IN THE ORISSA HIGH COURT 

K. N. Jena for the petitioners. 

K. P. Nanda for the respondent. 

JUDGMENT 

DIPAK MISRA J. - Invoking the inherent jurisdiction of this court under section 482 of the Criminal Procedure Code, 1973, the petitioners call in question the propriety of the order taking cognizance in I.C.C. No. 91 of 1994 under section 138 of the Negotiable Instruments Act, 1881, by the learned S.D.J.M., Bhubaneswar; and also pray for quashing of the proceeding in its entirety. 

The essential facts giving rise to the present petition are enumerate hereunder : 

The opposite party instituted a complaint case alleging that the petitioner-company, namely, Animal Feeds Dairies and Chemicals Ltd., and its managing director were carrying on business transactions with the opposite party-firm and were purchasing various types of raw materials for preparation of cattle and poultry feeds and there was good understanding and the business transaction was high. The petitioners were given credit by the opposite party-firm. In the process, Rs. 5,21,142.23 remained outstanding against the petitioners as on March 31, 1994. In spite of repeated reminders, when the amount in question was not paid, ultimately petitioner No. 1, the managing director of the company gave fifteen cheques amounting to Rs. 1,10,000 and assured that the cheques would be cleared by the bank as soon as they were presented. Six of the cheques amounting to Rs. 54,000 were deposited on March 31, 1994, fop collection, but the same were returned to the banker of the complainant on intimation that "payment stopped". On receipt of such intimation from the bank, the complainant issued notice to the petitioners through his counsel by registered post with acknowledgment due. 

In spite of the valid notice on opposite party No. 2 on April 11, 1994, no amount was paid. The notice on petitioner No. 1 was returned with endorsement by the Postal Department, "addressee was not available returned to sender". Thereafter, the complainant personally went to the office of the managing director on April 29, 1994, and requested him to receive the written notice, but he declined to receive the same stating that the reply of the notice to the company has already been given by their counsel. However, on April 29, 1994, a reply was received by the complainant from the advocate of petitioner No. 2 that they had instructed the bank to stop payment and that was a justified action. With these allegations, the complainant instituted the complaint case contending, inter alia, that an offence under section 138 of the Negotiable Instruments Act, 1881, read with section 420 of the Indian Penal Code has been committed by the present petitioners. 

The learned trial judge recorded the initial statement of the complainant and was prima facie satisfied that a case under section 138 of the Act has been made out against the accused persons and accordingly took cognizance of the same. The said order taking cognizance and initiation of criminal proceedings are sought to be quashed in this application. 

K. N. Jena, learned counsel for the petitioners, raises the following contentions : 

(a) In the instant case, the complaint having been filed by the manager of the proprietorship firm is not maintainable in view of the provisions envisaged under section 142 of the Act as the manager of a proprietorship concern cannot be regarded as the payee or the holder in due course of the cheque; 

(b) in absence of a complaint in writing either by the payee or holder of cheque in due course, the order taking cognizance and initiation of the proceeding against the present petitioner is incompetent and illegal; 

(c) as the complainant has suppressed the material facts and has put forth a false case without disclosing the reply given by the petitioner by annexure 3 denying the liability, the complaint should have been thrown out at the threshold and no cognizance should have been taken; 

(d) as there is dispute in regard to the dues of the firm, the same is not a legally enforceable debt, and in view of stoppage of payment because of the dispute, the criminal liability under section 138 of the Negotiable Instruments Act, 1881, is not attracted; and 

(e) as the proceeding has been actuated by mala fides the proceeding is liable to be quashed. That apart, the payee has approached the court with unclean hands and has dishonestly withheld many facts from which malice can be inferred for the purpose of quashing the criminal proceeding. 

K. P. Nanda, learned counsel for the opposite parties in his turn submits that : 

(i) the complaint has been filed by the power of attorney holder of Mohanlal Jain, the sole proprietor of Shri Annapurna Bhandar and as he represents the payee he is entitled to institute the complaint case under section 138 of the Act and at his instance the complaint case is maintainable; 

(ii) as there have been instructions by the accused to stop payment it would amount to dishonour of the cheque within the meaning of section 138 of the Act and dishonest intention can be inferred; 

(iii) as there has been a categorical instruction by the drawer for stoppage of payment without having sufficient funds in the account, the criminal liability as envisaged under the law remains and, therefore, the proceeding is not liable to be quashed on that score; 

(iv) the question of initiation of the criminal proceeding in a mala fide manner does not arise in the instant case and the question of mala fides having not been properly proved the proceeding cannot be quashed at the instance of the present petitioners; and 

(v) the allegations on record do make out a prima facie case and constitute the offence as alleged and, therefore, by applying the parameters and test for the purpose of quashing a criminal proceeding the impugned order does not call for interference by this court. 

The rival contentions require careful and conscious consideration. Shri Jena has referred to section 8, section 9 and section 130 of the Negotiable Instruments Act and'has submitted that the power of a power of attorney holder of a proprietorship concern cannot be construed as a payee and, therefore, the complaint case at his instance is not tenable. He has also canvassed that this aspect has to be strictly construed because the criminal action has been set in motion by the power of attorney holder. He has highlighted that once the power of attorney holder is regarded as not competent person to institute a complaint case of the present nature, it would be deemed as if there is absence of complaint in writing either by the payee or the holder of cheque in due course and thereby the order taking cognizance would become susceptible. To substantiate his submission Shri Jena has relied on the decisions reported in Braja Kishore Dikshit v. Purna Chandra Panda, AIR 1957 Orissa 153; Daulat Ram v. State of Punjab, AIR 1962 SC 1206; Gadadhar Samantary v. Damo Behera, AIR 1966 Orissa 230 and Kadarkarai Reddiar v. Arumugam Nadar, AIR 1992 Mad 346. 

In Braja Kishore Dikshit v. Purna Chandra Panda, AIR 1957 Orissa 153, after referring to section 9 of the Negotiable Instruments Act, this court held that to become a holder in due course three conditions are to be satisfied, such as : 

(1) that the endorsee becomes the holder in due course when it is for consideration; 

(2) he can be an endorsee before the amount mentioned in the promissory note became payable; and 

(3) without having sufficient cause to believe that any defect existed in the title of the person from whom he derived his title. 

After referring to the contentions, this court held that the burden has not been discharged. There is nothing in this decision that the power of attorney holder or an agent or manager of a proprietorship concern cannot institute any proceeding. 

In Gadadhar Samantary v. Damo Behera, AIR 1966 Orissa 230, this court held that where the endorsement of transfer of a promissory note does not mention the name of the plaintiff in whose favour it is intended to be transferred, he cannot sue on the basis of the promissory note as such because he himself is not the holder in due course as defined under section 8 and section 9 of the Negotiable Instruments Act. I am afraid the ratio of this decision cannot be pressed into service for the present purpose. 

In Daulat Ram v. State of Punjab, AIR 1962 SC 1206, the apex court held while dealing with prosecution under section 182 of the Indian Penal Code that prosecution must be on a complaint in writing by the complainant. This principle is not attracted for the present purpose, inasmuch as the manager has signed the complaint petition. The question that falls for consideration is whether it is tenable at his instance. 

The other decision is Kadarkarai Reddiar v. Arumugam Nadar, AIR 1992 Mad 346, wherein it has been held that a payee who takes an incomplete stamped instrument and completes it, cannot be said to be a "holder in due course" of that document because the transfer and negotiation in such a case to the payee is not of a negotiable instrument but is only of an inchoate instrument which is not a negotiable instrument and, therefore, he is not the "holder in due course" of that document and on that basis the amount cannot be recovered. I may humbly quote that this decision is not on the point. 

Shri Nanda, on the contrary has referred to a decision in Manimekalai v. Chapaldas Kalyanji [1995] Cr. LJ 1102 (Mad) wherein the Madras High Court took the view that a complaint for an offence under section 138 of the Negotiable Instruments Act can be filed by a person holding the power of attorney. I am in respectful agreement with the aforesaid view for the simple reason that there is no prohibition on the part of the manager or agent of a proprietorship concern or a power of attorney holder to institute a complaint case. 

The aforesaid answers the first two contentions raised by Shri Jena. I may now address myself with regard to the third and fourth contentions of learned counsel for the petitioners. In fact, the third contention of Shri Jena is absolutely in the realm of facts and I am not inclined to address myself to the same because the allegation is that a false case has been filed. It is well settled that the matters which are to be agitated during trial cannot be gone into for the purpose of quashment of a proceeding under section 482 of the Criminal Procedure Code. 

The fourth submission is that as the dues of the firm were not a legally enforceable debt, there was stoppage of payment by the present petitioner. The submission of Shri Jena is that once there was stoppage of payment that cannot come within the mischief of section 138 of the Act. He has referred to the decision reported in Sri Siba Shankar Sahu v. Utkal Asbestos Ltd. [1994] 1 OLR 165 to substantiate his submission that for commission of an offence under section 138, the complainant has to show that the cheque was issued in discharge of a debt or liability and that the cheque was returned by the bank on account of there being insufficient funds in the account to honour it, or it exceeds the amount to be paid from the account. It is worthwhile to state here that in this decision the court after analysing the preconditions that there has to be a pre-existent debt or liability which has to be independently established and to show that the cheque was issued in discharge of the debt or liability either in whole or in part, proceeded to analyse further aspects which may be profitably reproduced hereunder : 

"Once such ingredient is satisfied, the next fact to be seen is whether the cheque has not been paid because of either of the twin reasons as stated in the section itself. Since the Legislature has been specific that the criminal liability would arise when the cheque is returned because of either of those two reasons, it would not be proper to hold that for whatever reason the cheque is returned, the drawer would become criminally liable. A cheque may be returned for a host of reasons and the drawer stopping payment of it is one of them. He may stop payment on the cheque even when sufficient funds are available in the account to meet it or even when the amount is less than the limit of drawal agreed to by the bank. It cannot be said that even then a criminal liability would arise as that would run counter to the very provision of the section that the offence is committed if the cheque is returned only because of either of those two reasons. Supposing a cheque has been issued to meet the price of some article supplied, but before the cheque is encashed it was discovered that the article was not the same for which the price was paid and the payment is directed to be stopped, even though necessary funds are there in the account, it can hardly be said that the drawer has become criminally liable. In that case, the dispute between the parties would be of civil nature only." 

In para. 13 of the said decision the court has further held : 

"The primary object for the legislation seems to be to create criminal liability for unscrupulous issue of cheque without having the intention to pay. A cheque is an alternate mode of discharge of debt or other liability without paying cash. When a cheque is issued for such purpose, a representation is made to the drawee that there are sufficient funds in the account to meet the cheque. But when a cheque is issued with the knowledge that the account does not have sufficient funds to meet the cheque or that it is in excess of the amount agreed by the bank for payment from the account, the issue of the cheque is itself a dishonest act and it is such conduct of the drawer which is purported to be treated as an offence. When a cheque is issued under such circumstances, the mens rea is palpable since though issue of the cheque is an ostensible act for discharge of debt or other liability, in fact the discharge is never intended to be carried out." 

Analysing the aforesaid decision, I am of the considered view that the ratio of the said decision is not that whenever there would be direction to the bank to stop payment there would be no criminal liability under section 138 of the Act. One comes within the mischief of section 138 of the Act if he has issued a cheque dishonestly. "Stoppage of payment" on instructions cannot always redeem the situation. In this regard Shri Nanda, has relied on the decision rendered in Electronics Trade and Technology Development Corporation Ltd. v. Indian Technologists and Engineers (Electronics) Pvt. Ltd. [1996] 86 Comp Cas 30 (SC); [1996] Crl. LJ 1692, wherein the apex court held as follows (page 33) : 

"Shri Nageswara Rao, learned counsel appearing for the respondents, contended that stoppage of payment due to instructions does not amount to an offence under section 138 and that, therefore, the ingredients in section 138 have not been satisfied. We find no force in the contention. The object of bringing section 138 on the statute appears to be to inculcate faith in the efficacy of banking operations and credibility in transacting business on negotiable instruments. Despite civil remedy, section 138 is intended to prevent dishonesty on the part of the drawer of a negotiable instrument to draw a cheque without sufficient funds in his account maintained by him in a bank and induces the payee or holder in due course to act upon it. Section 138 draws a presumption that one commits the offence if he issues the cheque dishonestly. It is seen that once the cheque has been drawn and issued to the payee and the payee has presented the cheque and thereafter, if any instructions are issued to the bank for non-payment and the cheque is returned to the payee with such an endorsement, it amounts to dishonour of cheque and it comes within the meaning of section 138." 

In view of the aforesaid enunciation of law, the submission of Shri Jena is bound to be rejected. 

The fifth submission of Shri Jena is that the proceeding having been actuated with mala fides, the same is liable to be quashed. It is easy to allege mala fides, but difficult to prove it. I do not find any material on record from which I can conclude that the proceeding is racked with mala fides or the proceeding is a vexatious one. 

Lastly, Shri Jena has faintly argued that even if the entire materials are taken into consideration, no offence is made out, inasmuch as there was no liability, the same having been refuted. I am of the considered view that this should be a plea of defence available to the petitioners. It is well settled in law that what can be a possible plea of defence cannot be a ground for quashment of the criminal proceeding. In this connection, I may refer to the grounds on which a proceeding can be quashed. The same have been succinctly laid down by the apex court in State of Haryana v. Ch. Bhajan Lal, AIR 1992 SC 604. In para. 108 of the said decision, the apex court has laid down seven guidelines. Though their Lordships have said that they are not exhaustive, but illustrative, yet the petitioners' case does not come under these illustrations, nor is there any extra or special feature to take it beyond the illustrations. Under these circumstances, I am of the view that neither in law nor in fact a case has been made out for quashing the criminal proceeding forming the subject-matter of I.C.C. No. 91 of 1994. If the petitioners would have been able to cover their case under any one of the seven illustrations as indicated by the apex court in State of Haryana v. Ch. Bhajan Lal, AIR 1992 SC 604, then there would have been a possibility of quashing the proceeding. I am afraid, the petitioners have not been able to lay the foundation-stone for any of the setus of the aforesaid sapta setu. No foundation stone having been laid, the question of building the bridge does not arise. The setu remains unconstructed. 

Resultantly, the criminal miscellaneous case is dismissed.