Delhi District Court
Cc No.8820/16 M/S Tofarch Solutions vs . M/S Sky Construction Company & Ors 1/38 on 25 October, 2018
IN THE COURT OF GOPAL KRISHAN, METROPOLITAN MAGISTRATE(NI Act)-04 (SOUTH EAST):SAKET COURTS:NEW DELHI CC NO: 8820/2016 M/s Tofarch Solutions, A-4, 226, Paschim Vihar, New Delhi-110063 Through Sh. Ranjit Singh (Proprietor) ...............Complainant Versus (1) M/s Sky Construction Company, 5, Aurobindo Marg, New Delhi. (2) K. L. Katyal, Proprietor/partner, M/s Sky Construction Company, 5, Aurobindo Marg, New Delhi ................Accused Offence Complained of or proved : Under section 138 of Negotiable Instruments Act, 1881 Plea of the Accused : Pleaded not guilty Date of filing : 10.08.2006 Date of Institution : 11.08.2006 Date of reserving judgment/order : 18.10.2018 Final Order/Judgment : Acquitted Date of Pronouncement : 25.10.2018 CC No.8820/16 M/s Tofarch Solutions Vs. M/s Sky Construction Company & Ors 1/38 JUDGMENT:
BRIEF FACTS AND REASONS FOR THE DECISION OF THE CASE:-
1. By way of the present judgment, I shall dispose of the present complaint U/s 138 r/w Section 142 Negotiable Instruments Act, 1881 (hereinafter referred to as 'NI Act' in short) filed by M/s Tofarch Solution through its proprietor Ranjit Singh (hereinafter referred to as 'complainant') against M/s Sky Construction Company and its proprietor/partner Mr. K. L. Katyal, who have been impleaded as accused no. 1and 2 respectively (hereinafter referred to as 'accused').
2. The present complaint was filed by the complainant on 10.08.2006 on account of dishonour of one cheque bearing no. 025841 dated 02.06.2006 for a sum of Rs. 10,00,000/- drawn on Citi Bank, N.A,, Delhi-110001 in favour of complainant (hereinafter referred to as the cheque in question). Brief case of the complainant, as per complaint, is that the complainant firm is a sole proprietorship firm owned by Mr. Ranjit Singh & deals in sale and supply of furniture as also in furnishing interiors for its clients. Whereas accused no. 1 is a proprietorship/partnership firm and accused no. 2 is the owner/proprietor/partner of accused no. 1 firm. Complainant firm was having a long dealing with the accused firm through accused no. 2, wherein the accused firm used to obtain order from third parties for furnishing and supply CC No.8820/16 M/s Tofarch Solutions Vs. M/s Sky Construction Company & Ors 2/38 of the furniture, and in turn used to purchase the furniture from complainant and also used to ask the complainant to install the same in the premises of the third party. It is further submitted in the complaint that, in course of the business and against the liability of the accused no.1 towards the complainant firm to pay for the supply of the furniture and the job work done for the installation of the same, accused no.2 issued cheque in question in favour of the complainant, on behalf of accused no. 1, which cheque, on presentation, was returned unpaid with the remarks "Payment stopped by drawer" vide returning memo dt. 04.07.2006. It is further the case of complainant that since the accused have failed to make the payment against the cheque in question within fifteen days of receipt of legal notice of demand dated 06.07.2006 (sent through registered post), they have committed the offence punishable under Section 138 read with Section 142 of Negotiable Instruments Act, 1881.
3. On receipt of complaint, cognizance of the offence was taken by the Court and accused were summoned vide order dated 07.09.2006. Notice U/s 251 Cr.P.C was framed against the accused on 20.04.2010, to which the accused pleaded not guilty and claimed trial, and opportunity was granted to the accused to cross examine the complainant and, thereafter, matter was listed for CE.
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4. To prove his case, complainant examined himself as CW-1 by way of affidavit Ex. CW-1/1, where in complainant relied upon the following documents:-
(a) Ex. CW1/A : Copy of the sales tax registration certificate.
(b) Ex. CW1/B : Original cheque in question.
(c) Ex. CW1/C & Ex. CW1/D : Statement of cheque return & Cheque
returning advice dt. 04.07.2006 respectively.
(d) Ex. CW1/E : Legal demand notice dt. 06.07.2006.
(e) Ex. CW1/F & Ex. CW1/G : Original postal receipts.
(f) Ex. CW1/H : Returned Legal Notice along with postal envelope and AD
5. CW-1 was duly cross-examined by Ld. Counsel for the accused, on several dates. During his cross-examination, CW-1 produced the following documents:
(a) Ex. CW1/H : Copy of Ledger Account of Urbane Design (b) Ex. CW1/I : Copy of bill dt. 28.03.2005. (c) Ex. CW1/J : Copy of invoices by Tofarch. (d) Ex. CW1/K : Copy of ledger Account of Sky Construction. (e) Ex. CW1/L : Copy of letter dt. 20.05.2006. (f) Ex. CW1/M : Copy of invoices by Tofarch. (g) Ex.CW1/N : Copy of declaration for import. CC No.8820/16 M/s Tofarch Solutions Vs. M/s Sky Construction Company & Ors 4/38 (h) Ex. CW1/O : Copy of invoices by Tofarch. (i) Ex. CW1/P : Copy of declaration for import. (j) Ex. CW1/Q : Copy of invoices by Tofarch. (k) Ex. CW1/R : Copy of declaration for import. (l) Ex. CW1/S : Copy of furnishing plan. (m) Ex. CW1/T : Copy of balance-Sheet as on 31.03.2007. (n) Ex. CW1/U : Certificate under section 65 B of Indian Evidence Act.
CW-1 was discharged after cross-examination. No other witness was examined by the complainant in support of its case, and therefore, CE was closed and matter was listed for recording the statement of the accused U/s 313 Cr.P.C.
6. In the statement of accused no. 1 recorded through accused no. 2 as also statement of accused no. 2 (in individual capacity) recorded U/s 313 Cr.P.C, all the incriminating evidence was put to the accused, to which accused stated that accused no. 2 is AR of the accused no. 1 and accused no. 1 had ordered for model furniture of particular make from the complainant, but the complainant did not complete the work and supplied inferior quality furniture. When accused requested the complainant to change the furniture, complainant dismantled the furniture. It was further stated by the accused that the cheque in question was given in advance for the work, but complainant did not fulfill the CC No.8820/16 M/s Tofarch Solutions Vs. M/s Sky Construction Company & Ors 5/38 terms and conditions, therefore, accused stopped the payment, whereas there were sufficient funds in the account of the accused.
7. Though at the time of recording statement of accused u/s 313 CrPC, accused expressed willingness to lead DE but, later on, preferred not to lead DE. Therefore DE was closed and matter was fixed for final arguments.
8. Final arguments on behalf of both the parties were heard. Both the parties also filed written argumnets.
9. Ld. Counsel for the complainant has submitted that, by way of oral & documentary evidence lead by complainant as also in view of admission of the accused while answering notice of accusations U/s 251 Cr.P.C and explaining incriminating evidence U/s 313 Cr.P.C, the complainant very ably established his case against the accused. Accused no. 2 K. L. Katiyal has not denied his signatures upon the cheque in question and accused has also not denied the factum of assignment of job work/contract by accused to the complainant, and therefore legal presumption u/s 118 r/w 139 of NI Act arises in favour of complainant and against the accused that the cheque in question was issued by accused for valid consideration and discharge of its outstanding legal debt or liability towards the complainant. The counsel further submitted that since the limited defence of the accused has been that, the complainant failed to complete the work as per the terms of contract and installed the furniture of CC No.8820/16 M/s Tofarch Solutions Vs. M/s Sky Construction Company & Ors 6/38 inferior quality at the site and later on, even dismantled and damaged the entire work done at the site; therefore, it was incumbent upon the accused to establish his defence. But the accused could not establish his defence either by way of cross examination of complainant witnesses or by examining any witness in its defence. Counsel for the complainant further submitted that merely making bald averments, at the time of service of notice U/s 251 Cr.P.C notice or at the time of recording the statement of accused U/s 313 Cr.P.C, is not sufficient to rebut the presumptions raised against the accused U/s 118 r/w 139 of NI Act. At the end, submitted that since the accused miserably failed even to probablise its aforesaid defence, the accused persons are liable to be convicted u/s 138 of NI Act.
10. On the other hand, counsel for the accused has assailed the arguments and case of the complainant on the following grounds -
(i) That, this complaint has been filed by the complainant Ranjeet Singh as proprietor of sole proprietorship concern M/s Tofarch Solution and as per settled legal position, it was incumbent upon Mr. Ranjeet Singh to prove that he is sole proprietor of M/s Tofarch Solutions and therefore, has locus to present this criminal complaint. But Mr. Ranjeet has miserably failed to prove this fact. In this context, the counsel of the accused further submitted that despite the questions put on behalf of the accused during the cross CC No.8820/16 M/s Tofarch Solutions Vs. M/s Sky Construction Company & Ors 7/38 examination of of Mr. Ranjit Singh as CW-1, he failed to adduce any documentary evidence which could establish that he is sole proprietor of complainant firm M/s Tofarch Solutions and argued that the complainant is liable to be dismissed on this ground alone.
(ii) That, complainant has failed to establish that he has sent legal notice of dishonour of cheque in question to the accused at correct address, because admittedly, the legal notice on the accused persons was sent by the complainant on the address "5, Arurobindo Marg, New Delhi", whereas, during cross-examination of CW-1 on 26.09.2017, the complainant admitted that address of M/s Sky Construction as reflected in the documents is "5, South Apartment, Aurbindo Marg, New Delhi". At the end submitted that since legal notice of dishounour was never served upon the accused, therefore, the present complainant is without any cause of action in view of mandate of section 138 of N. I. Act and hence is liable to be dismissed on this ground also.
(iii) That, it is an admitted fact on the file that accused no.1 M/s Sky Construction company, is a sole proprietorship concern and accused no.2 i.e K. L. Katiyal is not the sole proprietor of the accused no.1, but is only an authorised representative/signatory of the accused no.1; and as per settled legal position, provision of section 141 of N.I. Act can not be invoked to CC No.8820/16 M/s Tofarch Solutions Vs. M/s Sky Construction Company & Ors 8/38 fasten the liability upon persons working as AR or having charge or control over the business of the sole proprietorship concern. In support of his argument, counsel for the accused relied upon ratio laid down by Hon'ble High Court of Delhi in case titled as M. L. Lal Vs. State of NCT Crl LP 290 of 2010 decided on 14.09.2010. In this context, it is also submitted by the counsel for the accused that complainant himself moved an application U/s 319 Cr.P.C to summon proprietor of the accused no.1 M/s Sky Construction company, as an accused in this case, which application came to be dismissed by the court vide its order dt. 10.05.2014. Since proprietor of the sole proprietorship concern M/s Sky Construction, has not been impleaded as accused in this case, therefore, nothing survives against the accused no.2 in his individual capacity or as an AR of M/s Sky Construction company, in view of the ratio laid down by Hon'ble High Court of Delhi in the aforesaid case.
(iv) That, complainant has failed to prove his case and accused clearly rebutted the presumptions raised in favour of complainant U/s 118 r/w 139 of N. I. Act during cross-examination of the complainant as also from the facts & documents admitted by the complainant himself during trial. In this context, it is submitted by the counsel that at the stage of final argument, on 19.07.2018, a letter dt. 04.2006 (a letter written by accused no. 2 K. L. Katiyal on behalf of M/s Sky Construction to complainant firm) has been admitted U/s 294 Cr.P.C CC No.8820/16 M/s Tofarch Solutions Vs. M/s Sky Construction Company & Ors 9/38 on behalf of the complainant and in the aforesaid letter dt. 04.2006, all the facts are mentioned by the accused firm as to why it is not liable to complainant firm. The counsel further submitted that since this document has been admitted by the counsel for the complainant U/s 294 Cr.P.C, therefore in view of the judgment of Hon'ble High Court of Delhi in Crl.A. No. 1/94 titled as Gunjit Singh Vs State decided on 23.01.1996, the only inference that could be raised is that the by admitting the said document, the complainant not only admitted its genuineness, but also the correctness of its contents. The counsel further submitted that, apart from it, in the written submissions filed on behalf of the complainant, he himself has relied upon one legal notice dated 18.07.2006 sent by accused to the complainant firm (and in one of the connected matters i.e. CC no. 8819/16 titled as M/s Tofarch Solutions Vs M/s Urbane Designs, pending in this court only, this legal notice dated 18.07.2006 got exhibited as Ex. CW1/D-1 & receipt of the same has been admitted by the CW-1 Mr. Ranjeet Singh during cross-examination in that case), and has also relied upon another two emails dt. 04.07.2006 and 05.07.2006 exchanged between the complainant firm and client (i.e. Tata Macgarav Hills) of accused firm, which documents further probablise the defence of the accused persons and therefore, accused has been able to rebut the presumption U/s 118 r/w 139 of NI Act, raised against the accused. It is further submitted by counsel for the CC No.8820/16 M/s Tofarch Solutions Vs. M/s Sky Construction Company & Ors 10/38 accused that, the complainant in his evidence has not tendered any legally admissible document which could show that on the date of presentation of cheque in question, any legal liability of the accused was outstanding towards the complainant and all the documents exhibited during evidence of CW-1 like invoices, ledger account, balance sheet etc, were mere photocopies, to which the objection was raised by accused during tendering of aforesaid documents by CW-1 in evidence and therefore, these documents cannot be relied upon to complaint to prove any liability of the accused towards the complainant.
At the end, counsel for the accused submitted that complaint be dismissed and accused be acquitted of the offence charged.
11. From the facts on the file and arguments, written as well as oral, advanced on behalf of both the parties, following points for determination arise in this case:-
(a) Whether complainant firm M/s Tofarch Solutions is sole proprietor concern owned by Sh. Ranjeet Singh, and hence, Whether Mr. Ranjeet Singh has locus to present this criminal complaint u/s 138 of NI Act against the accused?
(b) Whether the complaint of the complainant is liable to be dismissed on account of non-service of mandatory legal notice of demand in terms of proviso (b) of Section 138 of NI Act?
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(c) Whether the complaint is liable to be dismissed as proprietor of the accused firm M/s Sky Constructions company has not been made a party in this case?
(d) Whether the cheque in question was issued by accused in favour of complainant for discharge of its outstanding legal debt or liability towards the complainant?
I shall deal with the aforesaid points in seriatum herein below:-
12. (a) Whether complainant firm M/s Tofarch Solutions is sole proprietor concern owned by Sh. Ranjeet Singh, and hence, Whether Mr. Ranjeet Singh has locus to present this criminal complaint u/s 138 of NI Act against the accused?
In this regard, perusal of the file indicates that the complaint has been instituted in the name of M/s Tofarch Solutions through Sh. Ranjeet Singh (Proprietor) and averments regarding the fact that Sh. Ranjit Singh is proprietor of M/S Tofarch Solutions, have been made in para no.1 of the complaint as well as in para no.1 of affidavit Ex. CW1/1 tendered in complainant's evidence by CW-1. CW-1 in his affidavit got exhibited copy of sales tax registration certificate as Ex. CW1/A, wherein Sh. Ranjit Singh has been indicated as proprietor of M/s Tofarch Solutions.
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13. In this regard, it is submitted by the counsel for the accused during final arguments that, the said sales tax registration certificate is mere photocopy and complainant has failed to bring on record any admissible piece of evidence, which could have shown his locus to file the present complaint, as proprietor of M/s Tofarch Solutions. Ld. Counsel for the accused has also submitted that during cross examination of CW-1, suggestion was advanced on behalf of the accused that Sh. Ranjit Singh does not have any locus in respect of complainant firm and that is why he has not filed any documents in respect of the same. Counsel for the accused further submitted that in case of sole proprietorship concern, it is incumbent upon the complainant to positively show that he has locus as proprietor or authorised representative of complainant firm, which Sh. Ranjit Singh has filed to show, and therefore, submitted that in view of ratio laid down by Hon'ble Supreme Court in Milind Shripad Chandurkar Vs Kalim M. Khan and Another (2011) 4 SCC 275, complaint is liable to be dismissed on this ground alone.
14. In this context, it is correct that no documentary admissible piece of evidence has been tendered by the complainant showing that he is the proprietor of Tofarch Solutions and therefore, he has locus to present this complaint. However, it is pertinent to mention here that one document i.e legal notice dt. 18.07.2006 sent on behalf of accused firm M/s Sky Solutions CC No.8820/16 M/s Tofarch Solutions Vs. M/s Sky Construction Company & Ors 13/38 company through its lawyer to complainant firm M/s Tofarch Solutions has been filed by the complainant in his written arguments and same has been admitted by the accused no.2 in their written submissions at page no.9 (and in one of the connected matters i.e. CC no. 8819/16 titled as M/s Tofarch Solutions Vs M/s Urbane Designs, pending in this court only, this legal notice dated 18.07.2006 got exhibited as Ex. CW1/D-1 & receipt of the same has been admitted by the CW-1 Mr. Ranjeet Singh during cross-examination in that case) and hence this legal notice dated 18.07.2006 is an undisputed document, which has been, admittedly, sent by accused firm M/s Sky Solutions company to the complainant firm and has also been, admittedly, received by complainant firm. Perusal of this notice dated 18.07.2006 indicates, that in this notice, Mr. Ranjit Singh has been shown as addressee no.2 by the sender of the notice i.e accused no. 1 M/s Sky Constructions company and Mr. Ranjit Singh has been mentioned as proprietor of M/s Tofarch Solution. So, it is clear that even as per accused, Mr. Ranjit Singh was the sole proprietor of M/s Tofarch Solution at the relevant time and as per the section 58 of Indian Evidence Act, an admitted fact need not be proved by way of any other formal evidence. In these facts and circumstances of the case, this Court is of the view that Mr. Ranjit Singh was the proprietor of M/s Tofarch Solution at the relevant time and hence, had locus to present this CC No.8820/16 M/s Tofarch Solutions Vs. M/s Sky Construction Company & Ors 14/38 complaint.
15. Point (b) Whether the complaint of the complainant is liable to be dismissed on account of non-service of mandatory legal notice of demand in terms of proviso (b) of Section 138 of NI Act?
In this regard, complainant has made averments in para no.6 of the complaint that he has sent the legal notice to the accused no.1 and 2 regarding dishonour of the cheque, but the same was returned with the report that no accused found at the address and a similar averment has been made in para no.6 of the affidavit tendered in complainant evidence and in this regard, legal notice has been exhibited as CW1/E and returned legal notice along with postal envelope & AD, has been exhibited as CW1/H. Perusal of the Ex. CW1/E and Ex. CW1/H indicates that notice has been sent at the address "M/s Sky Constructions, 5, Arvindo Marg, New Delhi."
16. In this regard, it is submitted by the counsel for the accused, during final arguments, that complainant during cross-examination, himself has admitted that from the documents filed in the case, the address of the M/s Sky Constructions is reflected as "5, South Apartment, Aurbindo Marg, New Delhi" and therefore, admittedly, complainant has sent the legal notice at the incomplete address, due to which, no legal notice was received by the accused which is also clear from the report of postal department on CW-1/H. CC No.8820/16 M/s Tofarch Solutions Vs. M/s Sky Construction Company & Ors 15/38
17. In this context, it is pertinent to mention here that, though the accused is disputing the correctness of address of the M/s Sky Construction company as mentioned in the legal notice Ex. CW1/E 06.07.2006, sent by the complainant to the accused firm, however, legal notice dt. 18.07.2006 (as mentioned in para no. 15 above that this document has been relied upon by both the parties in written submissions filed by them and which document is also Ex. CW1/D-1 in one of the connected matters i.e CC No.8819/16), admittedly, sent on behalf of the accused no. 1 through its lawyer to complainant, is on record. Opening lines of this notice read as below :-
"Under instructions from and on behalf of my client M/s Sky Construction Company having their office at 5, Aurobindo Marg, New Delhi- 110016, I hereby serve you the following legal notice".
So mere perusal of aforesaid legal notice dt. 18.07.2006, makes it clear that even in the said legal notice sent on behalf of accused no. 1, the address of accused no. 1 is indicated as "5, Aurbindo Marg, New Delhi" only, which is same address as is mentioned by the complainant in its legal notice of demand Ex. CW1/E dated 06.07.2006, and therefore, again, it amounts to admission on behalf of accused, of the fact that legal notice sent by the complainant, has been sent at the correct address of the accused.
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18. It is again pertinent to mention that after taking cognizance in this case, all the summons were issued upon the accused by the Court at the same address, and in this regard, no fresh address of the accused has ever been filed by the complainant at any stage for ensuring the presence of the accused persons and accused persons has also entered their presence on the basis of processes issued by the Court at the abovesaid address only. This fact has nowhere been disputed by the accused and it has neven been argued on behalf of the accused that the complainant had filed any different address of the accused after filing of complaint, so as to ensure the presence of the accused persons in this case. Further, it is also not the case of the accused persons that they came to know about the proceedings of this case from any other source and therefore, they entered appearance before the court in this case on the basis of that other information rather than through summons of this court.
In these facts and circumstances, the court is of the view that legal notice has been sent by the complainant at proper & correct address of the accused.
19. Point (c) Whether the complaint is liable to be dismissed as proprietor of the accused firm M/s Sky Constructions company has not been made a party in this case?
In this regard, counsel for the accused no. 2 has argued that it is an CC No.8820/16 M/s Tofarch Solutions Vs. M/s Sky Construction Company & Ors 17/38 admitted position in the case that accused no. 1 is a sole proprietorship concern and admittedly, the complaint has not been filed against the proprietor of the accused no. 1 M/s Sky Construction Company, and accused no. 2, just being the authorised signatory and representative of accused no. 1, cannot be prosecuted, because vicarious liability in view of the provision u/s 141 of NI Act, can not be fastened upon authorised signatory/representative of a sole proprietorship concern and provision u/s 141 can be pressed into service only to held the authorized signatory/representative of a partnership firm/company, as vicariously liable alongwith partnership firm/company.
On the other hand, counsel for the complainant has argued that entire dealing of the complainant, throughout, has been with accused no.2 on behalf of accused no. 1 and accused no.2 never stated that he is not the proprietor of accused no.1, therefore, as an authorized representative of accused firm, accused no.2 is liable to be convicted in this case.
20. In this regard, it is pertinent to mention that complainant in para 2 of its complaint, himself has indicated the status of accused no.1 M/s Sky Construction company as a proprietorship/partnership firm and has also indicated accused no.2 as proprietor/partner of accused no.1. Therefore, it is clear that, at the time of presentation of complaint, the complainant himself made vague averments about the status or constitution of accused firm M/s CC No.8820/16 M/s Tofarch Solutions Vs. M/s Sky Construction Company & Ors 18/38 Sky Construction Company. Further, cheque in question also bears the imprint of accused no. 1 M/S Sky Construction Company and on the cheque, signature of accused no.2 are put specifically in the capacity of authorized signatory and not as sole proprietor of accused no.1. Therefore, on the basis averments made in the complaint, the court summoned the accused no. 1 M/s Sky Construction Company and accused no. 2 Mr. K. L. Katyal. After entering into appearance before the court, accused no.2, accordingly, started defending the case in his individual capacity and as an AR of accused no.1.
21. Later on, the complainant himself filed an application U/s 319 Cr.P.C on 15.09.2011, requesting the Court to summon Mrs. Akash Katyal, allegedly, the proprietor of accused no.1 firm (and allegedly, daughter in law of accused no.
2) stating that, at the time of filing the complaint, the complainant was not aware that whether the accused no. 1 is a partnership firm or proprietorship firm and the complainant assumed that the accused no. 2 is the partner of the firm, who issued the cheque in question. The complainant further stated in the aforesaid application that on a complaint, filed by accused against the complaint u/s 156 (3) later on, the complainant came to know that the accused firm is a sole proprietorship concern, whose sole proprietor is said Mrs. Akash katyal and accused no. 2 is only the authorised signatory of accused no. 1. At the end prayed that, since Mrs. Akash Katyal is the proprietor of the accused CC No.8820/16 M/s Tofarch Solutions Vs. M/s Sky Construction Company & Ors 19/38 firm (which fact has also been suppressed by accused no. 2), therefore, Mrs. Akash Katyal be summoned as an accused in this case.
22. This application of complainant, came to be rejected vide order dt. 10.05.2014 of the Court. The complainant, admittedly, has not challenged the said order of the court in appeal or revision and therefore, the aforesaid order dated 10.05.2014 of the court has attained finality. Therefore, the admitted facts before the court remain, that accused no.1 is a sole proprietorship concern and its sole proprietor Mrs. Akash Katyal, is not an accused before this court. It is also well settled position of law that sole proprietorship concern is not a separate legal entity than its proprietor and it is merely a trade name of its proprietor, and in case of sole proprietorship firm, no one except sole proprietor of accused firm can be made liable for the offence u/s 138 of NI Act and in case of sole proprietorship concern vicarious liability u/s 141 of NI Act cannot fastened on representative/authorised signatory/manager/any person having control over the business of the proprietorship concern except the sole proprietor himself. The Court finds support of this view from the judgment relied upon by the counsel for the accused, of Hon'ble High Court of Delhi pronounced in M. M. Lal Vs State NCT of Delhi & Anr. (2013) DLT (CRL.) 242 and Judgment of Hon'ble High Court of Kerala pronounced in B.S. Bhasi Vs K. M. Purushottam Das 2017 SCC online Ker 15302. CC No.8820/16 M/s Tofarch Solutions Vs. M/s Sky Construction Company & Ors 20/38
23. Though the counsel for the complainant has tried to make a case in favour of complainant by raising an argument that, since entire dealing of the complainant, throughout, has been with accused no.2 on behalf of accused no. 1 and since accused no.2 never stated that he is not the proprietor of accused no.1 and he is dealing with the complainant on behalf of accused no. 1 merely as an agent or authorised representative, therefore, even accused no. 2 is liable u/s 138 of NI Act, as per the provisions of section 28 of Negotiable Instrument Act.
24. The court does not find force in the aforesaid argument of counsel for the complainant on two counts.
25. Firstly, section 28 of NI Act reads as "An agent who signs his name to a promissory note, bill of exchange or cheque without indicating thereon that he signs as agent, or that he does not intend thereby to incur personal responsibility, is liable personally on the instrument, except to those who induced him to sign upon the belief that the principal only would be liable."
Now in view of the aforesaid provision, if we look at the facts of the case, then a bare perusal of cheque in question Ex. CW1/B will reveal that the cheque in question has been drawn on the account of accused no. 1 M/S Sky Construction Company and accused no.2 has put his signature on the cheque on behalf of accused no. 1, specifically indicating himself as 'authorized CC No.8820/16 M/s Tofarch Solutions Vs. M/s Sky Construction Company & Ors 21/38 signatory' and the cheque is not issued by accused no. 2 in his individual capacity or by misrepresenting himself as sole proprietor of accused no.1. Therefore, the section 28 of NI Act can not be pressed into service to fasten any liability on accused no. 2 in the facts of the present case.
26. Secondly, section 138 of NI Act imposes a penal liability on the drawer of the cheque specifically and further,only in certain mentioned circumstances, section 141 of NI Act fasten vicarious criminal liability on certain other persons, apart from the drawer of the cheque. These provisions are contained under chapter XVII of NI Act, which was incorporated in the year 1988 through an amendment, so as to impose penalties in case of dishonour of cheques. Since chapter XVII of NI Act imposes criminal liability, therefore, provisions contained in it have to be read strictly. In view of the court, vicarious criminal liability u/s 138 of NI Act can only be fastened with the help of 141 NI Act and if a person can not be held vicariously liable, for the offence u/s 138 of NI Act, with the aid of section 141, then the provisions like section 28 of NI Act can not be invoked to fasten vicarious criminal liability on any person for punishing him u/s 138 of NI Act, though the same (section 28 of NI Act) may be pressed into service to fasten any civil liability on agents for dishonour of cheques. Since accused no. 2, being an authorised signatory/representative of sole proprietorship concern (i.e. accused no. 1), can CC No.8820/16 M/s Tofarch Solutions Vs. M/s Sky Construction Company & Ors 22/38 not be held liable u/s 138 r/w section 141 of NI Act, in view of the authoritative pronouncement of Hon'ble High Court of Delhi in M. M. Lal Vs State NCT of Delhi & Anr. (supra) and of Hon'ble High Court of Kerala in B.S. Bhasi Vs K. M. Purushottam Das (Supra), therefore, the provisions u/s 28 of NI Act can not be invoked to held him guilty u/s 138 of NI Act.
27. Counsel for the complainant has further argued that since the complainant has impleaded sole proprietorship firm M/s Sky Construction Company as accused no. 1 in the case, in view of pronouncement of Hon'ble High Court of Delhi in M. M. Lal Vs State NCT of Delhi & Anr. (supra), relied upon by accused himself in support of his plea, any reference to sole proprietor firm M/s Sky Construction Company shall mean and include sole proprietor thereof i.e. Mrs. Akash Katyal also and hence complaint can not be dismissed for non-impleadment of sole proprietor.
28. However, the court does not find force in this argument also, raised on behalf of counsel of the complainant. Because, as stated above in para 20 & 21 that, from the reading of the complaint and also, as per averments made in application dated 10.05.2011 u/s 319 Cr.P.C filed by complainant, it is very clear that the complainant himself was not aware about the status/composition of the accused no. 1 at the time of institution and in his application u/s 319 Cr.P.C., the complainant stated that he assumed accused no. 2 as partner of the CC No.8820/16 M/s Tofarch Solutions Vs. M/s Sky Construction Company & Ors 23/38 accused no. 1 and impleaded accused no. 2 as such in the complaint. Therefore, in the complaint, the complainant has made vague averments about exact status/composition of accused no. 1, whereas, going by the averments of the complainant in its application u/s 319 Cr.P.C., it appears that the complaint was instituted by complainant against accused no. 1 assuming it as partnership firm and against accused no. 2 in the capacity of its partner, and then at the stage of final arguments, the counsel for the complainant has raised this argument that, any reference to sole proprietor firm M/s Sky Construction Company shall mean and include sole proprietor thereof i.e. Mrs. Akash Katyal also. Therefore, in view of the court, it appears that complainant is trying to cover up the lacunae in its case, by conveniently changing its stand continuously. Further, if this was the case that, complainant had impleaded sole proprietorship firm M/s Sky Construction Company as accused no. 1 in the case, which, as per the complainant, shall mean and include sole proprietor thereof i.e. Mrs. Akash Katyal also, then there was no need for the complainant to move the said application u/s 319 Cr.P.C.
29. Secondly, if the complainant really meant to institute case against sole proprietory concern M/s Sky Construction Company, then the impleadment of accused must have been either in the name of " M/s Sky Construction Company through its sole proprietor Mrs. Akash Katyal" or in the name of CC No.8820/16 M/s Tofarch Solutions Vs. M/s Sky Construction Company & Ors 24/38 "Mrs. Akash Katyal, sole proprietor M/s Sky Construction Company" and it could not have been simply "M/s Sky Construction Company", because as stated above, the sole proprietorship concern is not an independent legal entity or an independent legal person, and hence the complaint can not be filed by or against any entity which is not recognized as a separate legal entity, as per law. I also find support of my aforesaid view from the pronouncement of Hon'ble Supreme Court in the case of Shankar Finance and Investments Vs State of Andhra Pradesh and othrs., (2008) 8 SCC 536.
30. In view of the aforesaid discussion, it is clear that sole proprietor Mrs. Akash Katyal, of M/s Sky Construction Company is not an accused before the court. Though, the complainant had moved an application U/s 319 Cr.P.C to implead the sole proprietor Mrs. Akash Katyal as an accused, but as stated above, the same came to be rejected vide order dt. 10.05.2015 and the said order of the Court has attained finality. Further, as per settled legal position, in case of sole proprietorship firm, no one except the sole proprietor of firm can be made liable for the offence u/s 138 of N.I. Act. From the reading of the complaint as also, as per averments made in application dated 10.05.2011 u/s 319 Cr.P.C by complainant himself, the complainant was not aware about the status/composition of the accused no. 1 at the time of institution and he assumed accused no. 2 as partner of the accused no. 1 and impleaded accused CC No.8820/16 M/s Tofarch Solutions Vs. M/s Sky Construction Company & Ors 25/38 no. 2 as such in the complaint. Further, as per complainant, the material facts were suppressed by accused no. 2 only. But in view of the court, it was the duty of complainant to have checked/confirmed the status of the accused no. 1, at the time of dealing with accused or at the time of accepting the cheque in question from accused no. 1, and to have instituted this complaint against proper accused. The complainant can not simply plead ignorance and state that he did not have any way out to check the status of accused no. 1, or since accused no. 2 suppressed this fact from complainant, he assumed accused no. 2 as the sole proprietor/partner of accused no. 1 and therefore, now the accused no. 2 be made liable u/s 138 of NI Act.
Therefore, in view of the court, since the sole proprietor Mrs. Akash Katyal of sole proprietorship concern M/s Sky Construction Company has not been impleaded as an accused in this case, the complaint is not maintainable against any other accused and therefore, is liable to be dismissed on this ground alone.
31. (d) Whether the cheque in question was issued by accused in favour of complainant for discharge of its outstanding legal debt or liability towards the complainant?
Before appreciation of evidence on this point, at the very outset, I would like to narrate the legal principles laid down in several judgments of Hon'ble CC No.8820/16 M/s Tofarch Solutions Vs. M/s Sky Construction Company & Ors 26/38 Supreme Court of India and of various High Courts including our own High Court. In my considered opinion, it is now well settled that in case the accused admits his signatures on the cheque in question, there arises a presumption in terms of Sections 118(a) and 139 of the NI Act to the effect that the same was issued for valid consideration and in discharge of legally enforceable debt or liability. Though a Division Bench of Hon'ble Supreme Court of India in Krishna Janardhan Bhat v. Dattatraya G. Hegde, (2008) 4 SCC 54, has observed that the presumption under Section 139 of the NI Act does not go to the extent of presuming the existence of a legally recoverable debt, however, in a later judgment titled as Rangappa v. Sri Mohan, (2010) 11 SCC 441, a larger Bench of Hon'ble Supreme Court has expressed its disagreement with the aforesaid view, holding that there is also an initial presumption regarding the existence of legally recoverable liability under Section 139 of the NI Act. Further, it has been held that the presumptions under Sections 118(a) and 139 of the NI Act are rebuttable in nature and for rebuttal of the same, accused need not even step into the witness box, as the accused can rebut the same by placing reliance on the material brought on record by the complainant. It is also well settled legal position that the presumptions can be rebutted even by raising presumptions of facts and law on the basis of material available on record. The aforesaid propositions of law have been laid down by Hon'ble CC No.8820/16 M/s Tofarch Solutions Vs. M/s Sky Construction Company & Ors 27/38 Supreme Court in M/s Bharat Barrel & Drum Mfg. Co. v. Amin Chand Pyarelal (1999) 3 SCC 35, Krishna Janardhan Bhat's case (Supra) and Rangappa v. Sri Mohan's case (Supra). It is further well settled in the aforesaid judgments, that the standard required from the accused to prove his defence is preponderance of probabilities and accused need not prove his defence beyond reasonable doubts.
32. In this regard, complainant, in his complaint as well as in the affidavit tendered in evidence, has stated that accused M/s Sky Constructions has issued the cheque in question to the complainant, which was signed by accused no.2, for discharge of their legally outstanding liability/debt and the said cheque has been exhibited as CW1/B in the evidence. The fact of the issuance of cheque and signature on it are not denied by the accused no.2 and the defence of the accused no.2 has only been that, the accused had ordered furniture of particular make from the complainant, but complainant did not complete the work and supplied the inferior quality furniture and the complainant also dismantled the furniture, and cheque in question was only issued as an advance for the work and because the complainant did not complete the work as per agreed terms, therefore, accused stopped the payment of cheque. Therefore, in view of the Court, legal mandatory presumption of law u/s 118 and 139 of NI Act arises in the favour of the CC No.8820/16 M/s Tofarch Solutions Vs. M/s Sky Construction Company & Ors 28/38 complainant and against the accused that cheque in question was issued for discharge of legally enforceable debt and liability and the onus was on accused to rebut this presumptions as per his defence.
33. No doubt the aforesaid presumption is rebuttable in nature and for rebutting the same, accused need not even step into the witness box and accused could have rebutted the same through cross-examination of complainant. In case the accused is able to rebut the initial presumption regarding existence of debt or liability of accused towards the complainant through cross-examination of complainant, the onus would again shift to the complainant to prove the legally enforceable liability of the accused towards the complainant to the extent of cheque amount in question beyond reasonable doubts. Whether or not accused has been able to rebut the said presumptions is a question of fact which shall be decided on the basis of peculiar facts and circumstances of the present case.
34. Now, looking at the defence of the accused, it was incumbent upon him to bring any material on record which could have been indicated that there was some dispute regarding the inferior quality of furniture and complainant dismantled the furniture at work site and therefore, cheque in question was not for discharge of any legal liability outstanding on the date of presentation of cheque. It is also clear from the perusal of the case file that accused has not CC No.8820/16 M/s Tofarch Solutions Vs. M/s Sky Construction Company & Ors 29/38 stepped into witness box to probablise his defence and he has taken this defence either at the time of framing of notice U/s 251 Cr.P.C or in his application u/s 145(2) of NI Act or in his statement U/s 313 Cr.P.C. Apart from it, accused has also put certain questions during cross-examination of complainant witness i.e CW-1, in line with his defence. From cross examination of CW-1, it is also clear that though accused had put many suggestions to the complainant witnesses, in terms of his defence, but the same were denied by the CW-1.
35. However, it is pertinent to mention here that written submissions have been filed on behalf of complainant in this case wherein, at page 14 to 16, complainant has also filed copies of emails dt. 04.07.2006 and 05.07.2006, which e-mails, as per complainant, were exchanged between complainant and client of accused M/s Sky Constructions Company i.e Tata Macgarav Hills (i.e. where the complainant was supposed to carry out the work regarding installation of furniture as per the contract with accused firm). The mere reading of aforesaid e-mails indicates that in these emails, the complainant himself has admitted the factum of dismantling the work done by him in the office of Tata Macgarav Hill, which itself probablise the aforesaid defence taken by the accused.
CC No.8820/16 M/s Tofarch Solutions Vs. M/s Sky Construction Company & Ors 30/38
36. Though, counsel for the complainant during final oral arguments has stated that in their email dt. 05.07.2006 to Tata Macgarav Hill, they had also mentioned the factum of restoring the furniture again in same shape, on very same night itself and therefore, defence taken by the accused again gets misplaced. But in view of the Court, the aforesaid documents i.e. e-mail dt. 05.07.2006 sent by the complainant to Tata Macgarav Hill is a document, which has been produced and relied upon by the complainant during final written arguments and, accused did not get any opportunity to cross-examine the complainant in respect of said document and therefore, in the aforesaid email, any admission by complainant which is against the accused and in favour of complainant cannot be read and as per the section 21 of Indian Evidence Act, such admissions can be read only against the person who is making such admission and therefore, the admissions by complainant, in the said emails can be read against the complainant but not in his favour.
37. It is also pertinent to mention here that, at the stage of final arguments, complainant has filed copy of letter dt. 04.2006 at page no.8 of their written submissions and further, this document has been admitted by the complainant on 19.07.2018 u/s 294 Cr.P.C and the same was exhibited as P-1. The aforesaid document Ex. P-1, is a letter issued by accused no.2 on behalf of accused no.1 to complainant firm i.e M/s Tofarch Solution, wherein again the CC No.8820/16 M/s Tofarch Solutions Vs. M/s Sky Construction Company & Ors 31/38 factum of installation of inferior quality by the complainant at the work site is mentioned and it is also alleged against the complainant that on 01.07.2006 they had dismantled the installed furniture and manhandled their employees and the complainant forcibly took the cheques from the official of the accused, therefore, the accused firm instructed the banker to stop the payment of amount of Cheque no. 025839, 025840 & 025841 (cheque in question).
38. In this regard, Ld. Counsel for the accused has submitted that since the document has been admitted by complainant U/s 294 Cr.P.C, therefore, it is not only the admission of fact of receiving this document, but also the contents of the document which has been admitted by the complainant. For his submissions, counsel for the accused has relied upon judgment of Hon'ble High Court of Delhi pronounced in Gunjit Singh Vs State 1996 (36) DRJ.
39. On the other hand, the counsel for the complainant has submitted that by that admission, complainant has only admitted the factum of receiving the said document and this admission cannot be stretched beyond this, as including in it, the admission of correctness of the contents of this document.
40. After adverting to the aforesaid arguments and precedent relied upon by the accused on this point, the court is of the view that facts in the case of Gunjit Singh Vs State (supra) were quite different than the present case. Said case was a case u/s 5(2) r/w section 5(1)(e) of Prevention of Corruption Act, CC No.8820/16 M/s Tofarch Solutions Vs. M/s Sky Construction Company & Ors 32/38 wherein the prosecution relied upon certain documents which were executed between accused and third parties, and which were seized by police during investigation and formed part of report u/s 173 Cr.P.C. As mentioned in the aforesaid judgment itself that, genuineness of these documents was never disputed by prosecution, rather the prosecutor himself made a statement that he is relying upon these documents and tendered these documents in evidence and prosecutor insisted for direction to the accused to admit or deny the same. The court noted in the said case that these documents were in fact owned by the public prosecutor and he himself tendered these documents in evidence and after making these observations, the court mentioned in para 10 of the judgment that "in this backdrop we have to consider and appreciate the provision of section 294 Cr.P.C." and in this backdrop the court went on to hold that the documents became authentic and contents thereof became substantive evidence and set aside these observation of trial court that "prosecution had been disputing the genuineness of the documents produced by the accused during investigation, hence the admission of these documents by the accused had no consequence".
However, in this case, the aforesaid document Ex. P-1 dated 04.2006, has been enclosed by complainant along with his written arguments and in this regard, a written submission has been made on page 6 point (ix) on behalf of CC No.8820/16 M/s Tofarch Solutions Vs. M/s Sky Construction Company & Ors 33/38 the complainant that the accused did not intentionally step into the witness box in DE because accused was well aware about the fact that he might be confronted, inter-alia, with the aforesaid document. Subsequently, on the application u/s 294 Cr.P.C. filed by the accused, the same was admitted on behalf of the complainant u/s 294 Cr,P.C. and got exhibited as Ex. P-1. Therefore, looking at overall facts and circumstances, in view of the court, the counsel for the complainant has only admitted the factum of receiving the said legal notice and such admission can not be stretched to the point that the same includes even admission of correctness of contents by the complainant.
41. Having observed this, the court is also of the view, that since the complainant had admitted the receipt of the aforesaid legal notice Ex. P-1 dated 04.2006, wherein accused has mentioned all the pertinent facts levelling serious allegations against complainant, of installing inferior quality furniture & dismantling the work site as also forcibly taking away the cheque in question from the official of the accused firm, etc. and has also mentioned the factum of issuing instruction to the banker to stop the payment of cheque in question; it was incumbent upon the complainant to send the reply of aforesaid notice of the accused in view of the fact that the facts mentioned in the said notice were relevant for determining the liability of the accused in the present complaint. It is not the case of complainant that he had sent any reply to the CC No.8820/16 M/s Tofarch Solutions Vs. M/s Sky Construction Company & Ors 34/38 aforesaid notice Ex. P-1. Even if the reply to the said notice was not sent by the complainant to the accused, the complainant could have atleast mentioned the factum of receiving this notice in his complainant and could have mentioned in the complaint that the said notice Ex. P-1 was sent by the accused on false grounds. Since the complainant neither had replied to the aforesaid notice Ex. P-1 nor has revealed such facts in his complaint, an adverse inference is to be raised against the complainant, because if these facts mentioned in the said notice Ex. P-1 would not have been correct, the complainant would have replied and rebutted the allegations leveled against the complainant through proper reply or atleast by mentioning the same in his complaint.
42. In these circumstances, in view of admissions of the complainant in aforesaid documents i.e. e-mails dt. 04.07.2006 and 05.07.2006, produced by the complainant himself during his written arguments and also the adverse inference raised against the complainant in view of aforesaid legal notice Ex. P-1 dt. 04.06, the accused has been able to probablise its defence and to rebut presumption raised against him.
43. Therefore, onus shifted back upon the complainant to prove beyond reasonable doubt that even after dismantling of the work site by the complainant, the same was restored back and cheque in question was CC No.8820/16 M/s Tofarch Solutions Vs. M/s Sky Construction Company & Ors 35/38 presented in lieu of outstanding legal debt or liability of the accused towards the complainant. In view of the Court, complainant could have discharged his onus by proving on record, the proper invoices raised by the accused and any receipt in this regard or any other unimpeachable document or any witness having knowledge of the fact and who could have deposed about these facts in favour of complainant. Though, the complainant got exhibited various ledger accounts, invoices & other documents pertaining to the transaction as Ex. CW1/H to Ex. CW1/T during his cross-examination, but admittedly, all these documents were objected to, by the counsel for the accused, as being the photocopies only and since the documents are admittedly the photocopies, therefore, in view of the Court the same cannot be read in evidence.
44. Even otherwise, the complainant failed to explain the entries in the invoices during his cross examination. The relevant portion of Cross- examination of complainant CW-1 read as under:
"The entries in the ledger account of Sky Construction dt 01st June 2006 to 31st March 2007, dt. 09.06.2006 to 18.06.2006 are sale invoices made from complainant firm to the accused no. 1. I can not explain the other entries. It is wrong to suggest that I am not purposely explaining the entries as in the ledger as the entry dt. 01.06.2006 for Rs.11,73,000/- has been debited twice but credited thrice till the duration 05.06.2006 and thereafter the same was CC No.8820/16 M/s Tofarch Solutions Vs. M/s Sky Construction Company & Ors 36/38 debited and credited once again on 07.06.2006 and that the entire entires under the ledger are false. It is wrong to suggest that the entries are false and fabricated and therefore, the same were neither attested by me nor account department before filing."
45. Thus, in view of the aforesaid discussions, in my considered opinion, accused have been able to discharge the initial onus upon them to rebut the presumption arising in favour of complainant regarding liability of accused towards the complainant, by prepondrance of probabilities and complainant has failed to prove the liability of accused to the extent of cheque amount in question by leading any cogent evidence despite the fact that the onus to prove the same had shifted back to the complainant.
46. Counsel of the complainant also argued that the accused is not consistent in his defence and at some places, he has mentioned that cheque in question weas issued in advance to the complainant and at some places he has taken defence that complainant forcibly entered the premises of client of the accused and forcefully took the cheque in question from their officials and therefore, submitted that defence of the accused has been very inconsistent, which points towards the falsity of it. The Court agrees that during trial, at some places, the accused has taken defence that cheque in question was issued to the complainant in advance, whereas at some places, the accused has stated CC No.8820/16 M/s Tofarch Solutions Vs. M/s Sky Construction Company & Ors 37/38 that cheque in question, was forcibly taken by the complainant. But in view of the court, it is well settled position of law that complainant case should stand on its own feet and he cannot take advantages from the weaknesses in defence set forth and therefore, this argument raised by the complainant, looking at the complete facts and circumstances of the case, is liable to be rejected.
47. In view of the aforesaid discussion, complaint of the complainant under section 138 of the NI Act is hereby dismissed. Accused are acquitted of the charges under section 138 of NI Act.
48. Ordered accordingly.
49. Accused no. 2 has furnished PB and SB in sum of Rs. 30,000/- each in terms of provisions of Section 437-A of Cr.P.C. and the same have been accepted and shall remain in force for a period of six months from today.
Announce in the open Court (Gopal Krishan )
on 25.10.2018 MM (N.I Act)-04, South-East
Saket Court, New Delhi.
It is certified that the present judgment runs into thirty eight pages and each page bears my signature.
(Gopal Krishan) MM (N.I Act)-04, South-East Saket Court, New Delhi.
25.10.2018 CC No.8820/16 M/s Tofarch Solutions Vs. M/s Sky Construction Company & Ors 38/38