2020 (10) TMI 112 - HC - Indian Laws

Dishonor of Cheque - Section 138 of Negotiable Instruments Act, 1881 - the respondent/complainant issued statutory notice to the petitioner and since he has not paid the amount within the stipulated time, he filed the complaint - HELD THAT - It is no doubt that the subject cheque was issued by the petitioner himself as an authorized signatory of M/s.Sri Constructions in favour of the petitioner himself, of course to his S.B. Account No.40280101000996 and the cheque was not directly issued in favour of the respondent/bank. However, the claim of the respondent/bank is that the subject cheque was tendered by the petitioner along with a covering letter requesting the bank to credit the cheque amount in his S.B. Account No.40280101000996 and appropriate the said amount towards part payment of loan amount. Neither party produced the said covering letter before this Court. Therefore, whether the petitioner tendered the subject cheque dated 11.04.2012 for ₹ 5000/- along with a covering letter to the respondent/bank with a request as stated supra or not and if so whether by virtue of the said letter the respondent/bank can treat itself as holder in due course of the said cheque and file criminal complaint against the petitioner for dishonour of the cheque are the crucial issues which can be resolved only after a full fledged trial, not at this stage. This Criminal Petition is disposed of directing the learned Judicial First Class Magistrate, Guntakal to proceed with the trial by giving liberty to both parties to adduce evidence to project their respective versions and after hearing arguments of both parties pronounce the judgment expeditiously but not later than four (4) months from the date of receipt of a copy of this order.

Summary

Issues:
Petition to quash criminal proceedings under Section 138 of Negotiable Instruments Act, 1881 based on dishonored cheque issued by petitioner. Dispute over whether respondent/bank can file complaint as holder in due course of the cheque.

Analysis:
The petitioner sought to quash proceedings against him for dishonoring a cheque issued to the respondent/bank. The respondent/bank alleged the petitioner owed a total of ?1,23,011, including credit card dues and locker rent. The petitioner issued a cheque for ?5000, which bounced due to insufficient funds. The respondent/bank argued it could file a complaint as the holder in due course of the cheque. The petitioner contended the cheque was not issued directly in favor of the bank. Both parties presented conflicting arguments regarding the nature of the cheque issuance and the bank's standing as the holder in due course.

The Court acknowledged the conflicting claims and highlighted the crucial issues requiring resolution through a trial. The presence of a covering letter accompanying the cheque, as claimed by the respondent/bank, raised questions about the petitioner's intentions and the bank's status as the holder in due course. The Court emphasized the need for a full-fledged trial to determine the validity of the claims and counterclaims put forth by the parties. The Court directed the trial court to proceed with the trial expeditiously, allowing both parties to present evidence and arguments to establish their respective positions within a specified timeframe.

In conclusion, the Court dismissed the petition to quash the proceedings, emphasizing the necessity for a trial to adjudicate the complex legal issues surrounding the dishonored cheque. The directive to proceed with the trial within a stipulated timeframe aimed to ensure a timely resolution of the dispute and the determination of the parties' rights and liabilities in the matter.