2017 (4) TMI 1568 - HC - Indian Laws

Dishonor of Cheque - Whether the wife by virtue of her status as a wife of the payee of the cheque can be said to be a holder in due course ? - whether she can be a competent complainant to lodge complaint under Section 138 of the Negotiable Instruments Act, 1882 - holder in due course - legal heir for receipt of money - HELD THAT - The concept of holder is in Section 8 of the Act whereas the connotation holder in due course is a special concept under the Act which Section 9 speaks of. As per Section 8, holder of a promissory note, cheque etc., means any person entitled in his own name to the possession thereof and to receive or recover the amount due thereon from the parties thereto. The holder in due course , meaning of which bears relevance to the controversy, means any person who for consideration become the possessor of a promissory note, bill of exchange or cheque, if payable to the bearer or the payee or endorsee thereof if payable to order before the amount mentioned in it becomes payable, and without having sufficient cause to believe that any defect existed in the title of the person from whom he derived his title. The gist ingredient of the concept holder in due course is that holder in due course is a person who becomes possessor of instrument-the cheque etc., and that he becomes such possessor and possession thereof for a consideration, leaving the other conditions mentioned in the provisions standing satisfied - it would not be right to simply say that every possessor of a promissory note or cheque or bill of exchange is a holder in due course. What is trite is that he must be one who is the possessor of the instrument for a consideration. It is not the holder of the cheque but the holder in due course of the cheque who acquires a legal competence and locus standi in law to base an action on the basis of returned cheque. The legal connotation holder in due course has twin important essentials to carry. A person in order to become a holder in due course within the meaning of Section 9 of the Act must be in possession of a promissory note, bill of exchange or cheque, as is in the present case; at the same time, mere becoming possessor of the cheque etc., would not suffice. A person to the possessor of the instrument has to be for a consideration. It is indispensible ingredient for being clothed with the legal capacity of holder in due course is that the person in possession of the instrument, must have been in the possession for some consideration - merely being an heir of payee, though may be in possession of instrument, would not automatically make such heir or legatee a 'holder in due course' within the meaning of Section 9 of the N.I. Act. The concept of holder in due course does not recognize such position, besides which the ingredient of being a possessor for consideration has to exist. Respondent No.2 wife, in absence of possessing such ingredient-capacity, cannot claim locus standi in law to become a complainant under Section 138 of the Act. The respondent No.2-wife only on the ground of she being a wife or on the ground that she was an heir of the husband to receive money cannot be treated as holder in due course within the meaning of Section 9 of the Act. A locus standi for her cannot be conceived in law to be one entitled to file a complaint under the N.I. Act. If she is claiming any right over the amount of cheque in capacity of heir, her remedy would be in civil law. Complaint at her instance under the N.I. Act, however cannot be maintainable, she having no locus standi to be a complainant under the N.I. Act. Application disposed off.

Summary

Issues Involved:
1. Whether the wife of the payee can be considered a "holder in due course" under Section 138 of the Negotiable Instruments Act, 1882.
2. Whether the wife can be a competent complainant to lodge a complaint under Section 138 of the Negotiable Instruments Act, 1882.
3. The legal interpretation of "holder in due course" as per Section 9 of the Negotiable Instruments Act, 1882.
4. The maintainability of the complaint filed by the wife under Section 138 of the Negotiable Instruments Act, 1882.

Detailed Analysis:

1. Whether the wife of the payee can be considered a "holder in due course" under Section 138 of the Negotiable Instruments Act, 1882:

The court examined the definition of "holder in due course" under Section 9 of the Negotiable Instruments Act, 1882. It was clarified that a "holder in due course" must be in possession of the instrument for consideration and without any reason to believe that there was a defect in the title of the person from whom the title was derived. The wife, by virtue of being the heir, does not automatically become a "holder in due course" as she did not possess the cheque for consideration.

2. Whether the wife can be a competent complainant to lodge a complaint under Section 138 of the Negotiable Instruments Act, 1882:

The court highlighted that only a "payee" or "holder in due course" can file a complaint under Section 138. It was emphasized that the wife, despite being the heir, does not fulfill the criteria of a "holder in due course" as required by Section 9. Thus, she lacks the legal standing or locus standi to file a complaint under Section 138 of the Negotiable Instruments Act, 1882.

3. The legal interpretation of "holder in due course" as per Section 9 of the Negotiable Instruments Act, 1882:

The court reiterated that the essential elements of a "holder in due course" include possession of the instrument for consideration and without any defect in the title. The wife, in this case, did not meet these criteria as she did not possess the cheque for consideration. The court referred to various precedents, including decisions from the Bombay High Court and Madras High Court, which supported the view that mere possession of the cheque by an heir does not make them a "holder in due course."

4. The maintainability of the complaint filed by the wife under Section 138 of the Negotiable Instruments Act, 1882:

The court concluded that the complaint filed by the wife was not maintainable as she did not have the legal standing to file it. The court disagreed with the Karnataka High Court's view that an undisputed heir could file a complaint under Section 138, emphasizing that only a "payee" or "holder in due course" could do so. The court held that the wife could seek remedies under civil law for any claims over the cheque amount but could not maintain a complaint under the Negotiable Instruments Act.

Conclusion:

The court quashed Criminal Case No. 5327 of 2012 and the consequential process dated 12th October 2012 issued by the learned Additional Chief Judicial Magistrate, Palanpur. The rule was made absolute, establishing that the wife did not have the locus standi to file a complaint under Section 138 of the Negotiable Instruments Act, 1882.