Delhi District Court
Hon'Ble Supreme Court In The Case Of M.S ... vs . State Of on 15 March, 2022
DLSE020003532007
Presented on : 12012007
Registered on : 12012007
Decided on : 15032022
Duration : 15 years, 2 months, 3 days
IN THE COURT OF Metropolitan Magistrate AT ,SOUTH EAST DELHI
(Presided Over by SH. ANIMESH KUMAR)
CT CASES/622113/2016
(PROSECUTION): RAGHUNATH CHAUHAN
Through Police Station Officer Malviya Nagar, NEW DELHI
SOUTH EAST DELHI
RAGHUNATH CHAUHAN
VERSUS
1: PRITHVI SINGH
S/o Sh. Fakira Singh,
R/o PO Sahkari Nagar, PS Kotwali Dehat,
Bulandshaher, U.P. (Proceedings abated on 15.03.2022)
2: SANT RAJ SINGH
S/o Late Sh. Bhikam Singh,
R/o PO Sahkari Nagar, PS Kotwali Dehat,
Bulandshaher, U.P.
Sh. Rashid Ali, APP for State }: ,
Sh. A K Hosley, Advocate for appearing for Sant Singh Advocate.
CT Case 622113/2016 Dated 15.03.2022 Pages 1
Offence punishable under : 138 of
Negotiable Instruments Act.
JUDGMENT
(Delivered on 15032022) The present complaint has been filed by the complainant against the accused under section 138 Negotiable Instruments Act, 1881 (hereinafter referred as the "Act").
Version of the complainant:
1. The complainant and the accused persons had good family relationship. The accused persons had approached the complainant in the year 2006 for getting friendly loan amounting to Rs. 5-10 lakhs. On 24.06.2006, the complainant had given a friendly loan to the accused persons amounting to Rs. 9,60,000/-
and the accused persons had assured the complainant to return the same within 4 months.
2. The accused persons in discharge of their legal liability had issued a cheque bearing no. 765883 Ex. CW-1/A on the same date i.e. 24.06.2006 to the complainant drawn on Punjab National Bank, Moti Bangh, Bulandsahar, UP. The said cheque was presented by the complainant in November, 2006 with its banker UCO bank which got dishonoured with remarks "Account Closed"
vide return memo dated 14.11.2006 Ex. CW1/B which was received by the complainant on 16.11.2006. Thereafter, the complainant had sent a legal demand notice dated 08.12.2006 to the accused persons which got received back with report "recipient is out of house" and "refused" respectively.
3. Upon failure of the accused to make payment of the cheque in question within the stipulated time of 15 days, the complainant has filed the present complaint u/s 138 of the Act.
4. The complainant examined himself in pre-summoning evidence and after considering the complaint and entire documents on record, summon was issued by this Court against the accused on 19.10.2010.
CT Case 622113/2016 Dated 15.03.2022 Pages 2 Notice against the accused:
5. Following notice was framed against the accused on 19.10.2010:
"It is alleged against you Prithvi Singh s/o Sh. Fakira Singh and Sh. Sant Raj Singh both residing at Village Mursana, P.O. Sahkari Nagar, PS Kotwali Dehat, Reporting Chowki Nai Mandi, Bulandsahar, U.P. that both of you in discharge of your liability issued a cheque bearing number 765883 dated 24.06.2006 in the sum of Rs. 9,60,000/- in favour of the complainant Sh. Raghunath Chauhan, which on presentation was dishonoured and returned unpaid due to the reason "Account Closed". The Legal Demand Notice dated 08.12.2006 was issued to you to make the payment within the stipulated period of 15 days despite which you failed to make the payment within statutory period and thereby committed an offence punishable u/s 138 NI Act read with Section 142 NI Act and within my congnizance"
Plea of defence of the accused:
6. The accused persons had taken the following plea in his defence:
"We plead not guilty and claim trial.
We have taken no friendly loan from the complainant. The complainant is not our friend. There is no liability to issue any cheque. We are the agriculturist belonging to village Mursana, District Bulandsahar. Our land was acquired by the government. Regarding which we have engaged Sh. Radhe Shyan Lodhi and Sh. Tejvir Singh Chauhan, Advicates at Bulandsahar with regard to acquisition references. Sh. Tejvir Singh Chauhan, Advocate had introduced us and thereafter saving account was opened on the pretect of Sh. Tejvir Singh Chauhan. Sh. Tejvir Singh Chauhan and Sh. Radhey Shyam Lodhi, Advocates have taken cheque book and got signatures over certain cheques. Regarding which we have made complaint and on 01.05.2006 the account bearing the cheque in question was closed. The complaint is in relation of Sh. Tejvir Singh Chauhan, Advocate. In collusion with Sh. Tejvir Singh Chauhan, the complainant has filed a false complaint case against us. In addition, it is also submitted that Sh. Tejvir Singh Chauhan, Advocate with the help of other persons have filed the false complaint under section 138 of NI Act at Agra, Bulandsahar and third one is the present complaint case. "
CT Case 622113/2016 Dated 15.03.2022 Pages 3
7. Thereafter, an application u/s 145(2) was filed by the accused which was allowed by this Court vide order dated 06.09.2011.
Complainant's evidence:
8. The complainant examined himself as CW-1 reiterating the statements made in the complaint. He also relied upon the documents Ex. CW1/A to CW1/G. Original cheque in question is Ex. CW1/A Original return memo in question are Ex. CW1/B and Ex. CW1/C Copy of legal demand notice is Ex. CW1/D Original postal receipt are Ex. CW1/D1 and Ex. CW1/D2 Copy of delivery report are CW1/E, CW1/E1, Ex. CW1/F, Ex. CW1/G, Ex.
CW1/G1 and Ex. CW1/G2.
9. Thereafter, the complainant was duly cross-examined by the Ld. Counsel of the accused. No other witness was examined by complainant. CE was closed by this Court vide order dated 31.01.2012.
Statement of the accused
10. Statement of the accused was recorded under section 313 Code of Criminal Procedure (hereinafter referred as "Cr.P.C") on 07.09.2012 wherein all the incriminating evidences were put up before the accused.
11. Accused persons admitted the issuance of cheques by them, however, they stated that their advocates namely Sh. Tejvir Singh and Chauhan and Sh. Radhey Shyam Lodhi (who were representing them in a land acquisition case in Bulandsahar) had got opened a bank account and took their cheque book in possession. These advocates had also got the signatures of the accused persons on three blank cheques and later misused them to file frivolous complaint against them (including the present one). Accused persons had further stated that they had filed a complaint dated 08..11.2005 before the Court of Ld. Additional District Judge, Bulansahar regarding the misuse of cheques. Complainant in the present case had come into possession of these cheques through theses advocates. Accused persons also stated that they had merely signed the cheques and no other details were filed by them. The accused persons did not specifically deny the receipt of legal demand notice.
CT Case 622113/2016 Dated 15.03.2022 Pages 4 Defence Evidence
12. In support of their defence, accused persons examined Ms. Taruna Vinayak, Official of Punjab National Bank, Moti Nagar Branch, Bulandsahar as DW-1, Sh. Banne Singh as DW-2, Prithvi Singh as DW-3, Sant Raj Singh as DW-4 All these DWs were duly cross-examined by Ld. Counsel for the complainant. DE was closed on 06.05.2019.
13. During the pendency of trial, accused Prithvi Singh passed away and proceeding against him got abated.
14. Ld. Counsel for the accused persons had submitted that the accused persons are defending on the following grounds :
The accused did not receive any legal demand notice from the complainant;
The accused had not taken any loan from the complainant and no legally enforceable debt existed at the time of issuance of cheques to the complainant, and Advocates of the accused persons (who were representing them in a land acquisition case) had fraudulently got their signatures on the impugned cheque and later misused the same to file the present complaint through the complainant.
Final arguments have been heard on behalf of both the parties and my findings are discussed subsequently.
The Law:
15. Before proceeding to the merits of the case, it is considered important to lay down the basic provisions of law with respect to section 138 of the Act which are as follows:
16. Section 138 of Negotiable Instruments Act, 1881 makes dishonour of cheques an offence. It provides that "where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is CT Case 622113/2016 Dated 15.03.2022 Pages 5 insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provisions of this Act, be punished with imprisonment for a term which may be extended to two years, or with fine which may extend to twice the amount of the cheque, or with both".
17. Careful reading of section 138 of the Act reflects that there are three key ingredients which need to exist in order to constitute an offence therein. The three ingredients were highlighted by the Hon'ble Supreme Court in the case of Krishna Janardhan Bhat v. Dattatraya G. Hegde AIR 2008 SC 1325 wherein the Apex Court held that the procedural requirements of section 138 are:
There is a legally enforceable debt.
The drawer of the cheque issued the cheque to satisfy part or whole of the debt.
The cheque so issued has been returned due to insufficiency of funds.
18. It is a well settled principle of criminal jurisprudence that a criminal trial proceeds on the presumption of innocence of the accused i.e. an accused is presumed to be innocent unless proved guilty. Thus, normally the initial burden to prove the guilt of the accused lies on the complainant/prosecution Also, the standard of proof is beyond reasonable doubt. However, in offences under section 138 of the Act, there is a reverse onus clause contained in sections 118 and 139 of the Act.
19. Section 118(a) of the Act provides that until the contrary is proved, it shall be presumed that "that every negotiable instrument was made or drawn for consideration, and that every such instrument, when it has been accepted, endorsed, negotiated or transferred, was accepted, endorsed, negotiated or transferred for consideration."
20. Further, Section 139 of the Act lays down that "it shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque of the CT Case 622113/2016 Dated 15.03.2022 Pages 6 nature referred to in section 138 for the discharge, in whole or in part, of any debt or other liability."
21. On bare reading of these provisions, it becomes clear that the court shall presume the execution of a negotiable instrument for consideration unless and until the contrary is proved. Similarly, the Court shall also draw a presumption in favour of the complainant/holder of the cheque that the said cheque has been issued in discharge of legally enforceable debt or other liability.
22. There is a statutory presumption under section 139 of the act which arises in the favour of the complainant. This presumption is rebuttable and the accused is required to raise a probable defence. Burden of proof is hence upon the accused in such cases. Reliance can be placed on the decision of the Hon'ble Supreme Court in the case of M.S Narayan Menon vs. State of Kerala (2006) 6 SCC 39, wherein the Hon'ble Court has discussed in detail the scope and ambit of statutory presumption under section 118 read with section 139 of the Act. The relevant extract of the judgment is reproduced below:
"Applying the said definitions of 'proved' or 'disproved' to principle behind Section 118(a) of the Act, the Court shall presume a negotiable instrument to be for consideration unless and until after considering the matter before it, it either believes that the consideration does not exist or considers the non-existence of the consideration so probable that a prudent man ought, under the circumstances of the particular case, to act upon the supposition that the consideration does not exist. For rebutting such presumption, what is needed is to raise a probable defence.
Even for the said purpose, the evidence adduced on behalf
of the complainant could be relied upon"
23. Further, it is also a settled proposition of law that the standard of proof which is required from the accused to rebut the statutory presumption under section 118 read with section 139 of the Act is prepondereance of probabilities. The accused is not required to prove his case beyond reasonable doubt. This onus on the accused can be discharged from the materials available on CT Case 622113/2016 Dated 15.03.2022 Pages 7 record and from the circumstantial evidences. The Hon'ble Supreme Court in M.S Narayan Menon case (supra) has interalia held the following:
"The standard of proof evidently is preponderance of probabilities. Inference of preponderance of probabilities can be drawn not only from the materials on record but also by reference to the circumstances upon which he relies"
24. Further as discussed above, it should also be noted that the standard of proof in order to rebut the statutory presumption may be inferred from the materials on record and circumstantial evidences. It is not always mandatory for the accused to examine its own witnesses in order to rebut the said statutory presumption. At this point, reliance may be placed on the decision of the Hon'ble Supreme Court in the case of Krishna Janardhan Bhat (supra), wherein the Hon'ble Court has categorically held the following:
"32. 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. As accused has a constitutional right to remain silence. Standard of proof on the part of an accused and that of the prosecution in a criminal case is different.
34. Furthermore, whereas prosecution must prove the guilt of an accused beyond all reasonable doubt, the standard of proof so as to prove defence on the part of an 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."
25. This principle has been reiterated by the Hon'ble Supreme Court in Rangappa vs. Sri Mohan (2010) 11 SCC 441 wherein while discussing the scope and ambit of statutory presumption under section 139 of the Act, the Hon'ble Court has held the following:
"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 CT Case 622113/2016 Dated 15.03.2022 Pages 8 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 defendant-accused cannot be expected to discharge an unduly high standard of proof.
28. In the absence of compelling justifications, reverse onus clause 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 defence which creates doubts about the existence of a legally recoverable debt or liability, the prosecution can fail. As clarified in the citations, the accused can rely on the material submitted by the complainant in order to raise such a defence and it is conceivable that in some cases the accused may not need to adduce evidence of his/her own."
26. Thus, section 139 of the Act puts the burden on the accused to prove his defence. However, the accused has to prove his defence on the balance of probabilities and not beyond reasonable doubt. Accused can prove his defence by drawing inferences from the materials already on record (including complainant's evidences), circumstances of the case and also leading his own evidences. If the accused successfully creates doubts in the complainant's claim about the existence of legally enforceable debt then the burden of proof shifts back to the complainant who is the required to prove the guilt of the accused beyond reasonable doubt. Reference can be taken from the decision of the Hon'ble Supreme Court in the case of Bharat Barrel & Drum Manufacturing Company vs. Amin Chand Pyarelal 1999 (3) SCC 35, wherein it has held the following:
CT Case 622113/2016 Dated 15.03.2022 Pages 9 "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 non-existence of a consideration by raising a probable defence. 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 non- existence of the consideration can be either direct or by bringing on record preponderance of probabilities by reference to the circumstances upon which he relies. In such an event, the plaintiff is entitled under 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 non-existence 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 evidence as the existence of negative evidence is neither possible not contemplated and even if led, it is to be seen with a doubt..."
Points of Determination:
i. Whether the accused persons in the present case were in receipt of legal demand notice?
ii. Whether presumption under section 118(a) read with section 139 of the Act can be raised in favour of complainant in the present case?
iii. Whether legally enforceable debt exists in the present case?
iv. Whether the impugned cheques were issued by the accused persons in discharge of a legally enforceable debt?
I shall be deciding the abovementioned points of determination separately.
(i) Whether the accused in the present case was in receipt of legal demand notice?
CT Case 622113/2016 Dated 15.03.2022 Pages 10
27. Before examining the issue in hand, it would be prudent to discuss the legal position on the due service of notice sent by post. Presumption regarding successful delivery of documents sent by post (whether registered or not) can be raised by the court as per provision enshrined in section 27 of General Clauses Act r/w section 114 of Indian Evidence Act, 1861 (hereinafter referred as 'Evidence Act'). In terms of Section 27 of General Clauses Act, notice must be deemed to have been served in the ordinary course subject to the fulfillment of the conditions laid down therein. Section 27 reads as under;
"Where any [Central Act] or Regulation made after the commencement of this Act authorizes or requires any document to be served by post, whether the expression "serve" or either of the expressions "give" or "send" or any other expression is used, then, unless a different intention appears, the service shall be deemed to be effected by properly addressing, pre- paying and posting by registered post, a letter containing the document, and, unless the contrary is proved, to have been effected at the time at which the letter would be delivered in the ordinary course of post".
28. Reference can be taken from the decision of Hon'ble Supreme Court in the case of C.C Alavi Haji vs. Palapetty Muhd. & Anr 2007 6 SCC 555 wherein the Hon'ble Court has opined that section 27 of General Clauses Act gives rise to a presumption that service of notice has been effected when it is sent to the correct address by registered post. Unless and until the contrary is proved by the addressee, service of notice is deemed to have been effected at the time at which the letter would have been delivered in the ordinary course of business.
29. The aforesaid principle has been reiterated by the Hon'ble Supreme Court in the case of in the case of Subodh S. Salaskar vs. Jay Prakash M. Shah & Anr (2008) 13 SCC 689 wherein the Hon'ble Court has categorically held that service of notice which is sought to be effected by speed post / registered post shall be deemed to have been served in the ordinary course within few days. Such presumption of delivery of notice can also be raised u/s 114 of Evidence Act.
CT Case 622113/2016 Dated 15.03.2022 Pages 11
30. A similar view was taken by the Honble Supreme Court in the case of M/s Madan & Company vs. Wazir Jaivir Chand 1989 1 SCC 264. In this case, the Hon'ble Court while dealing with the question, as to whether the duty of the landlord was complete by sending of notice with reference to the presumption u/s 27 of General Clauses Act, held that once there is a proper tender of demand notice at the correct address, then there is service of demand notice in view of the said presumption.
31. After examining the legal position with respect to the service of any notice, it would be prudent to examine the instant case in realm of the above discussed legal position. In the present case, perusal of the file shows that the legal demand notice was sent by the complainant to the accused persons at the address situated at Bulandsahar through registered post. The said legal demand notice sent to accused no. 1 was received back with remarks "the recipient is out of house as informed by the family members" vide acknowledgment Ex. CW-1/E. Notice sent to accused no. 2 was received back with remarks "refused" vide acknowledgment Ex. CW-1/F.
32. It should be noted that the accused persons did not specifically deny the receipt of legal demand notice in their defence. They had also not cross- examined the complainant on this aspect. Even the correctness of their respective addresses (on which the legal demand notice was sent by the complainant) was not disputed by the accused persons.
33. As discussed in the preceding paragraphs, the legal demand notices sent to the accused persons were received back with report "recipient is out of house as informed by the family members" and "refused". It would mean that the addresses on which the legal demand notices were sent were the correct addresses of the accused persons.
34. Therefore, in light of the above mentioned judgments of the Hon'ble Supreme Court, I am of the considered view that a presumption regarding delivery of service of notice can be raised if the notice is sent through post on correct address of the accused. In the instant case, legal demand notices were sent CT Case 622113/2016 Dated 15.03.2022 Pages 12 on the correct addresses of the accused persons through registered post, and, therefore, a presumption can be raised about its successful delivery.
35. The accused has failed to rebut the presumption regarding the successful delivery of legal demand notice. Therefore, in view of the above, I am of the considered view that the legal demand notice in the present case has been successfully served to the accused on his address.
(ii) Whether presumption under section 118 read with section 139 NI Act can be raised in the favour of complainant in the present case?
36. As discussed in the preceeding paragraphs, section 118 (a) read with 139 of the Act raises a presumption in favour of the complainant regarding the issuance of the cheque by the accused for consideration and in discharge of a legally enforceable debt.
37. However, it should be noted that this statutory presumption would be raised in favour of the complainant only when the accused admits its signature on the cheque or if the complainant proves the issuance of cheque by the accused. At this point, reference can be taken from the decisions of the Hon'ble Supreme Court in the case of Kumar Exports vs. Sharma Carpets (2009) 2 SCC 513, wherein while discussing the contours of section 118(a) r/w 139 of the N I Act, the Hon'ble Court has held interalia the following:
"14. Section 139 of the Act provides that 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.
15. Applying the definition of the word "proved" in section 3 of the Evidence Act to the provisions of sections 118 and 139 of the Act, it becomes evident that in a trial under section 138 of the Act a presumption will have to be made that every negotiable intstrument was made or drawn for consideration and that it was executed for discharge of debt or liability once the execution of negotiable instrument is either proved or admitted. As soon as the complainant discharges the burden to prove that the instrument, say a note, was executed by the accused, the rules of presumptions under section 118 and 139 CT Case 622113/2016 Dated 15.03.2022 Pages 13 of the Act help him shift the burden on the accused. The presumption will live, exist and survive and shall end only when the contrary is proved by the accused, that is, the cheque was not issued for consideration and in discharge of any debt pr liability. A presumption is not in itself evidence, but only makes a prima facie case for a party for whose benefit it exists."
38. In the instant case, the accused persons at the time of framing of notice u/s 251 admitted the issuance of cheque and their signature albeit the person (to whom the cheque was given) was disputed. They had also admitted their signatures in their statements recorded u/s 313 Cr.P.C, however, they had also stated that the impugned cheque was only signed by them and no other details therein were filed by them. Perusal of the statements made by the accused persons would clearly suggest that while they had admitted the issuance of a blank cheque and also admitted their signatures on the impugned cheque, however, they had disputed the issuance of the same to the complainant and filing of details therein.
39. At this stage, it would also be prudent to examine the contours of section 138 of the Act vis-a-vis blank cheques. As discussed above, it should be noted that a presumption is raised in favour of the holder of cheque regarding the execution of cheque for consideration and in discharge of a legally enforceable debt. If the accused is issuing a cheque after signing the same to the complaint albeit blank cheques, he is giving implied authority to the complainant to fill the blank details and/or to present the cheque on or after the date mentioned in the cheque. Therefore, aforementioned statutory presumptions can be raised in favour of the complainant even in case of blank cheques also.
40. At this stage, reference may be taken from the decision of Hon'ble Supreme Court in the case of Laxmi Dyechem vs. State of Gujarat & Ors. (2012) 13 SCC 375 wherein the Hon'ble Court while uphelding the validity of post-dated cheque in a proceeding u/s 138 of the Act, has categorically held that the drawer of a post-dated cheque cannot be allowed to get away with the penal provisions of section 138 of the Act by countermanding payment of the said CT Case 622113/2016 Dated 15.03.2022 Pages 14 post-dated cheque. Reference can also be taken from the recent decision of the Hon'ble Supreme Court in the case of Bir Singh vs. Mukesh Kumar (2019) 4 SCC 197 wherein the Apex Court while upholding the validity of blank signed cheque and post-dated cheque in a proceeding u/s 138 of the Act has interalia held the following:
"36. The proposition of law which emerges from the judgments referred to above is that the onus to rebut the presumption under Section 139 that the cheque has been issued in discharge of a debt or liability is on the accused and the fact that the cheque might be post dated does not absolve the drawer of a cheque of the penal consequences of Section 138 of the Negotiable Instruments Act.
37. A meaningful reading of the provisions of the Negotiable Instruments Act including, in particular, Sections 20, 87 and 139, makes it amply clear that a person who signs a cheque and makes it over to the payee remains liable unless he adduces evidence to rebut the presumption that the cheque had been issued for payment of a debt or in discharge of a liability. It is immaterial that the cheque may have been filled in by any person other than the drawer, if the cheque is duly signed by the drawer. If the cheque is otherwise valid, the penal provisions of Section 138 would be attracted.
38. If a signed blank cheque is voluntarily presented to a payee, towards some payment, the payee may fill up the amount and other particulars. This in itself would not invalidate the cheque. The onus would still be on the accused to prove that the cheque was not in discharge of a debt or liability by adducing evidence."
41. Therefore, in light of the above discussion, I am of the considered view that statutory presumptions under section 118(a) and 139 would be raised even in the case of blank and/or post-dated signed cheques. Hence, in instant case, since, the accused persons had admitted the execution of impugned cheque and their signatures therein, therefore, the aforementioned statutory presumptions would be raised in favour of the complainant regarding the fact the impugned cheque was drawn for consideration and issued by the accused persons in discharge of legally enforceable debt.
CT Case 622113/2016 Dated 15.03.2022 Pages 15
(iii) Whether legally enforceable debt exists in favour of complainant?
42. As discussed in the preceding paragraphs, there is statutory presumption under section 118(a) and 139 of the Act in favour of complainant regarding interalia the following aspects:
That the impugned cheque was issued by the accused for consideration;
That there exists a legally enforceable debt in favour of the complainant; and That the impugned cheques have been issued in discharge of a legally enforceable debt.
43. Therefore, the burden of proof lies on the accused to prove the contrary. The standard of proof required by the accused is based on preponderance of probabilities which means that the accused is only required to create doubt in the complainant's claims and is not required to prove his own defence beyond reasonable doubt. The accused can examine his witnesses or file his own evidences for this purpose. He can even draw inferences from the evidences filed on record by the complainant in order to create doubts in the complainant's claims.
44. In order to create doubt in the complainant's claims regarding existence of a legally enforceable debt, the accused has adopted primarily three-fold defences:
The alleged loan amount being unaccounted cash of the complainant cannot be recovered i.e. source of fund could not be explained by the complainant;
No loan was advanced by the complainant to accused persons; and No liability of the accused persons towards complainant existed on the date on which impugned cheque was issued.
I shall be dealing with these defences separately.
(a) Alleged loan amount being unaccounted cash cannot be recovered / non explanation of some of fund.
CT Case 622113/2016 Dated 15.03.2022 Pages 16
45. Ld. Counsel for the accused submitted that the loan amount given by the complainant allegedly to the accused is his unaccounted cash, and, therefore, cannot be recovered under a complaint filed u/s 138 of the Act.
46. To buttress his proposition, Ld. Counsel for the accused further submitted that advancing a loan amount of more than Rs. 20,000/- in cash is not permissible as per the provisions enshrined in section 269SS of Income Tax Act, 1961(hereinafter referred as "ITA"). He argued that since, the instant alleged loan transaction involved a sum of Rs. 9,60,000/-, therefore, it would be considered as illegal loan which cannot be recovered in a complaint filed u/s 138 of the Act.
47. Before examining the aforesaid objections raised by the accused, it is prudent to discuss the relevant provisions and case laws on this aspect. Section 269SS of the ITA prohibits any person from taking or accepting from any other person a loan, deposit or other specified sum of more than Rs. 20,000 in cash. It reads as under:
"No person shall take or accept from any other person (herein referred to as the depositor), any loan or deposit or any specified sum, otherwise than by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account [or through such other electronic mode as may be prescribed], if,--
(a) the amount of such loan or deposit or specified sum or the aggregate amount of such loan, deposit and specified sum; or
(b) on the date of taking or accepting such loan or deposit or specified sum, any loan or deposit or specified sum taken or accepted earlier by such person from the depositor is remaining unpaid (whether repayment has fallen due or not), the amount or the aggregate amount remaining unpaid; or
(c) the amount or the aggregate amount referred to in clause
(a) together with the amount or the aggregate amount referred to in clause (b), is twenty thousand rupees or more"
CT Case 622113/2016 Dated 15.03.2022 Pages 17
48. The Hon'ble Supreme Court in the case of Krishna Janardan Bhat (supra) has discussed section 269SS of ITA in the realm of section 138 of the Act.
Relevant extract of the judgment is reproduced below:
"19. The courts below failed to notice that ordinarily in terms of Section 269SS of the Income Tax Act, any advance taken by way of any loan of more than Rs. 20,000/- was to be made by way of an account payee cheque only".
49. It should be noted that the Hon'ble Supreme Court in the Rangappa case (supra) has expressly overruled the Krishna Janardan Bhat case (supra) to a limited extent that presumption under section 139 of the Act would also include within its ambit the presumption regarding existence of legally enforceable debt. Although, the Apex Court did not specifically deal with the issue of advancing of loan amount of more than Rs. 20,000/- in cash, it nonethless upheld the conviction of accused in the case which involved loan transaction of Rs. 45,000/- in cash. At this stage, it would be prudent to refer to decision of the Hon'ble Bombay High Court in the case of Krishna P. Morajkar v. Joe Ferrato 2013 SCC online Bom 862, wherein it was held that the Hon'ble Supreme Court has impliedly overruled Krishna Janradan Bhat case (supra) on the aspect that loan of more than Rs. 20,000/- could not be advanced in cash. Observations made by the Hon'ble Supreme Court in Krishna Janardan Bhat case (supra) regarding loan transaction of more than Rs. 20,000/- in cash was made in peculiar facts and circumstances. The said observation cannot be considered as a blanket prohibition on loan transactions of more than Rs. 20,000/- in cash.
50. A bare reading of the provision enshrined in section 269SS of the ITA would suggest that there is prohibition in accepting or taking loan by a debtor for an amount of more than Rs. 20,000/- in cash. It is more of a regulatory provision in nature which regulates the mode of accepting deposits or loans. It does not per se declare all transactions in cash above the threhold of Rs. 20,000/- illegal. No similar prohibition has been made regarding advancing of such loan by the lender or creditor. If the loan of more than Rs. 20,000/- in cash has been accepted by the debtor then he cannot seek protection u/s 269SS to CT Case 622113/2016 Dated 15.03.2022 Pages 18 argue that the said loan transaction is illegal and nothing could be recovered from him. At this stage, I also find support from Rangappa case (supra) and Krishna P. Mojakar (supra) wherein transactions of more than Rs. 20,000 /- in cash loan were upheld by the Hon'ble Courts.
51. Therefore, I am of the view that there is no blanket prohibition on advancing a loan of more than Rs. 20,000/- in cash. It may be considered as illegal transaction in certain circumstances wherein source of fund is not clear, loan advanced in cash has not been disclosed in income tax return or book of accounts etc. However, loan transaction involving smaller amounts which is common in general practice could not be automatically treated as illegal. Courts cannot remain oblivious of the fact that loan transactions in cash especially between the family members and friends are very common. Rendering all such transactions illegal would frustrate the very basic purpose of section 138 of the Act and could prove to be haven for unscrupulous debtors.
52. Further, coming on to the another leg of argument that a loan transaction not disclosed in income tax return of the complainant would amount to unaccounted income, and, therefore, could not be recovered u/s 138 of the Act, it is important to refer to the decision of the Hon'ble Bombay High Court in the Sanjay Mishra case (supra) wherein the Hon'ble Court has dealt with the issue of recoverability of loan involving unaccounted transaction. It was held that if amount has been given on loan then non mentioning of said amount in income tax return will adversely affect the complainant and it cannot be said that it is a legally recoverable debt. However, the Hon'ble Bombay High Court has subsequently in Krishna P. Mojakar case (supra) has held that section 138 of the Act would be attracted even if the loan transaction is given in cash and not accounted in the income tax return of complainant. Relevant extract of the judgment is reproduced below:
"With utmost humility, I have to state that I have not come across any provision of Income Tax Act, which makes an amount not shown in the income tax returns unrecoverable. The entire scheme of the Income Tax Act is for ensuring that all CT Case 622113/2016 Dated 15.03.2022 Pages 19 amounts are accounted for. If some amounts are not accounted for, the person would be visited with the penalty or at times even prosecution under the Income Tax Act, but it does not mean that the borrower can refuse to pay the amount which he has borrowed simply, because there is some infraction of the provisions of Income Tax Act. Infraction of the provisions of Income Tax Act would be a matter between the revenue and the defaulter and advantage thereof can not be taken by the borrower. In my humble view, to say that the amount not disclosed in the income tax return becomes irrecoverable would itself defeat the provisions of section 138 N I Act."
53. It is pertinent to note that the Hon'ble Supreme Court in a catena of cases has held that unaccounted transactions are illegal transactions. In the case of G. Pankajakshi Amma and Others v. Mathai Mathew (Dead) Through Lrs. and Another (2004) 12 SCC 83 which dealt with a suit for recovery of money, it was held that :-
"10. ...According to the 1st respondent these transactions were to be unaccounted transactions. According to the 1st respondent, all these amounts are paid in cash. If these are unaccounted transactions then they are illegal transactions. No court can come to the aid of the party in an illegal transaction. It is settled law that in such cases the loss must be allowed to lie where it falls. In this case as these are unaccounted transactions, the court could not have lent its hands and passed a decree..."
54. Further, in the case of Devender Kumar v. Khem Chand 2015 (223) DLT 419 it was held as follows:
"22. Keeping the above proposition of law in mind, on an analysis of fact, the scale of balance tilts in favour of the respondent. The respondent appears to have rebutted the presumption under section 139 of the NI Act, namely, the existence of a legally enforceable debt by establishing that no loan was advanced to him even though there was an agreement and a corresponding promissory note and an affidavit. The aforesaid loan was not shown in the ITR return of the petitioner. An adverse inference could be drawn against the petitioner on that account. The loan amount also appears to be doubtful."
CT Case 622113/2016 Dated 15.03.2022 Pages 20
55. The Hon'ble Delhi High Court had affirmed its stand on unaccounted transactions even in the case of Kulvinder Singh v. Kafeel Ahmed 2013(2) AD (Delhi) 81 where it was held as follows:
"He has not reflected the loan advanced to the respondent in his income-tax return nor is he able to tell to the court the Ward in which the income-tax return is filed. The learned Magistrate has rightly placed reliance on the provisions of Section 269 SS of the Income-Tax Act wherein it is specifically laid down that if a loan is advanced which is more than `20,000/-, it has to be by way of writing reflected in the books of account but nothing of that sort has been done in the instant case. Obviously, this clearly creates a doubt regarding the truthfulness of the stand taken by the petitioner that he had advanced a loan of `9,30,000/- to the respondent."
56. Similar observation was made by the Hon'ble Delhi High Court in the case of Vipul Kumar Gupta (supra) case wherein it was held that:
"In the facts and circumstances of this case, there is every reason to doubt the version given by the appellant that the cheque was issued in the discharge of a liability or a legally recoverable debt. The reasons for this are a number of factors which have been enumerated by the learned ACMM also. Some of them are that non-mentioning by the appellant in his Income Tax Return or the Books of Accounts, the factum of the loan having been given by him because by no measure, an amount of 9,00,000/- can be said to be a small amount which a person would not reflect in his Books of Accounts or the Income Tax Return, in case the same has been lent to a person"
57. Perusal of the aforementioned decisions of the Hon'ble Court(s) suggests that the Courts have generally inclined in treating a loan (involving huge amount of money given in cash) not disclosed in the income tax return as unaccounted money which could not be recovered u/s 138 of the Act.
58. In the instant case, as per the complaint, the complainant had given a loan of Rs. 9,60,000/- to the accused persons in cash. The said loan was given in the year 2006. Value of Rs. 9,60,000/- in the year 2006 was much higher. Lending CT Case 622113/2016 Dated 15.03.2022 Pages 21 such a hefty amount in cash without disclosing the same in income tax return is highly improbable.
59. Also, the complainant had also failed to explain/disclose his source of funds in the present case. When he was cross-examined by Ld. Counsel for the accused persons, he had stated that he had arranged an amount of Rs. 9,60,000/- after borrowing Rs. 5 lakh from his nephew Rakesh Chauhan, Rs. 2 lakh from his friend Sh. Tej Pal Yadav and Rs. 2,60,000/- was arranged from the chit fund committee.
60. Interestingly, perusal of the above mentioned statements of the complainant would show that he had given loan to the accused persons after borrowing money himself from different sources. It is very difficult to believe that an ordinary reasonable prudent person will borrow a hefty amount of money himself in order to give friendly loan to other person. Amount involved in the present case is not smaller amount rather a very hefty amount (considering the fact that the alleged loan was given in the year 2006). As disclosed by the complainant himself, he was engaged in welding profession and was also an LIC agent. Any reasonable person involved in a humble professions generating modest income would not in all probability give friendly loan of such a hefty amount by himself borrowing from different persons.
61. Further, it would also be interesting to note that the complainant had met the accused persons first time in the year 2002 at a tea stall. It would mean that the complainant did not even know the complainant for long. There is insufficient materials on record to suggest that the complainant had close family/friendly relationship with the accused persons. In fact, in his cross- examination, the complainant had admitted that he had never visited the residence of complainant or met their children. He had only visited the village of accused persons for 4-5 times. Hence, it is again difficult to fathom that considering the status of relationship between both the parties, any person could give friendly loan of such a hefty amount in cash after borrowing himself first and without insisting for any collateral security.
CT Case 622113/2016 Dated 15.03.2022 Pages 22
62. Therefore, in view of the above discussion, since the source of fund/solvency of the complainant is doubtful, non-disclosure of the loan in the income tax return of the complainant becomes very relevant and sufficient enough to create a reasonable doubt in the case of complainant.
(b) No loan was advanced by the complainant to accused
63. The accused persons had stated in their plea of defence as well as in statements under Section 313 Cr.PC that they had not taken any loan from the complainant. In their defence, the accused persons had stated that one of their advocates (who was representing them in land acquisition case at Bulandsahar) had got opened their bank account (on which the impugned cheque was drawn) on the pretext of receiving compensation amount. The said advocate i.e. Tejvir Chauhan had also introduced them while opening the bank account. Thereafter, he had fraudulently got their signatures on three blank cheques and kept them along with the entire cheque book in his possession. When the accused persons understood this fraudulent act, they had closed the bank account and also filed complaint against the said advocate. In order to support this plea, the accused persons had examined bank official of Punjab National Bank as DW-1, Banne Singh as DW-2 and themselves as DW-3 and DW-4 respectively.
64. DW-1 was the bank official who was posted at PNB Branch, Moti Nagar, Bulansahar. In her testimony, she had supported the plea of accused persons to the extent of proving that the saving bank account no. of the accused persons bearing no. 10283 was introduced by a person namely Sh. Tejvir Singh. The said bank account was joint account in the name of Prithvi Singh, Nain Singh, Banney Singh, Rakham Singh, Prem Singh, Sant Raj Singh and Bhim Singh. The said bank account was closed by the account holders on 01.05.2006. She had also stated that the account holders at the time of moving an application to close the said bank account Ex. DW-1/D (OS& R) had also handed over the Photostat copy of the complaint addressed to the SSP Bulandsahar marked as C. She was duly cross-examined by Ld. CT Case 622113/2016 Dated 15.03.2022 Pages 23 Counsel for the complainant wherein she had maintained her stand and no major contradictions could be found in her testimony.
65. Perusal of the testimony of DW-1 would establish three facts i.e. (i) that the bank account no. 10283 was jointly opened by the accused persons along with their family relatives, (ii) one person namely Tejvir Singh had introduced the accused persons at the time of opening of said bank account and (iii) that the said bank account was closed by the accused persons on 01.05.2006. These facts would clearly corroborate the plea of defence taken by the accused persons in the present case. They were indeed introduced by a person namely Tejvir Singh at the time of opening of bank account. Further, the fact that the said account was opened in order to receive land acquisition compensation could also be corroborated from the fact that the said bank account was jointly opened in the name of accused persons along with their family members. It was not a personal account of either of the accused persons.
66. Further, DW-2 who was also one of the joint account holders of the impugned bank account had also supported the plea of defence taken by the accused persons. In his testimony, he had interalia stated that the said bank account was jointly opened in the name of Prithvi Singh, Sant Raj Singh, Bhim Singh, Banne Singh, Magal Mathi, Rakham Singh and Prem Singh. The said account was introduced by Adv. Tejvir Singh Chauhan and was opened with regard to land acquisition cases at Bulandsahar. DW-2 further deposed that the advocate Tejvir Singh had got the signature of accused persons on blank cheques and the said bank account was closed on 01.05.2006. He had also proved on record an application dated 08.11.2005 filed in the Court of Additional District Judge, Bulandsahar Ex. DW-2/1. The said application was filed seeking permission of the court to replace previous counsel on the ground that he had fraudulently gotten their signatures on certain documents including cheque books.
67. DW-2 was duly cross-examined by Ld. Counsel for the complainant wherein he had stood by his statements given during his examination-in-chief. In his CT Case 622113/2016 Dated 15.03.2022 Pages 24 cross-examination, DW-2 had also supported the plea of defence that the cheque book was taken by Tejvir Singh from the accused persons after getting their signatures on some cheques. Accused persons had signed the said cheques on instructions of Tejvir Singh. Although, he could not state the exact date on which the said cheques were signed, however, the same would not be material enough to discard the testimony of DW-2 entirely.
68. Perusal of the testimony of DW-2 would clearly suggest that he had corroborated the place of defence taken by the accused persons in material terms. His testimony would establish four facts i.e. (i) that the bank account no. 10283 was jointly opened by the accused persons along with their family relatives (ii) one person namely Tejvir Singh had introduced the accused persons at the time of opening of said bank account (iii) that the said bank account was closed by the accused persons on 01.05.2006 and (iv) Some cheques were signed by the accused persons at the instruction of Tejvir Singh who had also taken the cheque book in his possession.
69. Last but not the least, the accused persons had also examined themselves as DW-3 and DW-4 respectively. In their respective testimonies, they had categorically deposed that they had not taken any loan from the complainant. In fact, they had also stated that they had never seen the complainant before and saw him for the first time in the Court. They had also reiterated their plea taken in the defence and stated that their advocates Radhey Shyam Lodhi and Tejvir Singh had obtained their signatures on blank cheques on the pretext of withdrawing compensation amount. They had also stated that they had closed their bank accounts. Thereafter, they had changed the said advocates by filing an application in the Court.
70. DW-3 and DW-4 were duly cross-examined by Ld. Counsel for the complainant wherein they stood by their statements given in their examination-in-chief. Although, they had admitted that no separate complaint case was filed against the said advocated for misusing their cheques, however, the same would not be sufficient enough to discard their testimonies CT Case 622113/2016 Dated 15.03.2022 Pages 25 in entirety. Testimonies of DW-3 and DW-4 could be corroborated in material terms with the testimonies of DW-1 and DW-2.
71. It is a settled proposition of law that there is no prohibition in accepting the evidence of Defence Witness who is supporting the case of accused. Reference can be taken from the decision of the Hon'ble Kerala High Court in the case of P G Joshy vs. Jose Varghese & Anr. Crl. A. No. 1296 of 2008 wherein while discussing the testimony of a defence witness in a complaint filed under section 138 of the Act, the Hon'ble Court has interalia held the following:
"16. Merely because defence witnesses support the case of the accused, they cannot be held to be untruthful. What is to be considered is the intrinsic worth of the testimony of a witness. Defence witnesses are entitled to equal treatment with those of the prosecution. Quite often, they tell lies, but so do the prosecution witnesses (See Dudh Nath Pandey v. State of U.P. AIR 1981 SC 911). Depositions of witnesses, whether they are examined on the prosecution side or defence side or as court witnesses, constitute oral evidence in the case. The scrutiny thereof shall be without any predilection or bias. No witness is entitled to get better treatment merely because he was examined as a prosecution witness or even as a court witness. It is judicial scrutiny which is warranted in respect of the depositions of all witnesses. Different yardsticks cannot be prescribed for appreciation of the testimony of different categories of witnesses (See State of U.P v. Babu Ram: AIR 2000 SC 1735)."
72. In view of the above, discussion, I am of the considered view advancement of loan of Rs. 9,60,000/- by the complainant to the accused persons is doubtful. The accused persons in DE have successfully created a reasonable doubt on the advancement of loan itself. Complainant had not examined any other witness to support his claim.
(iv)Whether the impugned cheque was issued by the accused persons in discharge of a legally enforceable debt?
CT Case 622113/2016 Dated 15.03.2022 Pages 26
73. In the present case, the complainant in his evidence by way of affidavit had interalia stated that he had given a friendly loan to the accused persons on 24.06.2006 for the period of four months. He had also stated that the accused persons had given him the impugned cheque on the same day itself i.e. 24.06.2006 which subsequently got dishonoured.
74. It is interesting to note that when the complainant was cross-examined by the Ld. Counsel for the accused persons, he had contradicted his own statements and deposed that the accused came to his residence after two days and handed over the duly filed impugned cheque. This is a material contradiction on the part of complainant vis-à-vis the time of issuance of impugned cheque by the complainant.
75. Be that as it may, as stated by the complainant, the alleged friendly loan amounting to Rs. 7,00,000/- was given by the complainant to the accused persons on 24.06.2006 for a period of 4 months. An amount of Rs. 2,60,000/- was given to the accused persons after one week. It would mean that the impugned loan/liability would only become enforceable after the expiry of four months. Hence, no legal debt was in existence on 24.06.2006 i.e. on the date on which the impugned cheque was allegedly given by the accused persons. It would mean that the impugned cheque was given by the accused persons in advance before the existence of their legal liability.
76. It is a settled proposition of law that if no legal liability existed on the date on which cheque was issued then offence u/s 138 of the Act would not be attracted with respect to the said cheque. Reference can be taken from the decision of Hon'ble Supreme Court in the case of Indus Airways Private Limited vs. Magnum Aviation Private Limited (2014) 12 SCC 539 wherein the Apex Court has interalia held the following:
"13. The explanation appended to Section 138 explains the meaning of the expression 'debt or other liability' for the purpose of Section 138. This expression means a legally enforceable debt or other liability. Section 138 treats dishonoured cheque as an offence, if the cheque has been CT Case 622113/2016 Dated 15.03.2022 Pages 27 issued in discharge of any debt or other liability. The explanation leaves no manner of doubt that to attract an offence under Section 138, there should be legally enforceable debt or other liability subsisting on the date of drawal of the cheque. In other words, drawal of the cheque in discharge of existing or past adjudicated liability is sine qua non for bringing an offence under Section 138. If a cheque is issued as an advance payment for purchase of the goods and for any reason purchase order is not carried to its logical conclusion either because of its cancellation or otherwise, and material or goods for which purchase order was placed is not supplied, in our considered view, the cheque cannot be held to have been drawn for an exiting debt or liability. The payment by cheque in the nature of advance payment indicates that at the time of drawal of cheque, there was no existing liability."
77. A bare reading of aforementioned decision of the Hon'ble Supreme Court clearly suggests that the material date in order to attract section 138 of the Act is the date on which the cheques are issued. If at the time of drawal/issuance of cheque by the accused, no legal liability of the accused exists towards the complainant then he could not be punished u/s 138 of the Act.
78. In the instant case, as discussed above, the loan was advanced partly to the accused persons on 24.06.2006 for a period of four months and the impugned cheque was given on 24.06.2006 i.e. before the existence of legal enforceable doubt in favour of the complainant. Hence, I am of the opinion that the impugned cheque was not issued by the accused persons in discharge of any legally enforceable debt and could at best be considered as having being issued towards an advance payment.
79. Therefore, in view of the above discussion, I am of the considered view that the accused persons have successfully rebutted the statutory presumptions u/s 1118(a) read with 139 of the Act existed in favour of the complainant by creating reasonable doubt in the complainant's claim. As discussed, if the presumption is rebutted then the burden of proof shifts back to the complainant to prove the guilt of accused beyond reasonable doubt. The complainant, in the present case, has neither examined any witness (other CT Case 622113/2016 Dated 15.03.2022 Pages 28 than himself) nor filed any document on record to prove the culpability of accused beyond reasonable doubt.
80. Therefore, on evaluation of the entire evidence, this court finds the version of the complainant improbable and difficult to believe. Accused persons have successfully created reasonable doubts on advancement of loan by the complainant. Further, the existence of their legal liability towards complainant on the date of issuance/drawal of impugned cheques is also doubtful. The complainant, thereafter, has not been able to establish that there was a legal debt or liability standing on the part of the accused persons towards the complainant. Thus, the most important ingredient of section 138 of the Act has not been fulfilled.
Decision: -
81. In view of the above discussion, the accused Sant Raj Singh stands acquitted for the offence under section 138 of the Act.
Announced in the open court (ANIMESH KUMAR) on 15.03.2022 MM-06 South-East, New Delhi
It is certified that this judgment contains 29 pages and each page bears my signatures.
(ANIMESH KUMAR)
MM-06/SE/Saket/15.03.2022
CT Case 622113/2016 Dated 15.03.2022 Pages 29