2016 (3) TMI 762 - SC - Indian Laws

Cheque bounce case - offence punishable under section 138 and 142 of the Negotiable Instruments Act, 1881 - Held that - section 118(g) 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 - Whatever defence has been taken by the accused respondents as pointed out by the learned counsel appearing for the respondents before us, cannot be a ground for quashing a criminal prosecution.

Summary

Issues:
1. Quashing of criminal prosecution under Section 138 and 142 of the Negotiable Instruments Act.
2. Legality of the appellant Bank's complaint as a holder in due course.
3. Interpretation of Sections 142 and 8 of the Act.
4. Presumption of holder in due course under Section 118(g) of the Act.
5. Grounds for quashing a criminal prosecution.

Detailed Analysis:
1. The High Court quashed the criminal prosecution under Section 138 and 142 of the Negotiable Instruments Act, based on the contention that the appellant Bank, as a holder in due course, could not maintain a complaint without a legally enforceable debt between the parties. The accused respondents filed petitions under Section 482 of the Code of Criminal Procedure, arguing that the complainant failed to establish a prima facie case for section 138 of the Act, leading to the quashing of the prosecution.

2. The appellant Bank argued that as a holder in due course, they had the right to enforce their claim and file a complaint under Section 138 of the Act. Citing the precedent set by the case of Punjab & Sind Bank vs. Vinkar Sahakari Bank Ltd., the Supreme Court emphasized the definition of a "holder" under Section 8 of the Act, stating that the complainant Bank was entitled to possess the cheques and recover the amount due, thus justifying their legal standing as a holder in due course.

3. The Supreme Court analyzed the provisions of the Negotiable Instruments Act, particularly Sections 142 and 8. Section 142 mandates that a complaint can be made in writing by the payee or the holder in due course. Section 8 defines a "holder" as a person entitled to possess the cheque and receive the amount due. The Court reaffirmed that the complainant Bank met these criteria, aligning with the legal framework of the Act.

4. Regarding the presumption of a holder in due course under Section 118(g) of the Act, the Court highlighted that unless proven otherwise, the holder of a negotiable instrument is presumed to be a holder in due course. This statutory presumption reinforced the appellant Bank's position as a holder in due course, further supporting their legal right to initiate the criminal prosecution.

5. The Court dismissed the grounds presented by the accused respondents for quashing the criminal prosecution, asserting that the defenses raised were insufficient to warrant such an action. Ultimately, the Supreme Court allowed the appeals, setting aside the High Court's order that quashed the criminal prosecution, thereby upholding the appellant Bank's right to pursue the case.