 Crl.OP.No.8545/2006 sgl(co) pmk.28.7.2009. https://hcservices.ecourts.gov.in/hcservices/