S.142 NI Act | Third Party Cannot Prosecute Drawer For Dishonour Of Cheque: Kerala High Court

The Kerala High Court recently laid down that a third party cannot prosecute the drawer of cheque for the offence punishable under Section 138 of the Negotiable Instruments Act, 1881. 

Section 138 of the NI Act stipulates the penalty for dishonour of cheque for insufficiency of funds in the account. 

Perusing Section 142(a) of the Act which provides that no court shall take cognizance of any offence punishable under Section 138 except upon a complaint, in writing, made by the payee or, as the case may be, the holder in due course of the cheque, the Single Judge Bench of Justice A. Badharudeen proceeded to observe:

"...Therefore, a complaint alleging commission of offence punishable under Section 138 of the NI Act shall be filed either by the 'payee' or by the 'holder in due course' of the said cheque and no other person entitled to lodge a complaint and the court shall take cognizance acting on a complaint in writing filed by the 'payee' or 'holder in due course'". 

As per the factual matrix, three cheques for Rs.50,000/-, Rs.1,00,000/- and Rs.1,00,000/- were issued in the name of 'Intersight Tours and Travels Pvt. Ltd'. On dishonour of the cheques, the Director of Intersight Holidays Pvt.Ltd. issued legal notice and a complaint was also filed by the said Intersight Holidays Pvt. Ltd. 

The Court took note that nothing was stated in the complaint as regards the change of name of 'Intersight Tours and Travels Pvt.Ltd.' to 'Intersight Holidays Pvt.Ltd.', nor was anything stated that even though the complainant was not the 'payee', he was the 'holder in due course' of the three cheques, as defined under Section 9 of the NI Act.

'Holder in due course' refers to any person who for consideration became the possessor of a promissory note, bill of exchange or cheque if payable to bearer, or the payee or indorsee thereof, if payable to order, before the amount mentioned in it became payable, and without having sufficient cause to believe that any defect existed in the title of the person from whom he derived his title.

"Thus, prima facie, it appears that the present complainant has no locus standi to prosecute the second accused in terms of Section 142(a) of the N.I.Act and as such, the complaint is liable to be quashed. Therefore, I am inclined to invoke the power under Section 482 of Cr.P.C. in this particular case and accordingly, this petition stands allowed," the Court observed, while quashing the proceedings. 

The petitioner was represented by Advocates R. Padmarajsri, P.J. Antony Joseph, Maria Das, R. Ajithkumar, and V.K. Edom. Senior Public Prosecutor Renjit George, and Advocates Santhosh Mathew, Arun Thomas, Jennis Stephen, Karthika Maria, Maria Roy, Vijay V. Paul, and Veena Raveendran appeared on behalf of the respondents. 

Case Title: Arvind Singh Rajpoot v. M/S Intersight Holidays Pvt. Ltd. & Ors. 

Citation: 2023 LiveLaw (Ker) 445 

Case Number: CRL.MC NO. 983 OF 2018

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