Case: Punjab &amp; Sind Bank Vs. Vinkar Sahakari Bank Ltd.

3. The short facts leading to the filing of the complaint are theseThe 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 lacs, the relevant inscriptions of which are the following : "Payees account only - To pay PunjabSindh Bank - M/s. Poise Leasing and Finance Company Ltd. or 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 banks 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 Section 138 of the Act. Since the amount was not paid within the statutory period a complaint was filed on 9.3.1993.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 Section 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.

Reasoning: 17. We are of the opinion that the High Courts have taken the correct view in the above decisions. However, Mr. Shekhar Naphde, learned senior counsel for the respondents, invited our attention to the decision of a single Judge of the Bombay High Court in Maturi Sanyasilingam v. The Exchange Bank of India and Africa Ltd., AIR 1946 Bombay 1, wherein it was held that the demand draft issued by the branch of a bank to its head office or vice-versa is not a cheque nor a bill of exchange. But learned Single Judge expressed the opinion that a demand draft may be a bill of exchange if it is issued by one bank drawn on another. The said observation was made in the wake of the contention that the collecting bank could claim protection under Section 131 of the Act. The said decision of the Bombay High Court cannot hold good because the Negotiable Instruments Act was amended by incorporating Section 131A in the said Act.That apart, learned Single Judge while relying on the decisions of the House of Lords in Capital and Counties Bank v. Gordon (supra), restricted himself to the former limb of the observation therein. It is in the latter limb that the House of Lords said that when the draft is in possession of a holder the instrument can be treated as bill of exchange.We therefore dissent from the view adopted by the learned Single Judge in the impugned judgment that the pay order is not a cheque.The second premise of the learned Single Judge that since the pay order was a crossed instrument the complainant-Bank could have only collected the amount and remitted the proceeds to the account of the payee. The said view could not be supported by the learned counsel for the respondents. Hence it is unnecessary for us to dwell into that.The third ground for quashing the complaint is that the complainant was not "a holder in due course" in the absence of an endorsement made on the instrument in the manner prescribed under Section 50 of the Act. This ground was adopted by the learned Single Judge without regard to certain relevant provisions of the Act.Section 142 of the Act envisages a complaint to be made in writing "either by the payee or the holder in due course of the cheque, as the case may be". Section 8 of the Act defines "holder" as any person entitled in his own name to the possession of the cheque and to receive or recover the amount due thereon from the parties thereto. We have no doubt that complainant-Bank was well within its right to possess the cheque and to receive or recover the amount covered by the instrument. "Holder in due course" means a person who for consideration became the possessor of a cheque if payable to bearer before the amount became payable. (Vide Section 9).In this context reference has to be made to Section 118(g) of the Act which contains a mandate that until the contrary is proved the holder of a negotiable instrument shall be presumed to be a holder in due course. Thus there is no escape for the court from drawing such presumption.It is undisputed that the complainant-company is the holder of the instrument on its own right. As such it could be a holder in due course also until the concerned party adduce evidence to rebut the presumption. It is of course open to the respondents to rebut the presumption in the trial but till the High Court could not say that the complainant is not a holder in due course at all.