Delhi District Court
In Matter Of "Krishna Janardhan Bhat vs . Dattatraya G. Hegde" on 18 February, 2020
IN THE COURT OF PARAS DALAL,
METROPOLITAN MAGISTRATE - 04, N. I. ACT,
SOUTHEAST DISTRICT, SAKET DISTRICT COURTS, DELHI.
JUDGMENT
M/s. Karma Contractors & Developers ....................Complainant Versus Mr. Shanti Prasah ....................Accused PS - C.R. Park Under Section 138 of N. I. Act, 1881
a) Sl. No. of the case : CT No. 632195 of 2016
b) Alleged date of commission of offence : 10.04.2016 Approximately
c) Name of the complainant : Karma Contractors & Developers through its AR Harvinder Singh R/o E166, GKII, New Delhi110048
d) Name of the accused person(s) : Shanti Prasad Proprietor of M/s. Shanti Traders R/o 131, Yusuf Sarai Village New Delhi110016
e) Offence complained of : Under Section 138 of N. I. Act, 1881
f) Plea of accused : Pleaded not guilty
g) Final order : Acquitted
h) Date of such order : February 18, 2020 BRIEF STATEMENT OF THE REASONS FOR DECISION :
1. Vide this judgment, this Court shall dispose off complaint for offence punishable under Section 138 of The Negotiable Instruments Act, 1881 filed by the complainant M/s. Karma Contractors & Developers, sole proprietorship concern of Mrs. Avneet Kaur through her Attorney holder Mr. Harinder Singh against accused namely Mr. Shanti Prasad. In gist, it is alleged in complaint that complainant was M/s. Karma Contractors & Developers v. Shanti Prasad 1 of 14 lured by the accused with lucrative offer of assured profit on investment @2% per month apart from profit sharing of 65% on the total sales proceeds of the goods. The complainant relied on the Memorandum of Understanding Ex.CW1/B and the complainant further alleged that as per MOU it invested a total of Rs.60,10,000/ as per account ledger Ex.CW1/F. The complainant further alleged that the accused for storing the goods took its property on rent and an agreement was executed Ex.CW1/C. The complainant alleged that the accused failed to make the payment towards the assured return and therefore issued the present cheque in question Ex.CW1/D. Complainant presented the cheque, but same was dishonored vide memo Ex.CW1/E with reasons 'funds insufficient'. The complainant sent a legal demand notice on 21.03.2016 Ex.CW1/G1 which was duly received and replied by the accused vide reply dated 05.04.2016 and since no payment was made within statutory period of legal demand notice, hence, this complaint.
PRESUMMONING EVIDENCE & NOTICE
2. Presummoning evidence was led by the complainant side and after hearing complainant side, accused was summoned for offence punishable under Section 138 of The Negotiable Instruments Act, 1881. After appearance of accused, it was ensured that copy of complaint has been supplied. Notice was put to the accused by my scholarly predecessor for offence punishable under Section 138 of The Negotiable Instruments Act, 1881 on 08.05.2017 wherein he denied any liability. The accused defended that the complainant did not make the payment as provided in the MOU and instead goods worth more than Rupees 63 lacs were delivered to him. Qua the cheque, the accused stated that the same was given as security and the same was in conformity with the MOU. Thereafter, matter was fixed for complainant's evidence M/s. Karma Contractors & Developers v. Shanti Prasad 2 of 14 and accused side was granted opportunity to crossexamine the complainant's evidence.
COMPLAINANT'S POST NOTICE EVIDENCE
3. Complainant through its AR Mr. Harinder Singh stepped in witness box as CW1 adopted his affidavit of presummoning as his evidence reiterating almost all facts of complaint, stating all exhibits available on record and in gist in his cross examination he deposed that accused against discharge of his liability towards assured returns drew the cheque in question. The AR was subjected to cross examination wherein it was deposed that he was not employed with firm and was only a signing authority. The witness even admitted that he signed the Rent Agreement Ex.CW1/C in his individual capacity. The witness stated on 11.09.2018 that as per the MOU Ex.CW1/B no goods were supplied. The witness denied the suggestion that there was outstanding liability on his part towards the accused about Rs.33,00,000/. The witness admitted that no receipt was issued for cash payment made by him of Rs.30,10,000/. The witness on 23.04.2019 deposed that he made the cash payment as and when the goods were received by him. The witness admitted that as per MOU Ex.CW1/B complainant firm was to provide space for keeping of the products/goods. The witness even admitted that the receipts were issued in the name of Karma Contractors & Developers. During further cross examination, the witness was confronted with challan of Karma Contractors & Developers of which witness admitted signatures from Point A to H but volunteered that the same were only estimates. The witness even brought the ITRs of the complainant firm wherein the Shanti Traders is shows as debtor in the balance sheet for the year 201516 and the same are Ex.CW1/H to Ex.CW1/HD.
M/s. Karma Contractors & Developers v. Shanti Prasad 3 of 14
4. Complainant closed his postnotice evidence on 23.04.2019 and thereafter, matter was fixed for recording statement of accused. STATEMENT OF ACCUSED
5. The statement of accused was recorded under Section 313 of The Code of Criminal Procedure, 1973 read with Section 281 of The Code of Criminal Procedure, 1973 separately. Incriminating evidence was put to him. Accused denied all the allegations and reiterated his defence.
6. Accused was given opportunity to lead defense evidence and he called in defense four witnesses to prove the challan/ invoices. DW1 denied drawing of any invoice. DW2 admitted receiving goods as per the invoices which were in the name of Karma Contractors & Developers and the same were exhibited Ex.DW2/A and Ex.DW2/B. On similar lines DW3 admitted Ex.DW3/A and DW4 admitted invoice DW4/A to DW4/E. The complainant side was granted opportunity to cross examine DW2 to DW4 and during their cross examination questions were put that the invoices were only estimates and there was no tax receipt for payment of tax against the goods supplied. The witnesses admitted that the challans were estimates, however they volunteered that the same were final bills and no other invoices were issued and they admitted receipt of goods as per the invoices. The witnesses DW2 to DW4 even admitted that the tax receipt were not stated in the exhibits. The defense evidence was closed on 02.11.2019.
7. Final arguments from both sides heard on 10.02.2020. Case file perused.
POINTS FOR DETERMINATION : 8.1 Whether the complainant has been able to establish ingredients of M/s. Karma Contractors & Developers v. Shanti Prasad 4 of 14
offence punishable under Section 138 of The Negotiable Instruments Act, 1881 beyond shadow of reasonable doubt against the accused or not? 8.2 Final order.
APPRECIATION OF FACTS/CONTENTIONS/ANALYSIS & FINDINGS
9. To bring home conviction for offence punishable under Section 138 of The Negotiable Instruments Act, 1881, the complainant is obliged to prove :
(a) The cheque(s) was/were drawn/issued by the accused person(s) to the complainant on an account maintained by him/her/them/it with the bank for discharge, in whole or in part, of any debt or liability.
(b) The cheques(s) was/were presented to the bank within a
period of six months or within period of its/their validity.
(c) The cheque(s) so presented for encashment was/were
dishonored.
(d) The payee/complainant of the cheque(s) issued a Legal
Demand Notice within 30 days from the receipt of information from the bank regarding dishonourment of the cheque(s).
(e) The drawer of the cheque(s) failed to make the payment
within 15 days of receipt of aforesaid Legal Demand Notice.
(f) The complaint was presented within one month after the
expiry of above 15 days.
UNDISPUTED/UNCONTROVERTED FACTS
10. At the outset, it is pertinent to mention herein that it is not in dispute that M/s. Karma Contractors & Developers v. Shanti Prasad 5 of 14 cheques in question belong to the accused, it bears her signatures, they were drawn on an account maintained by the accused with a bank and cheques in question were dishonored as alleged. The accused even admitted that the amount was filled by her in one of the cheque. So, there is no need of discussion qua said ingredients and same can be regarded as being duly proved on record and being noncontroverted. The accused received the legal demand notice and duly replied denying his liability, which is also on record and hence there is no need of discussion of said ingredient in a complaint filed under the section 138 Negotiable Instruments Act.
CONTENTIONS QUA CONSIDERATION 11.1(a) The contentions which have been raised by defense is that the complainant side has itself not adhered to the terms of the MOU. The defence pleaded that the complainant has not placed the proper and true facts before this Court and has misused the cheque issued as security. The accused laid reliance on the inconsistency in the testimony of the complainant's attorney holder. The accused also argued that the accused has taken a consistent stand since his reply to the demand notice and has been able to prove its case by documentary as well as oral material on record and therefore the accused side has been able to rebut the presumption of consideration available in favour of the complainant as there was no consideration in question. It is contended that accused should be acquitted in this matter.
11.1(b) On the other hand, it is the contention of the complainant side that accused has admitted his signatures on the cheque and the complainant has presumption in his favour as per the law. The complainant has even pleaded that the power of attorney was duly appointed and since he has personal knoweldge of the present case, he can sign and depose in the present complainant. The complainant M/s. Karma Contractors & Developers v. Shanti Prasad 6 of 14 further laid reliance on the ITRs filed by the complainant to substantiate that as per their records the accused is still in debt of more than the amount stated in the cheque. The complainant submitted that since no amount was paid qua the cheque, the accused drew cheques in discharge of the liability, hence, all ingredients of commission of offence punishable under Section 138 of The Negotiable Instruments Act, 1881 stands established on record, therefore, accused should be held guilty in this matter. 11.2 Submissions of both side considered.
Section 118 (a) of The Negotiable Instruments Act, 1881 provides as under : "Section 118. Presumption as to negotiable instruments. Until the contrary is proved, the following presumption shall be made:
(a) of consideration that every negotiable instrument was made or drawn for consideration, and that every such instrument, when it has been accepted, indorsed, negotiated or transferred, was accepted, was indorsed, negotiated or transferred for consideration;........."
Section 139 of The Negotiable Instruments Act, 1881 provides as under : "Section 139 Presumption in favour of holder. It shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque of the nature referred to in section 138 for the discharge, in whole or in part, of any debt or other liability."
In matter of "Krishna Janardhan Bhat Vs. Dattatraya G. Hegde"
(2008) 4 SCC 54, Hon'ble Supreme Court of India has observed : "32. An accused for discharging the burden of proof placed upon him under a statute need not examine himself. He may discharge his burden on the basis of the materials already brought on record. An accused has a constitutional right to maintain silence. Standard of proof on the part of the accused and that of the prosecution in a criminal case is different."
"34. Furthermore, whereas prosecution must prove the guilty of an accused beyond all reasonable doubt, the standard of proof so as to prove a defense on the part of the accused is 'preponderance of probabilities'. Inference of preponderance of probabilities can be drawn not only from the materials brought on record by the parties but also by reference to the circumstances upon which he relies."
In matter of "Mallavarapu Kasivisweswara Rao Vs. Thadikonda Ramulu Firm" (2008) 7 SCC 655, Hon'ble Supreme Court of India (though it was a civil matter related to promissory note, but is relevant to refer herein) has held : "17. Under Section 118 (a) of the Negotiable Instruments Act, the court is obliged to presume, until the contrary is proved, that the promissory note was made for consideration. It is also a settled position that the initial burden in this regard lies on the defendant to prove the nonexistence of consideration by brining on record such facts and circumstances which would lead the court to believe the nonexistence of the consideration either by direct evidence or by preponderance of probabilities showing that the existence of consideration was improbable, doubtful or illegal."
M/s. Karma Contractors & Developers v. Shanti Prasad 7 of 14 In matter of "Bharat Barrel & Drum Mfg. Co. V. Amin Chand Payrelal" (1999) 3 SCC 35, Hon'ble Supreme Court of India (though it was also a civil matter related to promissory note, but is relevant to refer herein) has held : "12. Upon consideration of various judgments as noted hereinabove, the position of law which emerges is that once execution of the promissory note is admitted, the presumption under Section 118 (a) would arise that it is supported by a consideration. Such a presumption is rebuttable. The defendant can prove the nonexistence of a consideration by raising a probable defense. If the defendant is proved to have discharged the initial onus of proof showing that the existence of consideration was improbable or doubtful or the same was illegal, the onus would shift to the plaintiff who will be obliged to prove it as a matter of fact and upon its failure to prove would disentitle him to the grant of relief on the basis of the negotiable instrument. The burden upon the defendant of proving the nonexistence of the consideration can be either direct or by bringing on record the preponderance of probabilities by reference to the circumstances upon which he relies. In such an event, the plaintiff is entitled under the law to rely upon all the evidence led in the case including that of the plaintiff as well. In case, where the defendant fails to discharge the initial onus of proof by showing the nonexistence of the consideration, the plaintiff would invariably be held entitled to the benefit of presumption arising under Section 118 (a) in his favour. The court may not insist upon the defendant to disprove the existence of consideration by leading direct evidence as the existence of negative evidence is neither possible nor contemplated and even if led, is to be seen with a doubt. The bare denial of the passing of the consideration apparently does not appear to be any defense. Something which is probable has to be brought on record for getting the benefit of shifting the onus of proving to the plaintiff. To disprove the presumption, the defendant has to bring on record such facts and circumstances upon consideration of which the court may either believe that the consideration did not exist or its nonexistence was so probable that a prudent man would, under the circumstances of the case, shall act upon the plea that it did not exist."
In matter of "Rangappa Vs. Sri Mohan" (2010) 11 SCC 441 which is a Full Bench Decision, Hon'ble Supreme Court of India while discussing above said provisions, judgments and other case law on the point has held : "26. In light of these extracts, we are in agreement with the respondent claimant that the presumption mandated by Section 139 of the Act does indeed include the existence of a legally enforceable debt or liability . To the extent, the impugned observations in Krishna Janardhan Bhat may not be correct. However, this does not in any way cast doubt on the correctness of the decision in that case since it was based on the specific facts and circumstances therein. As noted in the citations, this is of course in the nature of a rebuttable presumption and it is open to the accused to raise a defense wherein the existence of a legally enforceable debt or liability can be contested. However, there can be no doubt that there is an initial presumption which favours the complainant".
"27. Section 139 of the Act is an example of a reverse onus clause that has been included in furtherance of the legislative objective of improving the credibility of negotiable instruments. While Section 138 of the Act specifies a strong criminal remedy in relation to the dishonour of cheques, the rebuttable presumption under Section 139 is a device to prevent undue delay in the course of litigation. However, it must be remembered that the offence made punishable by Section 138 can be better described as a regulatory offence since the bouncing of a cheque is largely in the nature of a civil wrong whose impact is usually confined to the private parties involved in commercial transactions. In such a scenario, the test of proportionality should guide the construction and interpretation of reverse onus clauses and the defendantaccused cannot be expected to discharge an unduly high standard or proof."
"28. In the absence of compelling justifications, reverse onus clauses usually impose an evidentiary burden and not a persuasive burden. Keeping this in view, it is a settled position that when an accused has to rebut the presumption under Section 139, the standard of proof for doing so is that of "preponderance of probabilities". Therefore, if the accused is able to raise a probable defense which creates doubt about the existence of a legally enforceable debt or liability, the prosecution can fail. As clarified in the citations, the accused can rely on the materials submitted by the complainant in order to raise such a defense and it is conceivable that in some cases the accused may not need to adduce evidence of his/her own."
11.3 So, precisely there is initial presumption of legally enforceable debt or liability against the accused side, but same is rebuttable. The standard of proof for rebuttal is preponderance of probabilities. Accused side can lead evidence in defense, M/s. Karma Contractors & Developers v. Shanti Prasad 8 of 14 even can rely on materials submitted by complainant and can rely upon circumstances also to show nonexistence of consideration or it being improbable and need not adduce evidence of his own for the same.
11.4 The defense of the accused side considered in view of abovecited case laws. As far as question qua the capacity of the attorney holder is concerned, the power of attorney is already on record and even in the complainant it is categorically pleaded that the same is filed by the attorney holder who has personal knowledge of the case. As against the liability qua the cheque is concerned, it is the case of the complainant that the cheque was in part discharge of liability which was towards assured return of 2% promised by the accused as per MOU. The complainant laid reliance on the statement of account to plead that they had invested a total of Rs.60,10,000/, Rupees Thirty lacs by way of cheques and remaining by way of cash as and when the goods were supplied. The accused on the other hand has placed on record its own challans/ receipt/ invoices to prove that the goods were supplied and since the complainant itself failed to make the investment as agreed, there was no liability on the accused to pay any amount to the complainant. 11.5 On perusal of the MOU Ex.CW1/B it is seen that the complainant was to invest Rs.50,00,000/ and in return was to get the assured 2% per month return on the invested amount. The MOU further states that complainant was to provide for the place for safe keeping of the goods. The MOU in para 4 also states that accused was to provide skill to complainant firm to sell the goods and all transaction while purchasing and selling. The para further states that all transaction amount received from selling of goods shall be handled by complainant firm. The MOU also states in para 2 that the complainant was to invest Rs.50,00,000/. The complainant however has led evidence M/s. Karma Contractors & Developers v. Shanti Prasad 9 of 14 inconsistent with the terms. The complainant placed on record Statement of account Ex.CW1/F wherein as per records of complainant they have invested a total of Rs.60,10,000/. Firstly, the Ex.CW1/F is self serving and nowhere it bears the signatures and stamp of the accused or his firm. The said statement of account is self serving and infact opposed to the terms of MOU Ex.CW1/B. It is unnatural to believe that the complainant is so gullible that he will invest money of Rs.60,10,000/ which is more than the agreed terms of Rs.50,00,000/ despite the accused being irregular in supply of goods and in making payment qua assured returns.
11.6 Another reason to disbelieve the case of the complainant is the inconsistent testimony of the attorney holder of the complainant. During his cross examination on 11.09.2018 CW1 deposed that the accused has not given any goods as per the terms, whereas the terms of the MOU clearly stipulates that the accused will only provide expertise to the complainant to sell the goods and all the transaction payment were handled by the complainant itself. The cross examination was however adjourned and on 23.04.2019, when the accused presented certain challans/ invoices/ estimates, the complainant admitted that invoices/estimate/challans Ex.CW1/D3 from point A to H bears his signature. The complainant when questioned about the total sales, pleaded ignorance that he did not know the exact figure as to how much total sale was made in the name of Karma Contractor and Developers. The CW1 even admitted that the three cheque stated in the MOU were kept with them as security. 11.7 The complainant has itself not adhered to the terms of the MOU and has deposed contrary to the terms of the MOU which is specifically barred by Section 92 of the Evidence Act, 1872. The complainant firstly did not adhere to payment as stipulated in the MOU. The complainant was to advance Rs.50,00,000/ to the M/s. Karma Contractors & Developers v. Shanti Prasad 10 of 14 accused, Rs. 30 lacs is admitted by the accused to be via cheque, the remaining is alleged by complainant to be by cash, however the document Ex.CW1/F is a self serving statement and nowhere it is signed or stamped by the accused. It has not been deposed or argued that the accused was shown the said statement or verified from the records of the accused. Even, if the complainant's version of cash payment is admitted, then as per the statement of account the investment would be Rs.60,10,000/, whereas the investment as per MOU to be made by the complainant was only Rs.50,00,000/. From the above version and pleas of the complainant from the records as well as inconsistencies in his own testimonies, the case of the complainant is not sustained. 11.8 The accused has in his defence pleaded that goods were traded and the same were supplied. DW2 to DW4 did stand in the witness box to depose that they received the goods as per invoices/ challans/ estimates and even at their own perils stated that there was no proper invoices or tax receipts. However, it shows that there was some exchange of goods. The complainant in his initial deposition deposed that no goods were supplied to him by the accused as per the terms of the MOU, however, later during the cross examination the complainant even admitted supply of goods, admitting his signatures in invoices/challans/estimates from Point A to H and even stated that 80% of the goods were sold without receipts or invoices. The accused has also filed his own ledger account Mark A, however, the same is also self serving and nowhere bears the receiving or acknowledgment of the complainant or her firm or even the signatures of attorney holder of the complainant.
11.9 From the above discussion, this Court is of the view, that none of the parties have maintained proper documentation of the goods supplied. The parties did not tally their ledger accounts and none presented their ledger accounts to the opposite M/s. Karma Contractors & Developers v. Shanti Prasad 11 of 14 site for confirmation. CW1 went to the extent of admitting that he did not have any knowledge as to how much goods were sold by Karma Contractor and Developers and in view of the same, the statement of account Ex.CW1/F filed by the complainant is itself doubtful. In view of the above, neither the complainant has been able to prove that he invested the amount as was agreed or that no goods were supplied nor the complainant has been able to prove that the cheque in question was towards any liability to the extent of amount in the cheque. There are documents of some trading in the goods and when it is agreed that all transaction payments were to be handled by the complainant firm, then to take the plea that the complainant did not receive any goods or amount would be contrary to the terms stipulated in the MOU, which is barred by the provisions of Section 9192 of the Evidence Act, 1872. It is also unnatural to believe that the complainant is so gullible that when it did not receive any goods, they would continue to make investment and that too more than the amount stipulated in the MOU.
11.10 From the discussion above, the accused having raised a consistent defence and having been able to point discrepancy and inconsistencies in the case of the complainant has raised a probable defence. The defence raised in the facts and circumstances is sufficient to tilt the scales of balance of probabilities. The onus thus shifts on the complainant and the rebuttable presumption of law under section 139 N.I. Act thus vanishes. The complainant has now to prove the case beyond reasonable doubt. The complainant has deposed ignorance of total sales made, there being no proof of payment of amount as agreed in the terms and payment in cash when the complainant had already paid Rs.30,00,000/ by way of cheque, does not adduce confidence of this Court. Mere mentioning of the accused as debtor in the ITRs is M/s. Karma Contractors & Developers v. Shanti Prasad 12 of 14 nothing but self serving statement. The complainant has to prove the existence of debt from cogent evidence and not just self serving documents which do not possess any evidentiary value.
11.11 In a more recent judgment passed on 09.04.2019 by a Division Bench of the Honble Supreme Court in Basalingappa v. Mudibasapp, Criminal Appeal no.636 of 2019 it was held that when the accused proves a probable defense, the reverse onus of proof shifts the burden on the complainant who is bound to explain his financial capacity and the transaction involved. Applying the above test in the present case, the complainant has relied on the MOU however has himself deposed inconsistent to the terms. The complainant has not supported his own case and has deposed inconsistent to records. The complainant has thus failed to prove his case beyond reasonable doubt. FINAL CONCLUSION
12. It stands established on record in the form of evidence of the complainant given vide affidavit (which can be read in evidence at all stages as per judgment of "Rajesh Agarwal Vs. State & Anr." 171 (2010) DELHI LAW TIMES
51), documents exhibited in evidence, documents exhibited in evidence, admission of accused during accusations explained to him and statement of accused recorded under Section 313 of The Code of Criminal Procedure, 1973 read with Section 281 of The Code of Criminal Procedure, 1973 that the complainant did not prove the investment to be made as per terms. The complainant has not fulfilled his part of the obligation as per the MOU Ex.CW1/B. The complainant has not been able to prove that the cheque in question was for discharge of legally enforceable liability as on the date of the cheque and hence the foremost ingredients of offence punishable under Section 138 of The Negotiable Instruments Act, 1881 is not established.
M/s. Karma Contractors & Developers v. Shanti Prasad 13 of 14 FINAL ORDER
13. In view of the aforementioned facts and circumstances, this Court is of the conclusion that complainant has not been able to duly prove its case under Section 138 of The Negotiable Instruments Act, 1881 beyond shadow of any reasonable doubt. Accordingly, accused namely Shanti Prasad stands acquitted for offence punishable under Section 138 of The Negotiable Instruments Act, 1881 qua the cheque in question in the present complaint Announced in the open Court PARAS Digitally signed by PARAS DALAL Date: 2020.02.19 on February 18, 2020. DALAL 16:53:43 +0530 (PARAS DALAL) M.M.04/N.I.Act/SouthEast, Saket/Delhi/18.02.2020 M/s. Karma Contractors & Developers v. Shanti Prasad 14 of 14