The Allahabad High Court has held that a complaint under Section 138 of the Negotiable Instruments Act, 1881 (NI Act) is not maintainable if it is filed by a third party in their own name, unless they qualify as a holder in due course or act merely as an authorized representative of the payee.
The Bench of Justice Samit Gopal, while allowing a criminal revision petition, quashed a summoning order passed by the Metropolitan Magistrate, Kanpur Nagar, observing that the complainant had no locus standi to initiate the proceedings as the cheques in question were drawn in favor of a different entity.
Background of the Case
The matter reached the High Court through a revision petition filed by Rajesh Kukreja challenging the summoning order dated July 26, 2013, passed by the Metropolitan Magistrate, VIIIth, Kanpur Nagar.
The proceedings were initiated on a complaint dated August 8, 2012, filed by M/s. Krishna Hotels and Developers through its partner Smt. Saroj Dubey against the revisionist, Rajesh Kukreja, Director of Mangalam Restaurant and Hotel Pvt. Ltd. The complaint alleged offences under Section 138 read with Section 142 of the NI Act and Sections 406 and 420 of the Indian Penal Code (IPC).
The dispute involved eleven cheques, each amounting to Rs. 2,00,000/-, dated April 15, 2012. Crucially, these cheques were drawn in favor of “Hotel Paradise”, whereas the complaint was filed by “M/s. Krishna Hotels and Developers”.
The trial court, in an order dated November 21, 2012, had initially noted this discrepancy, observing that while the cheques were drawn in favor of Hotel Paradise, the complaint was filed by M/s. Krishna Hotels and Developers. The Magistrate had directed the complainant to clarify why the complaint was not filed by Hotel Paradise or its authorized representative. However, subsequently, vide the impugned order dated July 26, 2013, the trial court summoned the revisionist under Section 138 of the NI Act, accepting the proceedings.
Arguments Before the Court
Counsel for the revisionist, Sri L.M. Singh, argued that the entire prosecution was flawed because the complainant had no locus to file the complaint. It was submitted that since the cheques were drawn in the name of “Hotel Paradise,” the complaint should have been filed by that entity or its authorized agent. The counsel contended that M/s. Krishna Hotels and Developers was a third party to the instrument and could not initiate proceedings under the NI Act.
Per contra, the counsel for the Opposite Party No. 2 (the complainant) submitted that Hotel Paradise was a unit of M/s. Krishna Hotels and Developers. It was argued that Hotel Paradise was given for marketing purposes under an agreement where 50% of the turnover would be paid to the opposite party. The counsel relied on the Supreme Court judgment in the case of M/s Naresh Potteries vs. M/s Aarti Industries and another (2025), arguing that disputes regarding authorization should be decided during the trial.
High Court’s Observations and Analysis
Justice Samit Gopal examined Section 142 of the NI Act, which deals with the cognizance of offences. The Court noted that Section 142(a) explicitly states that no court shall take cognizance of an 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.
Referencing Sections 7 and 9 of the NI Act, the Court defined “Payee” as the person named in the instrument to whom the money is directed to be paid, and “Holder in due course” as a person who lawfully becomes the possessor of the instrument for consideration.
The Court distinguished the facts of the present case from the judgment in M/s Naresh Potteries, noting that in that case, the complainant was the holder in due course, whereas in the present matter, the complainant was neither the payee nor the holder in due course.
The Court observed:
“A complaint under Section 138 of the Negotiable Instruments Act, 1881 is not maintainable by a third party. It must be filed by the payee or the holder in due course of cheque… A third party or a stranger with no legal title to the cheque can not file and institute a complaint. A person who is neither payee nor holder in due course cannot file a complaint even if he is indirectly affected by the transaction.”
The Court further clarified the position regarding authorized representatives:
“A complaint through a third party being an attorney holder or a manager is valid only if they are duly authorized and the complainant remains the payee or holder of the cheque… Thus conclusion which can be drawn is that under the Negotiable Instruments Act a complaint by a third party in their own name is not maintainable unless that third party qualifies as holder in due course or acts merely as an authorized representative of the payee or the holder of the cheque.”
Decision
The High Court concluded that M/s. Krishna Hotels and Developers had no locus to file the complaint regarding cheques issued in favor of Hotel Paradise. The Court held that the trial court failed to consider this vital aspect while passing the summoning order, despite having noted the discrepancy in an earlier order.
Accordingly, the Court allowed the revision petition and quashed the summoning order dated July 26, 2013, passed by the Metropolitan Magistrate, Court No. 8, Kanpur Nagar.
Case Details:
- Case Title: Rajesh Kukreja Versus State of U.P. and Anr.
- Case No: Criminal Revision No. – 2776 of 2013
- Coram: Justice Samit Gopal
- Counsel for Revisionist: L.M. Singh
- Counsel for Opposite Party: Alok Kumar Yadav, Ankur Kushwaha
