2006 (3) TMI 801 - HC - Indian Laws

Court quashes criminal proceedings against mandate holder under Negotiable Instruments Act

The Court quashed the criminal proceedings against the first petitioner, the mandate holder, under Sections 138 and 141 of the Negotiable Instruments Act, ... - Issues:Quashment of criminal proceedings under Sections 138 and 141 of the Negotiable Instruments Act - Competency of the complainant - Liability of the mandate holder.Analysis:The petition sought the quashment of criminal proceedings in C.C. No. 26715 of 2004 under Sections 138 and 141 of the Negotiable Instruments Act. The respondent/complainant alleged that the second accused, an authorised distributor, and the first accused, the father of the second accused, were involved in a case where a cheque issued by the accused was dishonoured. The complainant contended that the first accused, as the mandate holder, was responsible for determining contracts and issuing negotiable instruments on behalf of the second accused. The criminal prosecution was initiated after the cheque was dishonoured and statutory notice was issued.The accused filed a petition for quashment on two grounds. Firstly, they argued that another company was the competent person to prosecute under Sections 138 and 141 as the cheque was presented in their account. Secondly, they contended that the recent judgment of the Court exempted the mandate holder, the first accused, from prosecution. The Court considered the submissions and examined the records provided by the complainant.The Court found that there had been an amalgamation of two companies, and the complainant had informed the bank about the amalgamation. However, due to discrepancies in the bank's records, the issue of amalgamation needed to be resolved at the trial court. The complainant maintained that the first accused acted as the mandate holder on behalf of the second accused in issuing the cheque.Reference was made to legal precedents to determine the liability of a mandate holder in such cases. The Court cited a Supreme Court case where the relationship between the drawer and payee was deemed irrelevant for establishing liability under Section 138. Another judgment by the Court was referenced, which clarified that a mandate holder issuing a cheque on behalf of the account holder was not liable under Section 138.In light of the evidence and legal principles, the Court quashed the criminal proceedings against the first petitioner, the mandate holder, while dismissing the petition against the second petitioner. The judgment highlighted the distinction in liability between the mandate holder and the account holder in cases involving dishonoured cheques under the Negotiable Instruments Act.