Delhi District Court
Exports vs M/S Sharma Carpets, Criminal Appeal ... on 7 July, 2022
IN THE COURT OF MS. SALONI SINGH, ADDITIONAL CHIEF
METROPOLITAN MAGISTRATE (EAST) KARKARDOOMA
COURTS DELHI
Complaint case no. 47200/2016
CNR no. DLET020016152015
Police Station New Ashok Nagar
Pankaj Maini,
S/o, Sh. Surinder Nath Maini,
R/o, M-42A, Second floor,
Laxmi Nagar,
Delhi-110092. ...Complainant
Vs.
1.Kushmanda Overseas, Registered office at:-
Sector 10, Noida 201301.
2. Mr. Ashok Singh, Proprietor of Kushmanda Overseas, C-1/41, New Ashok Nagar, New Delhi-110096.
3. Mr. Ashish Singh, S/o, Ashok Singh, C-1/41, New Ashok Nagar, Delhi-110096 ...Accused COMPLAINT UNDER SECTION 138 OF THE NEGOTIABLE INSTRUMENTS ACT, 1881 Date of Institution: 15.12.2015 Date of Reserving Judgment: 05.07.2022 Date of Judgment: 07.07.2022 Final Order: Acquittal CT no. 47200/2016 Page 1 of 14 Judgment: -
In the present complaint filed under Section 138 of the Negotiable Instruments Act, 1881 (for short, "N.I. Act"), the complainant has prayed that the accused be summoned, tried, and punished for offence under Section 138 of the said Act.
1. The brief facts of the case are: -
a) The complainant had personal and business relations with Anil Kumar, son of Mr. Mithi Ram, for the past several years. The accused number 3 was introduced to the complainant by Anil with a proposal to start a business with the accused number 2/father of the accused number 3.
The accused number 2 is the proprietor of the accused number one, M/s. Kushmanda Overseas. The accused number 2 through his son/accused number 3 and Anil approached the complainant in November 2014 for a business loan of ₹ 20 lakh for starting a business of trade/manufacture of clothing with assurance that the said amount would be returned within a period of 6 months. The complainant, the accused number 3 and Anil enter into a partnership agreement dated 8 January 2015 to carry on the said business in the name of M/s. Kushmanda Exim. As per mutual agreement, it was decided that the accused number 2 and 3 would procure sales and business for the firm, the complainant would provide investment towards expenditure of the firm, and Anil would take care of logistics and the manufacturing of the items.
b) Initially, on 14 and 15 December 2014, the complainant advanced ₹ 50,000 and ₹ 80,000 in cash by hand to the accused number 2 for the said business as investment for M/s. Kushmanda Exim. Subsequently, on the pretext of better logistics for commencing production of the CT no. 47200/2016 Page 2 of 14 goods/frocks, the accused number 3 proposed that the production be commenced at the accused number one and for which the accused number 2 requested for loans from the complainant. The accused number 2 assured the complainant that all payments received for orders of the garments would be utilized in production of the garments and the payments would also be used to reimburse the complainant. The accused number 2 claimed to have procured an order from a prospective buyer at France of a consignment of 7500 jackets and, at the request of the accused number 2, for the benefit of the business of the complainant's firm, the complainant advanced the following loan amounts to the accused number 2: -
i. ₹ 170,000 in cash on 15 December 2014 was given to the accused number 2 for procuring raw material for the said new order and for improving manufacturing logistics.
ii. ₹ 120,000 in cash on 7 January 2015 was given to the accused number 3, in the presence of Anil, for expediting pending orders. iii. ₹ 150,000 on 8 January 2015 to the accused persons in the presence of accused number 3 and Anil.
iv. ₹ 230,000 on 12 January 2015 to the accused number 2 for purchase of fabric.
v. ₹ 150,000 in cash on 30 January 2015 to the accused number 2 for stitching and putting hooks and accessories on the jackets. vi. ₹ 55,000 in cash on 6th February 2015 to the accused number 2 for purchase of final layering of polyester.
vii. ₹ 50,000 and ₹ 60,000 on 20 February 2015 to the accused number 2 for higher investment by the partners on the pretext of sanction of initial advance payment by the buyer in France.CT no. 47200/2016 Page 3 of 14
c) The bank account of the complainant was encountering electronic discrepancy. Therefore, the accused number 2 on receipt of payment for the initial orders, in partial discharge of his liability, in March 2015 he issued four cheques bearing numbers 2059274 for ₹ 320,000 dated 3 March 2015, 2059354 for ₹ 50,000 dated 9 May 2015, 2059304 for ₹ 80,000 dated 26 May 2015 and 205942 for ₹ 2 lakh dated 26 May 2015, in the name of the proprietorship firm of the wife of the complainant, namely,'Devika Garments', drawn on IndusInd Bank, Sector 18, Noida. The accused number 3 supplied a copy of bill of lading and other documentary proof to show that the order was on its way and as soon as the payment is received, it would be set off towards the investment made by the complainant through loans. By now, the accused number 2 and 3 had gained the trust and confidence of the complainant by discharging their partial liability by means of the said 4 cheques. Thereafter, the accused number 3 informed the complainant that the shipment had been stopped and the shipping company had blackmailed the accused number 3 and compelled him to pay ₹ 1 lakh or else they would dispose of or illegally retain the goods, on which the complainant was compelled to arrange one loan for the accused number 2 of the said amount and gave the said amount on 22 May 2015.
d) The complainant came to know on enquiry that the accused number 2 and 3 had sold the entire consignment of the jackets to a different buyer at higher rates and received payments depriving the complainant of profit and his share as per the partnership agreement. Out of the total loan of ₹ 1,215,000, the accused persons had only repaid ₹ 7 lakh with due of ₹ 515,000. On persistent requests and reminders made by the complainant, the accused number 2 and 3 gave three cheques bearing CT no. 47200/2016 Page 4 of 14 number 205951 for ₹ 124,000, 205950 for ₹ 391,000, and 205954 for ₹ 50,000, issued in favour of the complainant, drawn on IndusInd Bank, sector 18, Noida (said cheques bearing numbers 205950 and 205951 are hereinafter referred to as, "cheques in question") and requested the complainant to present these cheques after 1 August 2015.
e) The cheques in question were then presented by the complainant to his banker, but the cheques were returned unpaid with remarks "Stop payment", vide bank return memos dated 22 August 2015. With the intervention of friends and acquaintances, the accused number 2 assured that the cheques would be honoured and the complainant presented the cheques on 9 October 2015, out of which one cheque bearing number 205954 was encashed, while the remaining 2 cheques were dishonoured vide return memos dated 9 October 2015. The complainant issued two legal notices dated 18 September 2015 and 28 October 2015, through registered posts A.D and speed posts, to all the accused and despite service of the legal notices, the accused failed to pay the amount of the cheques in question within a period of 15 days of receipt of legal notices.
2. Evidence of the parties: - On filing of the present complaint, the complainant was examined on oath and he tendered his examination-in-chief by way of an affidavit, Exhibit CW-1/A, relying upon the following documents, namely, partnership agreement as Exhibit CW-1/1, copy of registration certificate of partnership firm Kushmanda Exim., as Exhibit CW-1/2, acknowledgment receipt of PAN application of the partnership firm as Exhibit CW-1/3, bank account statement of M/s. Devika Garments as Mark Exhibit CW-1/4, cheques in question as Exhibit CW-1/5 and Exhibit CW-1/7, copy of third cheque bearing number 205954 as Mark CW-1/9, bank return memos are CT no. 47200/2016 Page 5 of 14 Exhibit CW-1/6, Exhibit CW-1/8, Exhibit CW-1/10, and Exhibit CW-1/15, legal notices are Exhibit CW-1/11 and Exhibit CW-1/16, cheque deposit slip is Exhibit CW-1/13, and postal receipts and registered post AD Card are Exhibit CW-1/12 (colly) and Exhibit CW-1/17.
3. On a prima facie fulfillment of the mandatory requirements of Section 138 of the N.I. Act, there were sufficient grounds found for proceeding against all the accused and they were summoned for 15.12.2015. On service of the summons upon the accused, the accused no. 2 and 3 appeared before the court and were granted bail on furnishing bail bonds in the sum of ₹ 100,000 with surety of like amount. A notice of accusation under Section 251 of Code of Criminal Procedure, 1973 (for short, "CrPC") was served upon both the accused for the offence punishable under Section 138 of N.I. Act, the contents of which were read over to both the accused and to which they pleaded not guilty and claimed trial. The accused no. 3 was discharged vide order dated 4 October 2016. Considering the plea of defence raised by the accused, the complainant was recalled for crossexamination to elicit the complete facts. On completion of complainant's evidence, the accused was examined under Section 313 read with Section 281 of CrPC, wherein all the incriminating evidence/circumstances were put to the accused, which denied by the accused. In his defence evidence, the accused only examined himself as DW- 1 and tendered his evidence by way of affidavit, Exhibit DW-1/X. On completion of defence evidence, the matter was listed for final arguments.
4. Final arguments: - Written arguments were filed on behalf of both the parties. In the written submissions filed on behalf of the complainant, it is submitted that the legal notice was served upon the accused as per Section 27 of the General Clauses Act, and that the accused failed to disprove the presumptions CT no. 47200/2016 Page 6 of 14 under Sections 118 and 139 of N.I. Act. It is also submitted that case of the accused that the cheques in question were security cheques would not be a ground to exonerate the penal liability under Section 138 of the said Act. It has also been submitted that on one hand accused number 2 has stated in his affidavit that when he demanded the cheques, he was told by the complainant's wife that the cheques had been misplaced, however, during his cross-examination he stated that the complainant's wife had told him that the cheques were lying with the complainant's brother and on account of this false statement, Section 340 of CrPC is attracted. In support of the said submissions, reliance has been placed upon the decisions in M/s Kumar Exports vs M/s Sharma Carpets, Criminal Appeal number 2045/2008; Uttam Ram vs Devinder Singh, Criminal Appeal number 1545 of 2019; Umaswamy vs K.N. Ramanath, 2006 Cri.L.J. 3760; and M/s General Autosales vs Vijaylakshmi. D, 2005 Cri.L.J. 1454.
5. In the written arguments filed on behalf of the accused, it is submitted that the proprietor of Devika Garments had misused the cheque number 205934 and filed a false civil suit, which was dismissed by the Court of Mr. Sanjay Sharma-I, District Judge, Commercial Court, East District and that she with the complainant filed this false case against the accused by misusing the cheques in question. It is also submitted the complainant has admitted that there was no business relation with the accused and has failed to produce any evidence to show that he had made any payment to the accused. Lastly, it is pleaded that the complainant has failed to discharge the initial onus on his to prove his case.
6. Issue: - The only consideration before this Court is to determine as to whether the accused is guilty of committing an offence under Section 138 of the N.I. Act, for which the essential ingredients are as follows:- (1) The cheque was CT no. 47200/2016 Page 7 of 14 drawn by a person on an account maintained by him with a banker; (2) The cheque drawn was for payment of money to another person from out of that account in discharge, in whole or part, of any debt or other liability; (3) On presentation of the cheque, it is returned by the bank unpaid, either because of the amount of money standing to the credit of that 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 that bank; (4) The cheque was presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier; (5) The payee or the holder in due course of the cheque, as the case may be, makes a demand for the payment of the said amount within thirty days of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and (6) The drawer of the cheque fails to make the payment of the said amount of money to the payee or, as the case may be, to the holder in due course, within fifteen days of the receipt of said notice.
7. Analysis of evidence/reasons for findings: - The submissions made on behalf of both the parties have been considered and the entire record of the case has been thoroughly perused. With respect to the above ingredients of Section 138 of N.I. Act, firstly, it does not seem to be disputed that the cheques in question had been drawn by the accused on his bank account in IndusInd Bank in Noida Branch. The accused in his cross-examination has stated that the amount written on the cheques in question, in words and figures, are in his handwriting. Next, it is also not disputed that the cheques in question had been presented twice by the complainant to his banker within its validity period or within a period of six months from the date of their issue. Next, it is also not disputed that the cheques in question had been returned by the complainant's bank with remarks, 'payment stopped by drawer' and 'instrument contains extraneous matter". Further, as per the complainant, CT no. 47200/2016 Page 8 of 14 within a period of thirty days of receipt of said information from his bank, he had sent two legal notices, Exhibit CW-1/11 and Exhibit CW-1/16, to the accused at his address at C-1/41, New Ashok Nagar, Delhi by way of registered post AD and speed post, which had been delivered to the accused. Usually, a letter sent by way registered post to the person concerned at the proper address shall be deemed to be served upon him/her in the due course unless contrary is proved. Reference in this regard is made to the presumption under Section 27 of the General Clauses Act, 1897. The accused has vaguely denied receipt of the said legal notice, however, has not disputed the correctness of his address of C-1/41, New Ashok Nagar, Delhi mentioned on the said legal notice. No evidence has been led to rebut the said presumption. In such circumstances, the legal notice(s) can be presumed to have been served on the accused. Lastly, it is not disputed that the accused failed to pay the cheque amounts to the complainant within fifteen days of receipt of the said legal notice(s).
8. From the above, it is stated that the very issuance of the cheque in question by the accused is not disputed, which gives rise to the presumptions under Sections 118 (a) and 139 of the said Act i.e., the cheques in question were drawn for a consideration and that the holder of the cheques received the same in discharge of an enforceable debt or liability. The said presumptions are rebuttable. The onus now shifts on the accused to establish a probable defence to rebut the said presumptions on the standard of preponderance of probabilities. For this, the accused made adduce direct evidence or may rely upon either materials on record or the evidence adduced by the complainant. Reference in this regard is made to the decisions of the Hon'ble Supreme Court in M.S. Narayan Menon @ Mani v. State of Kerala & Anr., Appeal (Crl) 1012 of 1999 dated 04.07.2006 and Hiten P. Dalal v. Bratindranath Bannerjee., (2001) 6 SCC 16.
CT no. 47200/2016 Page 9 of 149. Briefly, the case of the complainant is that his acquaintance Anil Kumar had introduced him to the accused number two and three, on which the accused number two suggested a proposal of investment by the complainant in the form of loan of ₹ 20 lakh in the business of manufacturing garments and to repay the loan by providing returns to the complainant on the sales of the manufactured goods. For this arrangement, the complainant, the accused number three, and Anil Kumar executed a partnership agreement on 8 January 2015, Exhibit CW-1/1, for the business of garments. It is pleaded by the complainant that on oral agreement between the parties, it was agreed, inter alia, that the responsibility of complainant would be to provide the capital/investment for this business. Further, it is stated that the complainant over a period from December 2014 to May 2015 made several advancements of loan to the accused number two amounting to ₹ 1,215,000, out of which the accused repaid ₹ 7 lakh by way of cheques issued in the name of M/s. Devika Garments, the proprietorship firm of the wife of the complainant. It is alleged that for the pending liability of ₹ 515,000, the accused issued three cheques including the two cheques in question.
10. In defence, the accused has pleaded that he had received an order of 7500 garments for which he had purchased the raw material from M/s. Devika Garments through Anil Kumar. It is the case of the accused that he had made payments to M/s. Devika garments, by way of cheques, for the raw materials supplied, however, subsequently there was a dispute between the accused and Devika Garments on the quantity of the order and this dispute was settled by the accused on payment of ₹ 50,000 issued in the account of the complainant. It is alleged by the accused that for the said purchase/supply of raw material, the proprietor of Devika Garments had taken security cheques from the accused, which included the cheques in question, and despite settlement of all CT no. 47200/2016 Page 10 of 14 dues between them, his cheques were not returned to him and were subsequently misused by the complainant.
11.The complainant claims that he had provided the loans to the accused number two for the business of the partnership firm, however, neither the partnership agreement was executed with the accused number two, nor any written agreement was executed for the alleged arrangement between the complainant and the accused number two and three. Clause 23 of the said partnership agreement clearly specifies that the necessary capital or funds required for the partnership business shall be contributed or arranged by the partners in such manner as may be mutually agreed upon in writing. Therefore, the plea of the complainant that there was an oral agreement between him, Anil Kumar, and the accused number three that the task of providing investment would be of the complainant is contrary to the express clause of the said partnership agreement. It is also contended by the complainant that on the pretext of the logistics, the manufacturing process was started at the proprietorship firm of the accused number two, however, the complainant has failed to produce any documentary evidence of his partnership firm to show the investments made by him as a partner in Kushmanda Overseas (firm of accused no. 2), the accounts of his firm reflecting returns received from the accused number two, etc.
12.In fact, the complainant in his cross-examination has admitted that there was no business transaction between him and the accused persons. The complainant has also admitted that there were transactions between the accused persons and Devika Garments. He has also admitted that an order for supply of raw material for the manufacturing of 7500 jackets had been booked to Devika Garments through Anil Kumar by the accused persons. He has also admitted that Devika Garments supplied raw material to the accused CT no. 47200/2016 Page 11 of 14 for which the accused persons had made part payment between 3 March 2015 and 26 May 2015. It is not disputed between the parties that the initial four cheques issued by the accused were in favour of Devika Garments and the amounts of those cheques had been credited in the account of Devika Garments. In light of the above admissions made by the complainant, the plea of the complainant that the said four cheques had been issued by the accused for discharge of his partial liability towards the complainant, in the name and account of Devika garments, as there was electronic discrepancy in his own bank account seems incredible.
13. It is reiterated that the complainant has admitted that there were no business transactions between him and the accused number two, which creates a doubt on how the complainant came in possession of the cheques in question, which were issued by the accused number two/the proprietor of M/s. Kushmanda Overseas. It is the defence of the accused that the cheques in question including another cheque bearing number 205934 had been given as security to the proprietor of Devika Garments for supply of the raw material to him. The accused has admitted that the amounts mentioned in the cheques in question, in words and figures, were filled by him, however he has denied that the name and date on the cheques in question were written by him. No suggestion has been given to the accused during his cross-examination that all particulars on the cheques in question had been filled by the accused. Further, the complainant in his cross-examination has denied being aware of the said three cheques been given to Devika Garments as security by the accused. At the same time, the complainant has filed the statement of accounts of the Devika Garments, Mark CW-1/4, which reflects an entry on 22 August 2015 of cheque number '205934/InduInd B' and rejected as 'payment stopped by drawer'. The said cheque number seems to be the same cheque, which the CT no. 47200/2016 Page 12 of 14 accused is claiming was given as security with the cheques in question to Devika Garments.
14. Lastly, it seems that no suggestion has been given to the accused denying that the payment of ₹ 50,000 made by cheque number 205954 on 20 August 2015 in the account of the complainant was not towards full and final settlement of dues of complainant. Instead, it has been suggested to the accused that the entire outstanding was paid by payment of ₹ 50,000 and the two security cheques were given subsequent to payment of the entire outstanding, which is contrary to the case of the complainant in his complaint/affidavit. Further, while the accused in his cross-examination has stated that there was a dispute between him, Anil Kumar, and Devika Garments with respect to the consignment of supply of raw material and that security cheques were left with Devika Garments, no suggestion has been given to the accused disputing the same. Further, while the accused has stated in his cross-examination that he had requested the proprietor of Devika Garments to return the security cheques, however, they stated that the cheques were with the brother of the complainant, again no suggestion was given on behalf of the complainant to the accused disputing the same.
15. From the above, it is evident that the complainant has mostly admitted the defence of the accused. Even otherwise, the capacity of the complainant to advance the loan amount of ₹ 1,215,000 appears doubtful. The complainant in his cross-examination has stated that in the year 2015, he was working in an export company and his monthly salary was ₹ 30,000, and for advancing the alleged loans, he had taken personal loan, gold loan and had made some borrowings, however he has not produced any documentary or oral evidence in support of his said claim.
CT no. 47200/2016 Page 13 of 1416. From the above analysis, the Court is of the view that the complainant has failed to discharge the burden to prove his case against the accused beyond all reasonable doubt. The accused has succeeded in raising a probable defence and displaced the presumptions under Sections 118 (a) and 139 of N.I. Act. Accordingly, the accused is acquitted of the offence under Section 138 of the N.I. Act.
Pronounced in Open Court on Seventh of July of the year Two Thousand and Twenty-Two.
Digitally signed (Saloni Singh) SALONI by SALONI SINGH ACMM/East/KKD. SINGH Date: 2022.07.07 19:16:10 +0530 Delhi. 07.07.2022 CT no. 47200/2016 Page 14 of 14