1. The petitioner
invokes the inherent powers of this Court under Section 482 Cr.P.C.
to quash the proceedings in C.C. No. 145 of 1998 on the file of V Additional
Munsif Magistrate, Guntur.
2. A brief
resume of background of facts is necessary. The petitioner is the Chairman
of Prudential Capital Markets Limited which is a Non-Banking Finance
Company working under the aegis of the Reserve Bank of India and is
governed by the Rules and Regulations thereof. In the year 1995, the
Company is said to have started accepting Fixed Deposits in lieu of
which it promised to give interest at the rate of 15 per cent per annum
to all the investors. It appears that due to CRB Capital Market Scam
in the year 1997, all the investors in the country lost faith in Non-Banking
Finance Companies. As a result, the company decided to stop accepting
fresh deposits as well as renewing matured deposits. The Company has
closed down nearly 60 of their 90 branches all over the country. Several
depositors presented applications under Section 45 QA of the Reserve
Bank of India Act, 1934 before the Company Law Board, praying for a
direction to the Company to make the payments. The Company Law Board
is said to have considered the applications filed by the depositors
and summoned the Directors of the company, several depositors and officials
of the Reserve Bank of India. After hearing all concerned, the Company
Law Board passed a comprehensive order on 27-5-1998. It is stipulated
that the amounts will be repaid within a period of 4 1/2 years from
the respective dates of maturities of the deposits. It is further stated
that the State Bank of India, suddenly withdraw the 'At par' facility
being extended by it to several NBFCs including the company and when
the depositors presented the post-dated cheques for encashment, the
same were returned unpaid by SBL 1st respondent is an Educational Institution
in Tadikonda. The entire money in the Educational Institution was invested
at the instance of President G.Kanakaiah. Rs. 1,00,000 Fixed Deposit
receipt was issued in the name of the complainant by the petitioner.
The Company issued a cheque for Rs. 16,070 representing the interest
payable or agreed to be paid to the 1st respondent. Cheque No. 242461,
dated 21-11-1997 and Cheque No. 108182, dated 21-11-1997 for Rs. 1,00,000
and Rs. 16,070 respectively are said to have been presented before State
Bank of India, through Indian Overseas Bank, Guntur, for encashment.
The Indian Overseas Bank, Guntur, by its memorandum dated 21-1-1998
returned the cheques for want of 'insufficient funds'. The 1st respondent
got issued a notice on 21-1-1998 and the same is said to have been received
on 2-2-1998. Thereafter, he presented the complaint which has been numbered
as C.C. No. 145/98.
by the same, the petitioner representing the Company filed the Criminal
4. The learned
counsel for the petitioner assails the proceedings on the ground that
the document issued is not a cheque and it is only a demand warrant.
It is also contended that 'cheque' is defined under Section 6 of N.I.
Act and demand warrant does not come within the said definition. The
learned Public Prosecutor contends that in the complaint the word 'cheque'
has been used. Therefore, it must be taken as 'cheque' only.
to the said contentions, 'cheque' is defined under Section 6 of N.I.
Act. It reads as follows :
Cheque : A 'Cheque' is bill of exchange drawn on a banker payable on
Bill of Exchange
is defined in Section 5 of N.I. Act. It reads as follows :
: Bill of Exchange: A Bill of Exchange is an instrument in writing containing
an unconditional order, signed by the maker, directing a certain person
to pay a certain sum of money only to, or to the order, of a certain
person or to the bearer of the instrument.
or order to pay is not 'conditional' within the meaning of this section
and Section 4, by reason of the time for payment of the amount of in
any instalment thereof being expressed to be on the lapse of a certain
period after the occurrence of a specified event which, according to
the ordinary expectation of mankind, is certain to happen, although
the time of its happening may be uncertain.
The sum payable
may be 'certain' within the meaning of this section and Section 4 although
it includes future interest or is payable at an indicated rate of exchange,
or is according to the course of exchange, and although the instrument
provides that, on default of payment of an instalment, the balance unpaid
shall become due.
to whom it is clear that the direction is given or that payment is to
be made may be a 'certain person' within the meaning of this section
and Section 4 although he is misnamed or designated by description only".
6. The only
point that has to be considered is whether the refund order. Fixed Deposit
receipt or interest warrant will come under the definition of cheque
and whether it constitute an offence. It is observed in the book 'Introduction
to Negotiable Instruments' by James Mc Loughlin in 1975 edition, at
page : 130 as follows :
may authorize his banker to make payment from his account by instruments
which are not cheques. These may be valid orders, and the banker may
be in breach of contract with his customer if he fails to comply, but
they will not have the characteristics of negotiable instruments . ..
about the definition of a cheque under Section 6 of N.I. Act reads as
by which a cheque is that it must be payable instantly on demand. This
is brought out in this section by stating negatively that a cheque cannot
be expressed to be payable otherwise than on demand. A bill is payable
on demand when it is expressed to be payable on demand, or at sight
or on presentment or when no time for payment specified in it. A cheque
cannot be drawn on a banker payable at a future day, that is by dating
the cheque say the first April 1989, and be payable on a future day
named, say the 10th April, 1989. However, a cheque can be made payable
on a future day be post-dating it. The language of this section does
not seem to require that a cheque must be drawn by a customer of the
drawee bank though for obvious reasons it is so.
of a cheque have been clearly mentioned in 16th Edition, at page : 117
of Negotiable Instruments Act by Bhashyam and Adiga's. It reads as follows
of a cheque: It is somewhat inaccurate to describe a cheque as a bill
of exchange payable on demand. While a cheque has many features in common
with bills and is in many respects governed by the same rules and principle
and is often taken to be included in the general term 'bill' in enactments,
it has several peculiar characteristics and differs from bills in some
respects. Cheques are compared with and distinguished from bills as
(a) A cheque
is always drawn on bank or a banker, and is payable immediately on demand
without any days of grace. A Bill of Exchange is a negotiable instrument
in writing containing an instruction to a third party to pay a stated
sum of money at a designated future date or on demand. A 'Cheque' on
the other hand, is a bill of exchange drawn on a bank by the holder
of an account payable on demand. Thus, a 'cheque' under Section 6 of
the Act is also a bill of exchange but it is drawn on a banker and is
payable on demand. It is, thus, obvious that even though a bill of exchange
is drawn on a banker, if it is not payable on demand, it is not a cheque.
Therefore, an order issued by the District Board Engineer on the Government
Treasury is not a cheque, as the Government is not a bank carrying on
business for profit. It has been held that an instrument is not precluded
from being a cheque by reason of the fact that it is drawn by a banker
on himself. But in the above case no reference is made to the decision
of the House of Lords in Capital and Counties Bank V. Gordon where it
was decided that a draft drawn by the branch bank on its head office
was not a cheque. By a later amendment to the Bills of Exchange Act
the legislature preferred to confirm the law stated by Bailhache, J.
in Ross's case.
(b) A cheque
requires no acceptance apart from prompt payment. It is presented for
payment only. Accordingly, there is no privity of contract between the
banker and the payee, who cannot, therefore, sue the bank on dishonour.
(c) A cheque
is supposed to be drawn upon funds in the hands of the banker.
(d) The drawer
of a cheque is not discharged by failure of the holder to present it
in due time unless the drawer has sustained damage by the delay. These
differences are pointed out in the well-known passage of Parke, CB,
in the case of Ramchurn v. Luchmeechund A banker's cheque is a peculiar
sort of instrument in many respects resembling a bill of exchange, but
in some entirely different. A cheque does not require acceptance; in
the ordinary course, it is never accepted. It is not intended for circulation,
it is given for immediate payment: it is not entitled two days of grace
and though strictly speaking, it is an order upon a debtor by a creditor
to pay a third person the whole or part of a debt; yet, in the ordinary
understanding of persons it is not so considered. It is more like an
appropriation of what is stated as ready money in the hands of the banker,
and in giving the order to appropriate to a creditor, the person giving
the cheque must be considered as the person primarily liable to pay
who orders his debt to be paid at a particular place, and as being much
in the position of the maker of a promissory note or the acceptor of
a bill of exchange payable at a particular place, and not elsewhere,
who has no right to insist on immediate presentment at that place.
(e) A cheque
is not noted or protested for dishonour and is generally inland; and
(f) In respect
of crossed cheques there is protection given to the banker which is
peculiar to these instruments."
7. The entire
dispute in issue depends upon interpretation to be put on to the document
issued. The refund Order or final interest warrant are said to have
been issued towards fixed deposit amount. They are not styled as cheques.
There is no mention in the said document to pay the amount 'on demand'.
The main ingredient 'payable on demand' is absent in all these documents.
They are being issued by the Bank in pursuance of the arrangement and
payment is said to have been made. Subsequently, the cheques were dishonoured.
Section 138 commences with the words 'Where any Cheque drawn by a person
on an account maintained by him .. .'. Any instrument, Bill of Exchange,
or warrants are issued under an arrangement does not strictly fall within
the definition of a 'cheque' as it is not specifically mentioned in
the document that it is payable 'on demand'. I am of considered opinion
that if there is no mention in the document that it is payable on demand,
the said document do not fall within the definition of a 'cheque' and
it is not a cheque. When the said document is not a cheque, the question
of Section 138 of N.I. Act does not arise. Merc use of a word 'cheque'
in the complaint do not make it as a 'cheque'. In view of the interpretation
put on by me, I find that the document, bill of exchange, refund order,
and final interest warrant do not constitute cheques within the meaning
of Section 138 of N.I. Act. No offence is made out under Section 138
of N.I. Act and the averments made in the complaint do not constitute
an offence. I agree with the contention of the learned counsel for the
8. To sum
up, I find that the alleged document issued do not constitute a 'cheque'
and no offence is made out under Section 138 of N.I. Act as the documents
are issued in pursuance of the directions of Reserve Bank of India.
As the complaint do not constitute an offence under Section 138 of N.I.
Act, the proceedings are quashed against the petitioner. In so far as
the Company is concerned, the trial shall go on.
9. In the
result, this Criminal Petition is allowed to the extent indicated above.