Delhi District Court
Cc No.4145/17 M/S Karina Fincap Ltd vs . Vikas Johar Page 1 Of 14 on 31 January, 2020
IN THE COURT OF MS JYOTI MAHESHWARI: MM (NI ACT) - 01
PATIALA HOUSE COURT: NEW DELHI DISTRICT: NEW DELHI
CC No: 4145/17
M/S KARINA FINCAP LTD
Having its registered Office at
B-2, Jungpura Extension,
New Delhi - 110014 ........Complainant
Versus
VIKAS JOHAR
s/o Mr. Mohan Lal Johar
R/o H. No.146, 1st floor,
Gali No.6, Joshi Road,
Karol Bagh, New Delhi-110015
Also At : Radha Krishna Shoes Stores
2736/A, Basement, Ajmal Khan Road, Karol Bagh,
New Delhi 110005 ..........Accused
Date of Institution of Complaint : 03.08.2015
Offence Complained of : u/s 138 N.I. Act.
Plea of Accused : Not Guilty
Order reserved : 21.01.2020
Decision : CONVICTED
Date of Decision : 31.01.2020
CC No.4145/17 M/s Karina Fincap Ltd Vs. Vikas Johar Page 1 of 14
- : JUDGMENT : -
1. The case of the complainant in brief, is that the complainant company is
incorporated under the Companies Act and is represented by its duly
authorized representative Sh. Amanvir Singh. The complainant issued a
loan in sum of Rs.5,000/- to Mrs. Jyoti Kumar (herein after "the
borrower") vide loan agreement bearing No.100480 and to secure the
repayment of the loan, the accused Vikas Johar stood as surety/guarantor.
Owing to continuous defaults of Mrs. Jyoti Kumar to repay the loan as per
the terms and conditions of the loan agreement, the complainant issued a
notice revoking the guarantee to the accused on 02.05.2015 (dispatched on
the same date at the correct last known address of the accused.) Upon
failure of Mrs. Jyoti Kumar to repay the outstanding balance, the accused
issued the cheque bearing No. 039661 for Rs.28,000/-. The impugned
cheque when presented in the bank was dishonored on 29.06.2015 with
the remarks "account closed". The complainant sent the legal demand
notice to the accused under Section 138 of the Negotiable Instruments Act
on 04.07.2015 (dispatched on the same date) and despite receipt of the
legal demand notice, the accused failed to make the payment within 15
days of the receipt of the legal notice and therefore, the complainant
instituted the present complaint case under Section 138 of NI Act within
limitation.
Course of trial:
2. At the stage of pre-summoning evidence, in support of the complaint, the
substituted AR of the complainant, Mr. D.P. Anand who was authorized
vide Board Resolution dated 07.04.2015 , tendered his evidence by way of
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affidavit (Ex. CW-1/1). The AR of the complainant also relied upon the
following documents: -
Sr. No. Exhibit/ Mark Nature of document
Board Resolution in favour of AR of the
1 Ex. CW-1/A
complainant, D P Anand
2 Mark A Notice invoking guarantee dated 02.05.2015
Postal receipts of the notice invoking guarantee
3 Ex. CW-1/C
dated 02.05.2015
Speed post tracking report of the notice dated
4 Mark B
02.05.2015
Impugned cheque bearing no. 039661 dated
5 Ex. CW-1/E
23.06.2015 for Rs. 28,000/-
6 Ex. CW-1/F Dishonorment memo dated 29.06.2015
7 Ex. CW-1/G Legal notice dated 04.07.2015
8 Ex. CW-1/H Speed post receipts
9 Mark C Tracking report
10 Mark D Personal Loan agreement dated 01.07.2014
11 Ex.CW1/I Loan application form
Certificate of registration of the complainant
12 Ex.CW1/J
with RBI
Statement of Accounts of Jyoti Kumar with
13 Ex.CW1/K
certificate under Section 65B Evidence Act
3. On the basis of the aforesaid pre-summoning evidence, cognizance of the
offence was taken and the accused was summoned. Consequent to the
CC No.4145/17 M/s Karina Fincap Ltd Vs. Vikas Johar Page 3 of 14
service of summons, the accused entered his appearance and the Notice of
accusation under Section 251 CrPC was put to the accused, to which he
pleaded not guilty and claimed trial. The accused admitted his signatures
on the impugned cheque and stated in his plea of defence that the
impugned cheque was a blank signed security cheque given to the
complainant and the same was misused by the complainant. He further
stated that he had only signed the cheque and the other particulars on the
impugned cheque were not filled by him. The accused acknowledged that
he was aware of the factum of dishonorment of the impugned cheque and
he also received the legal notice.
4. Thereafter, an application under Section 145(2) NI Act was filed by the
accused, which was allowed. AR of the complainant was cross-examined
as CW-1 on 27.01.2016. During his cross-examination, CW-1 deposed that
the accused was a guarantor to the loan issued to Mrs. Jyoti Kumar and
that there were continuous defaults by the borrower, Mrs. Jyoti Kumar in
the repayment of loan. He further deposed that the accused had orally
assured that he would make payments regarding the loan in question, but
the same was not fulfilled. Complainant evidence was closed on the same
day vide order dated 27.01.2016.
5. Subsequently, statement of accused under Section 313 CrPC was recorded
on 10.02.2016 and all the incriminating circumstances were put to the
accused to enable him to offer any explanation. The accused stated that he
stood as a guarantor for the loan taken by the borrower. The accused also
stated that he issued the impugned cheque to the complainant at the time
of entering into the loan agreement for security purpose and no prior
intimation was given to him before presentment of the impugned cheque.
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The accused admitted the receipt of legal notice and stated that he was
willing to make the payment qua the impugned cheque. The accused
further stated that he wished to lead defence evidence.
6. The application under Section 315 CrPC was moved by the accused and
the same was allowed. Accused was examined and cross-examined as
DW1. During the cross-examination of accused as DW-1, the complainant
furnished the following documents and confronted the accused :
Sr. No. Nature of document Exhibit
1. Loan Sanction letter dated 23.06.2014 Ex.DW1/C1 (OSR)
2. Minutes of Meeting held on 06.10.2014 Ex.DW1/C2 (OSR)
7. The accused, as DW-1 deposed that he stood as a guarantor to the loan
taken by his sister Mrs. Jyoti Kumar, in 2014. He further deposed that the
complainant took 30 blank signed cheques from him, prior to disbursal of
loan. He furnished the transaction sheet of his cheque book, which was
identified as Ex. DW1/1 and the complainant company misused the blank
signed security cheques so given. The accused in his cross-examination
admitted the loan agreement and deposed that he was a guarantor to the
loan in question. The accused also admitted his signatures on the loan
application form (Ex.CW1/I), loan sanction letter (Ex.DW1/C1) and
Minutes of Meeting dated 06.10.2014 (Ex.DW1/C2). The accused stated
that the loan amount was not repaid by the borrower Mrs. Jyoti Kumar.
Accused again admitted the receipt of legal demand notice and deposed
that various cheques including the impugned cheque were issued to the
complainant as blank signed security cheques, which were misused by the
complainant. However, the accused admitted in his testimony that no
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complaint was ever filed by him against the complainant for misuse of
security cheques and no written communication was sent to the
complainant regarding the above stated misuse.
8. As per the list of witnesses moved on behalf of the accused, witness
Ashwani Kumar, who is the husband of the borrower of the loan in
question, was also allowed to be examined. Witness Ashwani Kumar was
examined and cross-examined as DW-2. DW-2 again deposed about being
a guarantor to the loan in question and 12 to 14 blank signed cheques
were given to the complainant by way of security. During his cross-
examination, DW-2 admitted his signatures on the loan agreement (Mark
D) and loan application form (Ex.CW1/I). DW-2 admitted that the accused
stood as guarantor to the loan in question and was liable to make the
payment in case of default of payment by the borrower. The matter was
fixed for examination of DW-3, Mrs. Anita Johar, who is the mother of the
accused. However, despite sufficient opportunities, owing to her absence,
defence evidence was closed vide order dated 30.11.2019 and the matter
was fixed for final arguments.
9. Final arguments have been heard on behalf of both the parties at length.
Record perused.
Arguments advanced
10. It has been argued on behalf of the complainant that all the essential
ingredients of an offence under Section 138 have been fulfilled in the
instant case. The accused has admitted his signatures on the impugned
cheque and the presumption under Section 139 read with Section 118 of
the NI Act , therefore arises in favour of the complainant and the accused
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has failed to rebut the same. Further, the notice for revocation of
guarantee dated 02.05.2015 (Mark A) as well as personal loan agreement
(Mark D) are already on record, which show the liability of the accused
and the signatures on the same have been admitted by the accused.
11. Per contra, the accused has argued the following :
a. The complainant had taken the impugned cheque at the time of
entering into the loan agreement as a blank signed security
cheque and the same has been misused by the complainant.
b. The accused is only a guarantor to the loan in question and
hence, does not have any liability towards the complainant as
the primary liability is of the borrower Mrs. Jyoti Kumar.
Appreciation of evidence
12. To make any person liable under Section 138 Negotiable Instruments Act
(hereinafter to be read as 'The Act'), the following ingredients are required
to be proved by the complainant:
a) Existence of legally enforceable debt or liability and issuance
of cheque in discharge of said debt or liability;
b) Dishonor of cheque in question which must have been drawn
on an account maintained by the accused;
c) Service of demand notice seeking payment of cheque amount
within fifteen days from the date of service;
d) Non-payment of cheque amount within fifteen days from the
date of service of notice; and
e) Filing of complaint within one month from the date on which
cause of action arises.
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13. In the case at hand, issuance of the impugned cheque (Ex. CW1/E), its
presentation in the bank for encashment and dishonor of the impugned
cheque due to the reason "account closed" is not disputed and is a matter
of record proved by the return memo dated 29.06.2015 (Ex.CW1/F). The
receipt of legal notice (Ex.CW1/G) has also been admitted by the accused.
Further, the accused has also admitted his signature on the impugned
cheque, as is evident from the Notice under Section 251, CrPC and the
Statement of Accused under Section 313. Once the facts, that the
impugned cheque belongs to the accused and the signatures on the
impugned cheque are of the accused; are established, a presumption of the
cheque having been issued in discharge of a legally sustainable liability
and drawn for good consideration, arises by virtue of Section 118 (a) and
Section 139 of the NI Act. Once Section 139 of NI Act comes into picture,
the Court presumes that the cheque was issued in discharge, in whole or
in part, of any debt or liability. At this stage, with the help of the
presumption under Section 139 of the Act, the case of the complainant
stands proved.
14. The effect of the presumption has been explained in a catena of
judgments, including the judgments of the Hon'ble Supreme Court in,
Hiten P. Dalal v. Bratindranath Banerjee (2001) 6 SCC 16, Rangappa vs.
Sri Mohan (2010) 11 SCC 441 and more recently, in the case of Rohitbhai
Jivanlal Patel v. State of Gujarat & Anr (Crl. Appeal No. 508/19 dated
15.03.2019). It has been held time and again that the said presumption is a
rebuttable one and its only effect is to shift the initial burden of proof on
the accused. When the presumption is raised in favor of the complainant,
the burden shifts upon the accused to disprove the case of the
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complainant by rebutting the presumption raised in favour of the
complainant. It is well settled that in order to rebut the presumption and
shift back the burden of proof on the complainant, the accused is only
required to raise a probable defence and he cannot be expected to
discharge an unduly high standard of proof. Therefore, the standard of
proof for rebutting the presumption raised under Section 139 NI Act is
"preponderance of probabilities".
15. The accused has to make out a fairly plausible defence which is acceptable
to the Court. The accused can do the same, either by leading direct
evidence in his defence or by raising doubt on the material/evidence
brought on record by 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. However, at the same time, it is
also to be remembered that bare denial of the existence of legally
enforceable debt or other liability cannot be said to be sufficient to rebut
the presumption and something which is probable has to be brought on
record to shift the burden back to the complainant.
16. Keeping these basic principles in mind, this Court shall now proceed to
deal with the defence of the accused. The first defence raised by the
accused is that the impugned cheque was issued as a blank signed
security cheque to the complainant at the time of entering into the loan
agreement. However, the mere fact that the cheque was taken at the time
of disbursal of loan does not come to the aid of the accused, if the
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complainant is able to demonstrate that on the date, the cheque was
presented, the accused had an outstanding liability towards the
complainant.
17. It has been clearly held by the Hon'ble Delhi High Court in Suresh
Chandra Goyal v. Amit Singhal (Crl.L.P. 706/2014, dated 14.05.2015) that
there is no magic in the word "security cheque", such that, the moment the
accused claims that the dishonoured cheque (in respect whereof a
complaint under Section 138 of the Act is preferred) was given as a
"security cheque", the Magistrate would acquit the accused. It is to be
noted that whenever a cheque is issued, it is presumed to be issued in
discharge of liability on part of the accused, though the liability may be an
existing liability or a liability which would crystallize in future. If that
were not so, there would be no purpose of obtaining a security cheque
from the debtor. A security cheque is issued by the debtor so that the same
may be presented for payment as and when the apprehended liability
arises. Otherwise, it would not be a security cheque. Therefore, if a cheque
is issued to secure any future liability arising towards the payee of the
cheque for the purpose of which the cheque was issued by the drawer, the
drawer cannot raise the defence that the cheque was issued for security
purposes.
18. The Hon'ble High Court of Delhi in Credential Leasing & Credits Ltd.
Vs. Shruti Investments 223 (2015) DLT 343 has held that even a security
cheque can form the basis of complaint under Section 138 of the NI Act, if
on the date of the deposit of the post-dated security cheque, the debt of
the accused stood crystallized. It was further held that the crucial and
relevant date would be the date of presentation of the cheque and not the
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date of its issuance. Thus, if a crystallized and ascertained debt or other
liability exists on the date when the cheque is presented for payment, it
would not be relevant whether, or not, such crystallized debt or other
liability existed on the date when the cheque was issued. The relevant
extract from the judgment is reproduced below:
"27. Thus, the "debt or other liability" has to be a legally enforceable debt
or other liability. Neither the main provision of Section 138, nor the
explanation suggest that the debt or other liability should be in existence
on the date of issuance of the cheque, i.e. on the date of its delivery to the
drawee or someone on his behalf or, on the date that the cheque bears.
The only reference to time in the Section, is the point of time when the
cheque is returned unpaid by the drawers bank.
In my view, therefore, the scope of Section 138 NI Act would cover cases
where the ascertained and crystallised debt or other liability exists on the
date that the cheque is presented, and not only to case where the debt or
other liability exists on the date on which it was delivered to the seller as
a post-dated cheque, or as a current cheque with credit period (emphasis
supplied)."
19. Once the presumption under Section 139 read with Section 118, NI Act has
been raised in favour of the complainant; the burden was on the accused
to prove that there was no outstanding liability on the date, the impugned
cheques were presented. The accused has specifically admitted to being
the guarantor of the loan in question as well his signatures on the loan
application form (Ex. CW1/I). As per the statement of account furnished
by the complainant, Ex. CW1/K which is accompanied with the certificate
under Section 65B Evidence Act, it is clearly evident that outstanding
liability of the borrower existed on the date of presentment of the cheque
i.e. 27.06.2015. Further, the same has not been disputed by the accused.
The accused was also communicated about his liability as a guarantor
through the notice invoking guarantee, Mark A. Therefore, the accused
cannot avail the defence of security cheques to show that he did not have
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any liability.
20. The accused has also sought refuge in the ground that he only signed the
impugned cheque but the other particulars on the cheque were not filled
by the accused. However, the same will not be of any help to the accused,
in light of the clear position of law enunciated in the recent judgment of
the Hon'ble Supreme Court in Bir Singh v. Mukesh Kumar (Crl. Appeal
No. 230-231/189, dated 06.02.2019), wherein it was held that 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, by itself,
does 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. The Court further went on to hold that even a blank
cheque leaf, voluntarily signed and handed over by the accused, which is
towards some payment, would attract presumption under Section 139 of
the Negotiable Instruments Act, in the absence of any cogent evidence to
show that the cheque was not issued in discharge of a debt. Therefore, in
the absence of any cogent evidence on the part of accused to disprove the
liability, the above ground is also not attracted in the present case.
21. The second defence taken by the accused is that the accused was only a
guarantor to the loan taken by the borrower, Mrs. Jyoti Kumar and thus,
does not have any liability as the primary liability is of the
borrower/principal debtor. The defence taken by the accused has no legal
merit. Section 128 of the Contract Act, 1872 clearly states that liability of
the guarantor is co-extensive with that of the principal debtor/borrower
and hence, the accused can be held liable as a guarantor.
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22. Moreover, in the case of ICDS Limited v. Beena Shabeer & anr., AIR 202
SC 3014, the Hon'ble Supreme Court has held that cheque issued by the
guarantor towards discharge of liability of the principal borrower, is
within the purview of Section 138, NI Act. The Court in the above decision
has held as under:
"The language, however, has been rather specific as regards the intent of
the legislature. The commencement of the Section stands with the words
"Where any cheque". The above noted 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.
(Emphasis supplied). 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. .............."
"The issue as regards the co-extensive 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. (Emphasis supplied). 'Any cheque' and 'other liability' are
the two key expressions which stands as clarifying the legislative intent
so as to bring the 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. The judgments recorded in
the order of the High Court do not have any relevance in the contextual
facts and the same thus does not lend any assistance to the contentions
raised by the respondents. "
23. Therefore, the defence raised by the accused that there is no legally dischargeable debt or liability towards the complainant qua the impugned CC No.4145/17 M/s Karina Fincap Ltd Vs. Vikas Johar Page 13 of 14 cheque, as the accused is merely a guarantor of the loan, stands dismissed.
24. In light of the aforementioned discussion and the observations, the complainant has been successful in establishing the presumption raised under Section 139 of the NI Act read with Section 118, NI Act. The accused has failed to dislodge the presumption so raised in favour of the complainant, both through the cross-examination of AR of the complainant as well as through the defence raised. On the other hand, the complainant has been able to prove its case beyond reasonable doubt. Accordingly, accused Vikas Johar is hereby convicted of the offence under Section 138 of Negotiable Instruments Act.
25. A copy of this judgment be placed on the official website of the District Court.
Announced in Open Court (JYOTI MAHESHWARI)
On 31st January, 2020 Metropolitan Magistrate (NI Act-01)
Patiala House Court, New Delhi
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