Delhi District Court
The Present Complaint Under Section 138 ... vs . on 19 November, 2011
IN THE COURT OF SH.SUSHIL ANUJ TYAGI
METROPOLITAN MAGISTRATE: DWARKA COURT:NEW DELHI
CC No. 16866/10
IN THE MATTER OF
M/s Barclays Bank PLC ... Complainant
Eros Corporate Tower
Nehru Place, New Delhi 110 019
Vs.
Sh. Arun Gupta ... Accused
Sole Proprietor, M/s K.M. Udyog,
2430, Gali Mundeywali, Sadar Thana,
Delhi 110 006
Also At: 275, Kohat Enclave,
Pitampura,Delhi 110 034
Date of institution of case : 15.10.2009
Date of reserving Judgment : 02.11.2011
Date of pronouncement : 19.11.2011
JUDGMENT
1. Serial No. of the case : 16866/2010 2. Name of the complainant : Barclays Bank 3. Name of the accused : Sh. Arun Gupta 4. Offence complained of : S.138 N. I. Act 5. Plea of accused : Not guility 6. Final Order : Acquitted 7. Date of such order : 19.11.2011 CC No 16866/10 .. 1 .. M/S Barclays Bank V. Arun Gupta BRIEF FACTS AND REASONS FOR DECISION OF THE CASE
1. The present complaint under section 138 of Negotiable Instruments Act,1881 (hereinafter referred to as "NI Act") is filed by the complainant.
2. Succinctly, the facts which has led to the culmination of the present complaint as per the complainant are that the accused/Arun Gupta who is sole proprietor of M/s K.M. Udyog and person responsible and incharge of the said proprietorship was granted credit facility in the nature of Letter of Credit of Rs. 1 crore and the accused has issued cheque bearing no. 664258 dated 21.08.2009 drawn on Standard Chartered Bank Ltd. for amount of Rs.58,43,023/ to the complainant towards partial discharge of his liability on account of dues which got dishonoured on presentation for the reason "Insufficient Funds" vide return memo dated 22.08.2009. The complainant sent legal notice dt. 02.09.2009 to the accused vide postal receipts dated 03.09.2009 and despite service the accused did not paid the cheque amount. Hence the present complaint was filed against the accused by the complainant through its authorized representative (hereinafter referred to as "AR") on 15.10.2009 .
3. The AR was examined under section 200 Code of Criminal Procedure (hereinafter referred to as "CrPC") by way of tendering of presummoning affidavit on 22.01.2010.
4. After being satisfied that prima facie ingredients of Section 138 NI Act are made out, cognizance was taken and accused was summoned under section 204 CrPC whereupon the accused appeared and the notice under section 251 CrPC was served on the accused to which he pleaded not guilty and claimed trial. He admitted the signature CC No 16866/10 .. 2 .. M/S Barclays Bank V. Arun Gupta on the cheque in question and said that contents of the body of the cheque written in black ink were written by him at the instance of the officials of the complainant and rest of the contents have not been written by him and also denied receiving of the legal demand notice in admission/denial proceedings under section 294 CrPC.
5. In Complainant's evidence, the AR (CW 1) tendered his affidavit in post summoning evidence as Ex CW 1/2 and relied on documents:
Ex CW 1/A Power of attorney
Ex CW1/B Copy of sanction letter
Ex CW 1/C Copy of Multi Option Facility Agreement
Ex CW1/D Cheque in question
Ex CW1/E Return memo
Ex CW1/F Legal notice
Ex CW1/GG1 Postal receipts
6. The CW1 was examined, crossexamined and discharged. The Complainant evidence was closed.
7. The accused was examined under section 313 CrPC where all the incriminating evidence was put to the accused. It was stated by the accused that he was granted credit facility of Rs.1 crore by the complainant. It is further stated by the accused that he has not issued the present cheque in question and the same was taken blank before the grant of credit facility and further he was informed that the cheque shall be returned after the disbursal of the credit. Accused also submitted that he was not informed by the complainant prior to the presentation of the impugned cheque and admitted that the cheque has bounced. The accused wished to lead any defence evidence.
8. In defence evidence. the accused examined himself as defence witness and was CC No 16866/10 .. 3 .. M/S Barclays Bank V. Arun Gupta cross examined by the counsel for the complainant. DE was accordingly closed and the matter was fixed for final arguments.
9. During the final arguments, it is vehemently contended on behalf of the complainant that all the ingredients of Section 138 NI Act are satisfied in the present case. It is argued that the accused has admitted that he has taken a credit facility of Rs. 1 crore and has also admitted signatures of the cheque, and the contents in black ink on the body of the impugned cheque in accused's handwriting. It is further argued that accused has taken a sham defence that he is supposed to give impugned cheque back after disbursal of the loan. However, nothing has been proved by the accused to support his defence. It is further submitted that the accused has admitted his liability in the tune of Rs. 54 lacs at the time of dishonour of cheque and the interest and penalty clauses in the loan agreement. It is further submitted that the loan was repayable in 90 days and there is a subsisting liability of accused in the tune of Rs. 60 lacs on the date of dishonour of cheque. It is further contended that though the impugned cheque was given as a predisbursement condition, however, there is no law that such cheque is a security cheque. The learned counsel for the complainant relied on "ICDS Ltd. Vs. Beena Shabeer " AIR 2002 SC 3014 to support his contention that even if the cheque is given for security, it falls within the purview of Section 138 NI Act. It is further contented that cheque given for placing an order is not a security cheque and it has been held so in Magnum Aviation Pvt. Ltd. Vs. State 172(2010) DLT 91. It is further argued that the plea of accused that he has written the words "not more than Rs. Eighty lacs" at the instance of the complainant, is sham as he could have denied doing so and there was CC No 16866/10 .. 4 .. M/S Barclays Bank V. Arun Gupta no pressure on the accused. It is further urged that in K.S. Bakshi Vs. State 146(2008) DLT 125 it is held that cheque issued for due performance of contract is not a security cheque. It is further contended that the accused has very conveniently avoided the document put to him by replying that he do not remember but he has not categorically denied the documents. It is further contented that as per the loan agreement, failure to pay within 90 days amounts to default upon which the complainant has a right to cancel, demand and enforce all security or additional security, if any. It is further contended that the presumption under Section 118 with respect to consideration and date is in favour of the holder. It is further contended that Section 20 NI Act gives ample power to the holder to fill the incomplete cheques. It is further submitted that the complainant has proved the service of legal demand notice vide Ex CW 1/G. It is further contended that the summons were served to the accused at the same address and the accused has not come forward with any evidence to rebut the presumption under Section 27 General Clauses Act lying in the favour of the complainant. It is further submitted that mere denying the receipt of notice during examination under Section 313 Cr PC is not sufficient as it is not evidence. Reliance was placed upon V.S. Yadav Vs. Reena 172 (2010) DLT 561. To support the contentions herein above, the learned counsel has also relied on Navin Khilani Vs. Mashreq Bank PSC in 146 (2008) Delhi Law Times 134(DB), Hiten P. Dalal Vs. Bratindranath Banerjee, V.S. Yadav Vs. Reena in 172(2010) Delhi Law Times 561, Commissioner of Income Tax Vs. Vins Overseas India Ltd. in 144 (2007) Delhi Law Times 99 (DB).
10. Per contra, the learned counsel for the accused has argued that para 5 of the CC No 16866/10 .. 5 .. M/S Barclays Bank V. Arun Gupta affidavit of the CW 1 states that the cheque was issued for partial liability and during the crossexamination on 25.05.2011, the AR has stated that what is written in the affidavit. It is contented that if the cheque was issued for partial liability then that means the accused was having liability of more than cheque amount on the cheque date. It is further contended that complainant has not filed the account statement deliberately and has not established that the accused had the liability of the cheque amount on the date mentined on the cheque. It is further contented that the present cheque in question was taken as blank without amount and date for the satisfaction of the predisbursement condition of the loan. It is further contented that no conditions with respect to the cheque are mentioned in the sanction letter or the loan agreement. It is further contended that there is nothing mentioned anywhere that the cheque would be presented in case of default. It is further contented that the cheque was taken only to satisfy the predisbursement condition and not for any liability. It is further contended that no intimation has been given to the accused prior to filling the impugned cheque and no consent of the accused has been taken. It is further argued that the amount has been filled in the impugned cheque arbitrarily and the liability of the accused to the cheque amount is not established. It is further contended that the loan agreement only mentions that the FDR would be redeemed in case of default and there is no mention with respect to the cheque. It is further contended that the accused has not received the legal demand notice and there is no averment that the accused has received the notice. It is further contended that the accused has specifically stated that he has not received the legal demand notice, however, no suggestion has been given by the complainant to counter CC No 16866/10 .. 6 .. M/S Barclays Bank V. Arun Gupta the statement. It is further contended that the offence under Section 138 NI Act is very specific and technical offence. The presumption under NI Act are rebuttable in nature and once they are rebutted the burden lies on the complainant. It is further contented that the accused has not given the cheque as a facility which the bank can invoke at their discretion. It is further contended that the documents put by the complainant to the accused are not proved as no postal receipt showing dispatch has been proved on record. It is further contented that the present case does not fall within the ambit of Section 138 NI Act and the accused is entitled to be acquitted. The learned counsel for the accused has also filed written submission and has relied on the following judgments to support defence version:
M.S Narayana Menon v. State of Kerela (2006) 6 SCC 39 Ramakrishna Urban Cooperative Credit Society Ltd v. Rajendra Bhagchand Warma 2010 (2) DCR 317
11. After hearing the rival contentions at length, the first question that levels up for the consideration in the present case is whether the accused is served with the legal demand notice as envisaged under section 138 NI Act. The complainant has proved the sending of legal demand notice through registered AD vide receipt Ex CW1/G1. The postoffice reply Ex CW 1/G shows that the article (legal demand notice) was delivered on 07.09.2009. Further, the Section 27 General Clauses Act and Section 114 of Indian Evidence Act gives a combine effect that the legal demand notice sent through registered post to the correct address is deemed served on that address in the due course of time unless the contrary is proved. Section 27 General Clauses Act reads:
CC No 16866/10 .. 7 .. M/S Barclays Bank V. Arun Gupta "27. Meaning of service by post. 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, prepaying 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 dlivered in the ordinary course of post."
12. In C.C. Alavi Haji Appellant v. Palapetty Muhammed & Anr. Respondents 2007 STPL(DC) 952 SC, it was observed:
"14. Section 27 gives rise to a presumption that service of notice has been effected when it is sent to the correct address by registered post. In view of the said presumption, when stating that a notice has been sent by registered post to the address of the drawer, it is unnecessary to further aver in the complaint that in spite of the return of the notice unserved, it is deemed to have been served or that the addressee is deemed to have knowledge of the notice. 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. This Court has already held that when a notice is sent by registered post and is returned with a postal endorsement "refused" or "not available in the house" or "house locked" or "shop closed" or "addressee not in station", due service has to be presumed. [Vide Jagdish Singh Vs. Natthu Singh, AIR 1992 SC 1604, State of M.P. Vs. Hiralal & Ors. (1996) 7 SCC 523 and V. Raja Kumari Vs. P. Subbarama Naidu & Anr. (2004) 8 SCC 774]. It is, therefore, manifest that in view of the presumption available under Section 27 of the Act, it is not necessary to aver in the complaint under Section 138 of the Act that service of notice was evaded by the accused or that the accused had a role to play, in the return of the notice unserved."
13. It was further observed:
"17. It is also to be borne in mind that the requirement of giving of notice is a clear departure from the rule of Criminal Law, where there is no stipulation of giving of a notice before filing a complaint. Any drawer who claims that he did not receive the notice sent by post, can, within 15 days of receipt of summons from the court in respect of the complaint under Section 138 of the Act, make payment of the cheque amount and submit to the Court that he had made payment within 15 days of receipt of summons (by receiving a copy of complaint with the summons) and, therefore, the complaint is liable to be rejected. A person who does not pay within 15 days of receipt of the summons from the Court along with the copy of the complaint under Section CC No 16866/10 .. 8 .. M/S Barclays Bank V. Arun Gupta 138 of the Act, cannot obviously contend that there was no proper service of notice as required under Section 138, by ignoring statutory presumption to the contrary under Section 27 of the G.C. Act and Section 114 of the Evidence Act. In our view, any other interpretation of the proviso would defeat the very object of the legislation. As observed in Bhaskaran's case (supra), if the "giving of notice" in the context of Clause
(b) of the proviso was the same as the "receipt of notice" a trickster cheque drawer would get the premium to avoid receiving the notice by adopting different strategies and escape from legal consequences of Section 138 of the Act."
14. From the above observations, it is amply clear that here also the burden lies on the accused to show that he has not received the legal demand notice. In the present case nothing has been proved to discharge his burden except his mere statement under section 313 Cr.P.C. which is no evidence. More over, the address on the legal demand notice is the correct address of the accused. This fact finds corroboration as the address mentioned on the bail bond is same as one of the address mentioned on the legal demand notice. The accused has not disputed that it is not his correct address. The accused has not examined the postal witness to disprove the service. It is dogmatic that the accused has to disprove service by showing that service of legal demand notice was either not effected or the nonservice was not due to his fault. In a celebated judgment titled as K. Bhaskaran Versus Sankaran Vaidhyan Balan 1999 Cri LJ 4606, the Apex court observed:
"23. No doubt Section 138 of the Act does not require that the notice should be given only by "post". Nonetheless the principle incorporated in Section 27 (quoted above) can profitably be imported in a case where the sender has despatched the notice by post with the correct address written on it. Then it can be deemed to have been served on the sendee unless he proves that it was not really served and that he was not responsible for such non-service. Any other interpretation can lead to a very tenuous position as the drawer of the cheque who is liable to pay the amount would resort to the strategy of subterfuge by successfully avoiding the notice."
In these facts and circumstances, this court has no hesitation to hold that the accused was deemed served with the legal demand notice.
CC No 16866/10 .. 9 .. M/S Barclays Bank V. Arun Gupta
15. Now the another question in the present case revolves around as to whether the impugned cheque was issued towards the discharge in whole or in part of legally enforceable liability or debt as envisaged under section 138 NI Act. Thus it becomes apposite at this juncture to reproduce section 138 NI Act.
"138. Dishonour of cheque for insufficiency, etc., of funds in the accounts 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 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 extend to two year", or with fine which may extend to twice the amount of the cheque, or with both:
Provided that nothing contained in this section shall apply unless
(a) The cheque has been 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.
(b) The payee or the holder induce course of the cheque, as the case may be, 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 thirty days" of the receipt of information by him from the bank regarding the return of the cheques as unpaid, and
(c) The drawer of such 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 of the cheque, within fifteen days of the receipt of the said notice.
Explanation: For the purpose of this section, "debt or other liability" means a legally enforceable debt or other liability."
16. Undoubtedly, it is a sine qua non for constitution of the offence u/s 138 NI Act that the cheque must have been issued for the discharge in whole or in part of legally enforceable liability or debt. Section 138 NI Act has to be read with the legal CC No 16866/10 .. 10 .. M/S Barclays Bank V. Arun Gupta presumptions u/s 139 and 118 NI Act in favour of the payee or holder in due course. The said sections are reproduced below:
"139. Presumption in favour of holder It shall be presumed, unless the Contrary is proved, that the holder of a cheque received the cheque of the nature referred to in section 138 for the discharge, in whole or in part, or any debt or other liability."
"118. Presumptions as to negotiable instruments of consideration 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 bee accepted, endorsed, negotiated or transferred, was accepted, endorsed, negotiated or transferred for consideration.
(b) As to date that every negotiable instrument bearing a date was made or drawn on such date;
(c) ............................................................................"
17. These presumptions in favour or complainant are rebuttable in nature and it is no more res integra that the burden lies on the shoulder of the accused to rebut the same. It is now well established that the accused can prove the nonexistence of any debt or any other liability by raising a probable defence or by demolishing or discrediting the case of the complainant in crossexamination of witness adduced by the complainant.
18. In the present case, indisputably the accused has availed a credit facility of Rs. 1 crore from the complainant and in respect of which MultiOption Facility Agreement Ex CW1/C was executed between the parties. It is flagrant from Schedule B to the aforesaid agreement that the accused shall furnish a Fixed Deposit of Rs. 20 lacs in favour of the bank and shall provide a blank undated cheque (UDC) superscribed in the format "Not exceeding INR Rs. 8.0 million" as a predisbursement condition. The impugned cheque is admittedly the same cheque which was provided by the accused to satisfy the aforesaid predisbursement condition. Conspicuously, the impugned cheque CC No 16866/10 .. 11 .. M/S Barclays Bank V. Arun Gupta was given prior to the disbursal of the impugned credit facility and was given both undated and blank. It has been admitted by the complainant that the amount and the date in the impugned cheque is filled by the complainant subsequently when the accused has failed to repay the loan amount. It is the contention on behalf of the complainant that according to the Multi Option Facility Agreement, the complainant has a right to enforce all the securities or additional securities, if any, in case of default vide para no. 7 of the standard terms provided in Schedule D to the agreement. Now the question is whether the impugned cheque was given for security which the complainant can enforce in default or for the discharge of legally enforceable liability. Since the impugned cheque was given undated and blank before the disbursal of the loan, this court is of the view that the impugned cheque is a security cheque and was not issued for subsisting legally enforceable liability. It is not in doubt that the accused has subsisting liability, however, it cannot be said that the complainant can use the blank undated cheque given by the accused to fulfill the predisbursement condition to recover the outstanding amount. This court is unable to agree with the contention on behalf of the complainant that the impugned cheque lies within the realms of Section 138 NI Act. Conspicuously the FDR given for security and the impugned cheque given as a predisbursement condition are not the mode of repayment of the impugned credit facility. Moreover, there are no speicific terms and conditions which stipulates that in the event of default the complainant can fill the outstanding amount in the cheque for recovery. The purpose of Section 138 NI Act is to inculcate faith in the transaction dealing with Negotiable Instruments, specifically cheques. It cannot be the intention of the Legislature to make CC No 16866/10 .. 12 .. M/S Barclays Bank V. Arun Gupta the cheque as a instrument for recovery of loans which are taken by lenders as blank signed cheques and which are used in the contingency of default making the drawer accused in a criminal case under Section 138 NI Act. In the present case the impugned cheque was obtained prior to disbursement of loan at which time there was no subsisting liability. It is very clear that the impugned cheque is used in the contingent situation where the accused has defaulted in repaying the loan. Thus the cheque fails to comply with the requirement of Section 138 NI Act as it was not issued for legally enforceable liability but for security which is invoked in case of contingency. This court has placed reliance on the following judgments:
19. In M.S. Narayana Menon @ Mani vs. State of Kerala & Anr. (supra), it was observed:
"52..................................... If the defence is acceptable as probable the cheque therefore cannot be held to have been issued in discharge of the debt as, for example, if a cheque is issued for security or for any other purpose the same would not come within the purview of Section 138 of the Act."
20. In M/S. Collage Culture & Ors. v. Apparel Export Promotion Council & Anr. 2008 STPL(DC) 532 DEL, it was observed by Hon'ble Delhi High Court that:
"20. A post dated cheque may be issued under 2 circumstances. Under circumstance one, it may be issued for a debt in present but payable in future. Under second circumstance it may be issued for a debt which may become payable in future upon the occurrence of a contingent event.
21. The difference in the two kinds of postdated cheques would be that the cheque issued under first circumstance would be for a debt due, only payment being postponed. The latter cheque would be by way of a security.
22. The word 'due' means 'outstanding at the relevant date'. The debt has to be in existence as a crystallized demand akin to a liquidated damages and not a demand which may or may not come into existence; coming into existence being CC No 16866/10 .. 13 .. M/S Barclays Bank V. Arun Gupta contingent upon the happening of an event.
......................
24. It would be relevant to note that the statute does not refer to the debt being payable, meaning thereby, a post dated cheque for a debt due but payment postponed at a future date would attract Section 138 of the Negotiable Instruments Act 1881. But the cheque issued not for an existing due, but issued by way of a security, would not attract Section 138 of the Negotiable Instruments Act 1881, for it has not been issued for a debt which has come into in existence."
21. In Ramakrishna Urban Cooperative Credit Society Ltd. v. Rajendra Bhagchand Warma (supra), the Bombay High Court relying on a series of judgments of Hon'ble High Courts and Supreme Court of India observed:
"14. Thus the object of the amendment and introduction of Chapter XVII in the Negotiable Instruments Act by Act o£J988 was mainly to encourage all major transactions including commercial or business transactions through cheques and to enforce credibility and acceptability of cheques in settlement of liability in general. Encouragement of payment by cheques/credit cards/debit cards rather than by cash is necessary for healthy economy. That also brings in transparency in transactions and discourages creation of black or unaccounted money through evasion of taxes or other mal practices. So, provisions like Section 138 of Negotiable Instruments Act are salutary to give reliability, credibility and acceptability of negotiable instruments like cheques in daily life. However, the object was not to provide effective and speedy remedy for recovery of loans. Law makers must not have intended or imagined that money lenders or Banks would obtain blank or post dated cheques while sanctioning/disbursing loans as securities and would use them to malte debtors/borrowers to repay loan under threat of prosecution and punishment under Section 138 of the Negotiable Instruments Act. So, it is doubtful if provisions of Section 138 of the Negotiable Instruments Act would be attracted to a case in which a blank or post dated cheque is obtained by a Bank or money lender before or while sanctioning or disbursing loan amount as security for the loan.
..........................................................
21.In the present case blank cheques were issued prior to disbursement of loan as a collateral security for loan which was sanctioned. In such case there was no CC No 16866/10 .. 14 .. M/S Barclays Bank V. Arun Gupta existing debt or liability when the cheque is issued. So, in the facts and circumstances of the case, the case does not fall within four corners of offence punishable under Section 138 of the Negotiable Instruments Act. Of course such defence is available against payee and note holder in due course."
22. In very recent judgment of of Hon'ble High of Delhi, Ravi Kumar D v. State of Delhi reported as 2011 (3) LRC 210 (Del), Hon'ble Mr. Justice Ajit Bharihoke relying on M. S. Narayan Menon case (supra) observed:
" Plain reading of the above provision of law shows that criminal liability under Section 138 N.I.Act is attracted only if the dishonoured cheque was issued for the discharge in whole or in part of any existing debt or liability. The Section does not apply to a cheque issued to meet future liability which may arise on happening of some contingency. Thus, it is clear that a postdated cheque, if issued for discharge of a debt due, in the event of dishonour, would attract Section 138 N.I.Act but a cheque issued not for an existing debt/liability but issued by way of security for meeting some future contingency would not attract Section 138 of the N.I.Act"
FINAL ORDER
26. In the light of the above discussions and observations, this court has no hitch to hold that the complainant has failed in proving their case beyond the shadow of reasonable doubts. This court exonerates the accused/Arun Gupta for the offence under section 138 NI Act. The accused is hereby acquitted. Bail bonds are cancelled and sureties stands discharged. Endorsements, if any, stands cancelled. Announced in the open Court on 19th day of November, 2011 (Sushil Anuj Tyagi) Metropolitan Magistrate Dwarka, New Delhi 19.11.2011 CC No 16866/10 .. 15 .. M/S Barclays Bank V. Arun Gupta