2018 (11) TMI 36 - HC - Indian Laws

Dishonor of Cheque - Section 138 of NI Act - whether the learned Magistrate can dismiss the complaint by invoking the proviso to Section 203 of Cr.P.C. at the initial stage before issuing the process? - Held that - In the present case, on perusal of the complaint, all the three documents are annexed along with the complaint and the list of witness are also annexed including the Manager of the Central Bank and it is relevant to mention Section 142 of the Act deals with cognizance of offence. As per Section 142 of the Negotiable Instruments Act, notwithstanding anything contained in Cr.P.C., no Court shall take cognizance of any offence punishable under Section 138 except upon complaint in writing made by the payee or as the case may be, the holder in due course of the cheque; such complaint is made within one month of the date on which the cause of action arises and the offence under Section 138 shall be inquired into and tried only by a Court within whose local jurisdiction the cheque is delivered for collection through an account, the branch of the bank where the payee or holder in due course as the case may be, maintains the account is situated or if the instrument is presented for payment by the payee or holder indue course, otherwise through an account, the branch of the drawee bank where the drawer maintains the account is situated. Further, the involvement of the accused in the offence andother factual issues are trialable issue. However, this order will not stand on the way of the respondents to defend their case at the time of trial. It is for the petitioner to establish the day to day affairs of the firm and other legal ingredients for implicating the accused in the above said offence at the time of trial - revision allowed.

Summary

Issues Involved:
1. Dismissal of complaint invoking proviso to Section 203 of Cr.P.C. at the initial stage.
2. Maintainability of the complaint dismissed at the preliminary stage.

Analysis:

Issue 1: Dismissal of complaint invoking proviso to Section 203 of Cr.P.C. at the initial stage:
The petitioner initiated proceedings under Section 138 of the Negotiable Instruments Act against the respondents. The lower court dismissed the petition, citing lack of prima facie evidence against the accused. The petitioner challenged this decision through revision. The learned Magistrate relied on various decisions, including one from the Hon'ble Apex Court, emphasizing the need for the person to be actively involved in the affairs of the company to establish vicarious liability under Section 141 of the Act.

Issue 2: Maintainability of the complaint dismissed at the preliminary stage:
The petitioner argued that the third respondent was not a registered company but a proprietary firm owned by respondents 1 and 2, making the lower court's reliance on previous decisions inapplicable. The petitioner contended that the lower court's dismissal under Section 203 of Cr.P.C. was unwarranted as the complaint contained relevant documents and witness statements. The court highlighted the importance of the three key documents in a Section 138 complaint: the business relationship, the instrument issued, and the legal notice served to the accused.

The court found that the lower court prematurely dismissed the complaint without issuing notice to the respondents, contrary to the procedure outlined in Section 142 of the Negotiable Instruments Act. The court emphasized that the lower court should have assessed if a prima facie case existed against the accused based on available evidence. The court concluded that there were sufficient materials to proceed with the case, setting aside the lower court's order and directing it to continue the proceedings in accordance with the law.

The judgment clarified that the order did not prejudge the case's merits and instructed the lower court to conduct a fair trial without influence from the current ruling. The criminal revision was allowed, overturning the lower court's decision and directing further proceedings in the case lawfully.