JUDGMENT
Nirmal Yadav, J.
1. By this common judgment, I shall be disposing of three Criminal Misc. Petitions bearing Nos. 43826-M, 43829-M and 43832-M of 2005, as the questions of fact and law involved therein are identical in nature. However, for the sake of convenience, facts are being extracted from the petition viz. Criminal Mis. No. 43826-M of 2005.
2. Through the present petition filed under Section 482 of the Code of Criminal Procedure, petitioners seek quashing of complaint dated 8.7.2000 (Annexure P-3) and setting aside the order dated 19.4.2004 (Annexure P-5) vide which petitioners were summoned by Judicial Magistrate 1st Class, Ludhiana under Section 138 of the Negotiable Instruments Act, 1881 (hereinafter referred to as “the Act”)
3. Facts, in brief, are that the petitioner-firm deals in the business of advancing loan to the parties. M/s L.W.S. Knit Wear, L.W.S. Exports Limited and L.W.S. Knit Wear Limited (hereinafter referred to as “the loanee firms”) and its partners had been taking loans from the petitioner-firm for the last many years. The loanee firms were in need of money and requested the petitioner-firm to advance them loans. The petitioner-firm agreed to advance loans to the loanee firms by issuing three cheques worth Rs. 5,98,785.80p. Rs. 5,80,000/- and Rs. 5,74,850/- bearing Nos. 696265, 696266 and 696267 dated 26.2.2000, 28.2.2000 and 25.5.2000 respectively. After issuance of the cheques, the loanee firms did not comply with the terms and conditions of the agreement of loan, therefore, the petitioners instructed their bank not to encash their cheques. This intimation was also sent to the loanee firms. The Directors of the loanee firms duped the respondent-bank and pledged the above mentioned cheques having full knowledge of the fact that the cheques will not be honoured. It is pleaded that the petitioners had no dealing with the respondent-bank. On the asking of the loanee firms, the respondent-bank presented the cheques, but these were dishonoured on account of “insufficiency of funds”.
4. Respondent-Bank served a legal notice dated 24.5.2000 (Annexure P- 1) on one of the partners of the petitioner-firm for making the payment. The petitioner immediately submitted a reply thereto on 3.6.2000 (Annexure P-2) specifically stating that there existed no relationship between respondent-bank and the petitioner-firm, nor was the petitioner-firm under any liability to the bank, therefore, no offence under Section 138 to 142 of the Act was made out against them.
5. Respondent-Bank, thereafter filed a complaint dated 8.7.2000 (Annexure P-3) against the petitioners before the Judicial Magistrate 1 Class, Ludhiana. The learned Judicial Magistrate, after recording the testimony of Manager of the Bank, passed the impugned order dated 19.4.2004 (Annexure P-5) summoning the petitioners. Aggrieved against the order of summoning, the petitioners have filed the present petition under Section 482 of the Code of Criminal Procedure for setting aside the said order as well as for quashing the complaint.
6. Learned counsel for the petitioners argued that the petitioners have no dealing with the respondent-bank. There was an understanding between the petitioners and the loanee firms not to present the cheques, but the loanee, firms, with mala fide intention and in collusion with the respondent-bank, submitted the cheques to the bank, which, in turn, presented the same for encashment. It is argued that the petitioners do not maintain any account nor have any dealing with the respondent-bank. Learned counsel further argued that to constitute an offence under Section 138 of the Act, the cheque should have been drawn by a person, who has a legally enforceable liability to pay, but the petitioners cannot be said to be under any legal enforceable liability as far as complainant-bank is concerned. His liability, if any, was only towards the loanee firms under the cheques. In support of his contention, learned Counsel relies on a judgment of the Andhra Pradesh High Court in case Kalyani Refineries v. Banaras State Bank 2000 I.S.J. (Banking) 471. Learned counsel further relies on a decision of the Bombay High Court in case Credentials Finance Ltd v. State of Maharashtra 2000(3) Civil Court Cases 458.
7. Learned counsel further urged that there was no endorsement on the said cheques in favour of the complainant-bank; and the bank is neither the payee, nor holder in due course and as such, provision of Section 138 of the Act are not applicable in the present case. In support, learned Counsel relies on a judgment of this Court in case Punjab National Bank v. Himgiri Traders and Anr. 2004(1) Civil Court Cases 716.
8. On the other hand, learned Counsel for the respondent-bank argued that the petitioners were very well aware of the fact that the cheques would not be honoured, as the amount was never intended to be paid. It is further argued that the bank is holder of the cheques in due course in view of the provision of Section 9, of the Act. Learned counsel further argued that there was a written endorsement in favour of the bank on a separate slip, which is produced as Annexure R-2 along with reply filed by the respondent bank. It is further argued that the respondent-bank had purchased the cheques from the loanee firms. As per endorsement made on a separate slip (Annexure R-2), the bank became a holder in due course when the cheques were presented for payment in its own right. After the cheques were dishonoured on the ground of “insufficiency of funds”, the bank issued notice as per the provisions of the Act. Petitioners are drawer of the cheques of which respondent is a holder in due course. Hence, the respondent bank has cause of action for filing the complaint under Sections 138 to 142 of the Act.
9. I have heard learned Counsel for the parties and gone through the record carefully.
10. From the facts on record, it is amply clear that the respondent-bank had purchased the cheques from the aforementioned firms and endorsement to this effect was made by the loanee firms in favour of the bank on a separate slip (Annexure R-2) annexed with the reply field by the respondent-bank. The petitioners are the drawers of the cheques of which respondent-bank became a holder in due course. Reference may be made to Sections 9 and 15 of the Act, which read as under:
9. “Holder in due course”: “Holder in due course” means any person who for consideration became the possessor of a promissory note, bill of exchange or cheque if payable to bearer or the payee or indorsee thereof, if payable to order, before the amount mentioned in it became payable, and without having sufficient cause to believe that any defect existed in the title of the person from who he derived his title.
15. Endorsement: When the maker or holder of a negotiable instrument signs the same, otherwise than as such maker, for the purpose of negotiation, on the bank or face thereof or on a slip of paper annexed thereto, or so signs for the same purpose a stamped paper intended to be completed as a negotiable instrument, he is said to endorse the same, and is called the “indorser.”
11. The mere reference to Section 9 of the Act makes it clear that “holder in due course” means any person who for consideration became the possessor of promissory note, bill of exchange or cheque if payable to bearer or the payee or indorsee thereof. A purchaser of a cheque is, thus, a holder in due course and it is necessary that in favour of the purchaser, there should also be an endorsement. Provision of Section 118 of the Act provides for presumption with regard to Negotiable Instruments and Sub-sections (a) and (g) thereof are relevant for this purpose, which are reproduced as under:
18. Presumption as to negotiable instruments: Until the contrary is proved, the following presumptions shall be made: (A) of consideration: that every negotiable instrument was made or drawn for consideration, and that every such instrument, when it has been accepted, indorsed, negotiated or transferred, was accepted, indorsed, negotiated or transferred for consideration:
(b) to (t) XX XX XX
(g) that holder is a holder in due course – that the holder of a negotiable instrument is a holder in due course: provided that, where the instrument has been obtained from its lawful owner, 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.
12. Provision of Section 139 of the Act provides for a presumption in favour of a holder in due course, which reads as under:
139 Presumption in favour of holder: It shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque of the nature referred to in Section 138 for the discharge, in whole or in part, of any debt or other liability.” !3. In view of the provisions, as referred to above, it is amply clear that a presumption under the law is raised in favour of the respondent-bank, inasmuch as the cheques were drawn for consideration, and the same were purchased by the bank from the loanee firms in whose favour these were drawn by the petitioners. However, at the time of presentation of the cheques, bank was a holder in due course and purchaser of the cheques becomes a holder in due course. Presumption is also drawn in favour of the bank in view of the provision of Section 118(g) of the Act, as there is nothing available on record to show that the instrument has not been obtained from its lawful owner and there is also no material whatsoever to show that the cheques were obtained in any unlawful manner or for an unlawful consideration.
14. The last argument of the learned Counsel for the petitioners that there is not indorsement on the cheques, is also falsified from the fact that the respondent has placed on record a separate slip (Annexure R-2) for endorsement.
15. For the reasons recorded above, I do not find any ground to quash the complaint dated 8.7.2000 (Annexure P-5) vide which petitioners were summoned under Section 138 of the Act by Judicial Magistrate 1st Class, Ludhiana. Consequently, all the three Criminal Misc. Petitions bearing Nos. 43826-M, 43829-M and 32832-M of 2005 are
hereby dismissed.