Delhi District Court
M/S.Alpha Motor Finance Ltd vs Karan Arora on 19 December, 2023
IN THE COURT OF
METROPOLITAN MAGISTRATE (NI ACT) - 08
SOUTH WEST DISTRICT, DWARKA COURTS, DELHI
Presided by : Sh. Apoorv Bhardwaj
In case of:-
M/s Alpha Motor Finance Ltd. ... Complainant
VERSUS
Karan Arora ... Accused
JUDGMENT
a) Sl no. of the case : 25167/2017
b) CNR of the case : DLSW020352092017
c) Date of institution 07.12.2017
d) Name, parentage and M/s Alpha Motor Finance Limited
address of the 215, 2nd Floor, EMCA House
complainant : 23/23B, Ansari Road, Darya Ganj
New Delhi - 110002
e) Name, parentage and Mr. Karan Arora
address of the accused: S/o Sh. R.K. Arora
R/o H.No.H-2, IDPL Apartments
Road No.44, Pitampura, New
Delhi-110034
f) Offence complained of : 138 NI Act
g) Total cheque amount : Rs.2,60,000/-
h) Plea of the accused : Pleaded not guilty
i) Arguments heard on : 28.11.2023
j) Final order : Convicted
k) Date of Judgment : 19.12.2023
BRIEF STATEMENT OF FACTS FOR THE DECISION
1. Vide this judgment, I shall decide the present complaint filed under section 138 of the Negotiable Instruments Act, 1881 (hereinafter referred to as 'NI Act') by the complainant company against the accused.
Factual Background
2. As per the version set out by the AR of the complainant company in his complaint and affidavit, the principal borrower namely Sh. Nitin Arora had availed a loan against his vehicle namely Volkswagen Polo Car, Registration No. DL 8CY 0455 vide agreement dated 30.04.2016. Thereafter, despite various reminders, the principal borrower failed to make payments as per the terms and conditions of the agreement and finally, the accused issued the cheque in question for a sum of Rs 2,60,000/- towards repayment of the dues of the principal borrower. The complainant company presented the cheque to its bank i.e. Bank of Baroda, Sector 12, Dwarka, however, the same was returned unpaid with the remarks "Funds Insufficient". Legal demand notice was issued to the accused in regular course, however, he failed to pay the total cheque amount within 15 days thereof and hence the present case.
Trial & Proceedings before the Court
3. Upon a prima facie consideration of pre-summoning evidence, cognizance of offence under section 138 NI Act was taken and the accused was summoned. Thereafter, separate notice explaining the accusation was put to the accused under section 251 of The Code Ct Case No.25167/2017 M/s Alpha Motor Finance Ltd. vs. Karan Arora Page no.2 of 14 of Criminal Procedure, 1973 (hereinafter referred to as 'CrPC') to which the accused pleaded not guilty and claimed trial. At this stage, the following aspects were admitted/denied by him:-
3.1. Issuance of the cheque in question :- Admitted 3.2. Receiving the legal demand notice :- Admitted 3.3. Signatures on the cheque in question :- Admitted In his defence he stated that he was a guarantor to the loan and the cheque in question was issued as guarantee towards repayment of the loan. He had no personal liability to pay the loan amount.
4. Thereafter, he was granted an opportunity to cross-examine the complainant under section 145(2) NI Act.
5. The AR for the complainant was examined as CW-1 and he relied on pre-summoning evidence as post summoning evidence i.e on evidence by way of affidavit Ex CW1/A and on the following documents :-
5.1. Mark A i.e. certificate of incorporation 5.2. Ex. CW1/1 i.e. the certified true copy of Board Resolution in favour of the AR 5.3. Mark B i.e. a Certified True Copy of Loan Agreement.
5.4. Ex CW1/2 i.e the cheque in question 5.5. Ex. CW1/3 i.e. the return memo 5.6. Ex. CW1/4 i.e. the legal notice 5.7. Ex. CW1/5 (Colly) i.e. the postal receipts 5.8. Ex. CW1/6 i.e. the tracking report 5.9. Ex. CW1/7 i.e. the statement of account (showing total outstanding as Rs 2,71,395.49/-) 5.10. Ex CW1/8 Certificate under section 65B Evidence Act in support of Ex CW1/7.
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6. Thereafter, CW-1 was cross-examined. During his cross-examination, the following notable points emerged:-
6.1. He clarified that Karan Arora, the accused, hadn't taken a loan from the institution but acted as a guarantor for Nitin Arora.
6.2. Relevant documents, including Aadhar Card and Election ID, were obtained from Karan Arora, and an official from the company inspected his residence.
6.3. The accused provided the cheque in question, although the exact date escaped his memory.
6.4. No cheque was taken from the borrower, Nitin Arora, as he was untraceable; instead, the accused, as a guarantor, assumed liability, prompting the company to obtain the cheque from him.
6.5. The loan, facilitated through a cheque, was given directly to the borrower, and the accused was apprised of the agreement's terms.
6.6. He denied the suggestion that no attempts were made to recover money from Nitin Arora, the principal borrower, although no legal proceedings were initiated against him.
6.7. Article 8.1 of the agreement underscored the company's right to initiate proceedings against the guarantor first, a point he stressed was not a violation of the agreement's terms.
Ct Case No.25167/2017 M/s Alpha Motor Finance Ltd. vs. Karan Arora Page no.4 of 14 6.8. He rejected the idea that the borrower bore primary liability, maintaining that he was not deposing falsely.
Thereafter CE was closed.
7. Thereafter a statement of the accused under section 313 CrPC was recorded. At this stage he admitted receiving the legal demand notice and his signatures on the cheque in question. He maintained that the case had been filed to extort money from him as the cheque was given by him being a guarantor. He opted to lead defence evidence.
8. The accused moved an application under section 315 CrPC. The application was allowed to the extent of allowing the accused to appear as a defence witness.
9. The accused, appearing as DW-1, stated that he didn't borrow any money from the complainant but acted as a guarantor for Nitin Arora. He insisted that he wasn't responsible for repaying the loan amount. During cross-examination, he was confronted with Mark B, the loan agreement, and acknowledged signing it. He admitted that his signatures were on 'schedule 1' but mentioned that the details were not filled in when he signed it. He affirmed understanding the term 'guarantor' and acknowledged the responsibility if the borrower fails to repay. He admitted his signatures on the cheque in question, clarifying that he issued it as a guarantor for the complainant company. He confirmed that Nitin Arora hadn't repaid the full loan, nor returned the vehicle for which the loan was taken. Despite attempting to contact Nitin Ct Case No.25167/2017 M/s Alpha Motor Finance Ltd. vs. Karan Arora Page no.5 of 14 Arora, he had not received any response. He was unaware of Nitin Arora's repayment status and refuted various suggestions from the complainant's counsel. Thereafter, DE was closed.
10. During the course of final arguments Ld counsel for the complainant Sh. Mohit Aggarwal and Sh. Rahul Matharu submitted that the complainant company has duly proved its case by placing on record the entire documentary evidence and the accused has failed to rebut the presumption against him.
11. Per contra, Ld Counsel for the accused Sh. N. K. Tiwari submitted that since the complainant company has not exhausted all remedies available against the principal borrower they could not have presented the guarantor's cheque. He prayed that the accused be acquitted.
Legal Position:-
12. Before proceeding further to reflect upon the defence and evaluation of evidence, the foremost check point is whether the facts averred by the complainant fulfil the basic statutory requirement for constituting an offence under section 138 NI Act. To establish the offence under Section 138 of the NI Act against the accused, the complainant must prove the following:-
(i) The accused must have drawn a cheque on an account maintained by him in a bank for payment of a certain amount of money to another person from out of that account;
(ii) The cheque should have been issued for the Ct Case No.25167/2017 M/s Alpha Motor Finance Ltd. vs. Karan Arora Page no.6 of 14 discharge, in whole or in part, of any debt or other liability;
(iii) That cheque has been presented to the bank within a period of three months from the date on which it is drawn or within the period of its validity whichever is earlier;
(iv) That cheque is returned by the bank unpaid, either because of the amount of money standing to the credit of the account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with the bank;
(v) The payee or the holder in due course of the cheque makes a demand for the payment of the said amount of money by giving a notice in writing, to the drawer of the cheque, within 30 days of the receipt of information by him from the bank regarding the return of the cheque as unpaid;
(vi) The drawer of such cheque fails to make payment of the said amount of money to the payee or the holder in due course of the cheque within 15 days of the receipt of the said notice.
Being cumulative it is only when all the aforementioned ingredients are satisfied that the person who had drawn the cheque can be deemed to have committed an offence under section 138 Ct Case No.25167/2017 M/s Alpha Motor Finance Ltd. vs. Karan Arora Page no.7 of 14 NI Act.
13. In the present case, the complainant has filed on record the original cheque as Ex. CW1/2. The genuineness of the cheque is not disputed. The accused has also admitted issuing the cheque to the complainant and his signatures on the cheque in question.
Therefore ingredient number (i) stands fulfilled in the present case.
14. The said cheque was presented to the bank within a period of three months from the date on which it was drawn and was returned dishonoured for the reason "Funds Insufficient". The returning memo dated 13.10.2017 bearing the fact of dishonour of cheque in question has been exhibited by the complainant as Ex. CW1/3. The returning memo is signed and stamped by bank officials. The genuineness of the returning memo is also not disputed by the accused.
Therefore ingredient number (iii) & (iv) also stand fulfilled in this case.
15. The complainant then sent a legal notice, Ex CW1/4 dated 31.10.2017. The original postal receipts dated 03.11.2017 have been placed on record as Ex CW1/5 (colly) alongwith a tracking reports Ex CW1/6 with remarks 'item delivered'. The accused has also admitted that he received the legal demand notice.
Therefore, the ingredient number (v) and (vi) are also fulfilled in the present case.
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16. Now, I shall consider whether condition number (ii) i.e. the requirement that the cheque in question have been issued for the discharge, in whole or in part, of any debt or other liability is fulfilled or not. Towards this end, it is apt to discuss that a negotiable instrument including a cheque carries following presumptions in terms of Section 118 (a) and Section 139 of the NI Act.
Section 118 of the NI Act provides :
"Presumptions as to negotiable instruments: Until the contrary is proved, the following presumptions 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, indorsed, negotiated or transferred for consideration;"
Section 139 of the N.I Act further provides as follows:
"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"
Thus, the combined effect of Section 118(a) and Section 139 of NI Act raises a presumption in favour of the holder of the cheque that he has received the same for discharge, in whole or in part of any debt or other liability. Therefore, existence of condition number (ii) is also presumed against the accused.
17. When the presumption is raised in favour of the complainant, the burden is shifted on the accused to disprove the case of the complainant by rebutting the presumption. The accused can Ct Case No.25167/2017 M/s Alpha Motor Finance Ltd. vs. Karan Arora Page no.9 of 14 displace this presumption on the scale of preponderance of probabilities. Lack of consideration or a legally enforceable debt need not be proved beyond a reasonable doubt as is the general rule in criminal cases. The accused has to make out a fairly plausible defence which is acceptable to the court. This the accused can do either by leading his own evidence or by raising doubt /demolishing the material or evidence brought on record by the complainant. Reliance can be placed on Basalingappa v Mudibasappa (2019) 5 SCC 418.
18. Further, the court need not insist in every case that the accused should disprove the non-existence of consideration and debt by leading direct evidence because the existence of negative evidence is neither possible nor contemplated. Something which is probable has to be brought on record for getting the burden of proof shifted to the complainant. To disprove the presumptions, the accused should bring on record such facts and circumstances, upon consideration of which, the court may either believe that the consideration and debt did not exist or their non-existence was so probable that a prudent man would under the circumstances of the case, act upon the plea that they did not exist. The accused may also rely upon circumstantial evidence to shift the burden again on the complainant. [Refer: Bharat Barrel and Drum Manufacturing Company v Amin Chand Pyarelal 1999 SCCOnline SC 188 and Kumar Exports v Sharma Carpets, 2008 SCC OnLine SC 1885].
19. Also, the test of proportionality should guide the construction and interpretation of reverse onus clauses and the defendant-accused Ct Case No.25167/2017 M/s Alpha Motor Finance Ltd. vs. Karan Arora Page no.10 of 14 cannot be expected to discharge an unduly high standard or proof. Presumption of innocence as a human right needs to be delicately balanced with doctrine of reverse burden contained in section 139 of NI Act. [Reference can be made to Rangappa v Sri Mohan 2010 SCC OnLine SC 583 and Krishna Janardhan Bhat v Dattatreya G Hegde 2008 (4) SCC 54].
20. Having referred to the above judicial pronouncements, I shall now analyse the record in their light.
Whether the accused has been able to rebut the presumption against him.
21. In the present case the accused has admitted that he had stood as a guarantor for the principal borrower and he had issued the cheque in question in his capacity as a guarantor. It is also not his case that the principal borrower has discharged his liability qua the loan. His sole defence rests on the contention that he shouldn't be held accountable for the primary borrower's debts. However, this defence lacks legal merit. In a nearly identical scenario, the Hon'ble Supreme Court of India, in ICDS Ltd. v Beena Shabeer, (2002) 6 SCC 426, ruled that even a cheque issued by a guarantor concerning a loan taken by the primary borrower falls under the ambit of section 138 of the Negotiable Instruments Act. The relevant excerpts from the said judgment are being reproduced hereunder:-
"10. The language, however, has been rather specific as regards the intent of the legislature. The commencement of Ct Case No.25167/2017 M/s Alpha Motor Finance Ltd. vs. Karan Arora Page no.11 of 14 the section stands with the words "Where any cheque". The abovenoted three words are of extreme significance, in particular, by reason of the user of the word "any" -- the first three words suggest that in fact for whatever reason if a cheque is drawn on an account maintained by him with a banker in favour of another person for the discharge of any debt or other liability, the highlighted words if read with the first three words at the commencement of Section 138, leave no manner of doubt that for whatever reason it may be, the liability under this provision cannot be avoided in the event the same stands returned by the banker unpaid. The legislature has been careful enough to record not only discharge in whole or in part of any debt but the same includes other liability as well. This aspect of the matter has not been appreciated by the High Court, neither been dealt with or even referred to in the impugned judgment.
11. The issue as regards the coextensive liability of the guarantor and the principal debtor, in our view, is totally out of the purview of Section 138 of the Act, neither the same calls for any discussion therein. The language of the statute depicts the intent of the law-makers to the effect that wherever there is a default on the part of one in favour of another and in the event a cheque is issued in discharge of any debt or other liability there cannot be any restriction or embargo in the matter of application of the provisions of Section 138 of the Act. "Any cheque"
and "other liability" are the two key expressions which stand as clarifying the legislative intent so as to bring the Ct Case No.25167/2017 M/s Alpha Motor Finance Ltd. vs. Karan Arora Page no.12 of 14 factual context within the ambit of the provisions of the statute. Any contra-interpretation would defeat the intent of the legislature. The High Court, it seems, got carried away by the issue of guarantee and guarantor's liability and thus has overlooked the true intent and purport of Section 138 of the Act. [...]" (emphasis supplied)
22. I have also considered the argument that the cheque was given as a blank signed security cheque and the same has been misused. It is trite that averment that a blank signed security cheque has been misused is no defence unless the accused can prove on a scale of preponderance of probabilities that she did not have a crystallized legal liability co-extensive to the cheque amount on the date of presentation of the cheque. Reliance can be placed on Bir Singh v Mukesh Kumar (2019) 4 SCC 197 and Credential Leasing & Credits Ltd. v Shruti Investment 2015 SCC OnLine Del 10061. In the present case, the accused has made no attempt to discharge this burden.
23. Therefore, I am of the view that on a scale of preponderance of probabilities, the accused has not been able to rebut the presumption against him and therefore ingredient no. (ii) remains presumed to have been established against the accused beyond reasonable doubt.
Conclusion
24. In view of the evidence adduced, documents put forth and arguments advanced by the parties and further in view of the above discussion, the court is of the considered view that Sh.
Ct Case No.25167/2017 M/s Alpha Motor Finance Ltd. vs. Karan Arora Page no.13 of 14 Karan Arora is guilty of offence under Section 138 of Negotiable Instruments Act, 1881 and accordingly, he is hereby convicted under Section 138 of Negotiable Instruments Act, 1881.
Announced in open court on 19.12.2023 Digitally
signed by
APOORV
Judgment consists of 14 pages. APOORV BHARDWAJ
BHARDWAJ Date:
2023.12.19
15:02:59
+0530
APOORV BHARDWAJ
MM-08 (NI Act)
SOUTH WEST:DWARKA COURTS.
N.D/19.12.2023
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