YESKEY ENTERPRISES Vs. STATE BANK OF INDIA

JUDGEMENT

(1.) COMMON ORDER The above criminal original petitions have been filed by the accused 2, 3 and 5, in C.C.Nos.1287, 1525, 1526, 1286, 1288 and 1284 of 2005 on the file of the XVII Metropolitan Magistrate, Saidapet, Chennai. The petitioners are facing trial for an offence under Section 138 of the Negotiable Instruments Act (hereinafter referred to as "the Act") in all the aforesaid cases on the complaints filed by the respondent herein.

(2.) THE brief facts which are necessary for the disposal of the above Criminal Original Petitions are set-out below:- As per the allegations contained in the respective complaints, the first accused had issued the following cheques, TABLE in favour of the second accused. THE respondent-Bank had credited the amounts covered by the aforesaid cheques to the account of the second accused when the second accused presented the cheques on various dates by discounting the same and according to the respondent, the amounts had been utilised by the second accused on the same day. According to the complainant, on such discounts being made, the respondent herein / complainant becomes the 'holder in due course' of the cheques issued by the first accused and the second accused takes the position of the 'drawer' of the cheques, since the amounts covered under the cheques have been discounted and credited to the accounts of the second accused. It is further alleged in the respective complaints that when the above mentioned cheques were presented for encashment by the respondent Bank, the same were returned by the Banker of the first accused with endorsements "Funds Insufficient". THEreafter, after complying with the statutory requirements, the aforesaid complaints came to be filed by the respondent against the petitioners herein, the first accused and one P.R.Ganesan, the fourth accused, who is alleged to be the partner of the second accused. In the complaint it is alleged that to the best of the complainant's knowledge, accused 3 to 5 are responsible for the day-today affairs of the business of the second accused, hence the second accused is represented by third, fourth and fifth accused. THE petitioners have filed the above petitions seeking to quash all further proceedings in the cases initiated against them by the respondent contending that Section 138 of the Act contemplates action to be initiated by the payee against the drawer and not against both the drawer and the endorsee. It is contended that the respondent has filed the cases against the petitioners on the ground that the cheques presented by the second accused were discounted by the respondent and hence the respondent becomes the 'holder in due course' and the first petitioner becomes the 'drawer', but simply because the cheques were discounted by the respondent-Bank, the second accused will not become the drawer.

(3.) LEARNED counsel for the petitioners in support of the aforesaid contentions relied on a decision of the Andhra Pradesh High Court reported in (2001) 103 Company Cases 782 ( Kalyani Refineries V. Banaras State Bank (A.P.) ). He further submitted that the facts of that case and the facts of the cases on hand are similar; in that decision it has been held that a company cannot be prosecuted under Section 138 of the Act simply because the cheque issued in favour of the company and got discounted by it with the Bank got dishonoured subsequently; the reason for such a decision being that the company which got the cheques in its favour and got the same discounted with the bank cannot come under the definition of a drawer and under Section 138 of the Act on a cheque being dishonoured the drawer of the cheque alone is liable to be prosecuted for the offence under Section 138 of the Act.