Valid endorsement and delivery are essential for a transferee to sustain a cheque dishonour prosecution under the Negotiable Instruments Act.

A cheque payable to order can be enforced by a transferee only if valid endorsement and delivery are proved under the Negotiable Instruments Act. Mere possession or delivery, without a proper endorsement showing transfer, is insufficient to establish holder-in-due-course status. On the facts, the reverse of the cheque contained only signatures without the necessary endorsement particulars, the original payee was not examined, and the accused denied privity of contract and liability. In the absence of proof of valid transfer and consideration, the complainant could not sustain a prosecution under Section 138, and the acquittal was upheld.

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Issues: Whether the complainant, claiming through transfer of the cheque from the original payee, could be treated as a holder in due course in the absence of a valid endorsement under Section 50 of the Negotiable Instruments Act, so as to sustain a prosecution under Section 138.

Analysis: For a cheque payable to order to be enforced by a person other than the payee, there must be endorsement in favour of the transferee and delivery of the instrument. Mere possession or delivery, without a proper endorsement showing transfer, is insufficient to confer the status of holder in due course. On the facts, the reverse of the cheque contained only signatures without the necessary particulars of endorsement, the payee was not examined, and the accused had specifically denied privity of contract and liability. In the absence of proof of valid transfer and consideration, the complainant could not establish entitlement to proceed under Section 138.

Conclusion: The complainant was not proved to be a holder in due course, and the acquittal of the accused was upheld.

Ratio Decidendi: A prosecution under Section 138 of the Negotiable Instruments Act by a transferee of a cheque succeeds only when a valid endorsement and delivery are proved so as to establish holder-in-due-course status.

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