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Judgment
Bashir A. Kirmani, J.—On 6.8.2007 respondent/Bank instituted a complaint against petitioners and proforma respondents all associated
with a trading company styled as ""Prinkaya Overseas Pvt. Ltd"", with allegations that on their request the Bank extended financial assistance to
aforesaid company which by 151h Nov.2001 enhanced to the limit of Rs. 25.00 crores as beginning credit ship (pre-shipment loan) Rs. 15.00
crores as bid bond/bank guarantee/inline letter of credit/foreign letters of credit, Rs. 50.00 crores as post shipment limit and Rs. 25.00 crores as
forward exchange cover which was availed by them from time to time without however adhering to the expected schedule of repayment due to
which the account became irregular and outstanding against the company as non-performing assets as on 19.4.2007 swelled into Rs.
2465647157- in beginning credit limit and to Rs. 1622101104/- in inline letter of credit etc as on 19.4.2007. On 26.12.2006 however, Raj
Kumar Jain one of the Directors of company issued a post dated cheque No. 3298J36 with 19.1.2007 the date of its encashment at the office of
respondent/Bank at Lajpatnagar, New Delhi alongwith draft cover letter No. POPL/2006 dated: 26.12.2006 to meet part liability on account of
inline letter of credit extended under account No. 3126 but as the date of encashment approached the company, the company through said Sh.
Jain approached the Bank with the request that presentation of the post dated cheque be deferred as the company expected to get an amount of
Rs. 7.50 crores from prospective buyer of their rice Division after vacation of a particular restraint order purporting to have been passed by High
Court of Gujarat which the bank exceeded to but ultimately when it deposited the cheque with Air cargo Branch of the Bank on 8.6.2007, and
sent for collection through Regional Collection Centre, New Delhi to Bharat Overseas Bank, wherefrom it was returned with endorsement ""funds
insufficient"". Thus banker of accused returned the cheque unpaid alongwith the aforesaid memo despite enough time having been given to the
company for due deposits. Accordingly, while alleging that the conduct of aforesaid company amounted to an offence under Negotiable Instrument
Act the respondent/Bank sought criminal action against them through the aforesaid complaint.
On 16.8.2007 the Court of, Chief Judicial Magistrate, Srinagar before whom the complaint was lodged passed a preliminary order after recording
statements of the complainant and one Sh. Roshan Khyial Khan, the attorney of the Bank and opined that contents of the complaint and materials
submitted therewith disclosed commission of an offence u/s 138 read with Section 142 of Negotiable Instruments Act, and while taking cognizance
of the case directed issuance of process against petitioner/company and its directors first through summons and letter through bailable warrants and
posted the matter for their appearance. Aggrieved thereby the petitioners, some among directors of the aforesaid company seek quashment of the
above said complaint, the aforesaid order of learned Chief Jud./Magistrate, alongwith arrest warrants issued against them and pro forma
respondents chiefly on three grounds: First, that after issuance of the bounced cheque to Lajpatnagar branch of respondent/Bank, the company
issued another cheque under No. 330448 for Rs. 1.25 crores in lieu thereof and sought to deposit remaining amount of Rs. 3.75 crores after
receiving the amount from the buyer of its rice division which was cashed by them, withdrawing the demand notice earlier sent through Advocate
due to which no dishonest intention could be attributed to the petitioners herein. Secondly, that the cheque for Rs. 5.00 crores had been drawn on
Bharat Overseas Bank in the name of company itself and as such the company and not the respondent/Bank being drawee of the cheque no case
accrued to them for institution of the complaint u/s 138 of the Act. Thirdly, that the Court of Chief Judicial Magistrate, Srinagar had no territorial
jurisdiction to entertain the complaint. During their submissions the rival counsel have reiterated and further elaborated the contents of their
respective pleadings quoting certain precedents also in support of thereof which if necessary would be discussed in due course. The company's
counsel has also added that respondent/Bank has, also initiated action under Realization of Securities Act also against their landed properties in
New Delhi.
I have heard learned Counsel and considered the mater. In so far as the factum of outstanding against petitioners herein on account of over draft
facility availed by them from respondent /Bank is concerned it is not dsnied at all nor for that matter the fact that petitioners herein as front men of
the company under reference have been doing business with respondent/bank by availing over draft facilities and making periodical deposits
towards the outstanding which is clear on the face of the mater. That petitioner/company issued a cheque for Rs. 5.00 crores for adjustment
against their liability to respondent/bank is not denied and that it was returned unpaid due to insufficiency of amount in their account is clear from
the records,. That it had been drawn in the name of petitioner/company on Bharat Overseas Bank too is a fact apparent on record alongwith the
one that another cheque bearing No. 330448 for Rs. 1.25 crores was issued by company which was encashed by respondent/bank. In gamut of
these admitted facts the questions which arise for determination in the matter rare: First, whether cheque No. 330448 for Rs. 1.25 crores was
issued by petitioner/company in lieu of cheque No. 329836 for Rs. 5.00 crores and if so, what would be its effect on liquidity of earlier cheque and
the consequences thereof. Secondly, the cheque for Rs. 5.00 crores having been drawn in favour of the company itself, whether respondent/bank
was not a drawee in legal sense of the expression and as such incapable of invoking the provisions of the N.I. Act and finally that the cheque
having been drawn on Bharat Overseas Bank, New Delhi whether or not Chief Judicial Magistrate, Srinagar had jurisdiction to entertain the
complaint and take cognizance thereof.
On first question the petitioner contention that by issuing second cheque, they had impliedly withdrawn the earlier one and the respondent/bank
by having it cashed had by conduct acknowledged that. In that behalf it may in the first instance be observed that expression ""in lieu of would
ordinarily mean ""instead of and as such would not be applicable to the transaction under reference for simple reason that a cheque for Rs. 1.25
crores can neither be given nor accepted instead of a cheque for Rs. 5.00 crores or as a substitute thereof or to indemnifying the same, because of
the huge difference between the amount meant to be paid or received under the two. That being so, the expression ""in lieu of essentially appears to
be inapplicable for the simple reason of its being impracticable in the meaning suggested. If at all anything in given factual scenario of the case it can
mean on account of the earlier cheque drawn for a larger amount which in the final analysis would mean part payment of the amount mentioned in
earlier cheque and acceptance whereof by the creditor would not in any case mean abandonment of the remaining credit, or automatic extension in
the time fixed for payment in view whereof the petitioners would in law suffer the consequences of the return of the earlier cheque uncashed for
want of money in the account want of sufficient funds would continue or they should stand discharged there from. Considering the matter. Under
Chapter VII of the Negotiable Instruments Act the maker of a cheque would only been from liability thereof either by cancellation or by release or
by a payment there under. None of the three existing the petitioners cannot be said to have absolved themselves from the liability they incurred
under first cheque of Rs. 5.00 crores which bounced. In that view of the matter therefore, the contention that latter cheque was issued by
petitioners and accepted, by respondent/bank in lieu of earlier one does not appear to be tenable to wash of the effect of the return of earlier
cheque.
That takes me to the aspect of the matter pertaining to the company's contention that the cheque having been drawn in their own name, the
respondent/bank could not be categorized as a drawee within meaning of Section 38 of the Act. In this behalf the petitioners appear to confuse the
expression ""drawee"" with the expression ""payee"". In terms of the Act a person directed to pay under a cheque is the ""drawee"" and the person to
whom the money is directed to be paid is a ""payee"" In that sense thus ""drawee"" in the case would be the ""Bharat Overseas Bank"" on whom the
cheque was drawn while the person on whom the money was meant to be payable would be a ""Payee"". The petitioner/company would, therefore,
be a ""Payee"" in so much that the amount was directed to be deposited in their own account, and that would be the end of the matter. But it does
not end there. The amount under the cheque was to be adjusted in the account of petitioner/company only to be adjusted towards the over draft
admittedly received by them from the respondent/bank. It is irrelevant whether the adjustment was to be made directly or through Bharat Overseas
Bank as has been admitted in the instant case. At this stage it would also be appropriate to notice that on their own showing petitioners admit
having made payment of Rs. 1.25 crores to respondent/bank through the latter cheque wherein again their company itself was the payee but
admittedly the amount there under was paid to respondent/bank for adjustment against the over draft liability. Once that promise is agreed by
petitioners they can certainly not maintain an entirely converse contention in the other case. That being so the fact that petitioner / company
themselves were mentioned as payee of the amount would not make any difference in so far as respondent's/bank's right to invoke Section 138 of
the Act for whatever they have suffered due to refusal of payments for want of sufficient funds the petitioner/company is liable to suffer the legal
action envisaged under the Act.
That brings me to the question as to whether or not the Chief Judicial Magistrate, Srinagar had jurisdiction to entertain the complaint and take
cognizance against petitioner/company and its directors. While there is no doubt that the cheque was drawn on ""Bharat Overseas Bank"" but that
per see would not shift jurisdiction to New Delhi for the simple reason that as a matter of fact, it would have been presented for encashment at
respondent/bank's Air cargo branch at Srinagar who further transmit it to concerned bank through their Regional collection Centre, New Delhi, but
the refusal having been conveyed to respondent/bank at Srinagar, the local court would not cease to have the jurisdiction. No other ground has
been urged at bar except that the respondent/bank has also exercised its option of having the mortgaged properties at Delhi attached under
Realization of Securities Act"" which, however, does not appear to have any bearing on this matter pertaining as it is strictly to the criminal aspect
under N.I. Act.
For all that has been discussed above, the petition in hand does not appear to be well founded enough to entitle petitioner to the relief prayed for
and merely on his instance the proceedings initiated by Court below by way of taking cognizance of the complaint against them cannot be quashed.
The petition is accordingly dismissed. Subordinate file received be sent down alongwith a copy of this order for further proceedings. Parties
through their counsel are directed to appear there on 07.04.2008.
Petition disposed of alongwith connected Misc. petitions.